Highlights:
- 2Q22 Reported EPS of $2.61
- Adjusted EPS (non-GAAP) of $2.64
- 2Q22 Net sales increased 11.7% to $2.3 billion
- Sales growth ex. currency (non-GAAP) of 16.7%
- Organic sales growth (non-GAAP) of 11.3%
- Raised FY 2022 EPS guidance
- Reported EPS of $9.60 to $9.90 (previously $9.35 to $9.75)
- Adjusted EPS of $9.70 to $10.00 (previously $9.45 to
$9.85)
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its second quarter ended July 2,
2022. Non-GAAP financial measures referenced in this document are
reconciled to GAAP in the attached financial schedules. Unless
otherwise indicated, comparisons are to the same period in the
prior year.
“We once again delivered strong financial results amidst a
dynamic environment, with earnings above expectations,” said Mitch
Butier, Avery Dennison chairman and CEO. “LGM and RBIS delivered
impressive earnings growth and momentum in Intelligent Labels is
further accelerating.
“Our strong performance comes at a challenging time as supply
chains remain tight, inflationary pressures are significant and
COVID-19 continues. Despite these challenges and a significant
currency translation headwind, we have raised our guidance for the
year,” said Butier. “The strategic foundations we have laid enable
us to generate superior value creation through a balance of
GDP-plus growth and top-quartile returns over the long-term.
“Once again, I want to thank our entire team for their tireless
efforts to keep one another safe while continuing to deliver for
our customers during this challenging period. The team continues to
raise their game each quarter to address the unique challenges at
hand.”
Second Quarter 2022 Results by
Segment
Label and Graphic Materials
- Reported sales increased 8% to $1.5 billion. Sales were up 14%
ex. currency and 15% on an organic basis.
- Label and Packaging Materials sales were up high teens on an
organic basis with strong growth in both high value product
categories and the base business.
- Sales decreased by mid-single digits organically in the
combined Graphics and Reflective Solutions businesses.
- On an organic basis, sales were up high teens in North America,
more than 20% in Western Europe, and mid-single digits in emerging
markets.
- Reported operating margin decreased 140 basis points to 15.2%.
Adjusted EBITDA margin (non-GAAP) increased 50 basis points to
17.1%, as the benefits from the net impact of pricing, freight and
raw material costs, productivity and mix more than offset higher
employee-related costs and lower volume.
- Inflation continues to be significant in the company’s
materials businesses; it anticipates more than 20% inflation in
2022 compared to prior year.
Retail Branding and Information Solutions
- Reported sales increased 24% to $658 million. Sales were up 27%
ex. currency and 5% on an organic basis.
- Growth was strong in the high value product categories,
including Intelligent Labels and external embellishments.
- Sales decreased by low-single digits in the base business
following strong prior quarter, up mid-single digits
year-to-date.
- Reported operating margin increased 490 basis points to 12.9%.
Adjusted EBITDA margin increased 220 basis points to 19.0% as the
combined benefit from higher organic volume and acquisitions was
partially offset by growth investments and higher employee-related
costs.
Industrial and Healthcare Materials
- Reported sales increased 1% to $198 million. Sales were up 5%
ex. currency and 7% on an organic basis reflecting a mid-single
digit increase in industrial categories and a high teens increase
in healthcare categories.
- Reported operating margin decreased 120 basis points to 10.3%.
Adjusted EBITDA margin increased 190 basis points sequentially to
13.7%. Adjusted EBITDA margin decreased 160 basis points versus
prior year as the benefits from the net impact of pricing, freight,
and raw material costs were more than offset by higher
employee-related costs and lower volume/mix.
- Lower volume was principally driven by China.
Other
Balance Sheet and Capital Deployment
During the first half of the year, the company deployed $37
million for acquisitions and returned $386 million in cash to
shareholders, up $183 million compared to last year, through a
combination of share repurchases and dividends. The company
repurchased 0.7 million shares in the second quarter at an
aggregate cost of $117 million. Net of dilution from long-term
incentive awards, the company’s share count at the end of the
quarter was down 1.9 million compared to the same time last
year.
The company’s balance sheet remains strong, with ample capacity
to continue executing its long-term capital allocation strategy.
Net debt to adjusted EBITDA (non-GAAP) was 2.2 at the end of the
second quarter.
Income Taxes
The company’s reported second quarter effective tax rate was
25.5%. The adjusted tax rate (non-GAAP) for the quarter was 25.6%,
which is also the company’s current expectation for its full-year
adjusted tax rate.
Cost Reduction Actions
In the second quarter, the company realized approximately $6
million in pre-tax savings from restructuring, net of transition
costs, and incurred pre-tax restructuring charges of approximately
$3 million.
Guidance
In its supplemental presentation materials, “Second Quarter 2022
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its 2022 financial
results. Based on the factors listed and other assumptions, the
company has raised its guidance range for 2022 reported earnings
per share from $9.35 to $9.75 to $9.60 to $9.90.
Excluding an estimated $0.10 per share related to restructuring
charges and other items, the company raised its guidance range for
adjusted earnings per share from $9.45 to $9.85 to $9.70 to
$10.00.
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 2022 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 company specializing in the design and manufacture of a
wide variety of labeling and functional materials. The company’s
products, which are used in nearly every major industry, include
pressure-sensitive materials for labels and graphic applications;
tapes and other bonding solutions for industrial, medical, and
retail applications; tags, labels and embellishments for apparel;
and radio frequency identification (RFID) solutions serving retail
apparel and other markets. The company employs approximately 36,000
employees in more than 50 countries. Reported sales in 2021 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. Forward-looking statements also include
those related to the acquisition of CB Velocity Holdings, LLC
(“Vestcom”), including its effect on our long-term targets and
future financial results.
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, including as a result of
COVID-19; (ii) the availability of raw materials; (iii)
competitors' actions, including pricing, expansion in key markets,
and product offerings; (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, including our acquisition of
Vestcom.
Actual results and trends may differ materially from historical
or anticipated results depending on a variety of factors, including
but are not limited to, risks and uncertainties relating to the
following:
- COVID-19
- International Operations – worldwide and local economic and
market conditions; changes in political conditions, including those
related to the Russian invasion of Ukraine; 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, including our acquisition of Vestcom; 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; and collection of receivables
from customers
- 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 2021 Form 10-K, filed
with the Securities and Exchange Commission on February 23, 2022,
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. P/Y
2022
2021
Reported
Ex.
Currency
Organic
(a)
(b)
Net sales, by segment:
Label and Graphic Materials
$1,491.8
$1,376.2
8.4%
14.3%
14.5%
Retail Branding and Information Solutions
657.5
529.3
24.2%
27.0%
4.5%
Industrial and Healthcare Materials
197.7
196.5
0.6%
4.7%
7.1%
Total net sales
$2,347.0
$2,102.0
11.7%
16.7%
11.3%
As Reported (GAAP) Adjusted Non-GAAP (c)
2Q 2Q
%
% of Sales
2Q 2Q
%
% of Sales
2022
2021
Change
2022
2021
2022
2021
Change
2022
2021
Operating income (loss) / operating margins before interest, other
non-operating expense (income), and taxes, by segment: Label and
Graphic Materials
$226.3
$228.1
15.2%
16.6%
$226.8
$199.6
15.2%
14.5%
Retail Branding and Information Solutions
84.6
42.1
12.9%
8.0%
85.9
69.6
13.1%
13.1%
Industrial and Healthcare Materials
20.4
22.5
10.3%
11.5%
20.5
23.0
10.4%
11.7%
Corporate expense (d)
(23.9)
(22.8)
(22.4)
(22.9)
Total operating income / operating margins before interest, other
non-operating expense (income), and taxes
$307.4
$269.9
14%
13.1%
12.8%
$310.8
$269.3
15%
13.2%
12.8%
Interest expense
$20.8
$16.0
$20.8
$16.0
Other non-operating expense (income), net
($1.3)
($1.4)
($1.3)
($1.4)
Income before taxes
$287.9
$255.3
13%
12.3%
12.1%
$291.3
$254.7
14%
12.4%
12.1%
Provision for income taxes
$73.4
$70.4
$74.6
$65.2
Equity method investment (losses) gains
---
($1.1)
---
($1.1)
Net income
$214.5
$183.8
17%
9.1%
8.7%
$216.7
$188.4
15%
9.2%
9.0%
Net income per common share, assuming dilution
$2.61
$2.19
19%
$2.64
$2.25
17%
2Q Free Cash Flow (e)
$209.1
$206.0
YTD Free Cash Flow (e)
$282.4
$388.0
See accompanying schedules A-4 to
A-10 for reconciliations from GAAP to non-GAAP financial
measures.
(a)
Sales change ex. currency refers
to the increase or decrease in net sales, excluding the estimated
impact of foreign currency translation and the reclassification of
sales between segments, and, 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 adjustment 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 currency
fluctuations.
(b)
Organic sales change refers to
sales change ex. currency, excluding the estimated impact of
acquisitions and product line divestitures.
(c)
Excludes impact of restructuring
charges and other items.
(d)
As reported "Corporate expense"
for the second quarter of 2022 includes severance and related costs
of $.8, outcome of legal proceedings of $.7, and 2021 includes
severance and related costs of ($.1).
(e)
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 sales of property, plant and equipment, plus (minus)
net proceeds from insurance and sales (purchases) of investments.
Free cash flow is also adjusted for, where applicable, certain
acquisition-related transaction costs.
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts)
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 2, 2022
Jul. 3, 2021
Jul. 2, 2022
Jul. 3, 2021
Net sales
$
2,347.0
$
2,102.0
$
4,696.3
$
4,153.3
Cost of products sold
1,703.5
1,525.7
3,411.5
2,980.0
Gross profit
643.5
576.3
1,284.8
1,173.3
Marketing, general and administrative expense
332.7
307.0
687.7
619.3
Other expense (income), net(1)
3.4
(0.6
)
1.8
0.3
Interest expense
20.8
16.0
40.4
32.2
Other non-operating expense (income), net(2)
(1.3
)
(1.4
)
(2.7
)
(2.7
)
Income before taxes
287.9
255.3
557.6
524.2
Provision for income taxes
73.4
70.4
144.9
128.5
Equity method investment (losses) gains
---
(1.1
)
---
(2.4
)
Net income
$
214.5
$
183.8
$
412.7
$
393.3
Per share amounts:
Net income per common share, assuming dilution
$
2.61
$
2.19
$
5.00
$
4.69
Weighted average number of common shares outstanding,
assuming dilution
82.1
83.8
82.6
83.9
(1)
"Other expense (income), net" for
the second quarter of 2022 includes severance and related costs of
$3.1, outcomes of legal proceedings of $.7, and transaction and
related costs of $.1, partially offset by gain on sale of assets of
$.5.
"Other expense (income), net" for
the second quarter of 2021 includes outcomes of legal proceedings,
net, of $2.5, partially offset by severance and related costs of
$1.6, asset impairment charges of $.1, and loss on sale of assets
of $.2.
"Other expense (income), net" for
the first half of 2022 includes severance and related costs of $4,
outcomes of legal proceedings of $1.7, and transaction and related
costs of $.3, partially offset by gain on venture investment of
$3.7 and gain on sale of assets of $.5.
"Other expense (income), net" for
the first half of 2021 includes severance and related costs of $4,
asset impairment and lease cancellation charges of $.6, transaction
and related costs of $.7, and loss on sales of assets, net, of $.2,
partially offset by gain on sale of product line of $4.8 and
outcomes of legal proceedings, net, of $.4.
(2)
"Other non-operating expense
(income), net" for the first half of 2021 includes pension plan
settlement loss of $.4.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS
Jul. 2, 2022
Jul. 3, 2021
Current assets: Cash and cash equivalents
$
164.8
$
344.8
Trade accounts receivable, net
1,565.1
1,338.9
Inventories
990.1
824.8
Other current assets
228.8
233.1
Total current assets
2,948.8
2,741.6
Property, plant and equipment, net
1,451.0
1,344.8
Goodwill and other intangibles resulting from business
acquisitions, net
2,738.6
1,361.7
Deferred tax assets
119.9
188.5
Other assets
834.1
785.9
$
8,092.4
$
6,422.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt and
finance leases
$
738.6
$
33.6
Accounts payable
1,410.9
1,226.5
Other current liabilities
851.0
822.4
Total current liabilities
3,000.5
2,082.5
Long-term debt and finance leases
2,493.4
2,020.2
Other long-term liabilities
661.6
616.2
Shareholders' equity:
Common stock
124.1
124.1
Capital in excess of par value
855.9
846.5
Retained earnings
4,182.0
3,637.3
Treasury stock at cost
(2,914.0
)
(2,576.7
)
Accumulated other comprehensive loss
(311.1
)
(327.6
)
Total shareholders' equity
1,936.9
1,703.6
$
8,092.4
$
6,422.5
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED)
Six Months Ended
Jul. 2, 2022
Jul. 3, 2021
Operating Activities: Net income
$
412.7
$
393.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
88.2
80.8
Amortization
57.0
28.8
Provision for credit losses and sales returns
23.9
17.5
Stock-based compensation
23.9
18.5
Pension plan settlement loss
---
0.4
Deferred taxes and other non-cash taxes
8.6
10.6
Other non-cash expense and loss (income and gain), net
15.0
13.8
Changes in assets and liabilities and other adjustments
(234.9
)
(86.9
)
Net cash provided by operating activities
394.4
476.8
Investing Activities:
Purchases of property, plant and equipment
(106.8
)
(83.8
)
Purchases of software and other deferred charges
(9.9
)
(6.4
)
Proceeds from sales of property, plant and equipment
2.1
1.0
Proceeds from insurance and sales (purchases) of investments, net
2.0
0.4
Proceeds from sale of product line
---
6.7
Payments for acquisitions, net of cash acquired, and investments in
businesses
(37.0
)
(33.8
)
Net cash used in investing activities
(149.6
)
(115.9
)
Financing Activities:
Net increase (decrease) in borrowings with maturities of three
months or less
176.9
(36.2
)
Repayments of long-term debt and finance leases
(3.4
)
(3.1
)
Dividends paid
(117.4
)
(108.0
)
Share repurchases
(268.7
)
(95.0
)
Net (tax withholding) proceeds related to stock-based compensation
(25.1
)
(25.3
)
Net cash used in financing activities
(237.7
)
(267.6
)
Effect of foreign currency translation on cash balances
(5.0
)
(0.8
)
Increase (decrease) in cash and cash equivalents
2.1
92.5
Cash and cash equivalents, beginning of year
162.7
252.3
Cash and cash equivalents, end of period
$
164.8
$
344.8
A-4
Reconciliation of Non-GAAP Financial
Measures to 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. Based on
feedback from investors and financial analysts, we believe that the
supplemental non-GAAP financial measures we provide are useful to
their assessments of our performance and operating trends, as well
as liquidity.
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 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 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.
We use the non-GAAP financial measures described below in the
accompanying news release and related presentation.
Sales change ex. currency refers to the increase or decrease in
net sales, excluding the estimated impact of foreign currency
translation and the reclassification of sales between segments,
and, 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 adjustment 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 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 income before taxes;
interest expense; other non-operating expense (income), net; and
other 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 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 the
enactment of the U.S. Tax Cuts and Jobs Act ("TCJA"), where
applicable, 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.
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 sales of
property, plant and equipment, plus (minus) net proceeds from
insurance and sales (purchases) of investments. Free cash flow is
also adjusted for, where applicable, certain acquisition-related
transaction costs. We believe that free cash flow assists investors
by showing the amount of cash we have available for debt
reductions, dividends, share repurchases, and acquisitions.
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.
A-5
AVERY DENNISON CORPORATION PRELIMINARY RECONCILIATION
FROM GAAP TO NON-GAAP FINANCIAL MEASURES (In millions,
except % and per share amounts)
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 2, 2022
Jul. 3, 2021
Jul. 2, 2022
Jul. 3, 2021
Reconciliation from GAAP to Non-GAAP operating
margins: Net sales
$
2,347.0
$
2,102.0
$
4,696.3
$
4,153.3
Income before taxes
$
287.9
$
255.3
$
557.6
$
524.2
Income before taxes as a percentage of net sales
12.3
%
12.1
%
11.9
%
12.6
%
Adjustments:
Interest expense
$
20.8
$
16.0
$
40.4
$
32.2
Other non-operating expense (income), net
(1.3
)
(1.4
)
(2.7
)
(2.7
)
Operating income before interest expense, other non-operating
expense (income), and taxes
$
307.4
$
269.9
$
595.3
$
553.7
Operating margins
13.1
%
12.8
%
12.7
%
13.3
%
Income before taxes
$
287.9
$
255.3
$
557.6
$
524.2
Adjustments:
Restructuring charges:
Severance and related costs
3.1
1.6
4.0
4.0
Asset impairment and lease cancellation charges
---
0.1
---
0.6
Transaction and related costs
0.1
---
0.3
0.7
Outcomes of legal proceedings, net
0.7
(2.5
)
1.7
(0.4
)
(Gain) loss on sales of assets, net
(0.5
)
0.2
(0.5
)
0.2
Gain on venture investment
---
---
(3.7
)
---
Gain on sale of product line
---
---
---
(4.8
)
Interest expense
20.8
16.0
40.4
32.2
Other non-operating expense (income), net
(1.3
)
(1.4
)
(2.7
)
(2.7
)
Adjusted operating income (non-GAAP)
$
310.8
$
269.3
$
597.1
$
554.0
Adjusted operating margins (non-GAAP)
13.2
%
12.8
%
12.7
%
13.3
%
Reconciliation from GAAP to Non-GAAP net income:
As reported net income
$
214.5
$
183.8
$
412.7
$
393.3
Adjustments:
Restructuring charges and other items(1)
3.4
(0.6
)
1.8
0.3
Pension plan settlement loss
---
---
---
0.4
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(1.2
)
5.2
1.7
(4.3
)
Adjusted net income (non-GAAP)
$
216.7
$
188.4
$
416.2
$
389.7
(1)
Includes pretax restructuring
charges, transaction and related costs, outcomes of legal
proceedings, gain/loss on sales of assets, gain on venture
investment, and gain on sale of product line.
A-5
(continued)
AVERY DENNISON CORPORATION PRELIMINARY RECONCILIATION
FROM GAAP TO NON-GAAP FINANCIAL MEASURES (In millions,
except % and per share amounts)
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 2, 2022
Jul. 3, 2021
Jul. 2, 2022
Jul. 3, 2021
Reconciliation from GAAP to Non-GAAP net income
per common share: As reported net income per common share,
assuming dilution
$
2.61
$
2.19
$
5.00
$
4.69
Adjustments per common share, net of tax:
Restructuring charges and other items(1)
0.04
(0.01
)
0.02
---
Tax effect on restructuring charges and other items and impact of
adjusted tax rate
(0.01
)
0.07
0.02
(0.05
)
Adjusted net income per common share, assuming dilution (non-GAAP)
$
2.64
$
2.25
$
5.04
$
4.64
Weighted average number of common shares outstanding, assuming
dilution
82.1
83.8
82.6
83.9
Our adjusted tax rate was 25.6% for the three and six months
ended July 2, 2022, and 25.6% and 25.3% for the three and six
months ended July 3, 2021, respectively.
(1) Includes pretax restructuring
charges, transaction and related costs, outcomes of legal
proceedings, gain/loss on sales of assets, gain on venture
investment, and gain on sale of product line.
(UNAUDITED)
Three Months Ended
Six Months Ended
Jul. 2, 2022
Jul. 3, 2021
Jul. 2, 2022
Jul. 3, 2021
Reconciliation of free cash flow: Net cash
provided by operating activities
$
268.2
$
267.5
$
394.4
$
476.8
Purchases of property, plant and equipment
(57.1
)
(58.6
)
(106.8
)
(83.8
)
Purchases of software and other deferred charges
(4.3
)
(4.1
)
(9.9
)
(6.4
)
Proceeds from sales of property, plant and equipment
1.8
0.3
2.1
1.0
Proceeds from insurance and sales (purchases) of investments, net
0.2
0.9
2.0
0.4
Payments for certain acquisition-related transaction costs
0.3
---
0.6
---
Free cash flow (non-GAAP)
$
209.1
$
206.0
$
282.4
$
388.0
A-6
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Second Quarter Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2022
2021
2022
2021
2022
2021
Label and Graphic Materials
$
1,491.8
$
1,376.2
$
226.3
$
228.1
15.2
%
16.6
%
Retail Branding and Information Solutions
657.5
529.3
84.6
42.1
12.9
%
8.0
%
Industrial and Healthcare Materials
197.7
196.5
20.4
22.5
10.3
%
11.5
%
Corporate Expense
N/A
N/A
(23.9
)
(22.8
)
N/A
N/A
TOTAL FROM OPERATIONS
$
2,347.0
$
2,102.0
$
307.4
$
269.9
13.1
%
12.8
%
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION
Second Quarter Ended
2022
2021
2022
2021
Label and Graphic Materials
Operating income and margins, as reported
$
226.3
$
228.1
15.2
%
16.6
%
Adjustments:
Restructuring charges:
Severance and related costs
0.5
(0.1
)
---
---
Outcome of legal proceedings(1)
---
(28.4
)
---
(2.1
%)
Adjusted operating income and margins (non-GAAP)
$
226.8
$
199.6
15.2
%
14.5
%
Depreciation and amortization
27.6
28.7
1.9
%
2.1
%
Adjusted EBITDA and margins (non-GAAP)
$
254.4
$
228.3
17.1
%
16.6
%
Retail Branding and Information
Solutions
Operating income and margins, as reported
$
84.6
$
42.1
12.9
%
8.0
%
Adjustments:
Restructuring charges:
Severance and related costs
1.7
1.3
0.3
%
0.2
%
Asset impairment charges
---
0.1
---
---
Outcomes of legal proceedings, net(2)
---
25.9
---
4.9
%
Transaction and related costs
0.1
---
---
---
(Gain) loss on sales of assets
(0.5
)
0.2
(0.1
%)
---
Adjusted operating income and margins (non-GAAP)
$
85.9
$
69.6
13.1
%
13.1
%
Depreciation and amortization
39.0
19.4
5.9
%
3.7
%
Adjusted EBITDA and margins (non-GAAP)
$
124.9
$
89.0
19.0
%
16.8
%
Industrial and Healthcare
Materials
Operating income and margins, as reported
$
20.4
$
22.5
10.3
%
11.5
%
Adjustments:
Restructuring charges:
Severance and related costs
0.1
0.5
0.1
%
0.2
%
Adjusted operating income and margins (non-GAAP)
$
20.5
$
23.0
10.4
%
11.7
%
Depreciation and amortization
6.6
7.1
3.3
%
3.6
%
Adjusted EBITDA and margins (non-GAAP)
$
27.1
$
30.1
13.7
%
15.3
%
(1)
Second quarter of 2021 includes
Brazil indirect tax credit based on Brazilian Federal Supreme Court
ruling.
(2)
Second quarter of 2021 includes
contingent liability related to patent infringement lawsuit of
$26.6, partially offset by Brazil indirect tax credit based on
Brazilian Federal Supreme Court ruling of $.7.
A-7
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Six Months Ended
NET SALES
OPERATING INCOME (LOSS)
OPERATING MARGINS
2022
2021
2022
2021
2022
2021
Label and Graphic Materials
$
2,972.0
$
2,753.2
$
433.5
$
454.3
14.6
%
16.5
%
Retail Branding and Information Solutions
1,336.5
1,012.0
174.9
102.1
13.1
%
10.1
%
Industrial and Healthcare Materials
387.8
388.1
36.0
46.0
9.3
%
11.9
%
Corporate Expense
N/A
N/A
(49.1
)
(48.7
)
N/A
N/A
TOTAL FROM OPERATIONS
$
4,696.3
$
4,153.3
$
595.3
$
553.7
12.7
%
13.3
%
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION
Six Months Ended
2022
2021
2022
2021
Label and Graphic Materials
Operating income and margins, as reported
$
433.5
$
454.3
14.6
%
16.5
%
Adjustments: Restructuring charges: Severance and related costs
1.0
0.5
---
---
Asset impairment charges
---
0.1
---
---
Transaction and related costs
---
0.1
---
---
Outcomes of legal proceedings, net(1)
---
(26.3
)
---
(0.9
%)
Gain on sale of product line
---
(4.8
)
---
(0.2
%)
Gain on venture investment
(3.7
)
---
(0.1
%)
---
Adjusted operating income and margins (non-GAAP)
$
430.8
$
423.9
14.5
%
15.4
%
Depreciation and amortization
55.2
57.7
1.9
%
2.1
%
Adjusted EBITDA and margins (non-GAAP)
$
486.0
$
481.6
16.4
%
17.5
%
Retail Branding and Information
Solutions Operating income and margins, as reported
$
174.9
$
102.1
13.1
%
10.1
%
Adjustments: Restructuring charges: Severance and related costs
2.1
2.5
0.1
%
0.2
%
Asset impairment and lease cancellation charges
---
0.5
---
0.1
%
Outcomes of legal proceedings, net(2)
1.0
25.9
0.1
%
2.6
%
Transaction and related costs
0.3
0.2
---
---
(Gain) loss on sales of assets
(0.5
)
0.5
---
---
Adjusted operating income and margins (non-GAAP)
$
177.8
$
131.7
13.3
%
13.0
%
Depreciation and amortization
76.5
38.0
5.7
%
3.8
%
Adjusted EBITDA and margins (non-GAAP)
$
254.3
$
169.7
19.0
%
16.8
%
Industrial and Healthcare
Materials Operating income and margins, as reported
$
36.0
$
46.0
9.3
%
11.9
%
Adjustments: Restructuring charges: Severance and related costs
0.1
0.5
---
0.1
%
Transaction and related costs
---
0.4
---
0.1
%
Gain on sale of assets
---
(0.3
)
---
(0.1
%)
Adjusted operating income and margins (non-GAAP)
$
36.1
$
46.6
9.3
%
12.0
%
Depreciation and amortization
13.5
13.9
3.5
%
3.6
%
Adjusted EBITDA and margins (non-GAAP)
$
49.6
$
60.5
12.8
%
15.6
%
(1)
The first half of 2021 includes
Brazil indirect tax credit based on Brazilian Federal Supreme Court
ruling of $28.4, partially offset by outcome of certain legal
proceedings of $2.1.
(2)
The first half of 2021 includes
contingent liability related to patent infringement lawsuit of
$26.6, partially offset by Brazil indirect tax credit based on
Brazilian Federal Supreme Court ruling of $.7.
A-8
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION Reconciliation of Adjusted EBITDA Margins
(In millions, except %) (UNAUDITED)
QTD
QTD
Label and Graphic Materials
2Q22
2Q21
2Q20
1Q22
1Q21
1Q20
Net sales
$
1,491.8
$
1,376.2
$
1,101.5
$
1,480.2
$
1,377.0
$
1,173.5
Operating income before interest expense, other non-operating
expense (income) and taxes, as reported
$
226.3
$
228.1
$
137.5
$
207.2
$
226.2
$
172.5
Operating margins, as reported
15.2
%
16.6
%
12.5
%
14.0
%
16.4
%
14.7
%
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
0.5
$
(0.1
)
$
24.9
$
0.5
$
0.6
$
0.4
Asset impairment and lease cancellation charges
---
---
0.9
---
0.1
---
Other items
---
(28.4
)
---
(3.7
)
(2.6
)
0.7
Adjusted operating income (non-GAAP)
$
226.8
$
199.6
$
163.3
$
204.0
$
224.3
$
173.6
Adjusted operating margins (non-GAAP)
15.2
%
14.5
%
14.8
%
13.8
%
16.3
%
14.8
%
Depreciation and amortization
$
27.6
$
28.7
$
26.3
$
27.6
$
29.0
$
26.1
Adjusted EBITDA (non-GAAP)
$
254.4
$
228.3
$
189.6
$
231.6
$
253.3
$
199.7
Adjusted EBITDA margins (non-GAAP)
17.1
%
16.6
%
17.2
%
15.6
%
18.4
%
17.0
%
Retail Branding and Information
Solutions
2Q22
2Q21
2Q20
1Q22
1Q21
1Q20
Net sales
$
657.5
$
529.3
$
294.9
$
679.0
$
482.7
$
401.9
Operating income (loss) before interest expense, other
non-operating expense (income) and taxes, as reported
$
84.6
$
42.1
$
(10.7
)
$
90.3
$
60.0
$
30.9
Operating margins, as reported
12.9
%
8.0
%
(3.6
%)
13.3
%
12.4
%
7.7
%
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
1.7
$
1.3
$
11.3
$
0.4
$
1.2
$
1.5
Asset impairment and lease cancellation charges
---
0.1
0.9
---
0.4
---
Other items
(0.4
)
26.1
0.7
1.2
0.5
1.8
Adjusted operating income (non-GAAP)
$
85.9
$
69.6
$
2.2
$
91.9
$
62.1
$
34.2
Adjusted operating margins (non-GAAP)
13.1
%
13.1
%
0.7
%
13.5
%
12.9
%
8.5
%
Depreciation and amortization
$
39.0
$
19.4
$
17.7
$
37.5
$
18.6
$
14.9
Adjusted EBITDA (non-GAAP)
$
124.9
$
89.0
$
19.9
$
129.4
$
80.7
$
49.1
Adjusted EBITDA margins (non-GAAP)
19.0
%
16.8
%
6.7
%
19.1
%
16.7
%
12.2
%
Industrial and Healthcare
Materials
2Q22
2Q21
2Q20
1Q22
1Q21
1Q20
Net sales
$
197.7
$
196.5
$
132.1
$
190.1
$
191.6
$
147.6
Operating income before interest expense, other non-operating
expense (income) and taxes, as reported
$
20.4
$
22.5
$
7.5
$
15.6
$
23.5
$
14.9
Operating margins, as reported
10.3
%
11.5
%
5.7
%
8.2
%
12.3
%
10.1
%
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
0.1
$
0.5
$
1.5
$
---
$
---
$
0.5
Asset impairment charges
---
---
---
---
---
---
Other items
---
---
---
---
0.1
---
Adjusted operating income (non-GAAP)
$
20.5
$
23.0
$
9.0
$
15.6
$
23.6
$
15.4
Adjusted operating margins (non-GAAP)
10.4
%
11.7
%
6.8
%
8.2
%
12.3
%
10.4
%
Depreciation and amortization
$
6.6
$
7.1
$
6.3
$
6.9
$
6.8
$
6.5
Adjusted EBITDA (non-GAAP)
$
27.1
$
30.1
$
15.3
$
22.5
$
30.4
$
21.9
Adjusted EBITDA margins (non-GAAP)
13.7
%
15.3
%
11.6
%
11.8
%
15.9
%
14.8
%
Corporate expense
2Q22
2Q21
2Q20
1Q22
1Q21
1Q20
Corporate expense, as reported
$
(23.9
)
$
(22.8
)
$
(10.8
)
$
(25.2
)
$
(25.9
)
$
(19.1
)
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
0.8
$
(0.1
)
$
(0.2
)
$
---
$
0.6
$
---
Other items
0.7
---
---
---
---
---
Corporate expense (non-GAAP)
$
(22.4
)
$
(22.9
)
$
(11.0
)
$
(25.2
)
$
(25.3
)
$
(19.1
)
Total Company
2Q22
2Q21
2Q20
1Q22
1Q21
1Q20
Net sales
$
2,347.0
$
2,102.0
$
1,528.5
$
2,349.3
$
2,051.3
$
1,723.0
Operating income before interest expense, other non-operating
expense (income) and taxes, as reported
$
307.4
$
269.9
$
123.5
$
287.9
$
283.8
$
199.2
Operating margins, as reported
13.1
%
12.8
%
8.1
%
12.3
%
13.8
%
11.6
%
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
3.1
$
1.6
$
37.5
$
0.9
$
2.4
$
2.4
Asset impairment and lease cancellation charges
---
0.1
1.8
---
0.5
---
Other items
0.3
(2.3
)
0.7
(2.5
)
(2.0
)
2.5
Adjusted operating income (non-GAAP)
$
310.8
$
269.3
$
163.5
$
286.3
$
284.7
$
204.1
Adjusted operating margins (non-GAAP)
13.2
%
12.8
%
10.7
%
12.2
%
13.9
%
11.8
%
Depreciation and amortization
$
73.2
$
55.2
$
50.3
$
72.0
$
54.4
$
47.5
Adjusted EBITDA (non-GAAP)
$
384.0
$
324.5
$
213.8
$
358.3
$
339.1
$
251.6
Adjusted EBITDA margins (non-GAAP)
16.4
%
15.4
%
14.0
%
15.3
%
16.5
%
14.6
%
A-9
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION Reconciliation of Adjusted EBITDA Margins and
Net Debt to Adjusted EBITDA (In millions, except %)
(UNAUDITED)
QTD
Total Company
3Q21
4Q21
1Q22
2Q22
Net sales
$
2,071.8
$
2,183.2
$
2,349.3
$
2,347.0
Operating income before interest expense, other non-operating
expense (income) and taxes, as reported
$
241.5
$
263.5
$
287.9
$
307.4
Operating margins, as reported
11.7
%
12.1
%
12.3
%
13.1
%
Non-GAAP adjustments: Restructuring
charges: Severance and related costs
$
1.1
$
5.4
$
0.9
$
3.1
Asset impairment and lease cancellation charges
1.3
1.2
---
---
Other items
13.6
(17.3
)
(2.5
)
0.3
Adjusted operating income (non-GAAP)
$
257.5
$
252.8
$
286.3
$
310.8
Adjusted operating margins (non-GAAP)
12.4
%
11.6
%
12.2
%
13.2
%
Depreciation and amortization
$
61.9
$
72.6
$
72.0
$
73.2
Adjusted EBITDA (non-GAAP)
$
319.4
$
325.4
$
358.3
$
384.0
Adjusted EBITDA margins (non-GAAP)
15.4
%
14.9
%
15.3
%
16.4
%
Total Debt
$
3,232.0
Less: Cash and cash equivalents
164.8
Net Debt
$
3,067.2
Net Debt to Adjusted EBITDA LTM* (non-GAAP)
2.2
*LTM = Last twelve months (3Q21 to 2Q22)
A-10
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (UNAUDITED)
Second Quarter 2022
Total Company
Label and Graphic Materials
Retail Branding and Information
Solutions
Industrial and Healthcare
Materials
Reconciliation from GAAP to Non-GAAP sales change Reported
net sales change
11.7%
8.4%
24.2%
0.6%
Reclassification of sales between segments
---
0.4%
(1.0%)
---
Foreign currency translation
5.0%
5.5%
3.7%
4.1%
Sales change ex. currency (non-GAAP)(1)
16.7%
14.3%
27.0%
4.7%
Acquisitions
(5.4%)
0.2%
(22.5%)
2.4%
Organic sales change (non-GAAP)(1)
11.3%
14.5%
4.5%
7.1%
Six Months Ended 2022
Total Company
Label and Graphic Materials
Retail Branding and Information
Solutions
Industrial and Healthcare
Materials
Reconciliation from GAAP to Non-GAAP sales change Reported
net sales change
13.1%
7.9%
32.1%
(0.1%)
Reclassification of sales between segments
---
0.3%
(0.7%)
---
Foreign currency translation
4.2%
4.7%
3.2%
3.0%
Sales change ex. currency (non-GAAP)(1)
17.3%
12.9%
34.5%
2.9%
Acquisitions
(5.2%)
0.2%
(22.6%)
2.3%
Organic sales change (non-GAAP)(1)
12.1%
13.1%
12.0%
5.2%
(1)
Totals may not sum due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220725005978/en/
Media Relations: Kristin Robinson, (626) 304-4592
kristin.robinson@averydennison.com
Investor Relations: John Eble, (440) 534-6290
john.eble@averydennison.com
Avery Dennison (NYSE:AVY)
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