SONOCO PRODUCTS CO — Interim / Quarterly Report 2008

Apr 29, 2008

10-Q 1 g13024qe10vq.htm SONOCO PRODUCTS COMPANY Sonoco Products Company PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2008

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-516

SONOCO PRODUCTS COMPANY

Incorporated under the laws of South Carolina I.R.S. Employer Identification No. 57-0248420

1 N. Second St. Hartsville, South Carolina 29550 Telephone: 843/383-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at April 25, 2008:

Common stock, no par value: 99,499,491

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SONOCO PRODUCTS COMPANY

INDEX

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements:	3
	Condensed Consolidated Balance Sheets — March 30, 2008 (unaudited) and December 31, 2007 (unaudited)	3
	Condensed Consolidated Statements of Income — Three Months Ended March 30, 2008 (unaudited) and April 1, 2007 (unaudited)	4
	Condensed Consolidated Statements of Cash Flow — Three Months Ended March 30, 2008 (unaudited) and April 1, 2007 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6
	Report of Independent Registered Public Accounting Firm	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION		26
Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 6.	Exhibits	28
Exhibit 15
Exhibit 31
Exhibit 32

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SONOCO PRODUCTS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars and shares in thousands)

	March 30, — 2008	2007*
Assets
Current Assets
Cash and cash equivalents	$ 74,029	$	70,758
Trade accounts receivable, net of allowances	515,954		488,409
Other receivables	38,581		34,328
Inventories:
Finished and in process	143,024		138,722
Materials and supplies	206,966		204,362
Prepaid expenses	54,126		50,747
Deferred income taxes	41,816		40,353
	1,074,496		1,027,679
Property, Plant and Equipment, Net	1,098,490		1,105,342
Goodwill	831,745		828,348
Other Intangible Assets, Net	142,121		139,436
Other Assets	199,766		239,438
Total Assets	$ 3,346,618	$	3,340,243
Liabilities and Shareholders’ Equity
Current Liabilities
Payable to suppliers	$ 429,110	$	426,138
Accrued expenses and other	269,778		275,133
Notes payable and current portion of long-term debt	43,552		45,199
Accrued taxes	13,260		11,611
	755,700		758,081
Long-Term Debt, Net of Current Portion	796,311		804,339
Pension and Other Postretirement Benefits	182,129		180,509
Deferred Income Taxes	92,239		84,977
Other Liabilities	67,600		70,800
Commitments and Contingencies
Shareholders’ Equity
Common stock, no par value
Authorized 300,000 shares
99,488 and 99,431 shares issued and outstanding
at March 30, 2008 and December 31, 2007, respectively	7,175		7,175
Capital in excess of stated value	394,460		391,628
Accumulated other comprehensive loss	(85,038	)	(107,374	)
Retained earnings	1,136,042		1,150,108
Total Shareholders’ Equity	1,452,639		1,441,537
Total Liabilities and Shareholders’ Equity	$ 3,346,618	$	3,340,243

• The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles.

See accompanying Notes to Condensed Consolidated Financial Statements

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

	Three Months Ended — March 30,	April 1,
	2008	2007
Net sales	$ 1,037,996	$	955,679
Cost of sales	851,594		770,514
Gross Profit	186,402		185,165
Selling, general and administrative expenses	98,149		89,686
Restructuring / Asset impairment charges (see Notes 4 and 5)	61,538		6,806
Income before interest and income taxes	26,715		88,673
Interest expense	14,554		14,124
Interest income	(1,326	)	(2,636	)
Income before income taxes	13,487		77,185
Provision for income taxes	6,449		26,549
Income before equity in earnings of affiliates/minority
interest in subsidiaries	7,038		50,636
Equity in earnings of affiliates/minority interest in
subsidiaries, net of tax	6,221		2,468
Net income	$ 13,259	$	53,104
Weighted average common shares outstanding:
Basic	100,089		100,714
Diluted	100,702		102,293
Per common share:
Net income:
Basic	$ 0.13	$	0.53
Diluted	$ 0.13	$	0.52
Cash dividends	$ 0.26	$	0.24

See accompanying Notes to Condensed Consolidated Financial Statements

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

	Three Months Ended — March 30,	April 1,
	2008	2007*
Cash Flows from Operating Activities:
Net income	$ 13,259	$	53,104
Adjustments to reconcile net income to net cash
provided by operating activities:
Financial asset impairment	42,651		—
Restructuring-related asset impairment	11,344		381
Depreciation, depletion and amortization	45,853		42,722
Non-cash share-based compensation expense	3,417		3,823
Equity in earnings of affiliates/minority interest in subsidiaries	(6,218	)	(2,468	)
Cash dividends from affiliated companies	—		452
Loss on disposition of assets	394		512
Tax effect of nonqualified stock options	154		2,175
Excess tax benefit of share-based compensation	(54	)	(2,175	)
Deferred taxes	4,341		1,738
Change in assets and liabilities, net of effects from acquisitions,
dispositions, and foreign currency adjustments:
Receivables	(26,520	)	(29,894	)
Inventories	(3,828	)	(7,809	)
Prepaid expenses	786		(13,116	)
Payables and deferred expenses	(19,269	)	3,555
Cash contribution to pension plans	(6,368	)	(4,035	)
Prepaid income taxes and taxes payable	(2,621	)	32,821
Other assets and liabilities	6,697		(23,830	)
Net cash provided by operating activities	64,018		57,956
Cash Flows from Investing Activities:
Purchase of property, plant and equipment	(34,126	)	(36,919	)
Cost of acquisitions, net of cash acquired	(5,535	)	—
Proceeds from the sale of assets	547		726
Investment in affiliates and other	(979	)	—
Net cash used in investing activities	(40,093	)	(36,193	)
Cash Flows from Financing Activities:
Proceeds from issuance of debt	6,155		15,240
Principal repayment of debt	(43,960	)	(18,978	)
Net increase in commercial paper borrowings	27,000		43,000
Net increase in bank overdrafts	11,779		30
Cash dividends — common	(25,866	)	(24,036	)
Excess tax benefit of share-based compensation	54		2,175
Shares acquired	(800	)	(56,730	)
Common shares issued	166		13,595
Net cash used in financing activities	(25,472	)	(25,704	)
Effects of Exchange Rate Changes on Cash	4,818		(220	)
Net Increase (Decrease) in Cash and Cash Equivalents	3,271		(4,161	)
Cash and cash equivalents at beginning of period	70,758		86,498
Cash and cash equivalents at end of period	$ 74,029	$	82,337

• Prior year’s data have been reclassified to conform to the current year’s presentation.

See accompanying Notes to Condensed Consolidated Financial Statements

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

Note 1:	Basis of Interim Presentation
	In the opinion of the management of Sonoco Products Company (the “Company”), the
accompanying unaudited condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments, unless otherwise stated)
necessary to state fairly the consolidated financial position, results of operations and
cash flows for the interim periods reported herein. Operating results for the three
months ended March 30, 2008, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2008. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2007.
	On January 1, 2008, the Company adopted the provisions of Emerging Issues Task Force
Issue No. 06-10, “Accounting for the Deferred Compensation and Postretirement Benefit
Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements.” As a
result, the Company recognized a postretirement benefit liability of $1,492 associated
with its collateral assignment split-dollar life insurance arrangements which was
accounted for as a reduction to the January 1, 2008 balance of retained earnings.
	With respect to the unaudited condensed consolidated financial information of the
Company for the three month periods ended March 30, 2008 and April 1, 2007 included in
this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such information.
However, their separate report dated April 29, 2008 appearing herein, states that they
did not audit and they do not express an opinion on that unaudited financial
information. Accordingly, the degree of reliance on their report on such information
should be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited financial information
because that report is not a “report” or a “part” of a registration statement prepared
or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of
the Act.
Note 2:	Shareholders’ Equity
	Earnings Per Share
	The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended — March 30, 2008	April 1, 2007
Numerator:
Net income	$ 13,259	$ 53,104
Denominator:
Weighted average common shares outstanding	100,089,000	100,714,000
Dilutive effect of stock-based compensation	613,000	1,579,000
Dilutive shares outstanding	100,702,000	102,293,000
Reported net income per common share:
Basic	$ 0.13	$ 0.53
Diluted	$ 0.13	$ 0.52

Stock options to purchase approximately 1,934,083 and 615,375 shares at March 30, 2008 and April 1, 2007, respectively, were not dilutive and, therefore, are excluded from the computations of diluted income per common share amounts. No adjustments were made to reported net income in the computations of earnings per share.

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

	Stock Repurchases
	The Company’s Board of Directors has authorized the repurchase of up to
5,000,000 shares of the Company’s common stock. No shares were
repurchased under this authorization during the first quarter of 2008. Accordingly, at
March 30, 2008, a total of 5,000,000 shares remain available for repurchase.
	The Company occasionally repurchases shares of its common stock to satisfy employee tax
withholding obligations in association with the exercise of stock appreciation rights and
performance-based stock awards. These repurchases, which are not part of a publicly
announced plan or program, totaled 27,316 and 2,937 shares in the first quarters of 2008
and 2007, respectively. The cost of these repurchases was $800 for the quarter ending
March 30, 2008, and $111 for the quarter ending April 1, 2007.
Note 3:	Acquisitions
	During the three months ended March 30, 2008, the Company completed two acquisitions at
an aggregate cost of $5,535 in cash. These acquisitions included Amtex Packaging, Inc.,
a packaging fulfillment company, which is accounted for in the Packaging Services
segment, and VoidForm International Ltd., a construction tube business based in Canada,
which is accounted for in the Tubes and Cores/Paper segment. These acquisitions are
expected to generate annual sales of approximately $6,000. In conjunction with these
acquisitions, the Company recorded a preliminary fair value of assets acquired as
follows: identifiable intangibles of $4,890, goodwill of $179 and other net tangible
assets of $466. The Company has accounted for these acquisitions as purchases and,
accordingly, has included their results of operations in consolidated net income from the
date of acquisition. As these acquisitions were not material to the Company’s financial
statements individually or in the aggregate, pro forma results have not been provided.
Note 4:	Restructuring and Asset Impairment
	The Company has two active restructuring plans, one of which was approved in October 2006
(the 2006 Plan), and the other in August 2003 (the 2003 Plan). In addition, during the
last two quarters of 2007 and the first quarter of 2008, the Company recognized
additional restructuring and asset impairment charges associated with the closures of
several facilities which were not part of a formal restructuring plan. Following are the
total restructuring and asset impairment charges, net of adjustments, recognized by the
Company in the first quarters of 2008 and 2007.

	Three Months Ended — March 30,	April 1,
	2008	2007
Restructuring/Asset impairment:
Other 2008 Actions	$ 4,365	$	—
Other 2007 Actions	13,643		—
2006 Plan	742		6,419
2003 Plan	137		387
	$ 18,887	$	6,806
Income tax benefit	(5,681	)	(2,033	)
Minority interest impact, net of tax	(3,595	)	(10	)
Restructuring/Asset impairment charges, net of
adjustments (after tax)	$ 9,811	$	4,763

| Restructuring and asset impairment charges are included in “Restructuring/Asset
impairment charges” in the Condensed Consolidated Statements of Income, except for
restructuring charges applicable to equity method investments, which are included in
“Equity in earnings of affiliates/minority interest in subsidiaries, net of tax.” |
| --- |
| The Company expects to recognize future additional costs
totaling approximately $9,000 in connection with previously announced
restructuring actions. The majority of these charges are expected to
be incurred and paid during the remainder of 2008. Additional disclosures concerning other 2008 and 2007 restructuring and asset impairment
charges, and the 2006 and 2003 restructuring plans are provided below. |

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

| Other 2008 Actions |
| --- |
| In the first quarter of 2008, the Company initiated the closures of a tube and core plant
in Spain and a specialty paper machine at its paper mill in Holyoke, Massachusetts. Both
of these operations are part of the Company’s Tubes and Cores/Paper segment. As a result
of management’s first quarter decision to take these actions, non-cash asset impairment
charges of $4,365 were recorded in the quarter for the difference between the estimated
fair market value of the underlying property, plant and equipment and its net book value.
These closures are not part of a formal plan. |
| The Company expects to recognize future additional costs totaling approximately $2,300
associated with the Other 2008 Actions. These charges are expected to consist primarily
of severance and termination benefits, none of which were recognizable in the first
quarter as communication to the affected employees had not yet taken place. |
| Other 2007 Actions |
| In 2007, the Company initiated the closures of the following operations: a metal ends
plant in Brazil (Consumer Packaging segment), a rigid packaging plant in the United
States (Consumer Packaging segment), a paper mill in China (Tubes and Cores/Paper
segment), a molded plastics plant in Turkey (All Other Sonoco), and a point-of-purchase
display manufacturing plant in the United States (Packaging Services segment). These
closures were not part of a formal restructuring plan. |
| The total cost of the Other 2007 Actions is estimated to be approximately $36,600, most
of which is related to asset impairment charges. Accordingly, the majority of the total
cost will not result in the expenditure of cash. As of March 30, 2008, the Company had
incurred charges totaling $33,281 associated with the Other 2007 Actions. The following
table provides additional details of these charges: |

Other 2007 Actions	Severance and	Asset — Impairment/	Other
Restructuring/Asset Impairment Charges	Termination	Disposal	Exit
Inception to Date	Benefits	of Assets	Costs	Total
Tubes and Cores/Paper segment	$ 6,237	$ 3,638	$ —	$ 9,875
Consumer Packaging segment	1,064	19,669	1,606	22,339
Packaging Services segment	206	—	—	206
All Other Sonoco	36	597	228	861
Cumulative Restructuring Charges,
net of adjustments	$ 7,543	$ 23,904	$ 1,834	$ 33,281

| The Company expects to recognize future additional costs totaling approximately $3,300
associated with the Other 2007 Actions. These charges are expected to consist primarily
of other exit costs related to removal of equipment from the closed facilities. Of these
future costs, it is estimated that $900 will relate to the Tubes and Cores/Paper segment,
$2,200 will relate to the Consumer Packaging segment, and $200 will be related to the
Packaging Services segment. |
| --- |
| During the three months ended March 30, 2008, the Company recognized charges associated
with Other 2007 Actions of $13,643, net of adjustments. The following table provides
additional details of these net charges: |

Other 2007 Actions	Severance and	Asset — Impairment/	Other
Restructuring/Asset Impairment Charges	Termination	Disposal	Exit
First Quarter	Benefits	of Assets	Costs	Total
2008
Tubes and Cores/Paper segment	$ 5,089	$ 3,638	$ —	$ 8,727
Consumer Packaging segment	190	3,321	1,333	4,844
Packaging Services segment	72	—	—	72
	$ 5,351	$ 6,959	$ 1,333	$ 13,643

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

| The net charges for the three months ended March 30, 2008 relate primarily to the
announced closures of the paper mill in China (Tubes and Cores/Paper segment) and the
metal ends plant in Brazil (Consumer Packaging segment. Severance costs became
recognizable for the paper mill in China in the first quarter of 2008 upon communication
to the affected employees. Additionally, certain accounts receivable were deemed to be
impaired directly as a result of the closure of the facility. |
| --- |
| During the three months ended March 30, 2008, the Company also recorded non-cash,
after-tax offsets in the amount of $3,395 to reflect a minority interest holder’s portion
of restructuring costs that were charged to expense. |
| The following table sets forth the activity in the Other 2007 Actions restructuring
accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated
Balance Sheets: |

Other 2007 Actions	Severance and	Impairment/		Other
Accrual Activity	Termination	Disposal		Exit
2008 Year to Date	Benefits	of Assets		Costs		Total
Liability, December 31, 2007	$ 1,165	$	—	$	230	$	1,395
New charges	5,351		6,959		1,333		13,643
Cash payments	(1,904	)	—		(1,394	)	(3,298	)
Asset writedowns/disposals	—		(6,959	)	—		(6,959	)
Foreign currency translation	120		—		(18	)	102
Liability, March 30, 2008	$ 4,732	$	—	$	151	$	4,883

| As a result of the Other 2007 Actions, the Company recognized pre-tax asset impairment
charges totaling $6,959 in the first quarter of 2008. These non-cash charges were the
result of additional impairment losses on property, plant and equipment at the Company’s
metal ends plant in Brazil and additional reserves on accounts receivable at the
Company’s paper mill in China. In each case, the assets were determined to be impaired
directly as a result of the closure of the facilities. |
| --- |
| The 2006 Plan |
| The 2006 Plan included the closure of 12 plant locations and the reduction of
approximately 540 positions worldwide. The majority of the restructuring program focused
on international operations, principally Europe, in order to make those operations more
cost effective. These measures began in the fourth quarter of 2006 and are substantially
complete. |
| The pre-tax cost of the 2006 Plan is estimated to total approximately $38,100, most of
which is related to severance and other termination costs. Accordingly, the vast
majority of these charges represent a cash cost. As of March 30, 2008, the Company had
incurred total charges of $35,064 associated with these activities. The following table
provides additional details of the cumulative charges recognized through March 30, 2008: |

2006 Plan	Severance and	Asset — Impairment/	Other
Restructuring/Asset Impairment Charges	Termination	Disposal	Exit
Inception to Date	Benefits	of Assets	Costs	Total
Tubes and Cores/Paper segment	$ 13,534	$ 4,242	$ 6,395	$ 24,171
Consumer Packaging segment	5,458	1,686	1,550	8,694
Packaging Services segment	528	—	—	528
All Other Sonoco	757	261	653	1,671
Cumulative Restructuring Charges,
net of adjustments	$ 20,277	$ 6,189	$ 8,598	$ 35,064

The Company expects to recognize future charges of approximately $3,000 pretax associated with the 2006 Plan. These charges are expected to include approximately $1,900 of severance-related costs and $1,100 of

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

| other exit costs. The severance costs were not
recognizable in the first quarter of 2008, as communication to the affected employees had
not yet taken place. Of these future costs, it is estimated that $2,600 will impact the
Tubes and Cores/Paper segment, $300 will impact the Consumer Packaging segment, and $100
will impact All Other Sonoco. The Company expects to pay the majority of the remaining
2006 Plan restructuring costs, with the exception of certain building lease termination
expenses, by the end of 2008, using cash generated from operations. |
| --- |
| During the three months ended March 30, 2008 and April 1, 2007, the Company recognized
restructuring charges associated with the 2006 Plan of $742 and $6,419, respectively, net
of adjustments. The following table provides additional details of these net charges: |

2006 Plan	Severance and	Asset — Impairment/	Other
Restructuring/Asset Impairment Charges	Termination	Disposal	Exit
First Quarter	Benefits	of Assets	Costs	Total
2008
Tubes and Cores/Paper segment	$ 372	$ 20	$ 193	$ 585
Consumer Packaging segment	5	—	106	111
All Other Sonoco	—	—	46	46
Total	$ 377	$ 20	$ 345	$ 742
2007
Tubes and Cores/Paper segment	$ 957	$ 55	$ 404	$ 1,416
Consumer Packaging segment	3,451	222	446	4,119
Packaging Services segment	221	—	—	221
All Other Sonoco	379	—	284	663
Total	$ 5,008	$ 277	$ 1,134	$ 6,419

| The net charges for the three months ended March 30, 2008 relate primarily to the
announced closures of a paper mill in France, two tube and core plants in Canada, and a
molded plastics plant in the United States, as well as personnel reductions at tube and
core/paper operations in Finland. The net charges for the three months ended April 1,
2007 related primarily to the announced closures of the following: a rigid packaging
plant in Germany, rigid packaging production lines in the United Kingdom, a paper mill in
France, a tube and core plant in Canada, a flexible packaging plant in Canada, and a
molded plastics plant in the United States. |
| --- |
| During the three months ended April 1, 2007, the Company also recorded non-cash,
after-tax offsets in the amount of $10 after tax in order to reflect a minority interest
holder’s portion of restructuring costs that were charged to expense. |
| The following table sets forth the activity in the 2006 Plan restructuring accrual
included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance
Sheets: |

2006 Plan	Severance and	Impairment/		Other
Accrual Activity	Termination	Disposal		Exit
2008 Year to Date	Benefits	of Assets		Costs		Total
Liability, December 31, 2007	$ 3,517	$	—	$	470	$	3,987
New charges	390		20		332		742
Cash payments	(1,977	)	—		(677	)	(2,654	)
Asset impairment (noncash)	—		(20	)	—		(20	)
Foreign currency translation	26		—		(2	)	24
Adjustments	(14	)	—		14		—
Liability, March 30, 2008	$ 1,942	$	—	$	137	$	2,079

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

| Other exit costs consist primarily of building lease termination charges and other
miscellaneous exit costs. |
| --- |
| The 2003 Plan |
| In August 2003, the Company announced general plans to reduce its overall cost structure
by $54,000 pretax by realigning and centralizing a number of staff functions and
eliminating excess plant capacity. Pursuant to these plans, the Company completed 22
plant closings and has reduced its workforce by approximately 1,120 employees. As of
March 30, 2008, the Company had incurred cumulative charges, net of adjustments, of
$102,875 pretax associated with these activities. |
| During the three months ended March 30, 2008 and April 1, 2007, the Company recognized
restructuring charges associated with the 2003 Plan of $137 and $387, respectively, net
of adjustments. The 2008 charges consisted of $223 of other exit costs in the tubes and
cores/paper segment partially offset by a $(99) adjustment to severance benefits. In
addition, other exit costs in the consumer packaging segment totaled $13. The 2007
charges consisted of $448 of other exit costs in the tubes and cores/paper segment
partially offset by a $(61) adjustment to severance benefits. The net charges for the
first quarters of both 2008 and 2007 relate primarily to the termination of a building
lease in the United Kingdom and the closure of a tube and core plant and a paper mill in
the United States. |
| The following table sets forth the activity in the 2003 Plan restructuring accrual
included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance
Sheets: |

2003 Plan	Severance and	Impairment/		Other
Accrual Activity	Termination	Disposal		Exit
2008 Year to Date	Benefits	of Assets		Costs	Total
Liability, December 31, 2007	$ 172	$	—	$ 2,717	$	2,889
New charges	—		—	236		236
Cash payments	(9	)	—	(692	)	(701	)
Foreign currency translation	10		—	11		21
Adjustments	(99	)	—	—		(99	)
Liability, March 30, 2008	$ 74	$	—	$ 2,272	$	2,346

| | The Plan is substantially complete. The Company expects to recognize future pre-tax
charges of approximately $400 associated with the 2003 Plan. These costs are expected to
consist of other exit costs, primarily building lease termination charges and other
miscellaneous exit costs, within the Tubes and Cores/Paper segment. The majority of the
remaining 2003 Plan restructuring costs, with the exception of certain building lease
termination expenses, will be paid during 2008, using cash generated from operations. |
| --- | --- |
| Note 5: | Financial Asset Impairment |
| | As a result of the 2003 sale of the High Density Film business, the Company received a
preferred equity interest in the buyer and a subordinated note receivable due in 2013 as
a portion of the selling price. The Company’s year-end 2007 financial review of the
buyer indicated that collectibility was probable. However, based on updated information
provided by the buyer late in the first quarter of 2008, the Company concluded that
neither the collection of its subordinated note receivable nor redemption of its
preferred equity interest is probable and their value is likely zero. Accordingly, the
Company fully reserved these items in the first quarter of 2008, recording a charge
totaling $42,651 pretax ($30,981 after tax). Both the preferred equity interest and the
subordinated note receivable had been included in “Other Assets” in the Company’s
Condensed Consolidated Balance Sheets. |

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Note 6:
The following table reconciles net income to comprehensive income:

	Three Months Ended — March 30, 2008	April 1, 2007
Net income	$ 13,259	$ 53,104
Other comprehensive income:
Foreign currency translation
adjustments	14,340	10,944
Changes in defined benefit plans,
net of income tax	1,407	2,430
Changes in derivative financial
instruments, net of income tax	6,589	4,321
Comprehensive income	$ 35,595	$ 70,799

The following table summarizes the components of accumulated other comprehensive loss and the changes in accumulated other comprehensive loss, net of tax as applicable, for the three months ended March 30, 2008:

	Foreign Currency	Defined		Derivative		Accumulated — Other
	Translation	Benefit		Financial		Comprehensive
	Adjustments	Plans		Instruments		Loss
Balance at December 31, 2007	$ 72,819	$ (178,658	)	$ (1,535	)	$ (107,374	)
Year-to-date change	14,340	1,407		6,589		22,336
Balance at March 30, 2008	$ 87,159	$ (177,251	)	$ 5,054		$ (85,038	)

| At March 30, 2008, the Company had commodity swaps outstanding to fix the costs of a
portion of raw materials and energy. These swaps, which have maturities ranging from
June 2008 to December 2010, qualify as cash flow hedges under Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” and related amendments. The amounts included in accumulated other
comprehensive income related to these commodity swaps was a favorable position of $8,063
($5,054 after tax) at March 30, 2008, and an unfavorable position of $2,395 ($1,535 after
tax) at December 31, 2007. |
| --- |
| The tax effect in the first quarter of 2008 on the Defined Benefit Plans and Derivative
Financial Instruments was $(840) and $(3,869), respectively. The cumulative tax benefit
of the Defined Benefit Plans was $101,965 at March 30, 2008, and $102,805 at December 31,
2007. Additionally, the cumulative tax effect of Derivative Financial Instruments was
$(3,009) and $860, at March 30, 2008 and December 31, 2007, respectively. |

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Note 7:
Goodwill
A summary of the changes in goodwill for the quarter ended March 30, 2008 is as follows:

	Tubes and Cores — /Paper	Consumer — Packaging	Services		All Other
	Segment	Segment	Segment		Sonoco	Total
Balance as of December 31, 2007	$ 245,130	$ 366,223	$	151,000	$ 65,995	$ 828,348
Goodwill on 2008 acquisitions	179	—		—	—	179
Adjustments	76	1,163		—	2	1,241
Foreign currency translation	6,186	(4,349	)	9	131	1,977
Balance as of March 30, 2008	$ 251,571	$ 363,037	$	151,009	$ 66,128	$ 831,745

| The Company recorded goodwill of $179 from the 2008 acquisition of VoidForm
International. Adjustments to goodwill consist of the following: charges totaling $977
incurred in connection with the closures of two plants that were part of the fourth
quarter 2007 acquisition of the fiber and plastic container business of Caraustar
Industries, Inc.; a tax adjustment of $186 associated with the second quarter 2007
acquisition of Matrix Packaging, LLC; and $78 of other purchase price adjustments
relating to 2007 acquisitions. |
| --- |
| Other Intangible Assets |
| A summary of other intangible assets as of March 30, 2008 and December 31, 2007 is as
follows: |

	March 30, — 2008		December 31, — 2007
Amortizable intangibles — Gross cost
Patents	$ 3,509		$ 3,360
Customer lists	167,655		161,805
Land use rights	7,612		7,315
Supply agreements	1,000		1,000
Other	11,355		11,032
Total gross cost	$ 191,131		$ 184,512
Total accumulated amortization	$ (49,010	)	$ (45,076	)
Net amortizable intangibles	$ 142,121		$ 139,436

| | Other intangible assets are amortized, usually on a straight-line basis, over their
respective useful lives, which generally range from three to fifteen years. Aggregate
amortization expense on other intangible assets was $3,452 and $2,552 for the three
months ended March 30, 2008 and April 1, 2007, respectively. Amortization expense on
other intangible assets is expected to approximate $13,600 in 2008, $12,900 in 2009,
$12,600 in 2010, $12,300 in 2011 and $12,000 in 2012. |
| --- | --- |
| | The Company recorded $4,890 of identifiable intangibles in connection with 2008 business
acquisitions, all of which related to customer lists that will be amortized over a period
of 15 years. In addition, the Company acquired various patents in the first quarter of
2008 for a total cost of $149. |
| Note 8: | Fair Value Measurements |
| | The Financial Accounting Standards Board has issued Statement of Financial Accounting
Standards No. 157, “Fair Value Measurements” (FAS 157) to increase consistency and
comparability in fair value measurements |

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| and to expand disclosures about fair value measurements. Applicable provisions of FAS
157 were adopted by the Company effective January 1, 2008, including the disclosures
presented below. |
| --- |
| The following table sets forth information regarding the Company’s financial assets and
financial liabilities that are measured at fair value, except for pension assets which
are currently excluded from the disclosure requirements of FAS 157. The Company does not
currently have any nonfinancial assets or liabilities that are recognized or disclosed at
fair value on a recurring basis. |

		Fair Value Measurements at Reporting Date Using
		Quoted Market
		Prices in Active	Significant
		Market for	Other	Significant
		Identical	Observable	Unobservable
		Assets/Liabilities	Inputs	Inputs
Description	March 30, 2008	(Level 1)	(Level 2)	(Level 3)
Assets:
Derivatives	$ 10,270	$ —	$ 10,270	$ —
Deferred Compensation
Plan Assets	$ 2,103	$ 2,103	$ —	$ —
Liabilities:
Derivatives	$ 208	$ —	$ 208	$ —

| | The Company uses derivatives from time to time to mitigate the effect of raw material and
energy cost fluctuations, foreign currency fluctuations and interest rate movements. The
Company records qualifying derivatives in accordance with Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (FAS 133), and related amendments. Fair value measurements for the Company’s
derivatives, which at March 30, 2008, consisted primarily of natural gas swaps entered
into for hedging purposes and foreign currency swaps for which hedge accounting has not
been applied, are classified under Level 2 because such measurements are determined using
published market prices or estimated based on observable inputs such as interest rates,
yield curves, spot and future commodity prices and spot and future exchange rates. |
| --- | --- |
| | Certain deferred compensation plan liabilities are funded and the assets invested in
various exchange traded mutual funds. These assets are measured using quoted prices in
accessible active markets for identical assets. |
| | None of the Company’s financial assets or liabilities currently covered by the disclosure
provisions of FAS 157 are measured at fair value using significant unobservable inputs. |
| Note 9: | Dividend Declarations |
| | On February 6, 2008, the Board of Directors declared a regular quarterly dividend of
$0.26 per share. This dividend was paid March 10, 2008 to all shareholders of record as
of February 22, 2008. |
| | On April 16, 2008, the Board of Directors declared a regular quarterly dividend of $0.27
per share. This dividend is payable June 10, 2008 to all shareholders of record as of May
16, 2008. |
| Note 10: | Employee Benefit Plans |
| | The Company provides non-contributory defined benefit pension
plans for a majority of its employees in the United States and
certain of its employees in Mexico and Belgium. Effective
December 31, 2003, the Company froze participation for newly
hired salaried and non-union hourly U.S. employees in its
traditional defined benefit plan. The Company adopted a defined
contribution plan, the Sonoco Investment and Retirement Plan
(SIRP), covering its non-union U.S. employees hired on or after
January 1, 2004. The Company also sponsors contributory pension
plans covering the majority of its employees in the United |

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| Kingdom, Canada, and the Netherlands, as well as postretirement healthcare and life
insurance benefits to the majority of its retirees and their eligible dependents in the
United States and Canada. |
| --- |
| The components of net periodic benefit cost include the following: |

	Three Months Ended — March 30, 2008		April 1, 2007
Retirement Plans
Service cost	$ 6,523		$ 7,207
Interest cost	18,796		17,324
Expected return on plan assets	(22,438	)	(21,892	)
Amortization of net transition obligation	65		58
Amortization of prior service cost	563		482
Amortization of net actuarial loss	3,649		5,252
Net periodic benefit cost	$ 7,158		$ 8,431
Retiree Health and Life
Insurance Plans
Service cost	$ 512		$ 612
Interest cost	1,117		1,234
Expected return on plan assets	(475	)	(521	)
Amortization of prior service credit	(2,566	)	(2,426	)
Amortization of net actuarial loss	767		1,143
Net periodic benefit (income)/cost	$ (645	)	$ 42

| | During the three months ended March 30, 2008, the Company made contributions of $2,631 to
its retirement and retiree health and life insurance plans. The Company anticipates that
it will make additional contributions of approximately $7,500 in 2008. The Company also
contributed $3,737 to the SIRP during this same three-month period. No additional
contributions are expected during the remainder of 2008. |
| --- | --- |
| Note 11: | Income Taxes |
| | The Company adopted the provisions of Financial Accounting Standards Board Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), on January 1, 2007. There
have been no significant changes in the Company’s liability for uncertain tax positions
since December 31, 2007. |
| | The Company’s effective tax rate for the first quarter of 2008 was 47.8%. This varies
from the statutory rate primarily due to a valuation allowance recorded against the
capital loss carryovers created by the impairment of financial assets discussed in Note
5, as well as certain restructuring charges for which tax benefits cannot be recognized. |
| | The Company and/or its subsidiaries file federal, state and local income tax returns in
the United States and various foreign jurisdictions. With few exceptions, the Company is
no longer subject to U.S. federal, or non-U.S., income tax examinations by tax
authorities for years before 2004. With respect to state and local income taxes, the
Company is no longer subject to examination prior to 2002, with few exceptions. |
| | The Company’s estimate for the potential outcome for any uncertain tax issue is highly
judgmental. Management believes that any reasonably foreseeable outcomes related to these
matters have been adequately provided for. However, future results may include favorable
or unfavorable adjustments to estimated tax liabilities in the period the assessments are
made or resolved or when statutes of limitation on potential assessments expire.
Additionally, the jurisdictions in which earnings or deductions are realized may differ
from current estimates. As a result, the Company’s effective tax rate may fluctuate
significantly on a quarterly basis. |

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| Note 12: |
| --- |
| In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans” (FAS 158). The Company has complied with the
provision of FAS 158 that requires the recognition of the funded status of the Company’s
defined benefit plans since that portion of the standard became effective on December 31,
2006. The measurement date provision of FAS 158 becomes effective for the Company
beginning with its December 31, 2008 balance sheet. This provision requires the Company
to measure the funded status of its plans at the Company’s fiscal year end. Because
the Company currently uses December 31 as the measurement date for most of its plans,
including its major U.S.-based plans, this change will not have a material effect on the
Company’s financial statements. |
| In September 2006, the FASB issued FAS 157, “Fair Value Measurements,” which defines fair
value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. FAS 157 does not require any new fair value measurements. The
provisions of FAS 157 become effective in two phases. As of January 1, 2008, FAS 157
became effective for all financial assets and liabilities and for any nonfinancial assets
and liabilities measured at fair value on a recurring basis. Effective January 1, 2009,
the provisions of FAS 157 will apply to all assets and liabilities. Other than
additional disclosure, the adoption of FAS 157 has not and is not expected to have a
material impact on the Company’s financial statements. |
| In December 2007, the FASB issued FAS 141(R), “Business Combinations” which replaces FAS
141. While FAS 141(R) retains the fundamental requirement that the acquisition method of
accounting be used for all business combinations, several significant changes were made
some of which include: the scope of transactions covered; the treatment of transaction
costs and subsequent restructuring charges; accounting for in-process research and
development, contingent assets and liabilities, and contingent consideration; and how
adjustments made to the acquisition accounting after the transaction are reported. For
Sonoco, this statement applies prospectively to business combinations occurring on or
after January 1, 2009. While application of this standard will not impact the Company’s
financial statements for transactions occurring prior to the effective date, its
application will have a significant impact on the Company’s accounting for future
acquisitions compared to current practice. |
| In December 2007, the FASB issued FAS 160, “Noncontrolling Interests in Consolidated
Financial Statements” which amends current accounting and reporting for a noncontrolling
interest in a subsidiary and the deconsolidation of a subsidiary. This statement provides
that a noncontrolling interest in a subsidiary should be reported as equity rather than
as a “minority interest” liability and requires that all purchases, sales, issuances and
redemptions of ownership interests in a consolidated subsidiary be accounted for as
equity transactions if the parent retains a controlling financial interest. FAS 160 also
requires that a gain or loss be recognized when a subsidiary is deconsolidated and, if a
parent retains a noncontrolling equity investment in the former subsidiary, that the
investment be measured at its fair value. This statement is effective January 1, 2009,
and will be applied prospectively except for the presentation and disclosure requirements
which are retrospective. As such, the effect of this standard on current noncontrolling
interest positions will be limited to financial statement presentation and disclosure,
but its adoption will impact the Company’s accounting and disclosure for all transactions
involving noncontrolling interests after adoption. |
| In March 2008, the FASB issued FAS 161, “Disclosures about Derivative Instruments and
Hedging Activities” which requires enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133, and (c) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash flows. This
Statement is effective for fiscal years and interim periods beginning after November 15,
2008, with early application encouraged. As described above, the application of this standard will
impact the Company’s disclosure of its derivative instruments and hedging activities. |

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| Note 13: |
| --- |
| Sonoco reports its results in three segments, Consumer Packaging, Tubes and Cores/Paper
and Packaging Services. The remaining operations are reported as All Other Sonoco. |
| The Consumer Packaging segment includes the following products: round and shaped rigid
packaging (both composite and plastic); printed flexible packaging; and metal and
peelable membrane ends and closures. |
| The Tubes and Cores/Paper segment includes the following products: high-performance paper
and composite paperboard tubes and cores; fiber-based construction tubes and forms;
recycled paperboard, linerboard, recovered paper and other recycled materials. |
| The Packaging Services segment provides the following products and services: designing,
manufacturing, assembling, packing and distributing temporary, semi-permanent and
permanent point-of-purchase displays; brand artwork management; and supply chain
management services including contract packing, fulfillment and scalable service centers. |
| All Other Sonoco represents the Company’s businesses that do not meet the aggregation
criteria outlined in Statement of Financial Accounting Standards No. 131, “Disclosures
about Segments of an Enterprise and Related Information,” and therefore cannot be
combined with other operating segments into a reportable segment. All Other Sonoco
includes the following products: wooden, metal and composite wire and cable reels; molded
and extruded plastics; custom-designed protective packaging; and paper amenities such as
coasters and glass covers. |
| The following table sets forth net sales, intersegment sales and operating profit for the
Company’s three reportable segments and All Other Sonoco. Operating profit at the segment
level is defined as “Income before interest and income taxes” on the Company’s Condensed
Consolidated Statements of Income, adjusted for restructuring/asset impairment charges,
which are not allocated to the reporting segments. |

FINANCIAL SEGMENT INFORMATION

	Three Months Ended — March 30, 2008	April 1, 2007
Net Sales:
Consumer Packaging	$ 387,370	$	333,205
Tubes and Cores/Paper	436,187		405,575
Packaging Services	124,431		123,763
All Other Sonoco	90,008		93,136
Consolidated	$ 1,037,996	$	955,679
Intersegment Sales:
Consumer Packaging	$ 392	$	745
Tubes and Cores/Paper	24,505		22,315
Packaging Services	91		149
All Other Sonoco	11,229		10,357
Consolidated	$ 36,217	$	33,566
Income before income taxes:
Consumer Packaging — Operating Profit	$ 36,277	$	29,569
Tubes and Cores/Paper — Operating Profit	34,564		40,743
Packaging Services — Operating Profit	5,979		11,485
All Other Sonoco — Operating Profit	11,433		13,682
Restructuring/Asset Impairment Charges	(61,538	)	(6,806	)
Interest, net	(13,228	)	(11,488	)
Consolidated	$ 13,487	$	77,185

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| Note 14: |
| --- |
| The Company is a party to various legal proceedings incidental to its business and is
subject to a variety of environmental and pollution control laws and regulations in all
jurisdictions in which it operates. As is the case with other companies in similar
industries, the Company faces exposure from actual or potential claims and legal
proceedings. Some of these exposures have the potential to be material. Information with
respect to these and other exposures appears in Part I — Item 3 — “Legal Proceedings”
and Part II — Item 8 — “Financial Statements and Supplementary Data” (Note 13 -
“Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2007, and in Part II — Item 1 — “Legal Proceedings” of this report.
The Company cannot currently estimate the final outcome of many of the items described or
the ultimate amount of potential losses. |
| Pursuant to Statement of Financial Accounting Standards No. 5, “Accounting for
Contingencies,” accruals for estimated losses are recorded at the time information
becomes available indicating that losses are probable and that the amounts are reasonably
estimable. Amounts so accrued are not discounted. While the ultimate liabilities relating
to claims and proceedings may be significant to profitability in the period recognized,
it is management’s opinion that such liabilities, when finally determined, will not have
an adverse material effect on Sonoco’s consolidated financial position or liquidity. |
| Environmental Matters |
| During the fourth quarter of 2005, the U. S. Environmental Protection Agency (EPA)
notified U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company,
that U.S. Mills and NCR Corporation (NCR), an unrelated party, would be jointly held
responsible to undertake a program to remove and dispose of certain PCB-contaminated
sediments at a particular site on the lower Fox River in Wisconsin (the “Site”) which is
now labeled by EPA as Phase 1. U.S. Mills and NCR reached an agreement between themselves
that each would fund 50% of the costs of remediation, which the Company currently
estimates to be between $29,900 and $39,100 for the Site project as a whole. The Company
has expensed a total of $17,650 for its estimated share of the total cleanup cost. Of the
total expensed, $12,500 was recorded in 2005, and $5,150 was recorded
in 2007. Through March 30, 2008, a total of $8,875 has been
spent on remediation of the Site. The remaining accrual of $8,775
represents the Company’s best estimate of what it is likely to pay to complete the Site
project. However, the actual costs associated with cleanup of this particular site are
dependent upon many factors and it is reasonably possible that remediation costs could be
higher than the current estimate of project costs. The Company acquired U.S. Mills in
2001, and the alleged contamination predates the acquisition. |
| In February 2007, the EPA and Wisconsin Department of Natural Resources (WDNR) issued a
general notice of potential liability under CERCLA and a request to participate in
remedial action implementation negotiations relating to a stretch of the lower Fox River,
including the bay at Green Bay, (Operating Units 2 — 5) to eight potentially responsible
parties, including U.S. Mills. Operating Units 2 — 5 include but also comprise a vastly
larger area than the Site. Although it has not accepted any liability, U.S. Mills is
reviewing this information and discussing possible remediation scenarios, and the
possible allocation of responsibility therefor, with other potentially responsible
parties. On April 9, 2007, U.S. Mills, in conjunction with other potentially responsible
parties, presented to the EPA and the WDNR a proposed schedule to mediate the allocation
issues among eight potentially responsible parties, including U.S. Mills. Non-binding
mediation began in May 2007 and is presently continuing as bilateral/multilateral
negotiations. To date, no agreement among the parties has occurred. |
| On November 13, 2007, EPA issued a unilateral Administrative Order for Remedial Action
pursuant to Section 106 of CERCLA. The order requires U.S. Mills and the seven other
respondents to jointly take various actions to clean up Operating Units 2 — 5. The
order establishes two phases of work. The first phase consists of planning and design
work as well as preparation for dredging and other remediation work and must be completed
by December 31, 2008. The second phase consists primarily of dredging and disposing of
contaminated sediments and capping of the dredged and less contaminated areas of the
river bottom. The
second phase is required to begin in 2009 when weather conditions permit and is expected
to continue for several years. The order also provides for a $32.5 per day penalty for
failure by a respondent to comply with its terms as well as exposing a non-complying
respondent to potential treble damages. Although U.S. Mills has reserved its rights to
contest liability for any portion of the work, it is cooperating with the other
respondents to |

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| comply with the first phase of the order. |
| --- |
| As of December 31, 2007, U.S. Mills had accrued $20,000 for remediation of Operating
Units 2 — 5 (not including amounts accrued for remediation at the Site). That amount
represented the minimum of the range of probable loss that could be reasonably estimated
based on information then available. During the first quarter of 2008, U.S. Mills
increased its authorization for a cash settlement from $20,000 to $35,000, thereby
increasing its estimate of the minimum amount of potential loss it believes it is likely
to incur to $35,000. Accordingly, U.S. Mills recognized an additional pre-tax charge of
$15,000 during the quarter for the remediation of Operating Units 2 — 5. Also during
the first quarter of 2008, settlements totaling $15,000 were reached on certain of the
insurance policies covering the Fox River contamination. The recognition of these
insurance settlements during the quarter effectively offset the impact to earnings of the
additional charge. U.S. Mills’ ultimate share of the liability, and any claims against
the Company, could conceivably exceed the net worth of U.S. Mills. The Company does not
believe it is probable that the effect of U.S. Mills’ Fox River liabilities would result
in a consolidated pre-tax loss that would exceed the net worth of U.S. Mills, which was
approximately $75,000 at March 30, 2008. |
| The Company has been named as a potentially responsible party at several other
environmentally contaminated sites. All of the sites are also the responsibility of other
parties. The potential remediation liabilities are shared with such other parties, and,
in most cases, the Company’s share, if any, cannot be reasonably estimated at the current
time. |
| As of March 30, 2008 and December 31, 2007, the Company (and its subsidiaries) had
accrued $45,694 and $31,058, respectively, related to environmental contingencies. Of
these, a total of $43,775 and $28,996 relate to U.S. Mills at March 30, 2008 and December
31, 2007, respectively. These accruals are included in “Accrued expenses and other” on
the Company’s Condensed Consolidated Balance Sheets. As discussed above, U.S. Mills also
recognized a $15,000 benefit from settlements reached on certain insurance policies
covering the Fox River contamination in the first quarter of 2008. Of this total, cash
of $4,500 was received in March 2008 with the remainder received in April 2008. U.S.
Mills also has other insurance pursuant to which it may recover some or all of the costs
it ultimately incurs, or it may be able to recoup some of such costs from third parties.
There can be no assurance that such claims for recovery would be successful and no
amounts have been recognized in the consolidated financial statements of the Company for
such potential recovery or recoupment. |

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Directors of Sonoco Products Company:

We have reviewed the accompanying condensed consolidated balance sheet of Sonoco Products Company as of March 30, 2008, and the related condensed consolidated statements of income and cash flows for the three month periods ended March 30, 2008 and April 1, 2007 and the condensed consolidated statements of cash flows for each of the three-month periods ended March 30, 2008 and April 1, 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of income, shareholders’ equity and of cash flows for the year then ended (not presented herein), and in our report dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2007, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina April 29, 2008

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SONOCO PRODUCTS COMPANY

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Statements included in this report that are not historical in nature, are intended to be, and are hereby identified as “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. The words “estimate,” “project,” “intend,” “expect,” “believe,” “consider,” “plan,” “anticipate,” “objective,” “goal,” “guidance” and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to statements regarding offsetting high raw material costs; improved productivity and cost containment; adequacy of income tax provisions; refinancing of debt; adequacy of cash flows; anticipated amounts and uses of cash flows; effects of acquisitions and dispositions; adequacy of provisions for environmental liabilities; financial strategies and the results expected from them; continued payments of dividends; stock repurchases; and producing improvements in earnings. Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, expectations, beliefs, plans, strategies and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. The risks and uncertainties include, without limitation:

•	Availability and pricing of raw materials;
•	Success of new product development and introduction;
•	Ability to maintain or increase productivity levels and contain or reduce costs;
•	International, national and local economic and market conditions;
•	Fluctuations in obligations and earnings of pension and postretirement benefit plans;
•	Ability to maintain market share;
•	Pricing pressures and demand for products;
•	Continued strength of our paperboard-based tubes and cores and composite can
operations;
•	Anticipated results of restructuring activities;
•	Resolution of income tax contingencies;
•	Ability to successfully integrate newly acquired businesses into the Company’s
operations;
•	Currency stability and the rate of growth in foreign markets;
•	Use of financial instruments to hedge foreign currency, interest rate and commodity
price risk;
•	Actions of government agencies and changes in laws and regulations affecting the
Company;
•	Liability for and anticipated costs of environmental remediation actions;
•	Loss of consumer confidence; and
•	Economic disruptions resulting from terrorist activities.

The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

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COMPANY OVERVIEW

Sonoco is a leading manufacturer of industrial and consumer packaging products and provider of packaging services, with 334 locations in 35 countries.

Sonoco competes in multiple product categories with the majority of its operations organized and reported in three segments: Consumer Packaging, Tubes and Cores/Paper and Packaging Services. Various other operations are reported as “All Other Sonoco.” The majority of the Company’s revenues are from products and services sold to consumer and industrial products companies to be used in the packaging of their products for sale or shipment. The Company also manufactures paper stock, primarily from recycled materials, for both internal use and open market sale. Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers.

First Quarter 2008 Compared with First Quarter 2007

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three months ended March 30, 2008 versus the three months ended April 1, 2007.

OVERVIEW

Net income for the first quarter of 2008 was $13.3 million, down from the $53.1 million reported for the same period in 2007. 2008 earnings were significantly impacted by a $31.0 million after-tax non-cash impairment charge for the Company’s remaining financial interest related to the 2003 sale of its high density film business. Results for the first quarter also included after-tax restructuring and asset impairment charges of $9.8 million related to cost-reduction measures compared to $4.8 million in the same period of 2007. Prior year first quarter earnings were favorably impacted by a $3.6 million after-tax recovery of certain benefit costs from a third party.

Current quarter gross profit margin fell to 18.0%, compared with 19.4% in 2007. A decline in sales volume, resulting partially from slowing economic activity, along with an unfavorable shift in the mix of products and services sold, were the major contributors to the margin decline. Overall, selling price increases were able to more than offset the impact of global raw material inflation and rising energy and freight costs. Improved productivity and purchasing initiatives were also able to offset the impact of inflation on converting costs.

OPERATING REVENUE

Net sales for the first quarter of 2008 were $1,038 million, compared to $956 million for the first quarter of 2007, an increase of $82 million.

The components of the sales change were:

($ in millions) — Acquisitions/Divestitures	$ 44
Currency Exchange Rates	46
Selling Prices	35
Volume	(43	)
Total Sales Increase	$ 82

Selling prices throughout the Company were higher than in first quarter 2007, reflecting price increases implemented over the past year to offset the impact of higher costs of materials, energy and freight. Company-wide volume was down over 4% from first quarter 2007 levels, primarily in North American Tubes and Cores, flexible packaging and wire and cable reels, but also as a result of the closure of its paper business in China. The 2007 acquisition of Matrix Packaging Inc. accounted for the majority of the impact of acquisitions on net sales.

COSTS AND EXPENSES

The single largest expense impacting the Company during the first quarter of 2008 was an impairment of the Company’s remaining financial interest related to the 2003 sale of its high density film business. As part of this sale, the Company received a preferred equity interest in the buyer and a subordinated note receivable due in 2013 as a portion of the selling price. As was discussed in the 2007 Annual Report on Form 10-K, although the Company’s year-

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end 2007 financial review of the buyer indicated that collectibility was probable, given its highly leveraged nature, different assumptions regarding the outlook could result in impairment of the assets. Based on updated information provided by the buyer in March 2008, combined with restrictive conditions in the current credit market, the Company concluded that neither the collection of its subordinated note receivable nor redemption of its preferred equity interest is now probable and their value is likely zero. As a result, in the first quarter of 2008, the Company fully reserved these items, taking a pre-tax charge totaling $42.7 million, $31.0 million after tax. In addition, charges in connection with restructuring actions totaled $18.9 million and $6.8 million for the first quarters of 2008 and 2007, respectively. Additional information regarding restructuring actions is provided in Note 4 to the Consolidated Financial Statements. None of these charges are allocated to the reporting segments.

Operating costs were impacted by increasing market prices for old corrugated containers (OCC) and other recovered paper, which are expected to remain elevated and unpredictable for the near future. In addition, the rapid escalation of fuel and energy costs also resulted in increased cost for the Company. During the first quarter of 2008, the Company was able to increase selling prices sufficiently on a year-over-year basis to offset the material, fuel and freight cost increases, while manufacturing productivity improvements offset higher labor and other converting costs. First quarter 2007 operating expenses were reduced by a one-time $5.5 million recovery of certain benefit costs from a third party.

Net interest expense for the first quarter of 2008 increased to $13.2 million, compared with $11.5 million during the same period of 2007. This increase was primarily due to lower interest income, which accounted for $1.3 million of the change, and higher debt levels. When the Company reserved for the impairment of financial assets received in the sale of its high density film business, it ceased accruing interest income on these instruments, accounting for approximately $0.5 million of the year-over-year decline in interest income.

The effective tax rate for the Company for the first quarter of 2008 was 47.8 percent, compared with 34.4 percent in the same period in 2007. This increase is primarily due to a valuation allowance recorded against the capital loss carryovers created by the impairment of financial assets discussed above, as well as certain restructuring charges for which tax benefits cannot be recognized.

REPORTABLE SEGMENTS

The following table recaps net sales for the first quarters of 2008 and 2007:

	Three Months Ended — March 30, 2008	April 1, 2007
Net Sales:
Consumer Packaging	$ 387,370	$ 333,205
Tubes and Cores/ Paper	436,187	405,575
Packaging Services	124,431	123,763
All Other Sonoco	90,008	93,136
Consolidated	$ 1,037,996	$ 955,679

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

	Three Months Ended — March 30, 2008	April 1, 2007
Income before income taxes:
Operating Profit
Consumer Packaging	$ 36,277	$	29,569
Tubes and Cores/ Paper	34,564		40,743
Packaging Services	5,979		11,485
All Other Sonoco	11,433		13,682
Restructuring &
Impairment Charges	(61,538	)	(6,806	)
Interest, net	(13,228	)	(11,488	)
Consolidated	$ 13,487	$	77,185

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Segment results viewed by Company management to evaluate segment performance do not include restructuring, impairment and net interest charges. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “Income before income taxes” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other Sonoco.

Consumer Packaging

Sonoco’s Consumer Packaging segment includes the following products: round and shaped rigid packaging (both composite and plastic); printed flexible packaging; and metal and peelable membrane ends and closures.

First quarter 2008 sales increased $54 million, or 16%, in the segment compared with the first quarter of 2007. Acquisitions, net of a reduction from the partial exit of the composite can business in Europe, increased first quarter sales in this segment by nearly $40 million. In addition, the favorable impact of foreign currency translation and higher selling prices, primarily of rigid packaging, contributed to the sales increase. These items were partially offset by a decline in overall segment volume as increases in North American rigid paper and plastic were offset by lower volume in flexible packaging.

Segment operating profit was up 23% in the first quarter, primarily due to productivity improvements and purchasing initiatives more than offsetting increased labor costs. Another factor in the year-over-year improvement was the impact of the 2007 acquisition of Matrix Packaging, LLC. These favorable variances were partially offset by volume declines in flexible packaging. In addition, higher selling prices were able to offset inflation in material, energy and freight costs.

Tubes and Cores/Paper

The Tubes and Cores/Paper segment includes the following products: high-performance paper and composite paperboard tubes and cores; fiber-based construction tubes and forms; recycled paperboard, linerboard, recovered paper and other recycled materials.

First quarter 2008 sales for the segment were up $31 million, or 8%, compared with the same period in 2007, gaining from higher selling prices throughout the segment and the favorable impact of foreign currency translation. Partially offsetting these favorable factors was the impact of lower volume in most global tube, core and paper markets and the Company’s closure of its paper operations in China.

Segment operating profit decreased 15% compared to the first quarter of 2007. Operating profit declined in the first quarter primarily due to lower volumes. Selling price increases were able to offset higher raw material, energy and freight costs, while productivity improvements offset labor and other costs of production.

Packaging Services

The Packaging Services segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semipermanent and permanent point-of-purchase displays; brand artwork management; and supply chain management services including contract packing, fulfillment and scalable service centers.

First quarter 2008 sales for the segment increased slightly from first quarter 2007 levels, benefiting from the impact of favorable foreign currency rates. Lower volume and sales prices for point-of-purchase displays, both down as a result of competitive bidding activity with a major customer in 2007, offset most of the exchange rate benefit.

Segment operating profit declined nearly 48% in the first quarter, compared with the same period in 2007. The primary cause of this drop was lower point-of-purchase display prices as noted above. These price reductions, most of which went into effect in the third quarter of 2007, contributed approximately $3 million to the decline in quarterly segment profitability, but were partially offset by reduced selling and administrative expenses. In addition, lower volumes for point-of-purchase displays also had a negative effect on segment profitability.

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SONOCO PRODUCTS COMPANY

All Other Sonoco

All Other Sonoco includes businesses that are not aggregated in a reportable segment and include the following products: wooden, metal and composite wire and cable reels, molded and extruded plastics, custom-designed protective packaging and paper amenities such as coasters and glass covers.

First quarter 2008 sales in All Other Sonoco declined $3 million, or 3%, from the same period in 2007. Lower volumes in wire and cable reels and molded plastics were the major factors in the sales decline, but were partially offset by the impact of an acquisition in molded plastics and favorable foreign currency rates.

Operating profit for the first quarter was down 16% from the same period in 2007, as a result of lower volumes and an unfavorable shift in the mix of business. Productivity improvements were able to partially offset these negative factors.

Financial Position, Liquidity and Capital Resources

The Company’s financial position remained strong during the first quarter of 2008. Cash flows from operations totaled $64.0 million in the first quarter of 2008, compared with $58.0 million in the same quarter last year. The quarter-over-quarter increase of approximately $6 million was primarily the result of improved working capital management. Because the financial asset impairment was a non-cash charge, it had no impact on cash generated from operations.

Total debt decreased by $9.7 million during the first quarter of 2008 to $839.9 million at March 30, 2008, as cash generated from operations was used to pay down outstanding borrowings. On January 2, 2008, the Company prepaid its 6.125% industrial revenue bond with $35.1 million of other borrowings classified as long-term. On April 1, 2008, the Company prepaid its 6.0% industrial revenue bond with $35.0 million in other borrowings classified as long-term. Commercial paper, a component of the Company’s long-term debt, had a balance of $196.0 million at March 30, 2008.

During the three months ended March 30, 2008, the Company funded capital expenditures of $34.1 million and paid dividends of $25.9 million.

Certain assets and liabilities are reported in the Company’s financial statements at fair value, the fluctuation of which can impact the Company’s financial position and results of operations. Items reported by the Company on a recurring basis at fair value include derivative contracts and pension and deferred compensation related assets. The vast majority of these items are valued based either on quoted prices in active and accessible markets or on other observable inputs. Less than five percent of the fair value of the Company’s pension plan assets are measured using unobservable inputs.

At March 30, 2008, the Company had commodity swaps outstanding to fix the cost of a portion of anticipated raw materials and natural gas purchases. These swaps, which have maturities ranging from June 2008 to December 2010, qualify as cash flow hedges under FAS 133. The fair market value of these commodity swaps was a favorable position of $8.4 million at March 30, 2008, and an unfavorable position of $2.6 million at December 31, 2007. Natural gas contracts covering an equivalent of 5.2 million MMBtu were outstanding at March 30, 2008.

In addition, at March 30, 2008, the Company had various currency swaps outstanding to fix the exchange rate on certain anticipated foreign currency cash flows. Although placed as an economic hedge, the Company has chosen not to apply hedge accounting to these swaps. The fair value of currency swaps, all of which mature in 2008, was an unfavorable position of $1.7 million at March 30, 2008.

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SONOCO PRODUCTS COMPANY

Restructuring and Impairment

Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 4 to the Company’s Condensed Consolidated Financial Statements. Information regarding financial asset impairment charges is provided in Note 5 to the Company’s Condensed Consolidated Financial Statements.

New Accounting Pronouncements

Information regarding new accounting pronouncements is provided in Note 12 to the Company’s Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Information about the Company’s exposure to market risk is discussed under Item 2 in this report and was disclosed in its Annual Report on Form 10-K for the year ended December 31, 2007, which was filed with the Securities and Exchange Commission on February 28, 2008. There have been no material quantitative or qualitative changes in market risk exposure since the date of that filing.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision, and with the participation, of our management, including our principal executive officer and principal financial officer, we conducted an evaluation pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our principal executive officer and principal financial officer concluded that such controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.

Changes in Internal Controls

The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal controls. This results in refinements to processes throughout the Company. However, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information with respect to legal proceedings and other exposures appears in Part I — Item 3 — “Legal Proceedings” and Part II — Item 8 — “Financial Statements and Supplementary Data” (Note 13 - “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and in Part I — Item 1 — “Financial Statements” (Note 14 — “Commitments and Contingencies”) of this report. In April 2006, the United States and the State of Wisconsin (plaintiffs) sued U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, and NCR Corporation (NCR), an unrelated company, to recover certain costs incurred for response activities undertaken regarding the release and threatened release of hazardous substances and specific areas of elevated concentrations of polychlorinated biphenyls in sediments in the Lower Fox River and Green Bay in northeastern Wisconsin (hereinafter the Site). Pursuant to a Consent Decree agreed to by NCR and U.S. Mills as a consequence of the litigation, the Site is to be cleaned up on an expedited basis and NCR and U.S. Mills started removing contaminated sediment in May 2007. The remediation involves removal of sediment from the riverbed, dewatering of the sediment and storage at an offsite landfill. U.S. Mills and NCR reached an agreement between themselves that each would fund

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50% of the costs of remediation, which the Company currently estimates to be between $29.9 million and $39.1 million for the project as a whole. The actual costs associated with cleanup of this particular site are dependent upon many factors and it is reasonably possible that remediation costs could be higher than the current estimate of project costs

In addition to the Site discussed above, as previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2007, U.S. Mills faces additional exposure related to potential natural resource damage and environmental remediation costs for a larger stretch of the lower Fox River, including the bay at Green Bay, which includes the Site discussed above (Operating Units 2 — 5). On April 9, 2007, U.S. Mills, in conjunction with other potentially responsible parties (PRPs), presented to the U.S. Environmental Protection Agency and the Wisconsin Department of Natural Resources a proposed schedule to mediate the allocation issues among eight PRPs, including U.S. Mills. Non-binding mediation began in May 2007 and is continuing as bilateral/multilateral negotiations although no agreement among the parties has occurred. As of December 31, 2007, U.S. Mills had accrued $20 million for remediation of Operating Units 2 — 5 (not including amounts accrued for remediation at the Site). That amount represented the minimum of the range of probable loss that could be reasonably estimated based on information then available. During the first quarter of 2008, U.S. Mills increased its authorization for a cash settlement from $20 million to $35 million, thereby increasing its estimate of the minimum amount of potential loss it believes it is likely to incur to $35 million. Accordingly, U.S. Mills recognized an additional pre-tax charge of $15 million during the quarter for the remediation of Operating Units 2 — 5. Also during the first quarter of 2008, settlements totaling $15 million were reached on certain of the insurance policies covering the Fox River contamination. The recognition of these insurance settlements during the quarter effectively offset the impact to earnings of the additional charge. Although the Company lacks a reasonable basis for identifying any amount within the range of possible loss as a better estimate than any other amount, as has previously been disclosed, the upper end of the range may exceed the net worth of U.S. Mills. However, because the discharges of hazardous materials into the environment occurred before the Company acquired U.S. Mills, and U.S. Mills has been operated as a separate subsidiary of the Company, the Company does not believe that it bears financial responsibility for these legacy environmental liabilities of U.S. Mills. Therefore, the Company continues to believe that the maximum additional exposure to its consolidated financial position is limited to the equity position of U.S. Mills, which was approximately $75 million at March 30, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

			(c) Total Number of — Shares Purchased as	(d) Maximum Number — of Shares that May
	(a) Total Number of		Part of Publicly	Yet be Purchased
	Shares	(b) Average Price	Announced Plans or	under the Plans or
Period	Purchased 1	Paid per Share	Programs 2	Programs 2
1/01/08 — 2/03/08	—	—	—	5,000,000
2/04/08 — 3/02/08	26,577	$ 29.30	—	5,000,000
3/03/08— 3/30/08	739	$ 28.80	—	5,000,000
Total	27,316	$ 29.29	—	5,000,000

| 1 | All of the share purchases in the first quarter of 2008 relate to shares withheld to
satisfy employee tax withholding obligations in association with the exercise of
performance-based stock awards and stock appreciation rights. These shares were not repurchased
as part of a publicly announced plan or program. |
| --- | --- |
| 2 | On April 19, 2006, the Company’s Board of Directors authorized the repurchase of up
to 5.0 million shares of the Company’s common stock. This authorization rescinded all previous
existing authorizations and does not have a specific expiration date. During 2007, the Company
repurchased a total of 3.0 million shares of its common stock under the new authorization at a
total cost of $109.2 million; however, the Board of Directors approved the reinstatement of those
shares to the original authorization. Accordingly, 5.0 million shares remained available for
repurchase under this authorization at December 31, 2007. There were no repurchases under this
program in the first quarter of 2008. |

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Item 4. Submission of Matters to a Vote of Security Holders.

The Company’s annual meeting of shareholders was held on April 16, 2008. The following matters, as described more fully in the Company’s Proxy Statement, were approved by the shareholders at this meeting:

(1) The following directors were elected:

	Term	VOTES — For	Withheld
Charles J. Bradshaw	3 years 1	81,326,555	1,822,220
James L. Coker	3 years	82,380,000	768,775
Marc D. Oken	3 years	80,784,348	2,364,427
Lloyd W. Newton	3 years	80,443,499	2,705,276
Phillippe R. Rollier	2 years	80,768,296	2,380,479

1 Although Mr. Bradshaw was elected to a three-year term, he will reach mandatory retirement age in July 2008, and is only eligible to serve on the Board until that time.

(2) The 2008 Long-Term Incentive Plan was approved. The shareholders voted 61,584,707 for and 9,786,543 against approval, with 1,353,889 votes abstaining. There were 11,349,061 broker non-votes with respect to this matter.

(3) Selection of PricewaterhouseCoopers LLP as the independent accountants of the Company for the fiscal year ending December 31, 2008 was ratified. The shareholders voted 80,228,128 for and 2,702,896 against ratification, with 217,750 votes abstaining.

Item 6. Exhibits.

| Exhibit 10 — | Sonoco Products Company 2008 Long-Term Incentive Plan (incorporated by
reference to the Company’s Proxy Statement for the Annual Meeting of Shareholders on
April 16, 2008) |
| --- | --- |
| Exhibit 15 — | Letter re: unaudited interim financial information |
| Exhibit 31 — | Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(a) |
| Exhibit 32 — | Certification of Chief Executive Officer and Chief Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(b) |

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SIGNATURE

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

SONOCO PRODUCTS COMPANY (Registrant) — By:	/s/ Charles J. Hupfer
	Charles J. Hupfer
	Senior Vice President and Chief Financial Officer
(principal financial officer)
By:	/s/ Barry L. Saunders
	Barry L. Saunders
	Vice President and Corporate Controller
(principal accounting officer)

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EXHIBIT INDEX

Exhibit
Number	Description
10	Sonoco Products Company 2008 Long-Term Incentive Plan
(incorporated by reference to the Company’s Proxy Statement for
the Annual Meeting of Shareholders on April 16, 2008)
15	Letter re: unaudited interim financial information
31	Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and 17 C.F.R. 240.13a-14(a)
32	Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and 17 C.F.R. 240.13a-14(b)

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