Avery Dennison Announces Second Quarter 2024 Results

Rhea-AI Summary

Avery Dennison (NYSE:AVY) reported strong second quarter 2024 results, with significant earnings growth driven by higher volume and productivity gains. Key highlights include:

- Reported EPS of $2.18, up 76%
- Adjusted EPS (non-GAAP) of $2.42, up 26%
- Net sales of $2.2 billion, up 7%
- Organic sales growth of 7%

The company raised its full-year 2024 adjusted EPS guidance to $9.30 to $9.50. Both Materials and Solutions Groups delivered strong top- and bottom-line growth. The company continues to target significant growth in Intelligent Labels as apparel volumes normalize and new categories adopt their solutions.

Positive

• Reported EPS increased by 76% to $2.18
• Adjusted EPS (non-GAAP) grew by 26% to $2.42
• Net sales rose by 7% to $2.2 billion
• Organic sales growth of 7%
• Materials Group reported sales increased 5% to $1.5 billion
• Solutions Group reported sales increased 12% to $689 million
• Company raised full-year 2024 adjusted EPS guidance to $9.30 to $9.50
• Quarterly dividend increased by 9% to $0.88 per share

Negative

• Net debt to adjusted EBITDA (non-GAAP) was 2.2x at the end of the second quarter
• Performance Tapes and Medical sales were down low single-digits organically
• Reported effective tax rate increased to 25.8% in the second quarter

Insights

Financial Analyst

The second quarter of 2024 results for Avery Dennison highlight a significant improvement in their financial performance. The reported EPS of $2.18, which is up 76% year-over-year, is a clear indication of strong earnings growth. Adjusted EPS of $2.42, up 26%, also reinforces this strong financial performance. The net sales of $2.2 billion, up 7% and organic sales change of 7% demonstrate robust demand and effective execution of their business strategies.

The report also mentions a raise in the full-year EPS guidance to $9.30 to $9.50, which is an optimistic signal to the market about future performance. Investors should note the company’s strategic focus on Intelligent Labels, an area highlighted for significant growth due to apparel volumes normalizing and new category adoption. These factors contribute positively to the long-term growth trajectory of the company.

The company's ability to deliver pre-tax savings from restructuring efforts and maintain a strong balance sheet with a net debt to adjusted EBITDA of 2.2x is an indicator of financial health and prudent capital management. For retail investors, this suggests a stable return on investment through dividends and potential share repurchases.

Market Research Analyst

Avery Dennison’s strong performance in the second quarter of 2024 is underscored by the company's focus on high-value products and effective market strategies. The Materials and Solutions Groups both reported strong sales and margin improvements, with the Solutions Group particularly notable for its 12% increase in reported sales. This growth across different segments indicates a well-diversified product portfolio and a solid market position.

The emphasis on Intelligent Labels is particularly noteworthy. As industries increasingly adopt smart labels for better inventory management and anti-counterfeiting measures, Avery Dennison is well-positioned to benefit from these macro trends. Investors should pay attention to the company’s capability to capitalize on these emerging markets, which could drive long-term revenue growth.

Additionally, the company’s proactive approach in cost management and restructuring indicates a focused strategy to enhance profitability even further. This aligns with their upward revision in adjusted EPS guidance, suggesting that management’s efforts in operational efficiencies are bearing fruit.

Tech Expert

From a technological standpoint, Avery Dennison’s emphasis on Intelligent Labels signifies a forward-thinking approach to integrating advanced technologies within their product offerings. Intelligent labels, leveraging RFID and other tracking technologies, provide significant value by enhancing supply chain visibility and inventory accuracy. This is a strategic move catering to the growing demand for smart logistics solutions, particularly in the apparel industry and beyond.

As adoption of these technologies increases, Avery Dennison is likely to see sustained growth in this segment. For investors, this means the company is aligning itself with industry trends that promise high growth potential. Furthermore, the capital investment into these technologies reflects a commitment to innovation, which could serve as a competitive advantage in the long run.

The reported 6% organic sales growth in the Materials Group and 11% in the Solutions Group suggest that these technological advancements are resonating well with their customer base. Investors should consider the potential for continued technological integrations as a key driver of future revenue streams.

Highlights:

• 2Q24 Reported EPS of $2.18, up 76%
  • 2Q24 Adjusted EPS (non-GAAP) of $2.42, up 26%
• 2Q24 Net sales of $2.2 billion, up 7%
  • Sales change ex. currency (non-GAAP) up 8%
  • Organic sales change (non-GAAP) up 7%
• FY24 EPS guidance
  • Revising Reported EPS guidance of $8.75 to $8.95 (previously $8.60 to $9.10)
  • Raising Adjusted EPS guidance of $9.30 to $9.50 (previously $9.00 to $9.50)

MENTOR, Ohio--(BUSINESS WIRE)-- Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its second quarter ended June 29, 2024. 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.

“We delivered a strong second quarter, with significant earnings growth, driven by higher volume and productivity gains,” said Deon Stander, president and CEO. “Both our Materials and Solutions Groups delivered strong top- and bottom-line growth.

“In Intelligent Labels, we are targeting to deliver another year of significant growth, as apparel volumes normalize and new categories adopt our solutions that help address key industry challenges.

“We have raised our full-year outlook for adjusted earnings per share. We continue to remain confident that the consistent execution of our strategies will enable us to meet our long-term goals for superior value creation for all our stakeholders,” added Stander.

“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.”

Second Quarter 2024 Results by Segment

Materials Group

• Reported sales increased 5% to $1.5 billion. Sales were up 6% ex. currency and on an organic basis.
  • Label Materials sales were up mid-to-high single-digits on an organic basis.
    • Volume/mix was up low double-digits, which was partially offset by deflation-related price reductions.
  • Graphics and Reflectives were up low single-digits organically.
  • Performance Tapes and Medical were down low single-digits organically.
• Reported operating margin was 14.4%. Adjusted EBITDA margin (non-GAAP) was 17.9%, up 220 basis points driven by higher volume/mix and benefits from productivity, partially offset by higher employee-related costs.

Solutions Group

• Reported sales increased 12% to $689 million. Sales were up 14% ex. currency and 11% on an organic basis.
  • Sales in high-value categories were up low double-digits ex. currency.
  • Sales were up mid-to-high teens ex. currency in base solutions.
• Reported operating margin was 9.3%. Adjusted EBITDA margin was 16.8%, up 100 basis points, driven by higher volume and benefits from productivity, partially offset by higher employee-related costs and investments.
  • Margin was up 70 basis points sequentially; the company expects margin to continue to improve in the second half of 2024.

Other

Balance Sheet and Capital Deployment

During the first half of 2024, the company returned $177 million in cash to shareholders through a combination of dividends and share repurchases. The company repurchased 0.2 million shares at an aggregate cost of $41 million in the first half of the year. Net of dilution from long-term incentive awards, the company’s share count was unchanged compared to the same time last year. On April 25, 2024, the company increased its quarterly dividend to $0.88 per share, representing an increase of approximately 9% over the previous dividend rate.

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 2.2x at the end of the second quarter.

Income Taxes

The company’s reported effective tax rate was 25.8% in the second quarter. The adjusted tax rate (non-GAAP) for the quarter was 26.0%.

Cost Reduction Actions

In the first half of the year, the company realized approximately $36 million in pre-tax savings from restructuring, net of transition costs, and incurred approximately $13 million in pre-tax restructuring charges.

Guidance

In its supplemental presentation materials, “Second Quarter 2024 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 has revised its guidance range for 2024 reported earnings per share from $8.60 to $9.10 to $8.75 to $8.95.

Excluding an estimated $0.55 per share impact of restructuring charges and other items, the company raised its guidance range for 2024 for adjusted earnings per share from $9.00 to $9.50 to $9.30 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, “Second Quarter 2024 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 impact on underlying demand for our products from global economic conditions, political uncertainty, and changes in environmental standards, regulations, and preferences; (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 economic, social, political and market conditions; changes in political conditions, including those related to China, the Russia-Ukraine war, and the Israel-Hamas war and related hostilities in the Middle East; fluctuations in foreign currency exchange rates; and other risks associated with international 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, laws and regulations, tariffs and customer preferences; increasing environmental standards; 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; restructuring and other productivity actions; 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; our sustainability and governance practices; and epidemics, pandemics or other outbreaks of illness
• Information Technology – disruptions in information technology systems, cyber attacks or other security breaches; and successful installation of new or upgraded information technology systems
• 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
• 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 in 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 compliance and anti-corruption, environmental, 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 2023 Form 10-K, filed with the Securities and Exchange Commission on February 21, 2024, 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.

	Second Quarter Financial Summary - Preliminary, unaudited
	(In millions, except % and per share amounts)
		2Q				2Q				% Sales Change vs. PY
		2024				2023				Reported			Ex. Currency			Organic
	Net sales, by segment:
	Materials Group	$	1,546.8			$	1,476.0			4.8	%		5.6	%		5.6	%
	Solutions Group		688.5				614.5			12.0	%		13.7	%		10.8	%
	Total net sales	$	2,235.3			$	2,090.5			6.9	%		8.0	%		7.1	%
		As Reported (GAAP)																	Adjusted Non-GAAP
		2Q				2Q				%			% of Sales						2Q				2Q				%			% of Sales
		2024				2023				Change			2024			2023			2024				2023				Change			2024			2023
	Operating income (loss)/operating margins before interest, other non-operating expense (income), and taxes, by segment:
	Materials Group	$	223.4			$	193.8						14.4	%		13.1	%		$	244.5			$	199.9						15.8	%		13.5	%
	Solutions Group		64.1				(7.2	)					9.3	%		(1.2	%)			69.8				55.0						10.1	%		9.0	%
	Corporate expense		(25.7	)			(21.1	)												(25.5	)			(21.1	)
	Total operating income/operating margins before interest, other non-operating expense (income), and taxes	$	261.8			$	165.5			58	%		11.7	%		7.9	%		$	288.8			$	233.8			24	%		12.9	%		11.2	%
	Interest expense	$	29.2			$	31.9												$	29.2			$	31.9
	Other non-operating expense (income), net	($	5.8	)		($	6.6	)											($	5.3	)		($	6.6	)
	Income before taxes	$	238.4			$	140.2			70	%		10.7	%		6.7	%		$	264.9			$	208.5			27	%		11.9	%		10.0	%
	Provision for income taxes	$	61.6			$	39.8												$	68.9			$	53.1
	Net income	$	176.8			$	100.4			76	%		7.9	%		4.8	%		$	196.0			$	155.4			26	%		8.8	%		7.4	%
	Net income per common share, assuming dilution	$	2.18			$	1.24			76	%								$	2.42			$	1.92			26	%
	Adjusted free cash flow																		$	142.5			$	134.9
	YTD Adjusted free cash flow																		$	200.6			$	63.7
	Adjusted EBITDA:
	Materials Group																		$	277.3			$	231.9						17.9	%		15.7	%
	Solutions Group																		$	115.6			$	97.0						16.8	%		15.8	%
	Corporate expense																		($	25.5	)		($	21.1	)
	Total Adjusted EBITDA																		$	367.4			$	307.8						16.4	%		14.7	%

See accompanying schedules A-4 to A-9 for reconciliations of non-GAAP financial measures from GAAP.

A-1
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
		(UNAUDITED)
		Three Months Ended								Six Months Ended
		Jun. 29, 2024				Jul. 1, 2023				Jun. 29, 2024				Jul. 1, 2023
Net sales	$	2,235.3			$	2,090.5			$	4,386.6			$	4,155.5
Cost of products sold		1,572.6				1,537.1				3,091.7				3,059.8
Gross profit		662.7				553.4				1,294.9				1,095.7
Marketing, general and administrative expense		373.9				319.6				739.1				654.0
Other expense (income), net		27.0				68.3				39.6				86.1
Interest expense		29.2				31.9				57.8				58.3
Other non-operating expense (income), net		(5.8	)			(6.6	)			(14.4	)			(11.2	)
Income before taxes		238.4				140.2				472.8				308.5
Provision for income taxes		61.6				39.8				123.6				86.9
Net income	$	176.8			$	100.4			$	349.2			$	221.6
Per share amounts:
Net income per common share, assuming dilution	$	2.18			$	1.24			$	4.31			$	2.73
Weighted average number of common shares outstanding, assuming dilution		81.0				81.0				81.0				81.2

A-2
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
	(UNAUDITED)
ASSETS	Jun. 29, 2024				Jul. 1, 2023
Current assets:
Cash and cash equivalents	$	208.8			$	217.1
Trade accounts receivable, net		1,528.6				1,415.2
Inventories		979.9				990.5
Other current assets		250.5				228.2
Total current assets		2,967.8				2,851.0
Property, plant and equipment, net		1,590.0				1,567.0
Goodwill and other intangibles resulting from business acquisitions, net		2,790.7				2,868.9
Deferred tax assets		113.0				119.7
Other assets		836.7				859.7
	$	8,298.2			$	8,266.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt and finance leases	$	1,172.3			$	635.8
Accounts payable		1,313.4				1,234.8
Other current liabilities		814.5				738.1
Total current liabilities		3,300.2				2,608.7
Long-term debt and finance leases		2,046.5				2,909.7
Other long-term liabilities		664.4				732.7
Shareholders' equity:
Common stock		124.1				124.1
Capital in excess of par value		833.1				851.3
Retained earnings		4,922.2				4,526.9
Treasury stock at cost		(3,154.6	)			(3,093.9	)
Accumulated other comprehensive loss		(437.7	)			(393.2	)
Total shareholders' equity		2,287.1				2,015.2
	$	8,298.2			$	8,266.3

A-3
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
	(UNAUDITED)
	Six Months Ended
	Jun. 29, 2024				Jul. 1, 2023
Operating Activities
Net income	$	349.2			$	221.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		98.7				91.5
Amortization		57.2				54.8
Provision for credit losses and sales returns		28.2				18.9
Stock-based compensation		17.4				12.2
Deferred taxes and other non-cash taxes		(3.8	)			(17.5	)
Other non-cash expense and loss (income and gain), net		46.6				17.0
Changes in assets and liabilities and other adjustments		(276.0	)			(207.0	)
Net cash provided by operating activities		317.5				191.5
Investing Activities
Purchases of property, plant and equipment		(96.3	)			(115.9	)
Purchases of software and other deferred charges		(12.9	)			(11.0	)
Purchases of Argentine Blue Chip Swap securities		(34.2	)			---
Proceeds from sales of Argentine Blue Chip Swap securities		24.0				---
Proceeds from sales of property, plant and equipment		0.3				0.3
Proceeds from insurance and sales (purchases) of investments, net		2.2				(1.2	)
Payments for acquisitions, net of cash acquired, and venture investments		(1.9	)			(194.1	)
Net cash used in investing activities		(118.8	)			(321.9	)
Financing Activities
Net increase (decrease) in borrowings with maturities of three months or less		(2.2	)			281.8
Additional long-term borrowings		---				394.9
Repayments of long-term debt and finance leases		(3.5	)			(252.6	)
Dividends paid		(136.2	)			(126.2	)
Share repurchases		(40.7	)			(89.5	)
Net (tax withholding) proceeds related to stock-based compensation		(18.4	)			(23.7	)
Other		(1.1	)			(1.6	)
Net cash (used in) provided by financing activities		(202.1	)			183.1
Effect of foreign currency translation on cash balances		(2.8	)			(2.8	)
Increase (decrease) in cash and cash equivalents		(6.2	)			49.9
Cash and cash equivalents, beginning of year		215.0				167.2
Cash and cash equivalents, end of period	$	208.8			$	217.1

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 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.

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, 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, 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.

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; other non-operating expense (income), net; and other items.

Adjusted EBITDA refers to adjusted operating income before depreciation and amortization.

Adjusted operating margin refers to adjusted operating income as a percentage of net sales.

Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net sales.

Adjusted tax rate refers to the projected full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as effects of certain discrete tax planning actions, impacts related to enactments of comprehensive tax law changes, and other items.

Adjusted net income refers to income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges, and other items.

Adjusted net income per common share, assuming dilution (adjusted EPS) refers to adjusted net income divided by the weighted average number of common shares outstanding, assuming dilution.

We believe that adjusted operating margin, adjusted EBITDA margin, adjusted net income, and adjusted EPS assist investors in understanding our core operating trends and comparing our results with those of our competitors.

Net debt to adjusted EBITDA ratio refers to total debt (including finance leases) less cash and cash equivalents, divided by adjusted EBITDA for the last twelve months. We believe that the net debt to adjusted EBITDA ratio assists investors in assessing our leverage position.

Adjusted free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from 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.

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								Six Months Ended
	Jun. 29, 2024				Jul. 1, 2023				Jun. 29, 2024				Jul. 1, 2023
Reconciliation of non-GAAP operating and EBITDA margins from GAAP:
Net sales	$	2,235.3			$	2,090.5			$	4,386.6			$	4,155.5
Income before taxes	$	238.4			$	140.2			$	472.8			$	308.5
Income before taxes as a percentage of net sales		10.7	%			6.7	%			10.8	%			7.4	%
Adjustments:
Interest expense	$	29.2			$	31.9			$	57.8			$	58.3
Other non-operating expense (income), net		(5.8	)			(6.6	)			(14.4	)			(11.2	)
Operating income before interest expense, other non-operating expense (income) and taxes	$	261.8			$	165.5			$	516.2			$	355.6
Operating margins		11.7	%			7.9	%			11.8	%			8.6	%
As reported net income	$	176.8			$	100.4			$	349.2			$	221.6
Adjustments:
Restructuring charges, net of reversals:
Severance and related costs, net of reversals		6.3				8.8				11.2				25.9
Asset impairment and lease cancellation charges		0.9				1.2				2.0				1.7
(Gain) loss on venture investments		15.0				---				17.2				---
Losses from Argentine peso remeasurement and Blue Chip Swap transactions(1)		4.1				---				15.4				---
Outcomes of legal matters and settlements, net		0.4				53.8				0.2				53.8
Transaction and related costs		0.3				4.0				0.3				4.2
(Gain) loss on sales of assets		---				0.5				---				0.5
Interest expense		29.2				31.9				57.8				58.3
Other non-operating expense (income), net(2)		(5.8	)			(6.6	)			(14.4	)			(11.2	)
Provision for income taxes		61.6				39.8				123.6				86.9
Adjusted operating income (non-GAAP)	$	288.8			$	233.8			$	562.5			$	441.7
Adjusted operating margins (non-GAAP)		12.9	%			11.2	%			12.8	%			10.6	%
Depreciation and amortization	$	78.6			$	74.0			$	155.9			$	146.3
Adjusted EBITDA (non-GAAP)	$	367.4			$	307.8			$	718.4			$	588.0
Adjusted EBITDA margins (non-GAAP)		16.4	%			14.7	%			16.4	%			14.1	%
Reconciliation of non-GAAP net income from GAAP:
As reported net income	$	176.8			$	100.4			$	349.2			$	221.6
Adjustments:
Restructuring charges and other items		27.0				68.3				46.3				86.1
Argentine interest income(1)		(0.5	)			---				(4.1	)			---
Tax effect on restructuring charges and other items, and impact of adjusted tax rate		(7.3	)			(13.3	)			(10.3	)			(13.7	)
Adjusted net income (non-GAAP)	$	196.0			$	155.4			$	381.1			$	294.0

(1)		The total pretax net loss from the Argentine peso-related items was $3.6 and $11.3 for the three and six months ended June 29, 2024, respectively.
(2)		"Other non-operating expense (income), net" includes Argentine interest income of $.5 and $4.1 for the three and six months ended June 29, 2024, 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								Six Months Ended
	Jun. 29, 2024				Jul. 1, 2023				Jun. 29, 2024				Jul. 1, 2023
Reconciliation of non-GAAP net income per common share from GAAP:
As reported net income per common share, assuming dilution	$	2.18			$	1.24			$	4.31			$	2.73
Adjustments per common share, net of tax:
Restructuring charges and other items		0.33				0.84				0.57				1.06
Argentine interest income		---				---				(0.05	)			---
Tax effect on restructuring charges and other items, and impact of adjusted tax rate		(0.09	)			(0.16	)			(0.13	)			(0.17	)
Adjusted net income per common share, assuming dilution (non-GAAP)	$	2.42			$	1.92			$	4.70			$	3.62
Weighted average number of common shares outstanding, assuming dilution		81.0				81.0				81.0				81.2
Our adjusted tax rate was 26% for the three and six months ended June 29, 2024 and 25.5% for the three and six months ended July 1, 2023, respectively.

	(UNAUDITED)
	Three Months Ended								Six Months Ended
	Jun. 29, 2024				Jul. 1, 2023				Jun. 29, 2024				Jul. 1, 2023
Reconciliation of adjusted free cash flow:
Net cash provided by operating activities(1)	$	197.7			$	189.6			$	317.5			$	191.5
Purchases of property, plant and equipment		(47.5	)			(51.4	)			(96.3	)			(115.9	)
Purchases of software and other deferred charges		(6.0	)			(5.7	)			(12.9	)			(11.0	)
Purchases of Argentine Blue Chip Swap securities		(14.0	)			---				(34.2	)			---
Proceeds from sales of Argentine Blue Chip Swap securities		10.0				---				24.0				---
Proceeds from sales of property, plant and equipment		0.2				0.1				0.3				0.3
Proceeds from insurance and sales (purchases) of investments, net		2.1				2.3				2.2				(1.2	)
Adjusted free cash flow (non-GAAP)	$	142.5			$	134.9			$	200.6			$	63.7

(1)

Net cash provided by operating activities for the three and six months ended June 29, 2024 included payments associated with the settlement of a significant legal matter, net of taxes. The full-year 2024 cash payment, net of cash tax benefit, related to this settlement is estimated to be $56.6.

A-6
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions, except %)
(UNAUDITED)
		Second Quarter Ended
		NET SALES						OPERATING INCOME (LOSS)								OPERATING MARGINS
		2024			2023			2024				2023				2024			2023
Materials Group		$	1,546.8		$	1,476.0		$	223.4			$	193.8			14.4	%		13.1	%
Solutions Group			688.5			614.5			64.1				(7.2	)		9.3	%		(1.2	%)
Corporate Expense			N/A			N/A			(25.7	)			(21.1	)		N/A			N/A
TOTAL FROM OPERATIONS		$	2,235.3		$	2,090.5		$	261.8			$	165.5			11.7	%		7.9	%

RECONCILIATION OF NON-GAAP SUPPLEMENTARY INFORMATION FROM GAAP
		Second Quarter Ended
		2024				2023				2024			2023
Materials Group
Operating income and margins, as reported		$	223.4			$	193.8			14.4	%		13.1	%
Adjustments:
Restructuring charges, net of reversals:
Severance and related costs, net of reversals			1.6				4.5			0.1	%		0.3	%
Asset impairment charges			---				1.1			---			0.1	%
(Gain) loss on venture investment			15.0				---			1.0	%		---
Losses from Argentine peso remeasurement and Blue Chip Swap transactions			4.1				---			0.3	%		---
Outcomes of legal matters and settlements, net			0.4				---			---			---
(Gain) loss on sales of assets			---				0.5			---			---
Adjusted operating income and margins (non-GAAP)		$	244.5			$	199.9			15.8	%		13.5	%
Depreciation and amortization			32.8				32.0			2.1	%		2.2	%
Adjusted EBITDA and margins (non-GAAP)		$	277.3			$	231.9			17.9	%		15.7	%
Solutions Group
Operating income (loss) and margins, as reported		$	64.1			$	(7.2	)		9.3	%		(1.2	%)
Adjustments:
Restructuring charges, net of reversals:
Severance and related costs, net of reversals			4.5				4.3			0.7	%		0.7	%
Asset impairment charges			0.9				0.1			0.1	%		---
Transaction and related costs			0.3				4.0			---			0.7	%
Outcomes of legal matters and settlements, net			---				53.8			---			8.8	%
Adjusted operating income and margins (non-GAAP)		$	69.8			$	55.0			10.1	%		9.0	%
Depreciation and amortization			45.8				42.0			6.7	%		6.8	%
Adjusted EBITDA and margins (non-GAAP)		$	115.6			$	97.0			16.8	%		15.8	%

A-7
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions, except %)
(UNAUDITED)
		Six Months Ended
		NET SALES						OPERATING INCOME (LOSS)								OPERATING MARGINS
			2024			2023			2024				2023			2024			2023
Materials Group		$	3,043.3		$	2,936.5		$	449.5			$	354.3			14.8	%		12.1	%
Solutions Group			1,343.3			1,219.0			120.2				44.3			8.9	%		3.6	%
Corporate Expense			N/A			N/A			(53.5	)			(43.0	)		N/A			N/A
TOTAL FROM OPERATIONS		$	4,386.6		$	4,155.5		$	516.2			$	355.6			11.8	%		8.6	%

RECONCILIATION OF NON-GAAP SUPPLEMENTARY INFORMATION FROM GAAP
		Six Months Ended
		2024				2023				2024			2023
Materials Group
Operating income and margins, as reported		$	449.5			$	354.3			14.8	%		12.1	%
Adjustments:
Restructuring charges, net of reversals:
Severance and related costs, net of reversals			4.0				18.8			0.1	%		0.6	%
Asset impairment charges			0.1				1.1			---			0.1	%
Losses from Argentine peso remeasurement and Blue Chip Swap transactions			15.4				---			0.5	%		---
(Gain) loss on venture investment			15.0				---			0.5	%		---
Outcomes of legal matters and settlements, net			1.0				---			---			---
(Gain) loss on sales of assets			---				0.5			---			---
Adjusted operating income and margins (non-GAAP)		$	485.0			$	374.7			15.9	%		12.8	%
Depreciation and amortization			65.6				64.7			2.2	%		2.2	%
Adjusted EBITDA and margins (non-GAAP)		$	550.6			$	439.4			18.1	%		15.0	%
Solutions Group
Operating income and margins, as reported		$	120.2			$	44.3			8.9	%		3.6	%
Adjustments:
Restructuring charges, net of reversals:
Severance and related costs, net of reversals			6.9				7.2			0.5	%		0.6	%
Asset impairment and lease cancellation charges			1.9				0.6			0.2	%		0.1	%
(Gain) loss on venture investment			2.2				---			0.2	%		---
Outcomes of legal matters and settlements, net			(0.8	)			53.8			(0.1	%)		4.4	%
Transaction and related costs			0.3				4.2			---			0.3	%
Adjusted operating income and margins (non-GAAP)		$	130.7			$	110.1			9.7	%		9.0	%
Depreciation and amortization			90.3				81.6			6.8	%		6.7	%
Adjusted EBITDA and margins (non-GAAP)		$	221.0			$	191.7			16.5	%		15.7	%

A-8
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions, except ratios)
(UNAUDITED)
	QTD
		3Q23				4Q23				1Q24				2Q24
Reconciliation of adjusted EBITDA from GAAP:
As reported net income	$	138.3			$	143.1			$	172.4			$	176.8
Adjustments(1)		54.1				40.7				19.3				27.0
Interest expense		31.0				29.7				28.6				29.2
Other non-operating expense (income), net		(8.7	)			(10.9	)			(8.6	)			(5.8	)
Provision for income taxes		46.3				58.5				62.0				61.6
Depreciation and amortization		75.1				77.0				77.3				78.6
Adjusted EBITDA (non-GAAP)	$	336.1			$	338.1			$	351.0			$	367.4
Total Debt													$	3,218.8
Less: Cash and cash equivalents														208.8
Net Debt													$	3,010.0
Net Debt to Adjusted EBITDA LTM* (non-GAAP)														2.2
*LTM = Last twelve months (3Q23 to 2Q24)

(1)

Includes "Other expense (income), net" and other items. Refer to schedule A-5.

A-9
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(UNAUDITED)
	Second Quarter 2024
	Total Company			Materials Group			Solutions Group
Reconciliation of organic sales change from GAAP:
Reported net sales change	6.9	%		4.8	%		12.0	%
Foreign currency translation	1.1	%		0.8	%		1.7	%
Sales change ex. currency (non-GAAP)(1)	8.0	%		5.6	%		13.7	%
Acquisitions	(0.9	%)		---			(3.0	%)
Organic sales change (non-GAAP)(1)	7.1	%		5.6	%		10.8	%
(1) Totals may not sum due to rounding.
	Six Months Ended 2024
	Total Company			Materials Group			Solutions Group
Reconciliation of organic sales change from GAAP:
Reported net sales change	5.6	%		3.6	%		10.2	%
Foreign currency translation	0.5	%		0.1	%		1.6	%
Sales change ex. currency (non-GAAP)(1)	6.1	%		3.8	%		11.8	%
Acquisitions	(1.0	%)		---			(3.5	%)
Organic sales change (non-GAAP)(1)	5.1	%		3.8	%		8.3	%

(1)

Totals may not sum due to rounding.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240723276689/en/

John Eble

Vice President, Finance and Investor Relations

investorcom@averydennison.com

Kristin Robinson

Vice President, Global Communications

kristin.robinson@averydennison.com

Source: Avery Dennison Corporation

FAQ

What was Avery Dennison's (AVY) reported EPS for Q2 2024?

Avery Dennison (AVY) reported EPS of $2.18 for Q2 2024, representing a 76% increase compared to the same period in the previous year.

How much did Avery Dennison's (AVY) net sales grow in Q2 2024?

Avery Dennison's (AVY) net sales grew by 7% to $2.2 billion in Q2 2024 compared to the same quarter in the previous year.

What is Avery Dennison's (AVY) updated adjusted EPS guidance for FY 2024?

Avery Dennison (AVY) raised its adjusted EPS guidance for FY 2024 to a range of $9.30 to $9.50, up from the previous guidance of $9.00 to $9.50.

How much did Avery Dennison (AVY) return to shareholders in the first half of 2024?

Avery Dennison (AVY) returned $177 million in cash to shareholders through a combination of dividends and share repurchases in the first half of 2024.

What was the organic sales growth for Avery Dennison's (AVY) Materials Group in Q2 2024?

Avery Dennison's (AVY) Materials Group reported organic sales growth of 6% in Q2 2024.