Highlights:
- 2Q23 Net sales of $2.1 billion
- Sales change ex. currency (non-GAAP) down 10%
- Organic sales change (non-GAAP) down 10%
- 2Q23 Reported EPS of $1.24
- Increased accrual for legacy legal matter; preparing for
appeal
- Adjusted EPS (non-GAAP) of $1.92, up 13% sequentially
- 3Q23 Reported EPS guidance of $1.70 to $1.90
- Adjusted EPS guidance of $2.00 to $2.20
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its second quarter ended July 1,
2023. Non-GAAP financial measures referenced in this release are
reconciled from GAAP in the attached financial schedules. Unless
otherwise indicated, comparisons are to the same period in the
prior year.
“Earnings per share increased sequentially in the second
quarter, a trend we expect to continue in coming quarters,” said
Mitch Butier, Chairman and CEO. “Volumes in our Materials
businesses continue to recover from slow market conditions, largely
destocking, while our Intelligent Labels platform accelerates
adoption into new categories.
"While it's good to see the continuing sequential improvements
in our Materials businesses and the building momentum in
Intelligent Labels, the pace of our recovery is slower than
anticipated. Our results for the quarter were below our expectation
due to lower revenue, something the team was able to largely offset
through cost reduction actions,” Butier added.
“We remain confident this period of challenging results will
soon pass. Our leadership positions in large diverse growing
markets, the strategic foundations we have laid, and the dedication
and expertise of our team positions us well to continue to deliver
GDP+ growth and top-quartile returns over the long-run,” said Deon
Stander, President and COO.
Second Quarter 2023 Results by
Segment
Materials Group
- Reported sales decreased 13% to $1.5 billion. Sales were down
12% ex. currency and on an organic basis.
- Label materials sales were down mid-teens on an organic basis.
- Lower volume was driven primarily by inventory destocking.
- Volume increased sequentially, particularly in Europe, as the
negative impact of destocking moderated.
- Sales increased by high-single digits organically in the
Graphics and Reflective Solutions businesses.
- Sales decreased by low-to-mid single digits organically in the
combined Performance Tapes and Medical businesses.
- Reported operating margin decreased 150 basis points to 13.1%.
Adjusted EBITDA margin (non-GAAP) was strong, increasing 150 basis
points sequentially to 15.7%. Adjusted EBITDA margin decreased 100
basis points compared to prior year, as productivity initiatives
and temporary cost-saving actions largely offset lower
volume/mix.
- The company anticipates adjusted EBITDA margin will improve
sequentially.
Solutions Group
- Reported sales decreased 7% to $615 million. Sales were down 4%
ex. currency and 7% on an organic basis.
- Sales in high-value categories were up low-single digits on an
organic basis.
- Sales were down high-teens organically in base solutions as
retailer and brand sentiment remains muted.
- Reported operating margin decreased approximately 14 points to
(1.2%) with an increased accrual for a legacy legal matter, which
the company is preparing for appeal. Adjusted EBITDA margin
decreased 320 basis points to 15.8% driven by lower volume and
growth investments, partially offset by productivity initiatives
and temporary cost-saving actions.
- The company anticipates adjusted EBITDA margin will improve
sequentially.
Other
Balance Sheet and Capital Deployment
During the first half of the year, the company deployed $194
million for acquisitions and returned $216 million in cash to
shareholders through a combination of dividends and share
repurchases. The company repurchased 0.5 million shares at an
aggregate cost of $90 million during the first half of the year.
Net of dilution from long-term incentive awards, the company’s
share count at the end of the quarter was down 0.8 million compared
to the same time last year.
The company continues to deploy capital in a disciplined manner,
executing its long-term capital allocation strategy. The company’s
balance sheet remains strong. Net debt to adjusted EBITDA
(non-GAAP) was 2.75x at the end of the second quarter.
Income Taxes
The company’s reported second quarter effective tax rate was
28.4%. The adjusted tax rate (non-GAAP) for the quarter was
25.5%.
The company’s 2023 adjusted tax rate is expected to be in the
mid-twenty percent range based on current tax regulations.
Cost Reduction Actions
During the first half of the year, the company realized
approximately $24 million in pre-tax savings from restructuring,
net of transition costs, and incurred approximately $28 million in
pre-tax restructuring charges.
Guidance
In its supplemental presentation materials, “Second Quarter 2023
Financial Review and Analysis”, the company provides a list of
factors that it believes will contribute to its third quarter 2023
financial results. Based on the factors listed and other
assumptions, the company expects third quarter 2023 reported
earnings per share of $1.70 to $1.90.
Excluding an estimated $0.30 per share impact of restructuring
charges and other items, the company expects third quarter 2023
adjusted earnings per share of $2.00 to $2.20.
For more details on the company’s results, see the summary
tables accompanying this news release, as well as the supplemental
presentation materials, “Second Quarter 2023 Financial Review and
Analysis,” posted on the company’s website at
www.investors.averydennison.com, and furnished to the SEC on Form
8-K.
Throughout this release and the supplemental presentation
materials, amounts on a per share basis reflect fully diluted
shares outstanding.
About Avery Dennison
Avery Dennison Corporation (NYSE: AVY) is a global materials
science and digital identification solutions company that provides
branding and information labeling solutions, including
pressure-sensitive materials, radio-frequency identification (RFID)
inlays and tags, and a variety of converted products and solutions.
The company designs and manufactures a wide range of labeling and
functional materials that enhance branded packaging, carry or
display information that connects the physical and the digital, and
improve customers’ product performance. The company serves an array
of industries worldwide, including home and personal care, apparel,
e-commerce, logistics, food and grocery, pharmaceuticals and
automotive. The company employs approximately 36,000 employees in
more than 50 countries. Reported sales in 2022 were $9.0 billion.
Learn more at www.averydennison.com.
“Safe Harbor” Statement under the Private
Securities Litigation Reform Act of 1995
Certain statements contained in this document are
"forward-looking statements" intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements,
and financial or other business targets, are subject to certain
risks and uncertainties.
We believe that the most significant risk factors that could
affect our financial performance in the near term include: (i) the
impacts to underlying demand for our products from global economic
conditions, political uncertainty, and changes in environmental
standards and governmental regulations; (ii) the cost and
availability of raw materials; (iii) competitors' actions,
including pricing, expansion in key markets, and product offerings;
(iv) the degree to which higher costs can be offset with
productivity measures and/or passed on to customers through price
increases, without a significant loss of volume; (v) foreign
currency fluctuations; and (vi) the execution and integration of
acquisitions.
Actual results and trends may differ materially from historical
or anticipated results depending on a variety of factors, including
but not limited to, risks and uncertainties related to the
following:
- International Operations – worldwide and local economic and
market conditions; changes in political conditions, including those
related to China and those related to the Russian invasion of
Ukraine; and fluctuations in foreign currency exchange rates and
other risks associated with foreign operations, including in
emerging markets
- Our Business – fluctuations in demand affecting sales to
customers; fluctuations in the cost and availability of raw
materials and energy; changes in our markets due to competitive
conditions, technological developments, environmental standards,
laws and regulations, and customer preferences; the impact of
competitive products and pricing; execution and integration of
acquisitions; selling prices; customer and supplier concentrations
or consolidations; financial condition of distributors; outsourced
manufacturers; product and service quality; timely development and
market acceptance of new products, including sustainable or
sustainably-sourced products; investment in development activities
and new production facilities; successful implementation of new
manufacturing technologies and installation of manufacturing
equipment; our ability to generate sustained productivity
improvement; our ability to achieve and sustain targeted cost
reductions; collection of receivables from customers; and our
environmental, social and governance practices
- Income Taxes – fluctuations in tax rates; changes in tax laws
and regulations, and uncertainties associated with interpretations
of such laws and regulations; retention of tax incentives; outcome
of tax audits; and the realization of deferred tax assets
- Information Technology – disruptions in information technology
systems or data security breaches, including cyber-attacks or other
intrusions to network security; and successful installation of new
or upgraded information technology systems
- Human Capital – recruitment and retention of employees and
collective labor arrangements
- Our Indebtedness – credit risks; our ability to obtain adequate
financing arrangements and maintain access to capital; fluctuations
in interest rates; volatility of financial markets; and compliance
with our debt covenants
- Ownership of Our Stock – potential significant variability of
our stock price and amounts of future dividends and share
repurchases
- Legal and Regulatory Matters – protection and infringement of
intellectual property; impact of legal and regulatory proceedings,
including with respect to environmental, anti-corruption, health
and safety, and trade compliance
- Other Financial Matters – fluctuations in pension costs and
goodwill impairment
For a more detailed discussion of these factors, see “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our 2022 Form 10-K, filed
with the Securities and Exchange Commission on February 22, 2023,
and subsequent quarterly reports on Form 10-Q.
The forward-looking statements included in this document are
made only as of the date of this document, and we undertake no
obligation to update these statements to reflect subsequent events
or circumstances, other than as may be required by law.
For more information and to listen to a live broadcast or an
audio replay of the quarterly conference call with analysts, visit
the Avery Dennison website at
www.investors.averydennison.com
Second Quarter Financial Summary - Preliminary, unaudited
(In millions, except % and per share amounts)
2Q
2Q % Sales Change vs. PY
2023
2022
Reported Ex. Currency Organic Net sales, by segment: Materials Group
$1,476.0
$1,689.5
(12.6%)
(11.6%)
(11.6%)
Solutions Group
614.5
657.5
(6.5%)
(4.4%)
(7.2%)
Total net sales
$2,090.5
$2,347.0
(10.9%)
(9.6%)
(10.4%)
As Reported (GAAP) Adjusted Non-GAAP 2Q
2Q % % of Sales 2Q 2Q %
% of Sales
2023
2022
Change
2023
2022
2023
2022
Change
2023
2022
Operating income (loss) / operating margins before interest, other
non-operating expense (income), and taxes, by segment: Materials
Group
$193.8
$246.7
13.1%
14.6%
$199.9
$247.3
13.5%
14.6%
Solutions Group
(7.2)
84.6
(1.2%)
12.9%
55.0
85.9
9.0%
13.1%
Corporate expense (a)
(21.1)
(23.9)
(21.1)
(22.4)
Total operating income / operating margins before interest, other
non-operating expense (income), and taxes
$165.5
$307.4
(46%)
7.9%
13.1%
$233.8
$310.8
(25%)
11.2%
13.2%
Interest expense
$31.9
$20.8
$31.9
$20.8
Other non-operating expense (income), net
($6.6)
($1.3)
($6.6)
($1.3)
Income before taxes
$140.2
$287.9
(51%)
6.7%
12.3%
$208.5
$291.3
(28%)
10.0%
12.4%
Provision for income taxes
$39.8
$73.4
$53.1
$74.6
Net income
$100.4
$214.5
(53%)
4.8%
9.1%
$155.4
$216.7
(28%)
7.4%
9.2%
Net income per common share, assuming dilution
$1.24
$2.61
(52%)
$1.92
$2.64
(27%)
2Q Adjusted free cash flow
$134.9
$209.1
YTD Adjusted free cash flow
$63.7
$282.4
Adjusted EBITDA: Materials Group
$231.9
$281.5
15.7%
16.7%
Solutions Group
$97.0
$124.9
15.8%
19.0%
Corporate expense
($21.1)
($22.4)
Total Adjusted EBITDA
$307.8
$384.0
14.7%
16.4%
Previously reported segment results have been recast to
reflect our new operating structure. See accompanying
schedules A-4 to A-9 for reconciliations of non-GAAP financial
measures from GAAP.
(a)
As reported "Corporate expense" for the second quarter of 2022
includes severance and related costs of $.8 and outcomes of legal
proceedings of $.7.
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts)
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 1, 2023
Jul. 2, 2022
Jul. 1, 2023
Jul. 2, 2022
Net sales
$
2,090.5
$
2,347.0
$
4,155.5
$
4,696.3
Cost of products sold
1,537.1
1,703.5
3,059.8
3,411.5
Gross profit
553.4
643.5
1,095.7
1,284.8
Marketing, general and administrative expense
319.6
332.7
654.0
687.7
Other expense (income), net(1)
68.3
3.4
86.1
1.8
Interest expense
31.9
20.8
58.3
40.4
Other non-operating expense (income), net
(6.6
)
(1.3
)
(11.2
)
(2.7
)
Income before taxes
140.2
287.9
308.5
557.6
Provision for income taxes
39.8
73.4
86.9
144.9
Net income
$
100.4
$
214.5
$
221.6
$
412.7
Per share amounts:
Net income per common share, assuming dilution
$
1.24
$
2.61
$
2.73
$
5.00
Weighted average number of common shares outstanding, assuming
dilution
81.0
82.1
81.2
82.6
(1)
"Other expense (income), net" for the second quarter of 2023
includes outcomes of legal proceedings of $53.8, severance and
related costs of $8.8, asset impairment charges of $1.2,
transaction and related costs of $4, and loss on sales of assets of
$.5.
"Other expense (income), net" for the second quarter of 2022
includes severance and related costs of $3.1, outcomes of legal
proceedings of $.7, and transaction and related costs of $.1,
partially offset by gain on sales of assets of $.5.
"Other expense (income), net" for the first half of 2023 includes
outcomes of legal proceedings of $53.8, severance and related costs
of $25.9, asset impairment charges of $1.7, transaction and related
costs of $4.2, and loss on sales of asset of $.5.
"Other expense (income), net" for the first half of 2022 includes
severance and related costs of $4, outcomes of legal proceedings of
$1.7, and transaction and related costs of $.3, partially offset by
gain on venture investment of $3.7 and gain on sales of assets of
$.5.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS
Jul. 1, 2023
Jul. 2, 2022
Current assets: Cash and cash equivalents
$
217.1
$
164.8
Trade accounts receivable, net
1,415.2
1,565.1
Inventories
990.5
990.1
Other current assets
228.2
228.8
Total current assets
2,851.0
2,948.8
Property, plant and equipment, net
1,567.0
1,451.0
Goodwill and other intangibles resulting from business
acquisitions, net
2,868.9
2,738.6
Deferred tax assets
119.7
119.9
Other assets
859.7
834.1
$
8,266.3
$
8,092.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and current
portion of long-term debt and finance leases
$
635.8
$
738.6
Accounts payable
1,234.8
1,410.9
Other current liabilities
738.1
851.0
Total current liabilities
2,608.7
3,000.5
Long-term debt and finance leases
2,909.7
2,493.4
Other long-term liabilities
732.7
661.6
Shareholders' equity: Common stock
124.1
124.1
Capital in excess of par value
851.3
855.9
Retained earnings
4,526.9
4,182.0
Treasury stock at cost
(3,093.9
)
(2,914.0
)
Accumulated other comprehensive loss
(393.2
)
(311.1
)
Total shareholders' equity
2,015.2
1,936.9
$
8,266.3
$
8,092.4
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Six Months Ended
Jul. 1, 2023
Jul. 2, 2022
Operating Activities Net income
$
221.6
$
412.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
91.5
88.2
Amortization
54.8
57.0
Provision for credit losses and sales returns
18.9
23.9
Stock-based compensation
12.2
23.9
Deferred taxes and other non-cash taxes
(17.5
)
8.6
Other non-cash expense and loss (income and gain), net
17.0
15.0
Changes in assets and liabilities and other adjustments
(207.0
)
(234.9
)
Net cash provided by operating activities
191.5
394.4
Investing Activities
Purchases of property, plant and equipment
(115.9
)
(106.8
)
Purchases of software and other deferred charges
(11.0
)
(9.9
)
Proceeds from sales of property, plant and equipment
0.3
2.1
Proceeds from insurance and sales (purchases) of investments, net
(1.2
)
2.0
Payments for acquisitions, net of cash acquired, and venture
investments
(194.1
)
(37.0
)
Net cash used in investing activities
(321.9
)
(149.6
)
Financing Activities
Net increase (decrease) in borrowings with maturities of three
months or less
281.8
176.9
Additional long-term borrowings
394.9
---
Repayments of long-term debt and finance leases
(252.6
)
(3.4
)
Dividends paid
(126.2
)
(117.4
)
Share repurchases
(89.5
)
(268.7
)
Net (tax withholding) proceeds related to stock-based compensation
(23.7
)
(25.1
)
Other
(1.6
)
---
Net cash provided by (used in) financing activities
183.1
(237.7
)
Effect of foreign currency translation on cash balances
(2.8
)
(5.0
)
Increase (decrease) in cash and cash equivalents
49.9
2.1
Cash and cash equivalents, beginning of year
167.2
162.7
Cash and cash equivalents, end of period
$
217.1
$
164.8
A-4
Reconciliation of Non-GAAP Financial
Measures from GAAP
We report our financial results in conformity with accounting
principles generally accepted in the United States of America, or
GAAP, and also communicate with investors using certain non-GAAP
financial measures. These non-GAAP financial measures are not in
accordance with, nor are they a substitute for or superior to, the
comparable GAAP financial measures. These non-GAAP financial
measures are intended to supplement the presentation of our
financial results prepared in accordance with GAAP. Based on
feedback from investors and financial analysts, we believe that the
supplemental non-GAAP financial measures we provide are useful to
their assessments of our performance and operating trends, as well
as liquidity.
Our non-GAAP financial measures exclude the impact of certain
events, activities or strategic decisions. The accounting effects
of these events, activities or decisions, which are included in the
GAAP financial measures, may make it more difficult to assess our
underlying performance in a single period. By excluding the
accounting effects, positive or negative, of certain items (e.g.,
restructuring charges, outcomes of certain legal proceedings,
certain effects of strategic transactions and related costs, losses
from debt extinguishments, gains or losses from curtailment or
settlement of pension obligations, gains or losses on sales of
certain assets, gains or losses on venture investments and other
items), we believe that we are providing meaningful supplemental
information that facilitates an understanding of our core operating
results and liquidity measures. While some of the items we exclude
from GAAP financial measures recur, they tend to be disparate in
amount, frequency or timing.
We use these non-GAAP financial measures internally to evaluate
trends in our underlying performance, as well as to facilitate
comparison to the results of competitors for quarters and
year-to-date periods, as applicable.
We use the non-GAAP financial measures described below in the
accompanying news release.
Sales change ex. currency refers to the increase or decrease in
net sales, excluding the estimated impact of foreign currency
translation and the reclassification of sales between segments,
and, where applicable, an extra week in our fiscal year and the
calendar shift resulting from the extra week in the prior fiscal
year, and currency adjustment for transitional reporting of highly
inflationary economies. The estimated impact of foreign currency
translation is calculated on a constant currency basis, with prior
period results translated at current period average exchange rates
to exclude the effect of currency fluctuations.
Organic sales change refers to sales change ex. currency,
excluding the estimated impact of acquisitions and product line
divestitures.
We believe that sales change ex. currency and organic sales
change assist investors in evaluating the sales change from the
ongoing activities of our businesses and enhance their ability to
evaluate our results from period to period.
Adjusted operating income refers to net income adjusted for
taxes; other expense (income), net; interest expense; and other
non-operating expense (income), net.
Adjusted EBITDA refers to adjusted operating income before
depreciation and amortization.
Adjusted operating margin refers to adjusted operating income as
a percentage of net sales.
Adjusted EBITDA margin refers to adjusted EBITDA as a percentage
of net sales.
Adjusted tax rate refers to the projected full-year GAAP tax
rate, adjusted to exclude certain unusual or infrequent events that
are expected to significantly impact that rate, such as effects of
certain discrete tax planning actions, impacts related to
enactments of comprehensive tax law changes, and other items.
Adjusted net income refers to income before taxes, tax-effected
at the adjusted tax rate, and adjusted for tax-effected
restructuring charges and other items.
Adjusted net income per common share, assuming dilution
(adjusted EPS) refers to adjusted net income divided by the
weighted average number of common shares outstanding, assuming
dilution.
We believe that adjusted operating margin, adjusted EBITDA
margin, adjusted net income, and adjusted EPS assist investors in
understanding our core operating trends and comparing our results
with those of our competitors.
Net debt to adjusted EBITDA ratio refers to total debt
(including finance leases) less cash and cash equivalents, divided
by adjusted EBITDA for the last twelve months. We believe that the
net debt to adjusted EBITDA ratio assists investors in assessing
our leverage position.
Adjusted free cash flow refers to cash flow provided by
operating activities, less payments for property, plant and
equipment, software and other deferred charges, plus proceeds from
sales of property, plant and equipment, plus (minus) net proceeds
from insurance and sales (purchases) of investments. Adjusted free
cash flow is also adjusted for, where applicable, certain
acquisition-related transaction costs. We believe that adjusted
free cash flow assists investors by showing the amount of cash we
have available for debt reductions, dividends, share repurchases,
and acquisitions.
Reconciliations are provided in accordance with Regulations G
and S-K and reconcile our non-GAAP financial measures with the most
directly comparable GAAP financial measures.
A-5
AVERY DENNISON CORPORATION PRELIMINARY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FROM GAAP (In
millions, except % and per share amounts)
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 1, 2023
Jul. 2, 2022
Jul. 1, 2023
Jul. 2, 2022
Reconciliation of non-GAAP operating margins from
GAAP: Net sales
$
2,090.5
$
2,347.0
$
4,155.5
$
4,696.3
Income before taxes
$
140.2
$
287.9
$
308.5
$
557.6
Income before taxes as a percentage of net sales
6.7
%
12.3
%
7.4
%
11.9
%
Adjustments:
Interest expense
$
31.9
$
20.8
$
58.3
$
40.4
Other non-operating expense (income), net
(6.6
)
(1.3
)
(11.2
)
(2.7
)
Operating income before interest expense, other non-operating
expense (income) and taxes
$
165.5
$
307.4
$
355.6
$
595.3
Operating margins
7.9
%
13.1
%
8.6
%
12.7
%
As reported net income
$
100.4
$
214.5
$
221.6
$
412.7
Adjustments:
Restructuring charges:
Severance and related costs
8.8
3.1
25.9
4.0
Asset impairment charges
1.2
---
1.7
---
Outcomes of legal proceedings
53.8
0.7
53.8
1.7
Transaction and related costs
4.0
0.1
4.2
0.3
(Gain) loss on sales of assets
0.5
(0.5
)
0.5
(0.5
)
Gain on venture investment
---
---
---
(3.7
)
Interest expense
31.9
20.8
58.3
40.4
Other non-operating expense (income), net
(6.6
)
(1.3
)
(11.2
)
(2.7
)
Provision for income taxes
39.8
73.4
86.9
144.9
Adjusted operating income (non-GAAP)
$
233.8
$
310.8
$
441.7
$
597.1
Adjusted operating margins (non-GAAP)
11.2
%
13.2
%
10.6
%
12.7
%
Depreciation and amortization
74.0
73.2
146.3
145.2
Adjusted EBITDA (non-GAAP)
307.8
384.0
588.0
742.3
Adjusted EBITDA margins (non-GAAP)
14.7
%
16.4
%
14.1
%
15.8
%
Reconciliation of non-GAAP net income from GAAP:
As reported net income
$
100.4
$
214.5
$
221.6
$
412.7
Adjustments:
Restructuring charges and other items(1)
68.3
3.4
86.1
1.8
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(13.3
)
(1.2
)
(13.7
)
1.7
Adjusted net income (non-GAAP)
$
155.4
$
216.7
$
294.0
$
416.2
(1) Included pretax restructuring
charges, outcomes of legal proceedings, transaction and related
costs, gain/loss on sales of assets and gain on venture
investment.
A-5
(continued)
AVERY DENNISON
CORPORATION
PRELIMINARY RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES FROM GAAP
(In millions, except % and per
share amounts)
(UNAUDITED) Three Months Ended Six
Months Ended
Jul. 1, 2023
Jul. 2, 2022
Jul. 1, 2023
Jul. 2, 2022
Reconciliation of non-GAAP net income per common
share from GAAP: As reported net income per common share,
assuming dilution
$
1.24
$
2.61
$
2.73
$
5.00
Adjustments per common share, net of tax:
Restructuring charges and other items(1)
0.84
0.04
1.06
0.02
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(0.16
)
(0.01
)
(0.17
)
0.02
Adjusted net income per common share, assuming dilution (non-GAAP)
$
1.92
$
2.64
$
3.62
$
5.04
Weighted average number of common shares outstanding, assuming
dilution
81.0
82.1
81.2
82.6
Our adjusted tax rate was 25.5% for the three and six months
ended July 1, 2023 and 25.6% for the three and six months ended
July 2, 2022, respectively. (1) Included pretax
restructuring charges, outcomes of legal proceedings, transaction
and related costs, gain/loss on sales of assets and gain on venture
investment.
(UNAUDITED) Three Months
Ended Six Months Ended
Jul. 1, 2023
Jul. 2, 2022
Jul. 1, 2023
Jul. 2, 2022
Reconciliation of adjusted free cash flow: Net
cash provided by operating activities
$
189.6
$
268.2
$
191.5
$
394.4
Purchases of property, plant and equipment
(51.4
)
(57.1
)
(115.9
)
(106.8
)
Purchases of software and other deferred charges
(5.7
)
(4.3
)
(11.0
)
(9.9
)
Proceeds from sales of property, plant and equipment
0.1
1.8
0.3
2.1
Proceeds from insurance and sales (purchases) of investments, net
2.3
0.2
(1.2
)
2.0
Payments for certain acquisition-related transaction costs
---
0.3
---
0.6
Adjusted free cash flow (non-GAAP)
$
134.9
$
209.1
$
63.7
$
282.4
A-6
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Second Quarter Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
1,476.0
$
1,689.5
$
193.8
$
246.7
13.1
%
14.6
%
Solutions Group
614.5
657.5
(7.2
)
84.6
(1.2
%)
12.9
%
Corporate Expense
N/A
N/A
(21.1
)
(23.9
)
N/A
N/A
TOTAL FROM OPERATIONS
$
2,090.5
$
2,347.0
$
165.5
$
307.4
7.9
%
13.1
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY
INFORMATION FROM GAAP Second Quarter Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
193.8
$
246.7
13.1
%
14.6
%
Adjustments:
Restructuring charges:
Severance and related costs
4.5
0.6
0.3
%
---
Asset impairment charges
1.1
---
0.1
%
---
Loss on sales of assets
0.5
---
---
---
Adjusted operating income and margins (non-GAAP)
$
199.9
$
247.3
13.5
%
14.6
%
Depreciation and amortization
32.0
34.2
2.2
%
2.1
%
Adjusted EBITDA and margins (non-GAAP)
$
231.9
$
281.5
15.7
%
16.7
%
Solutions Group
Operating income (loss) and margins, as reported
$
(7.2
)
$
84.6
(1.2
%)
12.9
%
Adjustments:
Restructuring charges:
Severance and related costs
4.3
1.7
0.7
%
0.3
%
Asset impairment charges
0.1
---
---
---
Outcomes of legal proceedings
53.8
---
8.8
%
---
Transaction and related costs
4.0
0.1
0.7
%
---
Gain on sales of assets
---
(0.5
)
---
(0.1
%)
Adjusted operating income and margins (non-GAAP)
$
55.0
$
85.9
9.0
%
13.1
%
Depreciation and amortization
42.0
39.0
6.8
%
5.9
%
Adjusted EBITDA and margins (non-GAAP)
$
97.0
$
124.9
15.8
%
19.0
%
Previously reported segment results have been recast to
reflect our new operating structure.
A-7
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Six Months Ended NET SALES
OPERATING INCOME (LOSS) OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
2,936.5
$
3,359.8
$
354.3
$
469.5
12.1
%
14.0
%
Solutions Group
1,219.0
1,336.5
44.3
174.9
3.6
%
13.1
%
Corporate Expense
N/A
N/A
(43.0
)
(49.1
)
N/A
N/A
TOTAL FROM OPERATIONS
$
4,155.5
$
4,696.3
$
355.6
$
595.3
8.6
%
12.7
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY
INFORMATION FROM GAAP Six Months Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
354.3
$
469.5
12.1
%
14.0
%
Adjustments:
Restructuring charges:
Severance and related costs, net of reversals
18.8
1.1
0.6
%
---
Asset impairment charges
1.1
---
0.1
%
---
Loss on sales of assets
0.5
---
---
---
Gain on venture investment
---
(3.7
)
---
(0.1
%)
Adjusted operating income and margins (non-GAAP)
$
374.7
$
466.9
12.8
%
13.9
%
Depreciation and amortization
64.7
68.7
2.2
%
2.0
%
Adjusted EBITDA and margins (non-GAAP)
$
439.4
$
535.6
15.0
%
15.9
%
Solutions Group
Operating income and margins, as reported
$
44.3
$
174.9
3.6
%
13.1
%
Adjustments:
Restructuring charges:
Severance and related costs
7.2
2.1
0.6
%
0.1
%
Asset impairment charges
0.6
---
0.1
%
---
Outcomes of legal proceedings
53.8
1.0
4.4
%
0.1
%
Transaction and related costs
4.2
0.3
0.3
%
---
Gain on sales of assets
---
(0.5
)
---
---
Adjusted operating income and margins (non-GAAP)
$
110.1
$
177.8
9.0
%
13.3
%
Depreciation and amortization
81.6
76.5
6.7
%
5.7
%
Adjusted EBITDA and margins (non-GAAP)
$
191.7
$
254.3
15.7
%
19.0
%
Previously reported segment results have been recast to
reflect our new operating structure.
A-8
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except ratios)
(UNAUDITED) QTD
3Q22
4Q22
1Q23
2Q23
Reconciliation of adjusted EBITDA from GAAP: As
reported net income
$
221.5
$
122.9
$
121.2
$
100.4
Other expense (income), net
(3.9
)
1.5
17.8
68.3
Interest expense
21.2
22.5
26.4
31.9
Other non-operating expense (income), net
(1.4
)
(5.3
)
(4.6
)
(6.6
)
Provision for income taxes
51.0
46.3
47.1
39.8
Depreciation and amortization
72.0
73.5
72.3
74.0
Adjusted EBITDA (non-GAAP)
$
360.4
$
261.4
$
280.2
$
307.8
Total Debt
$
3,545.5
Less: Cash and cash equivalents
217.1
Net Debt
$
3,328.4
Net Debt to Adjusted EBITDA LTM* (non-GAAP)
2.75
*LTM = Last twelve months (3Q22 to 2Q23)
A-9
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (UNAUDITED) Second Quarter
2023 TotalCompany MaterialsGroup SolutionsGroup
Reconciliation of organic sales change from GAAP: Reported
net sales change
(10.9%)
(12.6%)
(6.5%)
Reclassification of sales between segments
---
---
(0.1%)
Foreign currency translation
1.3%
1.0%
2.3%
Sales change ex. currency (non-GAAP)(1)
(9.6%)
(11.6%)
(4.4%)
Acquisitions
(0.8%)
---
(2.8%)
Organic sales change (non-GAAP)(1)
(10.4%)
(11.6%)
(7.2%)
Six Months Ended 2023 TotalCompany
MaterialsGroup SolutionsGroup
Reconciliation of organic
sales change from GAAP: Reported net sales change
(11.5%)
(12.6%)
(8.8%)
Reclassification of sales between segments
---
0.1%
(0.3%)
Foreign currency translation
2.2%
2.0%
2.7%
Sales change ex. currency (non-GAAP)(1)
(9.3%)
(10.5%)
(6.4%)
Acquisitions
(0.5%)
---
(1.7%)
Organic sales change (non-GAAP)(1)
(9.8%)
(10.5%)
(8.1%)
(1) Totals may not sum due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230724863164/en/
Media Relations: Kristin Robinson (626) 304-4592
kristin.robinson@averydennison.com
Investor Relations: John Eble (440) 534-6290
john.eble@averydennison.com
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