Avery Dennison Corp

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, provides management’s views on our financial condition and results of operations and should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes thereto.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes thereto.

Previous wording

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 matters and settlements, 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, currency adjustments due to highly inflationary economies, 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.

Current wording

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 matters and settlements, 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 and other investments, currency adjustments due to highly inflationary economies, 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.

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, the currency adjustments for transitional reporting of highly inflationary economies, and the reclassification of sales between segments. Additionally, where applicable, sales change ex. currency is also adjusted for an extra week in our fiscal year and the calendar shift resulting from an extra week in the prior fiscal year. 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, the currency adjustments for transitional reporting of highly inflationary economies and the reclassification of sales between segments. Additionally, where applicable, sales change ex. currency is also adjusted for an extra week in our fiscal year and the calendar shift resulting from an extra week in the prior fiscal year. 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. Our 2025 fiscal year that began on December 29, 2024 will end on December 31, 2025; fiscal years 2026 and beyond will be coincident with the calendar year beginning on January 1 and ending on December 31.

Previous wording

•Adjusted free cash flow refers to cash flow (used in) provided by operating activities, less payments for property, plant and equipment, less payments for software and other deferred charges, plus proceeds from company-owned life insurance policies, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments, less net cash used for Argentine Blue Chip Swap securities. Where applicable, adjusted free cash flow is also adjusted for 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.

Current wording

•Adjusted free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, less payments for software and other deferred charges, plus proceeds from company-owned life insurance policies, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments, less net cash used for Argentine Blue Chip Swap securities. Where applicable, adjusted free cash flow is also adjusted for 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.

Previous wording

In the three months ended March 29, 2025, net sales increased on an organic basis compared to the same period in the prior year primarily due to higher volume/mix, partially offset by the impact of raw material deflation-related price reductions.

Current wording

In the three months ended June 28, 2025, net sales decreased on an organic basis compared to the same period in the prior year primarily due to the impact of raw material deflation-related price reductions, partially offset by higher volume/mix. In the six months ended June 28, 2025, net sales increased on an organic basis compared to the same period in the prior year primarily due to higher volume/mix, partially offset by the impact of raw material deflation-related price reductions.

Previous wording

Net income decreased from approximately $172 million in the first three months of 2024 to approximately $166 million in the first three months of 2025. The primary factors affecting this decrease were:

Current wording

Net income increased from approximately $349 million in the first six months of 2024 to approximately $355 million in the first six months of 2025. The primary factors affecting this increase were:

Previous wording

These items were partially offset by the following factors:

Current wording

These items were partially offset by the net impact of raw material deflation-related price reductions.

Previous wording

We recorded $4.8 million in restructuring charges, net of reversals, during the three months ended March 29, 2025. These charges consisted of severance and related costs for the reduction of approximately 130 positions, as well as asset impairment charges, at various locations across our company. Our 2025 actions are primarily intended to optimize the operational footprint in our Solutions Group reportable segment.

Current wording

We recorded $12.9 million in restructuring charges, net of reversals, during the six months ended June 28, 2025. These charges consisted of severance and related costs for the reduction of approximately 460 positions, as well as asset impairment charges, at various locations across our company. Our 2025 actions are primarily intended to optimize our operational footprint.

Previous wording

During the first three months of 2025, net cash (used in) provided by operating activities decreased compared to the same period last year primarily due to higher incentive compensation payments and trade rebates and changes in operational working capital, partially offset by lower tax payments, net of refunds. During the first three months of 2025, adjusted free cash flow decreased compared to the same period last year primarily due to a decrease in net cash provided by operating activities, partially offset by lower purchases of property, plant and equipment.

Current wording

During the first six months of 2025, net cash provided by operating activities decreased compared to the same period last year primarily due to higher incentive compensation payments, changes in operational working capital, higher trade rebate payments, and tax payments, net of refunds, partially offset by the prior-year settlement payment for the Adasa legal matter. During the first six months of 2025, adjusted free cash flow decreased compared to the same period last year primarily due to a decrease in net cash provided by operating activities, partially offset by lower purchases of property, plant and equipment and higher proceeds from the sales of property, plant and equipment.

Previous wording

In the first quarter of 2025, the U.S. announced additional tariffs on goods imported into the U.S. from numerous countries, many of which responded with reciprocal tariffs and other actions on goods imported from the U.S. The U.S. government has indicated that it is willing to negotiate with other countries regarding the tariffs; to enable these negotiations, it paused certain of these tariffs for a 90-day period. As it relates to the direct impact of these tariffs, a relatively small portion of our global materials purchases is impacted and the vast majority of our imports and exports between the U.S., Canada and Mexico are compliant with the United States-Mexico-Canada Agreement (“USMCA”). Based on current information, we estimate that the overall direct cost impact will likely result in a low single digit rate of inflation to our total raw material purchases. To mitigate the potential impact to our operations, we are implementing strategic sourcing adjustments and pricing surcharges. The indirect impact on demand for our products and solutions is more uncertain. While a majority of our products and solutions relates to less discretionary consumer staples, we also serve more discretionary and cyclical markets, such as industrials, durables and apparel.

Current wording

Beginning in the first quarter of 2025, the U.S. announced tariffs on goods imported into the U.S. from numerous countries, many of which responded with reciprocal tariffs and other actions on goods imported from the U.S. The U.S. government continues to negotiate with other countries regarding the tariffs; to enable these negotiations, it paused certain of these tariffs until August 1, 2025. As it relates to the direct impact of these tariffs, a relatively small portion of our global materials purchases is impacted and the vast majority of our imports and exports between the U.S., Canada and Mexico are compliant with the United States-Mexico-Canada Agreement (“USMCA”). Based on current information, we estimate that the overall direct impact will likely increase our total raw material costs by a low single digit rate. To mitigate the direct impact to our operations, we have implemented strategic sourcing adjustments and pricing surcharges. The indirect impact on demand for our products and solutions is more uncertain. While a majority of our products and solutions relates to less discretionary consumer staples, we also serve more discretionary and cyclical markets, such as industrials, durables and apparel. In the second quarter of 2025, we estimated that the indirect impact on apparel end markets resulted in a mid-single digit rate decrease in our sales in overall apparel categories.

Previous wording

•Elevated uncertainty related to trade policy and the macroeconomic environment.

Current wording

•We anticipate elevated uncertainty related to trade policy and the macroeconomic environment.

Previous wording

◦We expect an unfavorable impact to our net sales and operating income from foreign currency translation, based on recent rates.

Current wording

◦We expect a favorable impact to our net sales and operating income from foreign currency translation, based on recent rates.

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 for the first quarter of 2025 decreased from the same period last year due to the net impact of raw material deflation-related price reductions and unfavorable foreign currency translation, partially offset by benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and favorable volume/mix.

Current wording

Gross profit for the second quarter of 2025 decreased from the same period last year due to the net impact of raw material deflation-related price reductions and higher employee-related costs, partially offset by higher volume/mix and benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs.

Previous wording

Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information regarding restructuring charges. Refer to Note 10, “Commitments and Contingencies,” to the unaudited Condensed Consolidated Financial Statements for more information regarding the outcomes of legal matters and settlements, net.

Current wording

Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information regarding restructuring charges.

Previous wording

Interest expense increased in the first quarter of 2025 compared to the same period last year primarily due to higher interest related to the €500 million of senior notes we issued in November 2024.

Current wording

Interest expense increased in the second quarter of 2025 compared to the same period last year primarily due to higher interest related to the €500 million of senior notes we issued in November 2024 and an increase in commercial paper borrowings.

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

During the fourth quarter of 2024, we modified our segment performance measure to exclude other expense (income), net. These changes align with how our chief operating decision maker evaluates segment performance and allocates resources. The prior period has been conformed to the current period presentation. Segment adjusted operating income is defined as income before taxes adjusted for other expense (income), net; interest expense; other non-operating expense (income), net; and other items.

Current wording

During the fourth quarter of 2024, we modified our segment performance measure to exclude other expense (income), net. These changes align with how our chief operating decision maker evaluates segment performance and allocates resources. Prior-year periods have been conformed to the current period presentation. Segment adjusted operating income is defined as income before taxes adjusted for other expense (income), net; interest expense; other non-operating expense (income), net; and other items.

Previous wording

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $4.4 million and $14.4 million in the first quarter of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, (gain) loss on venture investments and other, losses from Argentine peso remeasurement and Blue Chip Swap transactions, and outcomes of legal matters and settlements, net.

Current wording

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $(7.0) million and $21.1 million in the second quarter of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, losses from Argentine peso remeasurement and Blue Chip Swap transactions, (gain) loss on venture and other investments, (gain) loss of sales of assets and outcomes of legal matters and settlements, net.

Previous wording

In the first quarter of 2025, net sales increased on an organic basis compared to the same period in the prior year mainly due to favorable volume/mix, partially offset by the impact of raw material deflation-related price reductions. On an organic basis, net sales increased by a low single digit rate in North America, decreased by a low single digit rate in Europe, the Middle East and North Africa, increased by a low single digit rate in Asia Pacific and increased by a high single digit rate in Latin America.

Current wording

In the second quarter of 2025, net sales decreased on an organic basis compared to the same period in the prior year mainly due to the impact of raw material deflation-related price reductions, partially offset by favorable volume/mix. On an organic basis, net sales increased by a low single digit rate in North America, decreased by a mid-single digit rate in Europe, the Middle East and North Africa, were comparable in Asia Pacific and increased by a mid-single digit rate in Latin America.

Previous wording

Marketing, general and administrative expense decreased in the first quarter of 2025 compared to the same period last year primarily due to lower employee-related costs, favorable foreign currency translation and benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, partially offset by growth investments.

Current wording

Marketing, general and administrative expense decreased in the first six months of 2025 compared to the same period last year primarily due to lower employee-related costs and benefits from productivity initiatives, including temporary cost-saving actions and savings from restructuring actions, net of transition costs, partially offset by growth investments.

Previous wording

Segment adjusted operating income decreased in the first quarter of 2025 compared to the same period last year primarily due to the net impact of pricing and raw material input costs and unfavorable foreign currency translation, partially offset by favorable volume/mix and productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs.

Current wording

Segment adjusted operating income decreased in the first six months of 2025 compared to the same period last year primarily due to the net impact of pricing and raw material input costs and the impact of unfavorable foreign currency translation, partially offset by benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and higher volume/mix.

Previous wording

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $10.1 million and $4.8 million in the first quarter of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, (gain) loss on venture investments and other, and outcomes of legal matters and settlements, net.

Current wording

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $17.3 million and $3.8 million in the first six months of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, (gain) loss on venture and other investments, transaction and related costs and outcomes of legal matters and settlements, net.

Previous wording

In the first quarter of 2025, net sales increased on an organic basis compared to the same period in the prior year by a low single digit rate in high-value categories and a high single digit rate in the base business. Company-wide, on an organic basis, net sales of intelligent labels increased by a mid-single digit rate compared to the same period in the prior year.

Current wording

In the first six months of 2025, net sales increased on an organic basis compared to the same period in the prior year due to low single digit rate increases in high-value categories and the base business. Company-wide, on an organic basis, net sales of intelligent labels increased by a low single digit rate compared to the same period in the prior year.

Previous wording

Segment adjusted operating income increased in the first quarter of 2025 compared to the same period last year primarily due to benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, and higher volume, partially offset by growth investments.

Current wording

Segment adjusted operating income increased in the first six months of 2025 compared to the same period last year primarily due to benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, and higher volume, partially offset by the net impact of pricing and raw material costs and growth investments.

Previous wording

During the first three months of 2025, net cash (used in) provided by operating activities decreased compared to the same period last year primarily due to higher incentive compensation payments and trade rebates and changes in operational working capital, partially offset by lower tax payments, net of refunds.

Current wording

During the first six months of 2025, net cash provided by operating activities decreased compared to the same period last year primarily due to higher incentive compensation payments, changes in operational working capital, higher trade rebate payments, and tax payments, net of refunds, partially offset by the prior-year settlement payment for the Adasa legal matter.

Previous wording

During the first three months of 2025, in our Materials Group reportable segment, we primarily invested in equipment to support growth in the U.S. and certain countries in Europe, primarily Belgium; in our Solutions Group reportable segment, we primarily invested in buildings and equipment to support growth in certain countries in Asia Pacific, including Vietnam and China, and in the U.S. 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.

Current wording

During the first six months of 2025, in our Materials Group reportable segment, we primarily invested in equipment to support growth in the U.S., certain countries in Europe and certain countries in Asia Pacific, primarily China; in our Solutions Group reportable segment, we primarily invested in buildings and equipment to support growth in certain countries in Asia Pacific, including Vietnam and China, and in the U.S. 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 certain countries in Europe, primarily France.

Previous wording

During the first three months of 2025 and 2024, we primarily invested in information technology upgrades in the U.S.

Current wording

During the first six months of 2025 and 2024, 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 2025, we received higher proceeds from sales from investments and insurance policies.

Current wording

During the first six months of 2025, we received higher proceeds from sales from investments and insurance policies.

Previous wording

During the first three months of 2025, we settled €420 million notional amount of net investment hedges.

Current wording

During the first six months of 2025, we settled €420 million notional amount of net investment hedges.

Previous wording

During the first three months of 2025 and 2024, our commercial paper borrowings were used to fund the repayment of long-term debt, dividend payments, share repurchases, capital expenditures and other general corporate purposes.

Current wording

During the first six months of 2025 and 2024, our commercial paper borrowings were used to fund the repayment of long-term debt, dividend payments, share repurchases, capital expenditures and other general corporate purposes.

Previous wording

We paid dividends of $0.88 per share in the first three months of 2025 compared to $0.81 per share in the same period last year. In April 2025, subsequent to the end of the first quarter of 2025, we increased our quarterly dividend rate to $0.94 per share, representing an increase of approximately 7% from our previous quarterly dividend rate of $0.88 per share.

Current wording

We paid dividends of $1.82 per share in the first six months of 2025 compared to $1.69 per share in the same period last year. In April 2025, we increased our quarterly dividend rate to $0.94 per share, representing an increase of approximately 7% from our previous quarterly dividend rate of $0.88 per share.

Previous wording

During the first three months of 2025 and 2024, we repurchased approximately 1.4 million and 0.1 million shares of our common stock, respectively.

Current wording

During the first six months of 2025 and 2024, we repurchased approximately 2.0 million and 0.2 million shares of our common stock, respectively.

Previous wording

In April 2025, subsequent to the end of the first quarter of 2025, our Board authorized the repurchase of shares of our common stock with a fair market value of up to $750 million, excluding any fees, commissions or other expenses related to such purchases and in addition to the amount outstanding under our previous Board authorization. Board authorizations remain in effect until shares in the amount authorized thereunder have been repurchased.

Current wording

In April 2025, our Board authorized the repurchase of shares of our common stock with a fair market value of up to $750 million, excluding any fees, commissions or other expenses related to such purchases and in addition to the amount outstanding under our previous Board authorization. Board authorizations remain in effect until shares in the amount authorized thereunder have been repurchased.

Previous wording

Tax withholding for stock-based compensation was lower in the first three months of 2025 compared to 2024 primarily due to a lower number of shares vesting for certain performance-based awards based on our performance against the objectives established for the awards.

Current wording

Tax withholding for stock-based compensation was lower in the first six months of 2025 compared to 2024 primarily due to a lower number of shares vesting for certain performance-based awards based on our performance against the objectives established for the awards.

Previous wording

During the first three months of 2025, we settled €420 million notional amount of fair value hedges.

Current wording

During the first six months of 2025, we settled €420 million notional amount of fair value hedges.

Previous wording

In the three months ended March 29, 2025, other intangibles resulting from business acquisitions, net, decreased by approximately $21 million to $734.7 million, primarily reflecting current year amortization expense.

Current wording

In the six months ended June 28, 2025, other intangibles resulting from business acquisitions, net, decreased by approximately $39 million to $716.4 million, primarily reflecting current year amortization expense, partially offset by the impact of foreign currency translation.

Previous wording

As of March 29, 2025, the balance of our shareholders’ equity was $2.17 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 28, 2025, 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.

Previous wording

International operations generated approximately 69% of our net sales during the three months ended March 29, 2025. Our future results are subject to changes in worldwide economic conditions, tariffs, social, geopolitical, and market conditions 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 69% of our net sales during the six months ended June 28, 2025. Our future results are subject to changes in worldwide economic conditions, tariffs, social, geopolitical, and market conditions in the regions in which we operate and the impact of fluctuations in foreign currency exchange and interest rates.