Highlights:
- 3Q23 Net sales of $2.1 billion
- Sales change ex. currency (non-GAAP) down 10%
- Organic sales change (non-GAAP) down 11%
- 3Q23 Reported EPS of $1.71
- Adjusted EPS (non-GAAP) of $2.10, up 9% sequentially
- 4Q23 Reported EPS guidance of $2.05 to $2.20
- Adjusted EPS guidance of $2.10 to $2.25
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its third quarter ended
September 30, 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 were in line with our expectations for the
third quarter, again increasing sequentially,” said Deon Stander,
president and CEO. “Volume in both Label Materials and Apparel
Solutions improved sequentially, continuing to recover from slow
market conditions, largely inventory destocking, while our
Intelligent Labels platform continued to accelerate adoption into
new categories.
“We expect further sequential improvement in the fourth quarter,
as the pace of inventory destocking continues to moderate and
non-apparel intelligent label programs accelerate.
“In Intelligent Labels, we expect to deliver more than twenty
percent growth annually in the coming years, as adoption
accelerates in logistics, food, and general retail, and apparel
rebounds, further advancing our leadership position at the
intersection of the physical and digital,” added Stander.
“We remain confident that the consistent execution of our
strategies will enable us to meet our long-term goals for superior
value creation through a balance of profitable growth and capital
discipline.
“Once again, I want to thank our entire team for their continued
resilience and commitment to addressing the unique challenges at
hand.”
Third Quarter 2023 Results by
Segment
Materials Group
- Reported sales decreased 14% to $1.5 billion. Sales were down
16% ex. currency and on an organic basis.
- Label Materials sales were down high-teens on an organic basis.
- Lower volume was driven primarily by inventory destocking.
- Volume was up sequentially as the impact of inventory
destocking continues to moderate.
- Sales decreased by low-single digits organically in the
Graphics and Reflective Solutions businesses.
- Sales increased by low-single digits organically in the
combined Performance Tapes and Medical businesses.
- Reported operating margin was 12.1%. Adjusted EBITDA margin
(non-GAAP) was strong, increasing 70 basis points sequentially to
16.4%. Adjusted EBITDA margin increased 90 basis points compared to
prior year, as productivity and temporary cost-saving actions more
than offset lower volume and mix.
Solutions Group
- Reported sales increased 3% to $642 million. Sales were up 5%
ex. currency and 1% on an organic basis.
- Apparel Solutions volume was up sequentially; retailer and
brand sentiment remains muted.
- Sales in high-value categories were up high-single digits on an
organic basis.
- Sales were down mid-to-high single digits organically in base
solutions.
- Reported operating margin was 7.9%. Adjusted EBITDA margin was
16.4%, up 60 basis points sequentially and is expected to further
improve in Q4. Adjusted EBITDA margin decreased 250 basis points
compared to prior year, driven by volume, higher employee costs and
growth investments, partially offset by productivity and temporary
cost-saving actions.
- The company announced an agreement to acquire Silver Crystal
Group, expanding our external embellishments portfolio, with annual
sales of approximately $30 million.
Other
Balance Sheet and Capital Deployment
During the first three quarters of the year, the company
deployed $204 million for acquisitions and returned $309 million in
cash to shareholders through a combination of dividends and share
repurchases. The company repurchased 0.7 million shares at an
aggregate cost of $117 million during the first three quarters of
the year. Net of dilution from long-term incentive awards, the
company’s share count at the end of the quarter was down 0.7
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 2.6x at the end of the third quarter.
Income Taxes
The company’s reported third quarter effective tax rate was
25.1%. The adjusted tax rate (non-GAAP) for the quarter was
26.3%.
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 three quarters of the year, the company
realized approximately $45 million in pre-tax savings from
restructuring, net of transition costs, and incurred approximately
$71 million in pre-tax restructuring charges.
Guidance
In its supplemental presentation materials, “Third Quarter 2023
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its fourth quarter 2023
financial results. Based on the factors listed and other
assumptions, the company expects fourth quarter 2023 reported
earnings per share of $2.05 to $2.20.
Excluding an estimated $0.05 per share impact of restructuring
charges and other items, the company expects fourth quarter 2023
adjusted earnings per share of $2.10 to $2.25.
For more details on the company’s results, see the summary
tables accompanying this news release, as well as the supplemental
presentation materials, “Third 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, the Russian invasion of Ukraine and the
Israel-Hamas war; 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.
Third Quarter Financial Summary - Preliminary, unaudited (In
millions, except % and per share amounts)
3Q
3Q % Sales Change vs. PY
2023
2022
Reported Ex. Currency Organic Net sales, by segment: Materials Group
$1,456.0
$1,694.0
(14.0%)
(15.7%)
(15.7%)
Solutions Group
642.3
623.1
3.1%
4.5%
0.6%
Total net sales
$2,098.3
$2,317.1
(9.4%)
(10.4%)
(11.4%)
As Reported (GAAP) Adjusted Non-GAAP 3Q
3Q % % of Sales 3Q 3Q %
% 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
$176.5
$235.9
12.1%
13.9%
$208.3
$228.6
14.3%
13.5%
Solutions Group
50.7
75.8
7.9%
12.2%
61.4
79.2
9.6%
12.7%
Corporate expense (a)
(20.3)
(19.4)
(16.5)
(19.4)
Total operating income / operating margins before interest, other
non-operating expense (income), and taxes
$206.9
$292.3
(29%)
9.9%
12.6%
$253.2
$288.4
(12%)
12.1%
12.4%
Interest expense
$31.0
$21.2
$31.0
$21.2
Other non-operating expense (income), net
($8.7)
($1.4)
($8.7)
($1.4)
Income before taxes
$184.6
$272.5
(32%)
8.8%
11.8%
$230.9
$268.6
(14%)
11.0%
11.6%
Provision for income taxes
$46.3
$51.0
$60.8
$67.1
Net income
$138.3
$221.5
(38%)
6.6%
9.6%
$170.1
$201.5
(16%)
8.1%
8.7%
Net income per common share, assuming dilution
$1.71
$2.70
(37%)
$2.10
$2.46
(15%)
3Q Adjusted free cash flow
$309.9
$140.4
YTD Adjusted free cash flow
$373.6
$422.8
Adjusted EBITDA: Materials Group
$239.5
$262.0
16.4%
15.5%
Solutions Group
$105.3
$117.8
16.4%
18.9%
Corporate expense
($16.5)
($19.4)
Total Adjusted EBITDA
$328.3
$360.4
15.6%
15.6%
Previously reported segment results have been recast to
reflect our current 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 third quarter of 2023
includes severance and related costs of $1 and asset impairment
charges of $2.8.
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts)
(UNAUDITED)
Three Months Ended
Nine Months Ended
Sep. 30, 2023
Oct. 1, 2022
Sep. 30, 2023
Oct. 1, 2022
Net sales
$
2,098.3
$
2,317.1
$
6,253.8
$
7,013.4
Cost of products sold
1,512.5
1,697.9
4,572.3
5,109.4
Gross profit
585.8
619.2
1,681.5
1,904.0
Marketing, general and administrative expense
332.6
330.8
986.6
1,018.5
Other expense (income), net(1)
46.3
(3.9
)
132.4
(2.1
)
Interest expense
31.0
21.2
89.3
61.6
Other non-operating expense (income), net
(8.7
)
(1.4
)
(19.9
)
(4.1
)
Income before taxes
184.6
272.5
493.1
830.1
Provision for income taxes
46.3
51.0
133.2
195.9
Net income
$
138.3
$
221.5
$
359.9
$
634.2
Per share amounts: Net income per common share, assuming
dilution
$
1.71
$
2.70
$
4.43
$
7.70
Weighted average number of common shares outstanding,
assuming dilution
81.0
81.9
81.2
82.4
(1)
"Other expense (income), net" for the third quarter of 2023
includes severance and related costs of $38.7, asset impairment
charges of $5.1 and outcomes of legal proceedings of $2.5.
"Other expense (income), net" for the third quarter of 2022
includes gain on venture investment of $8.7, partially offset by
severance and related costs of $4.7 and asset impairment charges of
$.1.
"Other expense (income), net" for 2023 YTD includes severance and
related costs of $64.6, asset impairment charges of $6.8, outcomes
of legal proceedings of $56.3, transaction and related costs of
$4.2 and loss on sale of asset of $.5.
"Other expense (income), net" for 2022 YTD includes gain on venture
investment of $12.4 and gain on sale of assets of $.5, partially
offset by severance and related costs of $8.7 and asset impairment
charges of $.1, outcomes of legal proceedings of $1.7 and
transaction and related costs of $.3.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS
Sep. 30, 2023
Oct. 1, 2022
Current assets: Cash and cash equivalents
$
209.9
$
128.2
Trade accounts receivable, net
1,426.2
1,585.6
Inventories
936.1
1,014.4
Other current assets
242.1
233.6
Total current assets
2,814.3
2,961.8
Property, plant and equipment, net
1,555.2
1,442.6
Goodwill and other intangibles resulting from business
acquisitions, net
2,836.6
2,679.9
Deferred tax assets
115.2
118.1
Other assets
811.8
839.9
$
8,133.1
$
8,042.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and
current portion of long-term debt and finance leases
$
716.0
$
669.9
Accounts payable
1,265.3
1,383.1
Other current liabilities
763.0
886.3
Total current liabilities
2,744.3
2,939.3
Long-term debt and finance leases
2,597.6
2,462.9
Other long-term liabilities
727.6
632.8
Shareholders' equity: Common stock
124.1
124.1
Capital in excess of par value
852.5
866.5
Retained earnings
4,608.2
4,347.0
Treasury stock at cost
(3,118.6
)
(2,962.3
)
Accumulated other comprehensive loss
(402.6
)
(368.0
)
Total shareholders' equity
2,063.6
2,007.3
$
8,133.1
$
8,042.3
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Nine Months Ended
Sep. 30, 2023
Oct. 1, 2022
Operating Activities Net income
$
359.9
$
634.2
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
138.5
132.2
Amortization
82.9
85.0
Provision for credit losses and sales returns
32.4
36.9
Stock-based compensation
17.4
34.5
Deferred taxes and other non-cash taxes
(29.4
)
(8.5
)
Other non-cash expense and loss (income and gain), net
25.2
14.7
Changes in assets and liabilities and other adjustments
(112.8
)
(313.8
)
Net cash provided by operating activities
514.1
615.2
Investing Activities Purchases of property, plant and
equipment
(173.0
)
(183.2
)
Purchases of software and other deferred charges
(15.3
)
(13.9
)
Proceeds from sales of property, plant and equipment
0.7
2.2
Proceeds from insurance and sales (purchases) of investments, net
47.1
1.9
Payments for acquisitions, net of cash acquired, and venture
investments
(203.7
)
(37.0
)
Net cash used in investing activities
(344.2
)
(230.0
)
Financing Activities Net increase (decrease) in
borrowings with maturities of three months or less
70.6
115.9
Additional long-term borrowings
394.9
---
Repayments of long-term debt and finance leases
(254.2
)
(4.4
)
Dividends paid
(191.5
)
(178.3
)
Share repurchases
(117.1
)
(318.6
)
Net (tax withholding) proceeds related to stock-based compensation
(23.8
)
(25.1
)
Other
(1.6
)
---
Net cash used in financing activities
(122.7
)
(410.5
)
Effect of foreign currency translation on cash balances
(4.5
)
(9.2
)
Increase (decrease) in cash and cash equivalents
42.7
(34.5
)
Cash and cash equivalents, beginning of year
167.2
162.7
Cash and cash equivalents, end of period
$
209.9
$
128.2
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
Nine Months Ended
Sep. 30, 2023
Oct. 1, 2022
Sep. 30, 2023
Oct. 1, 2022
Reconciliation of non-GAAP operating margins from
GAAP: Net sales $
2,098.3
$
2,317.1
$
6,253.8
$
7,013.4
Income before taxes $
184.6
$
272.5
$
493.1
$
830.1
Income before taxes as a percentage of net sales
8.8
%
11.8
%
7.9
%
11.8
%
Adjustments: Interest expense $
31.0
$
21.2
$
89.3
$
61.6
Other non-operating expense (income), net
(8.7
)
(1.4
)
(19.9
)
(4.1
)
Operating income before interest expense, other non-operating
expense (income) and taxes $
206.9
$
292.3
$
562.5
$
887.6
Operating margins
9.9
%
12.6
%
9.0
%
12.7
%
As reported net income $
138.3
$
221.5
$
359.9
$
634.2
Adjustments: Restructuring charges: Severance and related costs
38.7
4.7
64.6
8.7
Asset impairment charges
5.1
0.1
6.8
0.1
Outcomes of legal proceedings
2.5
---
56.3
1.7
Transaction and related costs
---
---
4.2
0.3
(Gain) loss on sales of assets
---
---
0.5
(0.5
)
Gain on venture investment
---
(8.7
)
---
(12.4
)
Interest expense
31.0
21.2
89.3
61.6
Other non-operating expense (income), net
(8.7
)
(1.4
)
(19.9
)
(4.1
)
Provision for income taxes
46.3
51.0
133.2
195.9
Adjusted operating income (non-GAAP) $
253.2
$
288.4
$
694.9
$
885.5
Adjusted operating margins (non-GAAP)
12.1
%
12.4
%
11.1
%
12.6
%
Depreciation and amortization
75.1
72.0
221.4
217.2
Adjusted EBITDA (non-GAAP)
328.3
360.4
916.3
1,102.7
Adjusted EBITDA margins (non-GAAP)
15.6
%
15.6
%
14.7
%
15.7
%
Reconciliation of non-GAAP net income from GAAP: As
reported net income $
138.3
$
221.5
$
359.9
$
634.2
Adjustments: Restructuring charges and other items(1)
46.3
(3.9
)
132.4
(2.1
)
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(14.5
)
(16.1
)
(28.2
)
(14.4
)
Adjusted net income (non-GAAP) $
170.1
$
201.5
$
464.1
$
617.7
(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
Nine Months Ended
Sep. 30, 2023
Oct. 1, 2022
Sep. 30, 2023
Oct. 1, 2022
Reconciliation of non-GAAP net income per common share
from GAAP: As reported net income per common share, assuming
dilution $
1.71
$
2.70
$
4.43
$
7.70
Adjustments per common share, net of tax: Restructuring charges and
other items(1)
0.57
(0.05
)
1.63
(0.03
)
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(0.18
)
(0.19
)
(0.34
)
(0.17
)
Adjusted net income per common share, assuming dilution
(non-GAAP) $
2.10
$
2.46
$
5.72
$
7.50
Weighted average number of common shares outstanding, assuming
dilution
81.0
81.9
81.2
82.4
Our adjusted tax rate was 26.3% and 25.8% for the three and
nine months ended Sep. 30, 2023, respectively, and 25% and 25.4%
for the three and nine months ended Oct. 1, 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
Nine Months Ended
Sep. 30, 2023
Oct. 1, 2022
Sep. 30, 2023
Oct. 1, 2022
Reconciliation of adjusted free cash flow: Net cash
provided by operating activities $
322.6
$
220.8
$
514.1
$
615.2
Purchases of property, plant and equipment
(57.1
)
(76.4
)
(173.0
)
(183.2
)
Purchases of software and other deferred charges
(4.3
)
(4.0
)
(15.3
)
(13.9
)
Proceeds from sales of property, plant and equipment
0.4
0.1
0.7
2.2
Proceeds from insurance and sales (purchases) of investments, net
48.3
(0.1
)
47.1
1.9
Payments for certain acquisition-related transaction costs
---
---
---
0.6
Adjusted free cash flow (non-GAAP) $
309.9
$
140.4
$
373.6
$
422.8
A-6
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Third Quarter Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
1,456.0
$
1,694.0
$
176.5
$
235.9
12.1
%
13.9
%
Solutions Group
642.3
623.1
50.7
75.8
7.9
%
12.2
%
Corporate Expense
N/A
N/A
(20.3
)
(19.4
)
N/A
N/A
TOTAL FROM OPERATIONS
$
2,098.3
$
2,317.1
$
206.9
$
292.3
9.9
%
12.6
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY
INFORMATION FROM GAAP Third Quarter Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
176.5
$
235.9
12.1
%
13.9
%
Adjustments: Restructuring charges: Severance and related costs
29.4
1.4
2.0
%
0.1
%
Asset impairment charges
1.2
---
0.1
%
---
Outcomes of legal proceedings
1.2
---
0.1
%
---
Gain on venture investment
---
(8.7
)
---
(0.5
%)
Adjusted operating income and margins (non-GAAP)
$
208.3
$
228.6
14.3
%
13.5
%
Depreciation and amortization
31.2
33.4
2.1
%
2.0
%
Adjusted EBITDA and margins (non-GAAP)
$
239.5
$
262.0
16.4
%
15.5
%
Solutions Group
Operating income and margins, as reported
$
50.7
$
75.8
7.9
%
12.2
%
Adjustments: Restructuring charges: Severance and related costs
8.3
3.3
1.3
%
0.5
%
Asset impairment charges
1.1
0.1
0.2
%
---
Outcomes of legal proceedings
1.3
---
0.2
%
---
Adjusted operating income and margins (non-GAAP)
$
61.4
$
79.2
9.6
%
12.7
%
Depreciation and amortization
43.9
38.6
6.8
%
6.2
%
Adjusted EBITDA and margins (non-GAAP)
$
105.3
$
117.8
16.4
%
18.9
%
Previously reported segment results have been recast to
reflect our current operating structure.
A-7
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Nine Months Ended NET SALES
OPERATING INCOME (LOSS) OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
4,392.5
$
5,053.8
$
530.8
$
705.4
12.1
%
14.0
%
Solutions Group
1,861.3
1,959.6
95.0
250.7
5.1
%
12.8
%
Corporate Expense
N/A
N/A
(63.3
)
(68.5
)
N/A
N/A
TOTAL FROM OPERATIONS
$
6,253.8
$
7,013.4
$
562.5
$
887.6
9.0
%
12.7
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY
INFORMATION FROM GAAP Nine Months Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
530.8
$
705.4
12.1
%
14.0
%
Adjustments: Restructuring charges: Severance and related costs,
net of reversals
48.2
2.5
1.1
%
---
Asset impairment charges
2.3
---
0.1
%
---
Outcomes of legal proceedings
1.2
---
---
---
Loss on sales of assets
0.5
---
---
---
Gain on venture investment
---
(12.4
)
---
(0.2
%)
Adjusted operating income and margins (non-GAAP)
$
583.0
$
695.5
13.3
%
13.8
%
Depreciation and amortization
95.9
102.1
2.2
%
2.0
%
Adjusted EBITDA and margins (non-GAAP)
$
678.9
$
797.6
15.5
%
15.8
%
Solutions Group
Operating income and margins, as reported
$
95.0
$
250.7
5.1
%
12.8
%
Adjustments: Restructuring charges: Severance and related costs
15.5
5.4
0.8
%
0.3
%
Asset impairment charges
1.7
0.1
0.1
%
---
Outcomes of legal proceedings
55.1
1.0
3.0
%
---
Transaction and related costs
4.2
0.3
0.2
%
---
Gain on sales of assets
---
(0.5
)
---
---
Adjusted operating income and margins (non-GAAP)
$
171.5
$
257.0
9.2
%
13.1
%
Depreciation and amortization
125.5
115.1
6.8
%
5.9
%
Adjusted EBITDA and margins (non-GAAP)
$
297.0
$
372.1
16.0
%
19.0
%
Previously reported segment results have been recast to
reflect our current operating structure.
A-8
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except ratios)
(UNAUDITED)
QTD
4Q22
1Q23
2Q23
3Q23
Reconciliation of adjusted EBITDA from GAAP: As
reported net income
$
122.9
$
121.2
$
100.4
$
138.3
Other expense (income), net
1.5
17.8
68.3
46.3
Interest expense
22.5
26.4
31.9
31.0
Other non-operating expense (income), net
(5.3
)
(4.6
)
(6.6
)
(8.7
)
Provision for income taxes
46.3
47.1
39.8
46.3
Depreciation and amortization
73.5
72.3
74.0
75.1
Adjusted EBITDA (non-GAAP)
$
261.4
$
280.2
$
307.8
$
328.3
Total Debt
$
3,313.6
Less: Cash and cash equivalents
209.9
Net Debt
$
3,103.7
Net Debt to Adjusted EBITDA LTM* (non-GAAP)
2.6
*LTM = Last twelve months (4Q22 to 3Q23)
A-9
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (UNAUDITED)
Third Quarter 2023 TotalCompany MaterialsGroup
SolutionsGroup
Reconciliation of organic sales change
from GAAP: Reported net sales change
(9.4%)
(14.0%)
3.1%
Reclassification of sales between segments
---
0.1%
(0.2%)
Foreign currency translation
(0.9%)
(1.7%)
1.6%
Sales change ex. currency (non-GAAP)(1)
(10.4%)
(15.7%)
4.5%
Acquisitions
(1.0%)
---
(3.9%)
Organic sales change (non-GAAP)(1)
(11.4%)
(15.7%)
0.6%
Nine Months Ended 2023 TotalCompany
MaterialsGroup SolutionsGroup
Reconciliation of organic
sales change from GAAP: Reported net sales change
(10.8%)
(13.1%)
(5.0%)
Reclassification of sales between segments
---
0.1%
(0.3%)
Foreign currency translation
1.2%
0.7%
2.4%
Sales change ex. currency (non-GAAP)(1)
(9.7%)
(12.3%)
(3.0%)
Acquisitions
(0.7%)
---
(2.4%)
Organic sales change (non-GAAP)(1)
(10.3%)
(12.3%)
(5.3%)
(1) Totals may not sum due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231024752697/en/
John Eble Vice President, Finance and Investor Relations
investorcom@averydennison.com
Kristin Robinson Vice President, Global Communications
kristin.robinson@averydennison.com
Avery Dennison (NYSE:AVY)
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