Capital Structure of Sonoco

By: Glenn C. Mack

FIN 560 Financial Management of the Enterprise Salem International University June 15th 2014

In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's leverage. In reality, capital structure may be highly complex and include dozens of sources. Gearing Ratio is the proportion of the capital employed of the firm which come from outside of the business finance, e.g. by taking a short term loan etc. (http://en.wikipedia.org/wiki/Capital_structure). Introduction Packaging is the expertise of protecting a product for distributing, storage, sale, and use. Research shows that packaging can be traced back to the ancient times. In this research paper we will be looking at the company Sonoco Products history, capital adequacy, its cash flow, its financing history and future plans. This company has a personal attachment to my family. It supported 3 generations of my family financially. My great grandfather (Tommy Mack) started working with the company in the 1940’s. Grandfather (Lee E. Mack) started in 1949, and retired after 43 years in 1992. My father (Lee E. Mack Jr.) started in 1973 and retired after 40 years in 2013. Before my research on Sonoco the only thing I knew about the company was that it engineer the town of Hartsville SC, it was able to provide for my family financially, and it made paper. Sonoco is one of the oldest/largest packaging company’s on the east coast, if not the oldest. Sonoco was able to with stand the time, and updated and adjust through several economic hardships. The company originally manufactured paper cones used by the textile industry to wind yarn. As the company expanded and diversified, Sonoco began to manufacture additional products such as molded plastic cones and tubes, toner cartridges, caulking cartridges, composite containers (used for refrigerated dough, frozen juice concentrates and other foods), fiber and plastic drums used for chemicals and pharmaceuticals, tennis ball containers, paperboard, packaging forms, and cap seals, to name a few. Sonoco had its beginnings in 1890, when Major James L. Coker and his son, James, Jr., founded the Carolina Fiber Company in Hartsville, South Carolina, to manufacture pulp and paper from Southern Pine trees. The enterprise was based on James, Jr.'s senior thesis, which outlined how to make paper pulp using a chemical process. A few years later, after unsuccessful attempts to sell the pulp commercially, the Cokers decided to use the pulp to make paper cones for the textile industry. On April 15, 1899, Maj. Coker and W. F. Smith formed the Southern Novelty Company, with Coker as the first president. The company ordered a Fourdrinier paper machine, which was built for $19,050. The machine was capable of turning out five to eight tons of paper in 24 hours. One year after its founding, the new company had sales of $17,000 and net earnings of $2,000. As the 20th century dawned, the textile industry in the South began to grow and prosper, and Sonoco's yarn carriers were in high demand. The advent of new uses for cotton and innovations in high-speed cotton spinning helped revolutionize the textile industry and fuel Sonoco's growth. By 1923, when the company changed its name to Sonoco Products Company, sales were approaching the one-million mark, and income was nearly $40,000. (http://www.fundinguniverse.com/company-histories/sonoco-products-company-history/).

The HBM is one of the most used conceptual frameworks in the health behavior research. HBM is a health behavior change and psychological model for studying and promoting the uptake of health services. The HBM have several concepts and predict why some people will take action to prevent, to screen, or to control illness conditions. These concepts include: susceptibility, severity, benefits, barriers, and cues to action, self-efficacy and other variables. Perceived Susceptibility is an individual's assessment of their risk of getting the condition. For example an alcoholic must believe that it is a possibility of liver failure before getting a screen. Something must happen to the alcoholic before he or she thinks about taking a screening (ex. stomach ache, pain in the stomach, etc…). Perceived Severity is how serious an individual is about contraction an illness or leaving it untreated, and thinking about the consequences that may potentially accrue. “For behavior change to succeed, people must feel threatened by their current behavioral patterns and believe that change of a specific kind will result in a valued outcome at an acceptable cost. Perceived Benefits are positive consequences for adopting the behavior. For example if a crack addict quits smoking crack, then his/her positive consequence is that they may find a job, become stable, and be able to save money. Perceived Barriers are an individual's influences that facilitate or discourage adoption of the promoted behavior (http://en.wikipedia.org/wiki/Health_Belief_Model ). Things that may stop you from implementing an action for the situation, due to expense, have negative side effects, inconvenient and/or time consuming. Cues to action are a perception of cues that can prompt actions. For example a drug abuse treatment facility promotes awareness to remind individuals of what drug abuse can do to the body. Self Efficacy can be referred to as one’s confidence to take action and successfully adopt a desired behavior. This is when an individual is convinced that he or she can overcome a drug addiction, and is willing to take the necessary steps to complete it. Other variables include diverse demographics, sociopsychological, and structural variables that may influence perceptions and thus, indirectly influence health-related behavior. The TTM emerged from a comparative analysis of leading theories of psychotherapy and behavior change in an effort to integrate and field that had fragmented into more than 300 theories of psychotherapy (Prochaska, 1984). TTM assesses an individual's readiness to act on a new healthier behavior, and provides strategies, or processes of change to guide the individual through the stages of change to action and maintenance. The TTM has a series of six stages that an individual will have to go through to become successful. These steps consist of precontemplation, contemplation, preparation, action, maintenance and termination. Precontemplation is the stage where individual’s are not ready to take action or start the healthy behavior and may be unaware of their need to change. This is usually when a drug abuser is just entering the substance abuse treatment program and may be in denial or not willing to participate in the program. Contemplation is the stage where individuals start the healthy behavior for the next six months and are aware of the pros and cons. This is when the individual has accepted that fact that they have a problem and is willing to work the program. Preparation at this stage, individuals are ready to start their healthy behavior for the next 30 days. This is when the individual will take small steps to make the healthy behavior apart of their life style and may even tell family members and friends that they are ready to make a change. Action at this stage individuals have continued their healthy behavior for the last six months and continuing to work hard on maintaining it. Individuals are taught techniques to keep maintaining this healthy behavior and also reward themselves for the positive steps that they have taken. Maintenance at this stage, individuals has continued their healthy behavior for more than six months and is working to prevent relapse. Individuals are encouraged to talk to people that they can trust, and spend time with people that they behave healthy around. Termination is the final stage, where the individual has zero temptation and 100 percent self confidents in him or herself. Individuals are not to return to their old unhealthy behaviors once in the termination stage. Both models (HBM & TTM) can be effective with substance abuse in the criminal justice system, if the individual follows the steps/stages actually and is willing to buy into the system. Both models are intended for the individual to live a healthy lifestyle and protecting against negative behaviors. Both models also motivate the individual to be confident about his or her decisions and the willingness to complete the program. The differentiation between the two models is that the HBM has a boarder audience. This model pertains more to the community than to a certain group on individuals. TTM is probably what one would look for if they were looking for a model that would focus on the individual with substance abuse issues in the criminal justice system. The TTM is more like a twelve step program that has a set of guiding principles outlining recovery for addicts. Within my particular agency the HBM, would be the most compatible model for our needs. My agency deals with Foster Care consumers, which require treatment in various areas including substance abuse. Before the consumer is placed with the agency he or she must go through an assessment process to find out what their needs are and if they have substance issues. Like the HBM, foster care is a very broad service that helps a wide range of individuals. Lots of females in foster care have to decide whether they want to take a screening or not. Most of our teens go through risky sexual behaviors and could value from the HBM constructs to get a better understanding of the different perspectives. Almost every consumer in foster care is assigned a therapist for either individual or family. Therapist could also reintegrate this model to the consumers during their session. This model would fit into my particular agency, due to us already focusing on healthy behavior for the consumers all of the time. This also means financially the agency wouldn’t have to spend much money to get the model incorporated into the company.

References

Wikipedia, Substance Abuse. Retrieved June 12th 2011 from http://en.wikipedia.org/wiki/Substance_abuse Wikipedia, Behavior Health Model. Retrieved June 12th 2011 from http://en.wikipedia.org/wiki/Health_Belief_Model

Wikipedia, Transtheoretical Model. Retrieved June 12th 2011 from http://en.wikipedia.org/wiki/Transtheoretical_model