Avery Dennison Corp

Previous wording

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. We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparisons with the results of competitors for quarters and year-to-date periods, as applicable. Based on feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are also useful to their assessments of our performance and operating trends, as well as liquidity. Reconciliations of our non-GAAP financial measures from the most directly comparable GAAP financial measures are provided in accordance with Regulation G and S-K.

Current wording

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. We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparisons with the results of competitors for quarters and year-to-date periods, as applicable. Based on feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are also useful to their assessments of our performance and operating trends, as well as liquidity. Reconciliations of our non-GAAP financial measures from the most directly comparable GAAP financial measures are provided in accordance with Regulations G and S-K.

Previous wording

•Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation and, where applicable, an extra week in our fiscal year, the calendar shift resulting from the extra week in the prior fiscal year, currency adjustments for transitional reporting of highly inflationary economies, and the reclassification of sales between segments. 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 foreign currency fluctuations.

Current wording

•Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation, and, where applicable, an extra week in our fiscal year, the calendar shift resulting from an extra week in the prior fiscal year, currency adjustments for transitional reporting of highly inflationary economies, and the reclassification of sales between segments. 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 foreign currency fluctuations.

Previous wording

In the three months ended March 30, 2024, net sales increased on an organic basis compared to the same period in the prior year primarily due to higher volume, partially offset by the impact of raw material deflation-related price reductions.

Current wording

In the three months and six months ended June 29, 2024, net sales increased on an organic basis compared to the same period in the prior year primarily due to higher volume, partially offset by the impact of raw material deflation-related price reductions.

Previous wording

Net income increased from approximately $121 million in the first three months of 2023 to approximately $172 million in the first three months of 2024. The major factors affecting this increase were:

Current wording

Net income increased from approximately $222 million in the first six months of 2023 to approximately $349 million in the first six months of 2024. The major factors impacting this increase were:

Previous wording

We recorded $6.0 million in restructuring charges, net of reversals, during the three months ended March 30, 2024. These charges consisted of severance and related costs for the reduction of approximately 100 positions at various locations across our company.

Current wording

We recorded $13.2 million in restructuring charges, net of reversals, during the six months ended June 29, 2024. These charges consisted of severance and related costs for the reduction of approximately 380 positions, as well as asset impairment and lease cancellation charges, at various locations across our company.

Previous wording

During the first three months of 2024, net cash provided by operating activities increased compared to the same period last year primarily due to higher net income, lower incentive compensation payments and lower tax payments, net of refunds. During the first three months of 2024, adjusted free cash flow increased compared to the same period last year primarily due to an increase in net cash provided by operating activities and a decrease in purchases of property, plant and equipment.

Current wording

During the first six months of 2024, net cash provided by operating activities increased compared to the same period last year primarily due to higher net income, lower incentive compensation payments and lower tax payments, net of refunds, partially offset by the settlement payment for the Adasa legal matter and changes in operational working capital. During the first six months of 2024, adjusted free cash flow increased compared to the same period last year primarily due to an increase in net cash provided by operating activities and a decrease in purchases of property, plant and equipment.

Previous wording

•We anticipate net sales to increase due to higher volume as our markets improve following significant inventory destocking downstream from our company in 2023, as well as growth in Intelligent Labels. This increase may be partially offset with raw material deflation-related price reductions.

Current wording

•We anticipate net sales to increase due to higher volume as our markets improve following significant inventory destocking downstream from our company in 2023, as well as growth in Intelligent Labels. This increase may be partially offset by raw material deflation-related price reductions.

Previous wording

•Based on recent rates, we expect a modestly unfavorable impact to our full-year operating income from foreign currency translation.

Current wording

•Based on recent rates, we expect foreign currency translation to have an unfavorable impact on our full-year operating income.

Previous wording

ANALYSIS OF RESULTS OF OPERATIONS FOR THE FIRST QUARTER

Current wording

ANALYSIS OF RESULTS OF OPERATIONS FOR THE SECOND QUARTER

Previous wording

Gross profit margin for the first quarter of 2024 increased from the same period last year due to benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, the net impact of pricing and raw material input costs, and higher volume, partially offset by higher employee-related costs.

Current wording

Gross profit margin for the second quarter of 2024 increased from the same period last year due to higher volume, benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and the net impact of pricing and raw material input costs, partially offset by higher employee-related costs.

Previous wording

Marketing, general and administrative expense increased in the first quarter of 2024 compared to the same period last year primarily due to higher employee-related costs and growth investments, partially offset by the benefits from productivity initiatives, including savings from restructuring actions, net of transition costs.

Current wording

Marketing, general and administrative expense increased in the second quarter of 2024 compared to the same period last year primarily due to higher employee-related costs and growth investments, partially offset by benefits from productivity initiatives, including savings from restructuring actions, net of transition costs.

Previous wording

Our effective tax rate for the three months ended March 30, 2024 decreased compared to the same period last year primarily due to the tax impacts resulting from Blue Chip Swap transactions in Argentina. Refer to Note 6, “Taxes Based on Income,” to the unaudited Condensed Consolidated Financial Statements for more information.

Current wording

Our effective tax rate for the three months ended June 29, 2024 decreased compared to the same period last year primarily due to higher tax incentives in certain foreign jurisdictions and the tax impacts resulting from Blue Chip Swap transactions in Argentina. Refer to Note 6, “Taxes Based on Income,” to the unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

RESULTS OF OPERATIONS BY REPORTABLE SEGMENT FOR THE FIRST QUARTER

Current wording

RESULTS OF OPERATIONS BY REPORTABLE SEGMENT FOR THE SECOND QUARTER

Previous wording

In the first quarter of 2024, net sales increased on an organic basis compared to the same period in the prior year mainly due to higher volume/mix, partially offset by the impact of raw material deflation-related price reductions. On an organic basis, net sales increased by a low-to-mid single-digit rate in Western Europe and a mid single-digit rate in emerging markets, which was partially offset by a low single-digit rate decrease in North America.

Current wording

In the second quarter of 2024, net sales increased on an organic basis compared to the same period in the prior year mainly due to higher volume/mix, partially offset by the impact of raw material deflation-related price reductions. On an organic basis, net sales increased by a low-to-mid single-digit rate in North America, a mid-single-digit rate in Western Europe and a high single-digit rate in emerging markets.

Previous wording

Operating income increased in the first quarter of 2024 compared to the same period last year primarily due to higher volume and benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, partially offset by higher employee-related costs and growth investments.

Current wording

Operating income increased in the second quarter of 2024 compared to the same period last year primarily due to the impact of the accrual for the Adasa legal matter in the prior year, higher volume and benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, partially offset by higher employee-related costs and growth investments.

Previous wording

The global minimum tax under the Pillar Two framework became effective for us in 2024. While the impact on our unaudited Condensed Consolidated Financial Statements is currently not material, our analysis is ongoing as the Organization for Economic Cooperation and Development continues to release additional guidance and countries enact related legislation.

Current wording

The global minimum tax under the Pillar Two framework became effective for us in 2024. While the impact of this framework is currently not expected to be material to our full-year effective tax rate, our analysis is ongoing as the Organization for Economic Cooperation and Development continues to release additional guidance and countries enact related legislation.

Previous wording

Our effective tax rate can vary from period to period due to a variety of factors, such as changes in our mix of earnings in countries with differing statutory tax rates, changes in our tax reserves, settlements of income tax audits, changes in tax laws and regulations, return-to-provision adjustments, tax impacts related to stock-based payments, and our execution of tax planning strategies.

Current wording

Our effective tax rate can vary from quarter to quarter due to a variety of factors, such as changes in the mix of earnings in countries with differing statutory tax rates, changes in tax reserves, settlements of income tax audits, changes in tax laws and regulations, return-to-provision adjustments, tax impacts related to stock-based payments and execution of tax planning strategies.

Previous wording

Operating income increased in the first quarter of 2024 compared to the same period last year primarily due to benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, higher volume/mix and lower restructuring charges, partially offset by higher employee-related costs and losses from Argentine peso remeasurement and Blue Chip Swap transactions.

Current wording

Operating income increased in the first six months of 2024 compared to the same period last year primarily due to higher volume/mix, benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and lower restructuring charges, partially offset by higher employee-related costs, losses from Argentine peso remeasurement and Blue Chip Swap transactions, and loss on venture investment.

Previous wording

In the first quarter of 2024, on an organic basis, sales increased compared to the same period in the prior year by a low double-digit rate in high value categories and a low single-digit rate in the base business. Company-wide, on an organic basis, sales of Intelligent Label solutions increased by a mid-to-high teens rate compared to the same period in the prior year.

Current wording

In the first six months of 2024, net sales increased on an organic basis compared to the same period in the prior year by a high single-digit rate in both high-value categories and the base business, Company-wide, on an organic basis, net sales of Intelligent Label solutions increased by a mid-to-high-teens rate compared to the same period in the prior year.

Previous wording

During the first three months of 2024, net cash provided by operating activities increased compared to the same period last year primarily due to higher net income, lower incentive compensation payments and lower tax payments, net of refunds.

Current wording

During the first six months of 2024, net cash provided by operating activities increased compared to the same period last year primarily due to higher net income, lower incentive compensation payments and lower tax payments, net of refunds, partially offset by the settlement payment for the Adasa legal matter and changes in operational working capital.

Previous wording

During the first three months of 2024, in our Materials Group reportable segment, we primarily invested in buildings and equipment to support growth in the U.S. and in certain countries in Europe, primarily France; in our Solutions Group reportable segment, we primarily invested in buildings and equipment in certain countries in Asia Pacific, including Vietnam and China, in the U.S. and in certain countries in Latin America, primarily Mexico. During the first three months of 2023, in our Materials Group reportable segment, we primarily invested in buildings and equipment to support growth in certain countries in Europe, including France and the Netherlands, in the U.S. and in certain countries in Latin America, primarily Brazil; in our Solutions Group reportable segment, these investments were made in certain countries in Latin America, primarily Mexico, and Asia, including Malaysia, Hong Kong and China, and in the U.S.

Current wording

During the first six months of 2024, in our Solutions Group reportable segment, we primarily invested in buildings and equipment in certain countries in Asia Pacific, including China and Vietnam, in the U.S. and in certain countries in Latin America, primarily Mexico; in our Materials Group reportable segment, we primarily invested in buildings and equipment to support growth in the U.S. and in certain countries in Europe, primarily France. During the first six months of 2023, in our Solutions Group reportable segment, we primarily invested in buildings and equipment to support growth in the U.S., in certain countries in Latin America, primarily Mexico, and in certain counties in Asia, primarily Malaysia; in our Materials Group reportable segment, we primarily invested in buildings and equipment in the U.S. and in certain countries in Europe, primarily France.

Previous wording

During the first three months of 2024 and 2023, we primarily invested in information technology upgrades in the U.S.

Current wording

During the first six months of 2024 and 2023, we primarily invested in information technology upgrades in the U.S.

Previous wording

During the first three months of 2024, we entered into Blue Chip Swap transactions that resulted in losses of approximately $6 million. Refer to Note 12, “Supplemental Financial Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Current wording

During the first six months of 2024, we entered into Blue Chip Swap transactions that resulted in losses of approximately $10 million. Refer to Note 12, “Supplemental Financial Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

During the first three months of 2023, we paid consideration, net of cash acquired, of approximately $44 million for the acquisition of Thermopatch, Inc. ("Thermopatch"). We funded the Thermopatch acquisition using cash and commercial paper borrowings.

Current wording

During the first six months of 2023, we paid consideration, net of cash acquired, of approximately $194 million for the acquisitions of Thermopatch, Inc. ("Thermopatch") and LG Group, Inc. ("Lion Brothers"). We funded the Thermopatch and Lion Brothers acquisitions using cash and commercial paper borrowings.

Previous wording

During the first three months of 2024 and 2023, our commercial paper borrowings were used to fund acquisitions, dividend payments, share repurchases, capital expenditures and other general corporate purposes.

Current wording

During the first six months of 2024 and 2023, our commercial paper borrowings were used to fund acquisitions, dividend payments, share repurchases, capital expenditures and other general corporate purposes.

Previous wording

In March 2023, we issued $400 million of senior notes, due March 15, 2033, which bear an interest rate of 5.750% per year, payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts and offering expenses, were $394.9 million, which we used to repay both existing indebtedness under our commercial paper programs and the $250 million aggregate principal amount of senior notes that matured on April 15, 2023.

Current wording

In March 2023, we issued $400 million of senior notes, due March 15, 2033, which bear an interest rate of 5.750% per year, payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts and offering expenses, were $394.9 million, which we used to repay both indebtedness under our commercial paper programs and the $250 million aggregate principal amount of senior notes that matured on April 15, 2023.

Previous wording

We paid dividends of $0.81 per share in the first three months of 2024 compared to $0.75 per share in the same period last year. In April 2024, subsequent to the end of our first quarter 2024, we increased our quarterly dividend rate to $0.88 per share, representing an increase of approximately 9% from our previous quarterly dividend rate of $0.81 per share.

Current wording

We paid dividends of $1.69 per share in the first six months of 2024 compared to $1.56 per share in the same period last year. In April 2024, we increased our quarterly dividend rate to $0.88 per share, representing an increase of approximately 9% from our previous quarterly dividend rate of $0.81 per share.

Previous wording

During the first three months of 2024 and 2023, we repurchased approximately 0.1 million and 0.3 million shares of our common stock, respectively.

Current wording

During the first six months of 2024 and 2023, we repurchased approximately 0.2 million and 0.5 million shares of our common stock, respectively.

Previous wording

In the three months ended March 30, 2024, goodwill decreased by approximately $20 million to $1.99 billion, primarily reflecting the impact of foreign currency translation.

Current wording

In the six months ended June 29, 2024, goodwill decreased by approximately $24 million to $1.99 billion, primarily reflecting the impact of foreign currency translation.

Previous wording

In the three months ended March 30, 2024, other intangibles resulting from business acquisitions, net, decreased by approximately $25 million to $823.8 million, reflecting current year amortization expense and the impact of foreign currency translation.

Current wording

In the six months ended June 29, 2024, other intangibles resulting from business acquisitions, net, decreased by approximately $48 million to $800.9 million, reflecting current year amortization expense and the impact of foreign currency translation.

Previous wording

As of March 30, 2024, the balance of our shareholders’ equity was $2.20 billion. Refer to Note 8, “Supplemental Equity and Comprehensive Income Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Current wording

As of June 29, 2024, the balance of our shareholders’ equity was $2.29 billion. Refer to Note 8, “Supplemental Equity and Comprehensive Income Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Previous wording

International operations generated approximately 70% of our net sales during the three months ended March 30, 2024. Our future results are subject to changes in political, social and economic conditions globally and in the regions in which we operate and the impact of fluctuations in foreign currency exchange and interest rates.

Current wording

International operations generated approximately 70% of our net sales during the six months ended June 29, 2024. Our future results are subject to changes in political, social and economic conditions globally and in the regions in which we operate and the impact of fluctuations in foreign currency exchange and interest rates.

Previous wording

The unfavorable impact of foreign currency translation on net sales in the first three months of 2024 compared to the same period last year was primarily related to sales in China, partially offset by euro-denominated sales.

Current wording

The unfavorable impact of foreign currency translation on net sales in the first six months of 2024 compared to the same period last year was primarily related to sales in China.

Previous wording

Operational working capital, as a percentage of annualized current-quarter net sales, is reconciled to working capital (deficit) below. Working capital (deficit) (current assets minus current liabilities) as of the first quarter 2024 decreased by approximately $767 million compared to the first quarter of 2023 primarily due to the reclassification of our $300 million of senior notes due in the third quarter of 2024 and €500 million of senior notes due in the first quarter of 2025 as well as an increase of approximately $48 million related to the contingent liability for the Adasa legal matter. Our objective is to minimize our investment in operational working capital, as a percentage of annualized current-quarter net sales, to maximize cash flow and return on investment. As shown below, operational working capital, as a percentage of annualized current-quarter net sales, in the first quarter of 2024 decreased compared to the first quarter of 2023.

Current wording

Operational working capital, as a percentage of annualized current-quarter net sales, is reconciled to working capital (deficit) below. Working capital (deficit) (current assets minus current liabilities) as of the second quarter of 2024 decreased by approximately $575 million compared to the second quarter of 2023 primarily due to the reclassification of our $300 million of senior notes due in the third quarter of 2024, €500 million of senior notes due in the first quarter of 2025 and $25 million of medium-term notes due in the second quarter of 2025, partially offset by lower commercial paper borrowings of approximately $321 million. Our objective is to minimize our investment in operational working capital, as a percentage of annualized current-quarter net sales, to maximize our cash flow and return on investment. As shown below, operational working capital, as a percentage of annualized current-quarter net sales, in the second quarter of 2024 decreased compared to the second quarter of 2023.

Previous wording

The average number of days sales outstanding was 63 days in the first quarter of 2024 compared with 60 days in the first quarter of 2023, calculated using the accounts receivable balance at quarter-end divided by the average daily sales in the respective quarter. The increase in average number of days sales outstanding was primarily due to the timing of collections, partially offset by foreign currency translation.

Current wording

The average number of days sales outstanding was 62 days in the second quarters of 2024 and 2023, calculated using the accounts receivable balance at quarter-end divided by the average daily sales in the respective quarter.

Previous wording

Average inventory turnover was 6.2 in the first quarter of 2024 compared to 5.8 in the first quarter of 2023, calculated using the annualized first-quarter cost of products sold in 2024 and 2023, respectively, and divided by the inventory balance at quarter-end. The increase in average inventory turnover primarily reflected the impact of higher prior-year inventory balances due to customer inventory destocking.

Current wording

Average inventory turnover was 6.4 in the second quarter of 2024 compared to 6.2 in the second quarter of 2023, calculated using the annualized second-quarter cost of products sold in 2024 and 2023, respectively, and divided by the inventory balance at quarter-end.

Previous wording

The average number of days payable outstanding was 78 days in the first quarter of 2024 compared to 74 days in the first quarter of 2023, calculated using the accounts payable balance at quarter-end divided by the respective annualized first-quarter cost of products sold. The increase in average number of days payable outstanding primarily reflected the timing of vendor payments, partially offset by the impact of foreign currency translation.

Current wording

The average number of days payable outstanding was 76 days in the second quarter of 2024 compared to 73 days in the second quarter of 2023, calculated using the accounts payable balance at quarter-end divided by the respective annualized second-quarter cost of products sold. The increase in average number of days payable outstanding primarily reflected the timing of vendor payments.

Previous wording

Capital resources include cash flows from operations, cash and cash equivalents and debt financing, including access to commercial paper borrowings supported by our $1.20 billion revolving credit facility (the “Revolver”). We use these resources to fund our operational needs.

Current wording

Capital resources used to fund our operational needs include cash flows from operations, cash and cash equivalents and debt financing, including access to commercial paper borrowings supported by our $1.20 billion revolving credit facility (the “Revolver”).

Previous wording

The Revolver, which matures in February 2026, is used as a back-up facility for our commercial paper borrowings and can be used for other corporate purposes. No balance was outstanding under the Revolver as of March 30, 2024 or December 30, 2023.

Current wording

The Revolver is used as a back-up facility for our commercial paper borrowings and can be used for other corporate purposes. No balance was outstanding under the Revolver as of June 29, 2024 or our prior revolving credit facility as of December 30, 2023.

Previous wording

As of March 30, 2024, we had cash and cash equivalents of $185.7 million held in accounts at third-party financial institutions. Our cash balances are held in numerous locations around the world. As of March 30, 2024, the majority of our cash and cash equivalents was held by our foreign subsidiaries, primarily in the Asia Pacific region.

Current wording

As of June 29, 2024, we had cash and cash equivalents of $208.8 million held in accounts at third-party financial institutions. Our cash balances are held in numerous locations around the world. As of June 29, 2024, the majority of our cash and cash equivalents was held by our foreign subsidiaries, primarily in Asia Pacific.