Highlights:
- 4Q23 Reported EPS of $1.77
- 4Q23 Adjusted EPS (non-GAAP) of $2.16, up 31%
- 4Q23 Net sales of $2.1 billion, up 4%
- Sales change ex. currency (non-GAAP) up 3%
- Organic sales change (non-GAAP) up 1%
- FY23 Reported EPS of $6.20
- FY23 Adjusted EPS of $7.90
- FY23 Net sales of $8.4 billion, down 8%
- Sales change ex. currency down 7%
- Organic sales change down 8%
- FY24 Reported EPS guidance of $8.65 to $9.15
- Adjusted EPS guidance of $9.00 to $9.50
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its fourth quarter and full year
ended December 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
fourth quarter, increasing sequentially for the fourth consecutive
quarter,” said Deon Stander, president and CEO. “Volume in both
Label Materials and Apparel Solutions improved sequentially,
continuing to recover from slow market conditions, largely due to
inventory destocking, while our Intelligent Labels platform
continues to accelerate.
“In Intelligent Labels, we are targeting to deliver significant
growth in 2024, as apparel rebounds and we accelerate the adoption
of our solutions that help address key industry challenges in
logistics, food and general retail, further advancing our
leadership position at the intersection of the physical and
digital.
“Following a challenging 2023 which included significant
inventory destocking downstream from us, we expect to deliver
strong earnings growth in 2024 and make progress toward our 2025
goals,” 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, focus on excellence and commitment to addressing the
unique challenges at hand.”
Fourth Quarter 2023 Results by
Segment
Materials Group
- Reported sales decreased 2% to $1.4 billion. Sales were down 4%
ex. currency and on an organic basis.
- Label Materials sales were down mid-single digits on an organic
basis.
- Volume was up low-single digits.
- Inventory destocking was largely complete as of year end.
- Sales increased by mid-single digits organically in the
Graphics and Reflectives businesses.
- Sales decreased by low-to-mid single digits organically in the
combined Performance Tapes and Medical businesses.
- Reported operating margin was 12.0%. Adjusted EBITDA margin
(non-GAAP) was 16.2%, up 340 basis points driven by productivity
and the net benefit of pricing and raw material input costs.
Solutions Group
- Reported sales increased 18% to $692 million. Sales were up 19%
ex. currency and 14% on an organic basis.
- Apparel Solutions volume was up sequentially.
- Sales in high-value categories were up more than 20% on an
organic basis.
- Sales were up mid-single digits organically in base
solutions.
- Reported operating margin was 10.2%. Adjusted EBITDA margin was
18.2%, up 230 basis points compared to prior year and 180 basis
points sequentially, driven primarily by volume.
Other
Balance Sheet and Capital Deployment
During 2023, the company deployed $225 million for acquisitions
and returned $394 million in cash to shareholders through a
combination of dividends and share repurchases. The company
repurchased 0.8 million shares at an aggregate cost of $138
million. Net of dilution from long-term incentive awards, the
company’s share count was down 0.6 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 2.4x at the end of the fourth quarter.
Income Taxes
The company’s reported effective tax rate was 29.0% in the
fourth quarter and 27.6% for the full year. The adjusted tax rate
(non-GAAP) was 25.8% in both the fourth quarter and the full
year.
Cost Reduction Actions
During 2023, the company realized approximately $69 million in
pre-tax savings from restructuring, net of transition costs, and
incurred approximately $79 million in pre-tax restructuring
charges.
Guidance
In its supplemental presentation materials, “Fourth Quarter and
Full Year 2023 Financial Review and Analysis,” the company provides
a list of factors that it believes will contribute to its 2024
financial results. Based on the factors listed and other
assumptions, the company expects 2024 reported earnings per share
of $8.65 to $9.15.
Excluding an estimated $0.35 per share impact of restructuring
charges and other items, the company expects 2024 adjusted earnings
per share of $9.00 to $9.50.
For more details on the company’s results, see the summary
tables accompanying this news release, as well as the supplemental
presentation materials, “Fourth Quarter and Full Year 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
a wide range of branding and information solutions that optimize
labor and supply chain efficiency, reduce waste, advance
sustainability, circularity and transparency, and better connect
brands and consumers. Our products and solutions include labeling
and functional materials, radio frequency identification (RFID)
inlays and tags, software applications that connect the physical
and digital, and a variety of products and solutions that enhance
branded packaging and carry or display information that improves
the customer experience. Serving an array of industries worldwide —
including home and personal care, apparel, general retail,
e-commerce, logistics, food and grocery, pharmaceuticals and
automotive — we employ approximately 35,000 employees in more than
50 countries. Our reported sales in 2023 were $8.4 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) competitors' actions,
including pricing, expansion in key markets, and product offerings;
(iii) the cost and availability of raw materials; (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, the Israel-Hamas
war and tensions in the Middle East; 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.
Fourth Quarter Financial Summary - Preliminary, unaudited
(In millions, except % and per share amounts)
4Q
4Q
% Sales Change vs. PY
2023
2022
Reported Ex. Currency Organic Net sales, by segment: Materials Group
$1,418.8
$1,441.3
(1.6%)
(3.9%)
(3.9%)
Solutions Group
691.7
584.6
18.3%
18.9%
13.9%
Total net sales
$2,110.5
$2,025.9
4.2%
2.5%
1.1%
As Reported (GAAP) Adjusted Non-GAAP(1)
4Q
4Q
%
% of Sales
4Q
4Q
%
% 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
$170.1
$153.9
12.0%
10.7%
$198.4
$150.4
14.0%
10.4%
Solutions Group
70.7
51.6
10.2%
8.8%
80.5
53.1
11.6%
9.1%
Corporate expense(2)
(20.4)
(19.1)
(17.8)
(15.6)
Total operating income/operating margins before interest, other
non-operating expense (income), and taxes
$220.4
$186.4
18%
10.4%
9.2%
$261.1
$187.9
39%
12.4%
9.3%
Interest expense
$29.7
$22.5
$29.7
$22.5
Other non-operating expense (income), net
($10.9)
($5.3)
($3.9)
($5.3)
Income before taxes
$201.6
$169.2
19%
9.6%
8.4%
$235.3
$170.7
38%
11.1%
8.4%
Provision for income taxes
$58.5
$46.3
$60.7
$36.0
Net income
$143.1
$122.9
16%
6.8%
6.1%
$174.6
$134.7
30%
8.3%
6.6%
Net income per common share, assuming dilution
$1.77
$1.51
17%
$2.16
$1.65
31%
Adjusted free cash flow
$218.3
$244.5
Adjusted EBITDA: Materials Group
$230.3
$184.1
16.2%
12.8%
Solutions Group
$125.6
$92.9
18.2%
15.9%
Corporate expense
($17.8)
($15.6)
Total Adjusted EBITDA
$338.1
$261.4
16.0%
12.9%
See accompanying schedules A-4 to A-9 for
reconciliations of non-GAAP financial measures from GAAP.
(1)
Adjusted non-GAAP results for the fourth quarter of 2023 exclude
the impact of the Argentine peso remeasurement loss and interest
income. The impact of the Argentine peso remeasurement loss and
interest income for the fourth quarter of 2022 was not material.
(2)
As reported "Corporate expense" for the fourth quarter of 2023
includes outcome of legal proceeding of $2.5 and severance and
related costs, net of reversals, of $.1. As reported "Corporate
expense" for the fourth quarter of 2022 includes outcome of legal
proceeding of $4.6 and gain on venture investment of ($1.1).
Full Year Financial Summary - Preliminary, unaudited (in
millions, except % and per share amounts)
% Sales
Change vs. PY
2023
2022
Reported
Ex.
Currency
Organic
Net sales, by segment: Materials Group
$5,811.3
$6,495.1
(10.5%)
(10.4%)
(10.4%)
Solutions Group
2,553.0
2,544.2
0.3%
2.2%
(0.8%)
Total net sales
$8,364.3
$9,039.3
(7.5%)
(6.9%)
(7.7%)
As Reported (GAAP) Adjusted Non-GAAP(1)
% % of Sales % % 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
$700.9
$859.3
12.1%
13.2%
$789.2
$845.9
13.6%
13.0%
Solutions Group
165.7
302.3
6.5%
11.9%
252.0
310.1
9.9%
12.2%
Corporate expense(2)
(83.7)
(87.6)
(77.4)
(82.6)
Total operating income/operating margins before interest, other
non-operating expense (income), and taxes
$782.9
$1,074.0
(27%)
9.4%
11.9%
$963.8
$1,073.4
(10%)
11.5%
11.9%
Interest expense
$119.0
$84.1
$119.0
$84.1
Other non-operating expense (income), net
($30.8)
($9.4)
($18.9)
($9.4)
Income before taxes
$694.7
$999.3
(30%)
8.3%
11.1%
$863.7
$998.7
(14%)
10.3%
11.0%
Provision for income taxes
$191.7
$242.2
$222.8
$246.3
Net income
$503.0
$757.1
(34%)
6.0%
8.4%
$640.9
$752.4
(15%)
7.7%
8.3%
Net income per common share, assuming dilution
$6.20
$9.21
(33%)
$7.90
$9.15
(14%)
Adjusted free cash flow
$591.9
$667.3
Adjusted EBITDA: Materials Group
$917.0
$981.7
15.8%
15.1%
Solutions Group
$422.6
$465.0
16.6%
18.3%
Corporate expense
($77.4)
($82.6)
Total Adjusted EBITDA
$1,262.2
$1,364.1
15.1%
15.1%
See accompanying schedules A-4 to A-9 for definition
and reconciliations of non-GAAP financial measures from GAAP.
(1)
Adjusted non-GAAP results for fiscal year 2023 exclude the impact
of the Argentine peso remeasurement loss and interest income. The
impact of the Argentine peso remeasurement loss and interest income
prior to the third quarter of 2023 was not material.
(2)
As reported "Corporate expense" for fiscal year 2023 includes asset
impairment charges of $2.8, outcome of legal proceeding of $2.5,
and severance and related costs, net of reversals, of $1. As
reported "Corporate expense" for fiscal year 2022 includes outcomes
of legal proceedings of $5.3, severance and related costs, net of
reversals of $.8, and gain on venture investment of ($1.1).
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts) (UNAUDITED)
Three Months Ended
Twelve Months Ended
Dec. 30, 2023
Dec. 31, 2022
Dec. 30, 2023
Dec. 31, 2022
Net sales $
2,110.5
$
2,025.9
$
8,364.3
$
9,039.3
Cost of products sold
1,514.5
1,525.7
6,086.8
6,635.1
Gross profit
596.0
500.2
2,277.5
2,404.2
Marketing, general and administrative expense(1)
334.9
312.3
1,313.7
1,330.8
Other expense (income), net(1)(2)
40.7
1.5
180.9
(0.6
)
Interest expense
29.7
22.5
119.0
84.1
Other non-operating expense (income), net(3)
(10.9
)
(5.3
)
(30.8
)
(9.4
)
Income before taxes
201.6
169.2
694.7
999.3
Provision for income taxes
58.5
46.3
191.7
242.2
Net income $
143.1
$
122.9
$
503.0
$
757.1
Per share amounts: Net income per common share, assuming
dilution $
1.77
$
1.51
$
6.20
$
9.21
Weighted average number of common shares outstanding,
assuming dilution
81.0
81.6
81.1
82.2
(1)
Includes the reclassification of the Argentine peso remeasurement
loss from "Marketing, general and administrative expense" to "Other
expense (income), net" in the third and fourth quarters of 2023.
There were no reclassifications made prior to the third quarter of
2023 as the impacts were not material.
(2)
"Other expense (income), net" for the fourth quarter of 2023
includes severance and related costs, net of reversals, of $6.2,
asset impairment and lease cancellation charges of $1.8, Argentine
peso remeasurement loss of $22.1, outcomes of legal proceedings of
$8, loss on venture investment of $1.5, and transaction and related
costs of $1.1. "Other expense (income), net" for the fourth quarter
of 2022 includes outcome of legal proceeding of $4.6, partially
offset by gain on venture investment of $1.1, gain on sales of
assets of $.9, and severance and related costs, net of reversals,
of $1.1. "Other expense (income), net" for fiscal year 2023
includes severance and related costs, net of reversals, of $70.8,
asset impairment and lease cancellation charges of $8.6, outcomes
of legal proceedings of $64.3, Argentine peso remeasurement loss of
$29.9, transaction and related costs of $5.3, loss on venture
investment of $1.5 and loss on sale of asset of $.5. "Other expense
(income), net" for fiscal year 2022 includes gain on venture
investments of $13.5 and gain on sales of assets of $1.4, partially
offset by severance and related costs, net of reversals, of $7.6,
asset impairment charges of $.1, outcomes of legal proceedings of
$6.3, and transaction and related costs of $.3.
(3)
"Other non-operating expense (income), net" for the fourth quarter
of 2023 and fiscal year 2023 include Argentine interest income of
$6.9 and $11.8, respectively.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED)
ASSETS
Dec. 30, 2023
Dec. 31, 2022
Current assets: Cash and cash equivalents $
215.0
$
167.2
Trade accounts receivable, net
1,414.9
1,374.4
Inventories
920.7
1,009.9
Other current assets
245.4
230.5
Total current assets
2,796.0
2,782.0
Property, plant and equipment, net
1,625.8
1,540.2
Goodwill and other intangibles resulting from business
acquisitions, net
2,862.7
2,702.7
Deferred tax assets
115.7
115.1
Other assets
809.6
810.5
$
8,209.8
$
7,950.5
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Short-term borrowings and current portion of long-term
debt and finance leases $
622.2
$
598.6
Accounts payable
1,277.1
1,339.3
Other current liabilities
800.2
861.9
Total current liabilities
2,699.5
2,799.8
Long-term debt and finance leases
2,622.1
2,503.5
Other long-term liabilities
760.3
615.0
Shareholders' equity: Common stock
124.1
124.1
Capital in excess of par value
854.5
879.3
Retained earnings
4,691.8
4,414.6
Treasury stock at cost
(3,134.4
)
(3,021.8
)
Accumulated other comprehensive loss
(408.1
)
(364.0
)
Total shareholders' equity
2,127.9
2,032.2
$
8,209.8
$
7,950.5
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED)
Twelve Months Ended
Dec. 30, 2023
Dec. 31, 2022
Operating Activities Net income $
503.0
$
757.1
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
187.4
177.4
Amortization
111.0
113.3
Provision for credit losses and sales returns
49.9
50.1
Stock-based compensation
22.3
47.4
Deferred taxes and other non-cash taxes
(24.4
)
18.4
Other non-cash expense and loss (income and gain), net
37.1
23.5
Changes in assets and liabilities and other adjustments
(60.3
)
(226.2
)
Net cash provided by operating activities
826.0
961.0
Investing Activities Purchases of property, plant and
equipment
(265.3
)
(278.1
)
Purchases of software and other deferred charges
(19.8
)
(20.4
)
Proceeds from company-owned life insurance policies
48.1
---
Proceeds from sales of property, plant and equipment
1.0
2.3
Proceeds from insurance and sales (purchases) of investments, net
1.9
1.9
Proceeds from sale of product line and venture investments
---
1.1
Payments for acquisitions, net of cash acquired, and venture
investments
(224.9
)
(39.5
)
Net cash used in investing activities
(459.0
)
(332.7
)
Financing Activities Net increase (decrease) in
borrowings with maturities of three months or less
(36.6
)
34.6
Additional long-term borrowings
394.9
---
Repayments of long-term debt and finance leases
(255.9
)
(6.3
)
Dividends paid
(256.7
)
(238.9
)
Share repurchases
(137.5
)
(379.5
)
Net (tax withholding) proceeds related to stock-based compensation
(23.8
)
(25.1
)
Other
(1.6
)
---
Net cash used in financing activities
(317.2
)
(615.2
)
Effect of foreign currency translation on cash balances
(2.0
)
(8.6
)
Increase (decrease) in cash and cash equivalents
47.8
4.5
Cash and cash equivalents, beginning of year
167.2
162.7
Cash and cash equivalents, end of year $
215.0
$
167.2
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. 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. 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 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.
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, 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.
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; the reclassification of sales between segments; 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 adjustments 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 foreign 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 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
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. 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.
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
Twelve Months Ended
Dec. 30, 2023
Dec. 31, 2022
Dec. 30, 2023
Dec. 31, 2022
Reconciliation of non-GAAP operating margins from
GAAP: Net sales $
2,110.5
$
2,025.9
$
8,364.3
$
9,039.3
Income before taxes $
201.6
$
169.2
$
694.7
$
999.3
Income before taxes as a percentage of net sales
9.6
%
8.4
%
8.3
%
11.1
%
Adjustments: Interest expense $
29.7
$
22.5
$
119.0
$
84.1
Other non-operating expense (income), net
(10.9
)
(5.3
)
(30.8
)
(9.4
)
Operating income before interest expense, other non-operating
expense (income) and taxes $
220.4
$
186.4
$
782.9
$
1,074.0
Operating margins
10.4
%
9.2
%
9.4
%
11.9
%
As reported net income $
143.1
$
122.9
$
503.0
$
757.1
Adjustments: Restructuring charges, net of reversals: Severance and
related costs, net of reversals
6.2
(1.1
)
70.8
7.6
Asset impairment and lease cancellation charges
1.8
---
8.6
0.1
Outcomes of legal proceedings
8.0
4.6
64.3
6.3
Argentine peso remeasurement loss(1)
22.1
---
29.9
---
Transaction and related costs
1.1
---
5.3
0.3
(Gain) loss on venture investments
1.5
(1.1
)
1.5
(13.5
)
(Gain) loss on sales of assets
---
(0.9
)
0.5
(1.4
)
Interest expense
29.7
22.5
119.0
84.1
Other non-operating expense (income), net(1)(2)
(10.9
)
(5.3
)
(30.8
)
(9.4
)
Provision for income taxes
58.5
46.3
191.7
242.2
Adjusted operating income (non-GAAP) $
261.1
$
187.9
$
963.8
$
1,073.4
Adjusted operating margins (non-GAAP)
12.4
%
9.3
%
11.5
%
11.9
%
Depreciation and amortization $
77.0
$
73.5
$
298.4
$
290.7
Adjusted EBITDA (non-GAAP) $
338.1
$
261.4
$
1,262.2
$
1,364.1
Adjusted EBITDA margins (non-GAAP)
16.0
%
12.9
%
15.1
%
15.1
%
Reconciliation of non-GAAP net income from GAAP: As
reported net income $
143.1
$
122.9
$
503.0
$
757.1
Adjustments: Restructuring charges and other items(1)
40.7
1.5
180.9
(0.6
)
Argentine interest income(1)
(6.9
)
---
(11.8
)
---
Pension plan settlement loss (gain)
(0.1
)
---
(0.1
)
---
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(2.2
)
10.3
(31.1
)
(4.1
)
Adjusted net income (non-GAAP) $
174.6
$
134.7
$
640.9
$
752.4
(1) The impact of the Argentine peso remeasurement loss and
interest income prior to the third quarter of 2023 was not
material. (2) "Other non-operating expense (income), net" for the
fourth quarter of 2023 and fiscal year 2023 include Argentine
interest income of $6.9 and $11.8, respectively.
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
Twelve Months Ended
Dec. 30, 2023
Dec. 31, 2022
Dec. 30, 2023
Dec. 31, 2022
Reconciliation of non-GAAP net income per common
share from GAAP: As reported net income per common share,
assuming dilution $
1.77
$
1.51
$
6.20
$
9.21
Adjustments per common share, net of tax: Restructuring charges and
other items(1)
0.50
0.02
2.23
(0.01
)
Argentine interest income(1)
(0.08
)
---
(0.15
)
---
Pension plan settlement loss (gain)
---
---
---
---
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(0.03
)
0.12
(0.38
)
(0.05
)
Adjusted net income per common share, assuming dilution
(non-GAAP) $
2.16
$
1.65
$
7.90
$
9.15
Weighted average number of common shares outstanding, assuming
dilution
81.0
81.6
81.1
82.2
Our adjusted tax rate was 25.8% for both the three and
twelve months ended December 30, 2023, and 21.1% and 24.7% for the
three and twelve months ended December 31, 2022, respectively.
(1) The impact of the Argentine peso remeasurement loss and
interest income prior to the third quarter of 2023 was not
material.
(UNAUDITED) Three Months
Ended Twelve Months Ended Dec. 30, 2023
Dec. 31, 2022 Dec. 30, 2023 Dec. 31, 2022
Reconciliation of adjusted free cash flow: Net
cash provided by operating activities $
311.9
$
345.8
$
826.0
$
961.0
Purchases of property, plant and equipment
(92.3
)
(94.9
)
(265.3
)
(278.1
)
Purchases of software and other deferred charges
(4.5
)
(6.5
)
(19.8
)
(20.4
)
Proceeds from company-owned life insurance policies
---
---
48.1
---
Proceeds from sales of property, plant and equipment
0.3
0.1
1.0
2.3
Proceeds from insurance and sales (purchases) of investments, net
2.9
---
1.9
1.9
Payments for certain acquisition-related transaction costs
---
---
---
0.6
Adjusted free cash flow (non-GAAP) $
218.3
$
244.5
$
591.9
$
667.3
A-6
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Fourth Quarter Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
1,418.8
$
1,441.3
$
170.1
$
153.9
12.0
%
10.7
%
Solutions Group
691.7
584.6
70.7
51.6
10.2
%
8.8
%
Corporate Expense
N/A
N/A
(20.4
)
(19.1
)
N/A
N/A
TOTAL FROM OPERATIONS
$
2,110.5
$
2,025.9
$
220.4
$
186.4
10.4
%
9.2
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY INFORMATION FROM
GAAP
Fourth Quarter Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
170.1
$
153.9
12.0
%
10.7
%
Adjustments: Restructuring charges, net of reversals: Severance and
related costs, net of reversals
1.7
(3.5
)
0.1
%
(0.3
%)
Asset impairment charges
0.2
---
---
---
Argentine peso remeasurement loss(1)
22.1
---
1.6
%
---
Outcome of legal proceeding
4.3
---
0.3
%
---
Adjusted operating income and margins (non-GAAP)
$
198.4
$
150.4
14.0
%
10.4
%
Depreciation and amortization
31.9
33.7
2.2
%
2.4
%
Adjusted EBITDA and margins (non-GAAP)
$
230.3
$
184.1
16.2
%
12.8
%
Solutions Group
Operating income and margins, as reported
$
70.7
$
51.6
10.2
%
8.8
%
Adjustments: Restructuring charges, net of reversals: Severance and
related costs, net of reversals
4.4
2.4
0.6
%
0.4
%
Asset impairment and lease cancellation charges
1.6
---
0.2
%
---
Loss on venture investment
1.5
---
0.2
%
---
Outcome of legal proceeding
1.2
---
0.2
%
---
Transaction and related costs
1.1
---
0.2
%
---
Gain on sales of assets
---
(0.9
)
---
(0.1
%)
Adjusted operating income and margins (non-GAAP)
$
80.5
$
53.1
11.6
%
9.1
%
Depreciation and amortization
45.1
39.8
6.6
%
6.8
%
Adjusted EBITDA and margins (non-GAAP)
$
125.6
$
92.9
18.2
%
15.9
%
(1) The impact of the Argentine peso remeasurement loss for
the fourth quarter of 2022 was not material.
A-7
AVERY DENNISON
CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION (In millions,
except %) (UNAUDITED) Twelve Months Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2023
2022
2023
2022
2023
2022
Materials Group
$
5,811.3
$
6,495.1
$
700.9
$
859.3
12.1
%
13.2
%
Solutions Group
2,553.0
2,544.2
165.7
302.3
6.5
%
11.9
%
Corporate Expense
N/A
N/A
(83.7
)
(87.6
)
N/A
N/A
TOTAL FROM OPERATIONS
$
8,364.3
$
9,039.3
$
782.9
$
1,074.0
9.4
%
11.9
%
RECONCILIATION OF NON-GAAP SUPPLEMENTARY INFORMATION FROM
GAAP
Twelve Months Ended
2023
2022
2023
2022
Materials Group Operating
income and margins, as reported
$
700.9
$
859.3
12.1
%
13.2
%
Adjustments: Restructuring charges, net of reversals: Severance and
related costs, net of reversals
49.9
(1.0
)
0.9
%
---
Asset impairment charges
2.5
---
---
---
Argentine peso remeasurement loss(1)
29.9
---
0.5
%
---
Outcomes of legal proceedings
5.5
---
0.1
%
---
Loss on sales of assets
0.5
---
---
---
Gain on venture investment
---
(12.4
)
---
(0.2
%)
Adjusted operating income and margins (non-GAAP)
$
789.2
$
845.9
13.6
%
13.0
%
Depreciation and amortization
127.8
135.8
2.2
%
2.1
%
Adjusted EBITDA and margins (non-GAAP)
$
917.0
$
981.7
15.8
%
15.1
%
Solutions Group
Operating income and margins, as reported
$
165.7
$
302.3
6.5
%
11.9
%
Adjustments: Restructuring charges, net of reversals: Severance and
related costs, net of reversals
19.9
7.8
0.8
%
0.3
%
Asset impairment and lease cancellation charges
3.3
0.1
0.1
%
---
Outcomes of legal proceedings
56.3
1.0
2.2
%
0.1
%
Transaction and related costs
5.3
0.3
0.2
%
---
Loss on venture investment
1.5
---
0.1
%
---
Gain on sales of assets
---
(1.4
)
---
(0.1
%)
Adjusted operating income and margins (non-GAAP)
$
252.0
$
310.1
9.9
%
12.2
%
Depreciation and amortization
170.6
154.9
6.7
%
6.1
%
Adjusted EBITDA and margins (non-GAAP)
$
422.6
$
465.0
16.6
%
18.3
%
(1) The impact of the Argentine peso remeasurement loss
prior to the third quarter of 2023 was not material.
A-8
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except ratios)
(UNAUDITED)
QTD
1Q23
2Q23
3Q23
4Q23
Reconciliation of adjusted EBITDA from GAAP: As
reported net income
$
121.2
$
100.4
$
138.3
$
143.1
Other expense (income), net(1)
17.8
68.3
54.1
40.7
Interest expense
26.4
31.9
31.0
29.7
Other non-operating expense (income), net
(4.6
)
(6.6
)
(8.7
)
(10.9
)
Provision for income taxes
47.1
39.8
46.3
58.5
Depreciation and amortization
72.3
74.0
75.1
77.0
Adjusted EBITDA (non-GAAP)
$
280.2
$
307.8
$
336.1
$
338.1
Total Debt
$
3,244.3
Less: Cash and cash equivalents
215.0
Net Debt
$
3,029.3
Net Debt to Adjusted EBITDA LTM* (non-GAAP)
2.4
*LTM = Last twelve months (1Q23 to 4Q23)
(1)
"Other expense (income), net" includes the Argentine peso
remeasurement loss in the third and fourth quarters of 2023. The
Argentine peso remeasurement loss was not material in the first and
second quarters of 2023.
A-9
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (UNAUDITED) Fourth Quarter
2023 TotalCompany MaterialsGroup SolutionsGroup
Reconciliation of organic sales change from GAAP: Reported
net sales change
4.2
%
(1.6
%)
18.3
%
Reclassification of sales between segments
---
0.1
%
(0.2
%)
Foreign currency translation
(1.6
%)
(2.4
%)
0.7
%
Sales change ex. currency (non-GAAP)(1)
2.5
%
(3.9
%)
18.9
%
Acquisitions
(1.4
%)
---
(5.0
%)
Organic sales change (non-GAAP)(1)
1.1
%
(3.9
%)
13.9
%
Full Year 2023 TotalCompany MaterialsGroup
SolutionsGroup
Reconciliation of organic sales change
from GAAP: Reported net sales change
(7.5
%)
(10.5
%)
0.3
%
Reclassification of sales between segments
---
0.1
%
(0.2
%)
Foreign currency translation
0.6
%
0.1
%
2.1
%
Sales change ex. currency (non-GAAP)(1)
(6.9
%)
(10.4
%)
2.2
%
Acquisitions
(0.8
%)
---
(3.0
%)
Organic sales change (non-GAAP)(1)
(7.7
%)
(10.4
%)
(0.8
%)
(1) Totals may not sum due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240130156638/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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