UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

or

Commission File No. 0-516

SONOCO PRODUCTS COMPANY

One North Second Street
Post Office Box 160
Hartsville, South Carolina 29551-0160
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 x     No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x     No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at October 31, 2004:

Common stock, no par value: 98,266,264

SONOCO PRODUCTS COMPANY

INDEX

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SONOCO PRODUCTS COMPANY

See accompanying Notes to Condensed Consolidated Financial Statements

3

SONOCO PRODUCTS COMPANY

See accompanying Notes to Condensed Consolidated Financial Statements

4

SONOCO PRODUCTS COMPANY

See accompanying Notes to Condensed Consolidated Financial Statements

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SONOCO PRODUCTS COMPANY

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) necessary to present fairly the consolidated financial position, results of operations and cash flows for the interim periods reported herein. Operating results for the three and nine months ended September 26, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. 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 for the fiscal year ended December 31, 2003.
		With respect to the unaudited condensed consolidated financial information of the Company for the three and nine month periods ended September 26, 2004 and September 28, 2003 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 November 2, 2004 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 the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.
		In conjunction with the preparation of this Quarterly Report on Form 10-Q, the Company has finalized its condensed consolidated balance sheet as of September 26, 2004. This finalization resulted in certain adjustments to the preliminary balance sheet previously included in the press release dated October 20, 2004. The adjustments only impacted classifications within the balance sheet and did not impact the earnings or cash flows that were reported in the press release.
		During the fourth quarter of 2003, the Company completed the sale of its High Density Film business to Hilex Poly Co., LLC, Los Angeles, California. Operating results of this business have been presented for the three and nine months ended September 28, 2003 as “Income from discontinued operations, net of income taxes” in the Company’s Condensed Consolidated Statements of Income. Items included in the Notes to Condensed Consolidated Financial Statements that relate to the Consolidated Statements of Income for the three and nine months ended September 28, 2003 have been restated to reflect the reclassification of the Company’s High Density Film business as discontinued operations.

Note 2: Acquisitions/Joint Ventures

		Acquisition of CorrFlex Graphics, LLC
		On May 28, 2004, the Company completed its purchase of CorrFlex Graphics, LLC (“CorrFlex”) for an all-cash purchase price of approximately $250,000. CorrFlex, a privately held company, is one of the nation’s largest point-of-purchase display companies. The acquired business, which is known as Sonoco CorrFlex, LLC, is reflected in the Packaging Services segment beginning in June of 2004.
		The unaudited proforma combined historical results, as if CorrFlex had been acquired at the beginning of fiscal 2003 and 2004, are estimated to be:

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

		The proforma results include amortization of intangibles and interest expense on debt assumed to finance the purchase. The proforma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of each period presented, nor are they necessarily indicative of future consolidated results.
		European Joint Venture
		On April 19, 2004, the Company announced that it had signed a definitive agreement with Ahlstrom Corporation, Helsinki, Finland (“Ahlstrom”) to combine each of the companies’ respective European paper-based tube/core and coreboard operations into a joint venture that will operate under the name Sonoco-Alcore S.a.r.l. On October 6, 2004, the Commission of the European Communities approved this joint venture, subject to the completion of an agreement to sell Ahlstrom’s core production facility at Sveberg, Norway. A binding sales agreement regarding this facility was signed, and on November 2, 2004, the joint venture was completed. The Company contributed to the joint venture ownership positions in 25 tube and core plants and nine paper mills and holds a 64.5% interest in the joint venture. Ahlstrom, a leader in high-performance fiber-based materials serving niche markets worldwide, contributed 14 tube and core plants and one paper mill to the joint venture and holds a 35.5% interest in it. The Company will consolidate the results of the joint venture and will report Ahlstrom’s minority interest as such in its financial statements.
		Following a two and one-half year standstill period, subject to certain conditions, Ahlstrom will have the right over the next three and one-half years to require the Company to purchase its interest in the joint venture for a price primarily based on a multiple of earnings. During the seventh year, the Company will have the right to require Ahlstrom to sell the Company its interest in the joint venture based on the same pricing formula.

Note 3: Discontinued Operations

		The financial statements and accompanying notes for prior periods have been restated to report the revenues and expenses of the components of the Company that were disposed of separately as discontinued operations. Income from discontinued operations, net of income taxes for the three and nine months ended September 28, 2003 represents the results of operations of the Company’s High Density Film business unit, which was sold in December 2003.
		The following table sets forth the operating results for the High Density Film business unit, which was previously reported in the Company’s Consumer Packaging segment:

		No interest expense or income was allocated to this business unit.
		The Company has no continuing involvement in the management or operations of the divested business.

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

Note 4: Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

Stock options to purchase approximately 3,140 and 8,016 shares at September 26, 2004 and September 28, 2003, respectively, were not dilutive and, therefore, are not included in 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 and shares in thousands except per share data)
(unaudited)

Note 5: Restructuring Programs

		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 has initiated or completed 12 plant closings and has terminated approximately 890 employees. As of September 26, 2004, the Company had incurred cumulative charges, net of adjustments, of approximately $62,126 pretax associated with these activities. Of this amount, $41,003 was related to the Engineered Carriers and Paper segment, $11,280 was related to the Consumer Packaging segment, $333 was attributed to the Packaging Services segment, $2,438 was related to All Other Sonoco, and $7,072 was associated with Corporate. These restructuring charges, net of adjustments, consisted of severance and termination benefits of $45,860, asset impairment charges of $10,393 and other exit costs of $5,873. The Company expects to recognize an additional cost of approximately $2,100 pretax in the future associated with these activities, which is comprised of approximately $900 in severance and termination benefits and $1,200 in other exit costs. Of this amount, approximately $2,000 is related to the Engineered Carriers and Paper segment and approximately $100 is related to the Consumer Packaging segment. The Company also expects to announce the closing of up to five additional plants in furtherance of these plans (excluding any plant closings related to consolidation opportunities associated with the Sonoco-Alcore joint venture). The costs associated with these future plant closings have not yet been determined. In conjunction with the Company’s review of its restructuring accrual in the second quarter of 2004, it was determined that one of the plants that had originally been identified to be closed pursuant to these plans would not be closed due to changes in certain factors. In response to this determination, the Company reduced its restructuring accrual for the Consumer Packaging segment, which resulted in a credit to the restructuring accrual of approximately $900 in the nine months ended September 26, 2004.
		During the three months ended September 26, 2004, the Company recognized restructuring charges, net of adjustments, of $1,148 ($910 after tax), which are reflected as “Restructuring charges” on the Company’s Condensed Consolidated Statements of Income. Of these charges, $854 was attributed to the Engineered Carriers and Paper segment, $592 was related to the Consumer Packaging segment and ($298) was associated with All Other Sonoco. These restructuring charges, net of adjustments, consisted of severance and termination benefits of $429, asset impairment charges of $399 and other exit costs of $320.
		During the three months ended September 28, 2003, the Company recognized restructuring charges, net of adjustments, of $24,170 ($15,594 after tax and minority interest) related to previously announced restructuring plans, $12,686 of which was attributed to the Engineered Carriers and Paper segment, $3,667 was related to the Consumer Packaging segment, $325 was attributed to the Packaging Services segment, $1,305 was associated with All Other Sonoco, and $6,187 was associated with Corporate. These restructuring charges, net of adjustments, consisted of severance and termination benefits of $20,835, asset impairment charges of $2,827 and other exit costs of $508.
		During the nine months ended September 26, 2004, the Company recognized restructuring charges, net of adjustments, of $8,244 ($6,524 after tax). Of these charges, $7,355 was attributed to the Engineered Carriers and Paper segment, $247 was related to the Consumer Packaging segment and $642 was associated with All Other Sonoco. These restructuring charges, net of adjustments, consisted of severance and termination benefits of $4,653, asset impairment charges of $2,097 and other exit costs of $1,494.
		During the nine months ended September 28, 2003, the Company recognized restructuring charges, net of adjustments, of $33,135 ($24,211 after tax and minority interest) related to previously announced restructuring plans. Of these charges, $20,845 was attributed to the Engineered Carriers and Paper segment, $4,167 was related to the Consumer Packaging segment, $325 was attributed to the Packaging Services segment, $1,611 was associated with All Other Sonoco, and $6,187 was associated with Corporate. These restructuring charges, net of adjustments, consisted of severance and termination

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

		benefits of $28,513, asset impairment charges of $3,556 and other exit costs of $1,066. Additionally, the Company’s High Density Film business, which was divested in December 2003, incurred restructuring charges of approximately $200 ($128 after tax) in the nine months ended September 28, 2003.
		The following table sets forth the activity in the restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. Restructuring charges are included in “Restructuring charges” on the Company’s Condensed Consolidated Statements of Income. In accordance with the agreement of sale for the High Density Film business, the liability of that business associated with the restructuring has been retained by the Company and is, therefore, included in the table below:

		During the nine months ended September 26, 2004, the Company recognized writeoffs of impaired equipment and facilities in the Engineered Carriers and Paper segment in the amount of $1,483, in the Consumer Packaging segment of $101, and in All Other Sonoco of $513. Other exit costs are primarily associated with lease termination and other miscellaneous plant closing costs.
		The Company expects to pay the remaining restructuring costs, with the exception of ongoing pension subsidies and certain building lease termination expenses, by the end of the third quarter of 2005, using cash generated from operations.

Note 6: Comprehensive Income

The following table reconciles net income to comprehensive income:

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