Avery Dennison Corp

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.

Net Income

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:

•Higher volume

•Benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs

Offsetting factors were:

•Higher employee-related costs

•Higher provision for income taxes

Cost Reduction Actions

2023 Actions

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.

In the third quarter of 2023, we approved a restructuring plan (the “2023 Plan”) to further optimize the European footprint of our Materials Group reportable segment by reducing operations in a manufacturing facility in Belgium. The cumulative charges associated with the 2023 Plan, which we recorded in 2023, consisted of severance and related costs for the reduction of approximately 210 positions, as well as asset impairment charges. We do not anticipate additional charges related to the 2023 Plan and expect it to be substantially completed by mid-2025.

Restructuring charges were included in “Other expense (income), net” in the unaudited Condensed Consolidated Statements of Income. Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information.

Cash Flow

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.

Outlook

Certain factors that we believe may contribute to our 2024 results are described below.

•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.

•We anticipate incremental savings from restructuring actions, net of transition costs.

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

•We expect our full-year effective tax rate to be in the mid-twenty percent range.