• | COVID-19 |
• | International Operations – worldwide and local economic and market conditions; changes in political conditions; 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 |
Avery Dennison Corporation |
| |
2021 Annual Report |
1 |
|
12/31/2016 |
12/31/2017 |
12/31/2018 |
12/31/2019 |
12/31/2020 |
12/31/2021 |
||||||||||||||||||
Avery Dennison |
$100 | $167 | $133 | $197 | $239 | $338 | ||||||||||||||||||
S&P 500 Index |
100 | 119 | 112 | 144 | 168 | 213 | ||||||||||||||||||
Market Basket (2) |
100 | 130 | 118 | 155 | 183 | 230 |
(1) |
Assumes $100 invested on December 31, 2016 and reinvestment of dividends. |
(2) |
Average weighted by market capitalization. |
2 |
2021 Annual Report |
| |
Avery Dennison Corporation |
3 | ||||
4 | ||||
6 | ||||
8 | ||||
9 | ||||
15 | ||||
18 | ||||
18 |
• | Sales change ex. currency |
• | Organic sales change |
• | Free cash flow |
• | Operational working capital as a percentage of annualized current quarter net sales |
Avery Dennison Corporation |
| |
2021 Annual Report |
3 |
annualized current quarter net sales assists investors in assessing our working capital requirements because it excludes the impact of fluctuations attributable to our financing and other activities (which affect cash and cash equivalents, deferred taxes, other current assets, and other current liabilities) that tend to be disparate in amount, frequency, or timing, and may increase the volatility of working capital as a percentage of sales from period to period. The items excluded from this measure are not significantly influenced by our day-to-day activities managed at the operating level and do not necessarily reflect the underlying trends in our operations. |
|
2021 |
2020 |
||||||
Reported sales change |
21 | % | (1 | )% | ||||
Foreign currency translation |
(3 | ) | 1 | |||||
Extra week impact |
1 | (1 | ) | |||||
Sales change ex. currency (1) |
19 | % | (2 | )% | ||||
Acquisitions and product line divestitures |
(3 | ) | (2 | ) | ||||
Organic sales change (1) |
16 | % | (3 | )% |
(1) |
Totals may not sum due to rounding |
• | Higher volume/mix |
• | Lower restructuring charges |
• | Favorable currency translation |
• | Benefits from productivity initiatives, including savings from restructuring actions, net of transition costs |
• | Benefit from the Brazil indirect tax credit |
• | Lower allowance for credit losses |
• | Higher employee-related costs |
• | Impact of prior-year temporary cost reduction actions |
• | Net impact of higher selling prices, higher raw material costs, and higher freight costs |
• | Higher income tax provision |
• | Growth investments |
• | Contingent liability related to patent infringement litigation |
4 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
5 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net cash provided by operating activities |
$ | 1,046.8 | $ | 751.3 | $ | 746.5 | ||||||
Purchases of property, plant and equipment |
(255.0 | ) | (201.4 | ) | (219.4 | ) | ||||||
Purchases of software and other deferred charges |
(17.1 | ) | (17.2 | ) | (37.8 | ) | ||||||
Proceeds from sales of property, plant and equipment |
1.1 | 9.2 | 7.8 | |||||||||
Proceeds from insurance and sales (purchases) of investments, net |
3.1 | |
5.6 |
|
4.9 | |||||||
Contributions for U.S. pension plan termination |
– | |
– |
|
10.3 | |||||||
Payments for certain acquisition-related transaction costs |
18.8 | |
– |
|
|
– |
| |||||
Free cash flow |
$ | 797.7 | $ | 547.5 | $ | 512.3 |
• | We expect net sales to increase by approximately 8% to 11%, reflecting in part a decrease of approximately 3% from the effect of foreign currency translation and an increase of approximately 3% from the effect of acquisitions. |
• | Based on recent exchange rates, we expect foreign currency translation to decrease our operating income by approximately $35 million. |
• | We expect fixed and IT capital expenditures to be approximately $350 million. |
• | We expect our full year effective tax rate to be in the mid-twenty percent range. |
(In millions, except percentages) |
2021 |
2020 |
2019 |
|||||||||
Net sales |
$ | 8,408.3 | $ | 6,971.5 | $ | 7,070.1 | ||||||
Cost of products sold |
6,095.5 | 5,048.2 | 5,166.0 | |||||||||
Gross profit |
2,312.8 | 1,923.3 | 1,904.1 | |||||||||
Marketing, general and administrative expense |
1,248.5 | 1,060.5 | 1,080.4 | |||||||||
Other expense (income), net |
5.6 | 53.6 | 53.2 | |||||||||
Interest expense |
70.2 | 70.0 | 75.8 | |||||||||
Other non-operating expense (income), net |
(4.1 | ) | 1.9 | 445.2 | ||||||||
Income before taxes |
$ | 992.6 | $ | 737.3 | $ | 249.5 | ||||||
Gross profit margin |
27.5 | % | 27.6 | % | 26.9 | % |
6 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Other expense (income), net by type |
||||||||||||
Restructuring charges: |
||||||||||||
Severance and related costs |
$ | 10.5 | $ | 49.1 | $ | 45.3 | ||||||
Asset impairment charges and lease cancellation costs |
3.1 | 6.2 | 5.1 | |||||||||
Other items: |
||||||||||||
Transaction and related costs |
20.9 | 4.2 | 2.6 | |||||||||
Loss (gain) on sale of assets, net |
.2 | (.5 | ) | (3.2 | ) | |||||||
Gain on venture investments, net |
(23.0 | ) | (5.4 | ) | – | |||||||
Gain on sale of product line |
(5.7 | ) | – | – | ||||||||
Outcomes of legal proceedings, net |
(.4 | ) | – | 3.4 | ||||||||
Other expense (income), net |
$ | 5.6 | $ | 53.6 | $ | 53.2 |
(In millions, except percentages and per share amounts) |
2021 |
2020 |
2019 |
|||||||||
Income before taxes |
$ | 992.6 | $ | 737.3 | $ | 249.5 | ||||||
Provision for (benefit from) income taxes |
248.6 | 177.7 | (56.7 | ) | ||||||||
Equity method investment (losses) gains |
(3.9 | ) | (3.7 | ) | (2.6 | ) | ||||||
Net income |
$ | 740.1 | $ | 555.9 | $ | 303.6 | ||||||
Net income per common share |
$ | 8.93 | $ | 6.67 | $ | 3.61 | ||||||
Net income per common share, assuming dilution |
8.83 | 6.61 | 3.57 | |||||||||
Effective tax rate |
25.0 | % | 24.1 | % | (22.7 | )% |
Avery Dennison Corporation |
| |
2021 Annual Report |
7 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net sales including intersegment sales |
$ | 5,528.9 | $ | 4,795.4 | $ | 4,826.1 | ||||||
Less intersegment sales |
(98.5 | ) | (80.3 | ) | (80.2 | ) | ||||||
Net sales |
$ | 5,430.4 | $ | 4,715.1 | $ | 4,745.9 | ||||||
Operating income (1) |
801.7 | 688.8 | 601.5 | |||||||||
(1) Included charges associated with restructuring actions, transaction and related costs and gain/losses on sale of assets in all years, outcomes of legal proceedings and gain on sale of product line in 2021 and gain on venture investments in 2020 |
$ | (28.1 | ) | $ | 22.2 | $ | 28.3 |
|
2021 |
2020 |
||||||
Reported sales change |
15 | % | (1 | )% | ||||
Foreign currency translation |
(4 | ) | 1 | |||||
Extra week impact |
1 | (1 | ) | |||||
Sales change ex. currency (1) |
13 | (1 | ) | |||||
Acquisitions and product line divestitures |
(1 | ) | – | |||||
Organic sales change (1) |
12 | % | (1 | )% |
(1) |
Totals may not sum due to rounding |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net sales including intersegment sales |
$ | 2,239.1 | $ | 1,658.4 | $ | 1,670.9 | ||||||
Less intersegment sales |
(37.3 | ) | (27.5 | ) | (20.6 | ) | ||||||
Net sales |
$ | 2,201.8 | $ | 1,630.9 | $ | 1,650.3 | ||||||
Operating income (1) |
257.2 | 144.7 | 196.6 | |||||||||
(1) Included charges associated with restructuring actions and net gains on sales of assets and transaction and related costs in all years, outcomes of legal proceeding, loss on sale of asset and gain on venture investments in 2021 and loss on venture investments in 2020 |
$ | 36.6 | $ | 22.7 | $ | 9.9 |
|
2021 |
2020 |
||||||
Reported sales change |
35 | % | (1 | )% | ||||
Foreign currency translation |
(2 | ) | 1 | |||||
Extra week impact |
2 | (2 | ) | |||||
Sales change ex. currency (1) |
35 | (2 | ) | |||||
Acquisitions |
(10 | ) | (7 | ) | ||||
Organic sales change (1) |
25 | % | (10 | )% |
(1) |
Totals may not sum due to rounding |
8 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net sales including intersegment sales |
$ | 789.4 | $ | 631.9 | $ | 682.7 | ||||||
Less intersegment sales |
(13.3 | ) | (6.4 | ) | (8.8 | ) | ||||||
Net sales |
$ | 776.1 | $ | 625.5 | $ | 673.9 | ||||||
Operating income (1) |
81.6 | 58.2 | 60.0 | |||||||||
(1) Included charges associated with restructuring actions in all years and transaction and related costs and gain on sale of assets in 2021. |
$ | 2.4 | $ | 8.4 | $ | 9.4 |
|
2021 |
2020 |
||||||
Reported sales change |
24 | % | (7 | )% | ||||
Foreign currency translation |
(4 | ) | – | |||||
Extra week impact |
2 | (2 | ) | |||||
Sales change ex. currency (1) |
22 | (9 | ) | |||||
Acquisitions |
(4 | ) | – | |||||
Organic sales change (1) |
18 | % | (9 | )% |
(1) |
Totals may not sum due to rounding |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net income |
$ | 740.1 | $ | 555.9 | $ | 303.6 | ||||||
Depreciation |
167.3 | 154.2 | 140.3 | |||||||||
Amortization |
76.8 | 51.1 | 38.7 | |||||||||
Provision for credit losses and sales returns |
35.7 | 64.0 | 58.7 | |||||||||
Stock-based compensation |
37.2 | 24.0 | 34.5 | |||||||||
Pension plan settlements and related charges |
1.6 | .5 | 444.1 | |||||||||
Deferred taxes and other non-cash taxes |
2.6 | 9.3 | (216.9 | ) | ||||||||
Other non-cash expense and loss (income and gain), net |
10.1 | 44.9 | 28.3 | |||||||||
Trade accounts receivable |
(113.2 | ) | 14.7 | (42.2 | ) | |||||||
Inventories |
(182.7 | ) | (6.0 | ) | (18.1 | ) | ||||||
Accounts payable |
255.2 | (68.2 | ) | 46.4 | ||||||||
Taxes on income |
(7.3 | ) | (35.2 | ) | 5.4 | |||||||
Other assets |
4.1 | 18.2 | 38.4 | |||||||||
Other liabilities |
19.3 | (76.1 | ) | (114.7 | ) | |||||||
Net cash provided by operating activities |
$ | 1,046.8 | $ | 751.3 | $ | 746.5 |
Avery Dennison Corporation |
| |
2021 Annual Report |
9 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Purchases of property, plant and equipment |
$ | (255.0 | ) | $ | (201.4 | ) | $ | (219.4 | ) | |||
Purchases of software and other deferred charges |
(17.1 | ) | (17.2 | ) | (37.8 | ) | ||||||
Proceeds from sales of property, plant and equipment |
1.1 | 9.2 | 7.8 | |||||||||
Proceeds from insurance and sales (purchases) of investments, net |
3.1 | 5.6 | 4.9 | |||||||||
Proceeds from sale of product line |
7.6 | – | – | |||||||||
Payments for acquisitions, net of cash acquired, and investments in businesses |
(1,477.6 | ) | (350.4 | ) | (6.5 | ) | ||||||
Net cash used in investing activities |
$ | (1,737.9 | ) | $ | (554.2 | ) | $ | (251.0 | ) |
10 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net increase (decrease) in borrowings with maturities of three months or less |
$ | 259.2 | $ | (110.4 | ) | $ | (5.3 | ) | ||||
Additional borrowings under revolving credit facility |
– | |
500.0 |
|
– | |||||||
Repayments of borrowings under revolving credit facility |
|
– |
|
|
(500.0 |
) |
– | |||||
Additional long-term borrowings |
791.7 | 493.7 | – | |||||||||
Repayments of long-term debt and finance leases |
(13.4 | ) | (270.2 | ) | (18.6 | ) | ||||||
Dividends paid |
(220.6 | ) | (196.8 | ) | (189.7 | ) | ||||||
Share repurchases |
(180.9 | ) | (104.3 | ) | (237.7 | ) | ||||||
Net (tax withholding) proceeds related to stock-based compensation |
(25.4 | ) | (19.7 | ) | (17.4 | ) | ||||||
Other |
(6.3 | ) | – | (1.6 | ) | |||||||
Net cash provided by (used in) financing activities |
$ | 604.3 | $ | (207.7 | ) | $ | (470.3 | ) |
Avery Dennison Corporation |
| |
2021 Annual Report |
11 |
(In millions) |
2021 |
2020 |
||||||
Change in net sales |
$ | 201 | $ | (67 | ) |
12 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions, except percentages) |
2021 |
2020 |
||||||
( |
$ | 186.7 | $ | 490.2 | ||||
Reconciling items: |
||||||||
Cash and cash equivalents |
(162.7 | ) | (252.3 | ) | ||||
Other current assets |
(240.2 | ) | (211.5 | ) | ||||
Short-term borrowings and current portion of long-term debt and finance leases |
318.8 | 64.7 | ||||||
Current income taxes payable and other current accrued liabilities |
930.3 | 810.4 | ||||||
( |
$ | 1,032.9 | $ | 901.5 | ||||
(C) Fourth-quarter net sales, annualized |
$ | 8,732.8 | $ | 7,394.8 | ||||
Operational working capital, as a percentage of annualized current-quarter net sales (B) ÷ (C) |
11.8 | % | 12.2 | % |
Avery Dennison Corporation |
| |
2021 Annual Report |
13 |
|
Payments Due by Period |
|||||||||||||||||||||||||||
(In millions) |
Total |
2022 |
2023 |
2024 |
2025 |
2026 |
Thereafter |
|||||||||||||||||||||
Short-term borrowings |
$ | 313.2 | $ | 313.2 | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||||
Long-term debt |
2,795.3 | – | 250.0 | 300.0 | 595.3 | |
– |
|
1,650.0 | |||||||||||||||||||
Interest on long-term debt |
537.0 | |
75.1 |
|
71.0 | 66.8 | 64.0 | |
54.9 |
|
205.2 | |||||||||||||||||
Finance leases |
18.3 | 6.1 | 5.3 | 5.0 | 1.7 | .2 | – | |||||||||||||||||||||
Operating leases |
204.4 | 51.5 | 40.1 | 29.8 | 22.9 | 14.4 | 45.7 | |||||||||||||||||||||
Total contractual obligations |
$ | 3,868.2 | $ | 445.9 | $ | 366.4 | $ | 401.6 | $ | 683.9 | $ | 69.5 | $ | 1,900.9 |
• | Purchase obligations or open purchase orders at year-end – It is impracticable for us to obtain or provide a reasonable estimate of this information due to the decentralized nature of our purchasing systems. In addition, purchase orders are generally entered into at fair value and cancelable without penalty. |
• | Cash funding requirements for pension benefits payable to certain eligible current and future retirees under our funded plans – Benefits under our funded pension plans are paid through trusts or trust equivalents. Cash funding requirements for our funded plans, which can be significantly impacted by earnings on investments, the discount rate, changes in the plans, and funding laws and regulations, are not included as we are not able to estimate required contributions to the trusts or trust equivalents. Refer to Note 6, “Pension and Other Postretirement Benefits,” to the |
14 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Consolidated Financial Statements for information regarding our expected contributions to these plans and plan terminations and settlements. |
• | Pension and postretirement benefit payments – We have unfunded benefit obligations related to defined benefit plans. Refer to Note 6, “Pension and Other Postretirement Benefits,” to the Consolidated Financial Statements for more information, including our expected benefit payments over the next 10 years. |
• | Deferred compensation plan benefit payments – It is impracticable for us to obtain a reasonable estimate for 2022 and beyond due to the volatility of payment amounts and certain events that could trigger immediate payment of benefits to participants. In addition, participant account balances are marked-to-market |
• | Cash-based awards to employees under incentive compensation plans – The amounts to be paid to employees under these awards are based on our stock price and, as applicable, achievement of certain performance objectives as of the end of their respective performance periods. Therefore, we cannot reasonably estimate the amounts to be paid on the respective vesting dates. Refer to Note 12, “Long-term Incentive Compensation,” to the Consolidated Financial Statements for more information. |
• | Unfunded termination indemnity benefits to certain employees outside of the U.S. – These benefits are subject to applicable agreements, local laws and regulations; however, the timing of these payments cannot be reasonably estimated. Refer to Note 6, “Pension and Other Postretirement Benefits,” to the Consolidated Financial Statements for more information. |
• | Unrecognized tax benefits of $74 million – The resolution of the balance, including the timing of payments, is contingent upon various unknown factors and cannot be reasonably estimated. Refer to Note 14, “Taxes Based on Income,” to the Consolidated Financial Statements for more information. |
Avery Dennison Corporation |
| |
2021 Annual Report |
15 |
• | future revenue and profit margins; |
• | royalty rates; |
• | discount rates; |
• | customer retention rates; |
• | technology migration curves; and |
• | useful lives assigned to acquired intangible assets. |
16 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
17 |
18 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
19 |
(Dollars in millions, except per share amount) |
January 1, 2022 |
January 2, 2021 |
||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Trade accounts receivable, less allowances of $ year-end 2021 and 2020, respectively |
||||||||
Inventories |
||||||||
Other current assets |
||||||||
Total current assets |
||||||||
Property, plant and equipment, net |
||||||||
Goodwill |
||||||||
Other intangibles resulting from business acquisitions, net |
||||||||
Deferred tax assets |
||||||||
Other assets |
||||||||
$ |
$ |
|||||||
Liabilities and Shareholders’ Equity |
||||||||
Current liabilities: |
||||||||
Short-term borrowings and current portion of long-term debt and finance leases |
$ |
$ |
||||||
Accounts payable |
||||||||
Accrued payroll and employee benefits |
||||||||
Accrued trade rebates |
||||||||
Income taxes payable |
||||||||
Other current liabilities |
||||||||
Total current liabilities |
||||||||
Long-term debt and finance leases |
||||||||
Long-term retirement benefits and other liabilities |
||||||||
Deferred tax liabilities and income taxes payable |
||||||||
Commitments and contingencies (see Notes 7 and 8) |
||||||||
Shareholders’ equity: |
||||||||
Common stock, $ year-end 2021 and 2020; issued – year-end 2021 and 2020; outstanding – year-end 2021 and 2020, respectively |
||||||||
Capital in excess of par value |
||||||||
Retained earnings |
||||||||
Treasury stock at cost, year-end 2021 and 2020, respectively |
( |
) | ( |
) | ||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Total shareholders’ equity |
||||||||
$ |
$ |
20 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions, except per share amounts) |
2021 |
2020 |
2019 |
|||||||||
Net sales |
$ | $ | $ | |||||||||
Cost of products sold |
||||||||||||
Gross profit |
||||||||||||
Marketing, general and administrative expense |
||||||||||||
Other expense (income), net |
||||||||||||
Interest expense |
||||||||||||
Other non-operating expense (income), net |
( |
) | ||||||||||
Income before taxes |
||||||||||||
Provision for (benefit from) income taxes |
( |
) | ||||||||||
Equity method investment (losses) gains |
( |
) | ( |
) | ( |
) | ||||||
Net income |
$ | $ | $ | |||||||||
Per share amounts: |
||||||||||||
Net income per common share |
$ | $ | $ | |||||||||
Net income per common share, assuming dilution |
$ | $ | $ | |||||||||
Weighted average number of shares outstanding: |
||||||||||||
Common shares |
||||||||||||
Common shares, assuming dilution |
Avery Dennison Corporation |
| |
2021 Annual Report |
21 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net income |
$ | $ | $ | |||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Foreign currency translation: |
||||||||||||
Translation gain (loss) |
( |
) | ||||||||||
Pension and other postretirement benefits: |
||||||||||||
Net gain recognized from actuarial gain/loss and prior service cost/credit |
||||||||||||
Reclassifications to net income |
||||||||||||
Cash flow hedges: |
||||||||||||
Gains (losses) recognized on cash flow hedges |
( |
) | ||||||||||
Reclassifications to net income |
( |
) | ( |
) | ( |
) | ||||||
Other comprehensive income (loss), net of tax |
( |
) | ||||||||||
Total comprehensive income, net of tax |
$ | |
$ | |
$ | |
22 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(Dollars in millions, except per share amounts) |
Common stock, $1 par value |
Capital in excess of par value |
Retained earnings |
Treasury stock |
Accumulated other comprehensive loss |
Total |
||||||||||||||||||
Balance as of December 29, 2018 |
$ |
$ |
$ | $ | ( |
) | $( |
) | $ | |||||||||||||||
Net income |
– | – | – | – | ||||||||||||||||||||
Other comprehensive income (loss), net of tax |
– | – | – | – | ||||||||||||||||||||
Repurchase of |
– | – | – | ( |
) | – | ( |
) | ||||||||||||||||
Issuance of |
– | ( |
) | – | ||||||||||||||||||||
Contribution of |
– | – | – | |||||||||||||||||||||
Dividends of $ |
– | – | ( |
) | – | – | ( |
) | ||||||||||||||||
Balance as of December 28, 2019 |
$ |
$ |
$ | $ | ( |
) | $( |
) | $ | |||||||||||||||
Net income |
– | – | – | – | ||||||||||||||||||||
Other comprehensive income (loss), net of tax |
– | – | – | – | ( |
) | ( |
) | ||||||||||||||||
Repurchase of |
– | – | – | ( |
) | – | ( |
) | ||||||||||||||||
Issuance of |
– | ( |
) | ( |
) | – | ||||||||||||||||||
Contribution of |
– | – | – | |||||||||||||||||||||
Dividends of $ |
– | – | ( |
) | – | – | ( |
) | ||||||||||||||||
Balance as of January 2, 2021 |
$ |
$ |
$ | $ | ( |
) | $( |
) | $ | |||||||||||||||
Net income |
– | – | – | – | ||||||||||||||||||||
Other comprehensive income (loss), net of tax |
– | – | – | – | ||||||||||||||||||||
Repurchase of |
– | – | – | ( |
) | – | ( |
) | ||||||||||||||||
Issuance of |
– | ( |
) | – | ||||||||||||||||||||
Contribution of |
– | – | – | |||||||||||||||||||||
Dividends of $ |
– | – | ( |
) | – | – | ( |
) | ||||||||||||||||
Balance as of January 1, 2022 |
$ |
$ |
$ | $ | ( |
) | $( |
) | $ |
Avery Dennison Corporation |
| |
2021 Annual Report |
23 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Operating Activities |
||||||||||||
Net income |
$ | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation |
||||||||||||
Amortization |
||||||||||||
Provision for credit losses and sales returns |
||||||||||||
Stock-based compensation |
||||||||||||
Pension plan settlements and related charges |
||||||||||||
Deferred taxes and other non-cash taxes |
( |
) | ||||||||||
Other non-cash expense and loss (income and gain), net |
||||||||||||
Changes in assets and liabilities and other adjustments: |
||||||||||||
Trade accounts receivable |
( |
) | ( |
) | ||||||||
Inventories |
( |
) | ( |
) | ( |
) | ||||||
Accounts payable |
( |
) | ||||||||||
Taxes on income |
( |
) | ( |
) | ||||||||
Other assets |
||||||||||||
Other liabilities |
( |
) | ( |
) | ||||||||
Net cash provided by operating activities |
||||||||||||
Investing Activities |
||||||||||||
Purchases of property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
Purchases of software and other deferred charges |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from sales of property, plant and equipment |
||||||||||||
Proceeds from insurance and sales (purchases) of investments, net |
||||||||||||
Proceeds from sale of product line |
|
|
|
|
|
|
|
|
|
|
|
|
Payments for acquisitions, net of cash acquired, and investments in businesses |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Financing Activities |
||||||||||||
Net increase (decrease) in borrowings with maturities of three months or less |
( |
) | ( |
) | ||||||||
Additional borrowings under revolving credit facility |
– | – | ||||||||||
Repayments of borrowings under revolving credit facility |
– | ( |
) | – | ||||||||
Additional long-term borrowings |
– | |||||||||||
Repayments of long-term debt and finance leases |
( |
) | ( |
) | ( |
) | ||||||
Dividends paid |
( |
) | ( |
) | ( |
) | ||||||
Share repurchases |
( |
) | ( |
) | ( |
) | ||||||
Net (tax withholding) proceeds related to stock-based compensation |
( |
) | ( |
) | ( |
) | ||||||
Other |
( |
) | – | ( |
) | |||||||
Net cash provided by (used in) financing activities |
( |
) | ( |
) | ||||||||
Effect of foreign currency translation on cash balances |
( |
) | ( |
) | ||||||||
Increase (decrease) in cash and cash equivalents |
( |
) | ( |
) | ||||||||
Cash and cash equivalents, beginning of year |
||||||||||||
Cash and cash equivalents, end of year |
$ | $ | $ |
24 |
2021 Annual Report |
| |
Avery Dennison Corporation |
• |
The financial condition of customers; |
• |
The aging of receivable balances; |
• |
Our historical collection experience; and |
• |
Current and expected future macroeconomic and market conditions. |
Avery Dennison Corporation |
| |
2021 Annual Report |
25 |
26 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
27 |
28 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
29 |
(In millions) |
|
|||
Cash and cash equivalents |
$ | |||
Trade accounts receivable |
||||
Other current assets |
||||
Property, plant and equipment |
||||
Goodwill |
||||
Other intangibles resulting from business acquisition |
||||
Other assets |
||||
Total assets |
||||
Current liabilities |
||||
Other liabilities |
||||
Deferred and non-current income tax liabilities |
||||
Total liabilities |
||||
Net assets acquired |
$ |
30 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
Label and Graphic Materials |
Retail Branding and Information Solutions |
Industrial and Healthcare Materials |
Total |
||||||||||||
Goodwill as of December 28, 2019 |
$ | $ | $ | $ | ||||||||||||
Acquisitions (1) |
– | |||||||||||||||
Translation adjustments |
||||||||||||||||
Goodwill as of January 2, 2021 |
$ | $ | $ | |||||||||||||
Acquisitions (2) |
– | |||||||||||||||
Acquisition adjustment (3) |
– | – | ||||||||||||||
Translation adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Goodwill as of January 1, 2022 |
$ | $ | $ | $ |
(1) |
Goodwill acquired in 2020 related to the acquisitions of Smartrac, which is included in our RBIS reportable segment, and ACPO, which is included in our LGM reportable segment. We expect the recognized goodwill related to the Smartrac acquisition not to be deductible for income tax purposes and the recognized goodwill related to the ACPO acquisition to be deductible for income tax purposes. |
(2) |
Goodwill acquired related to the acquisitions of Vestcom, JDC and ZippyYum. We expect nearly all of the recognized goodwill related to the Vestcom and JDC acquisitions not to be deductible for income tax purposes and the recognized goodwill related to the ZippyYum acquisition to be deductible for income tax purposes. |
(3) |
Measurement period adjustment related to the finalization of the purchase price allocation for the acquisition of ACPO completed in December 2020. |
|
Amount (in millions) |
Amortization period (in years) |
||||||
Customer relationships |
$ | |||||||
Patented and other developed technology |
Avery Dennison Corporation |
| |
2021 Annual Report |
31 |
|
Amount (in millions) |
Weighted average amortization period (in years) |
||||||
Patented and other developed technology |
$ | |||||||
Customer relationships |
||||||||
Trade names and trademarks |
|
2021 |
|
2020 |
|||||||||||||||||||||||||
(In millions) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||||||||||
Customer relationships |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Patented and other developed technology |
||||||||||||||||||||||||||||
Trade names and trademarks |
||||||||||||||||||||||||||||
Other intangibles |
||||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ |
(In millions) |
Estimated Amortization Expense |
|||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
32 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
||||||
Long-term debt |
||||||||
Medium-term notes: |
||||||||
Series 1995 due 2020 and 2025 |
$ | $ | ||||||
Long-term notes: |
||||||||
Senior notes due 2023 at |
||||||||
Senior notes due 2024 at |
– | |||||||
Senior notes due 2025 at (1) |
||||||||
Senior notes due 2028 at |
||||||||
Senior notes due 2030 at |
||||||||
Senior notes due 2032 at |
– | |||||||
Senior notes due 2033 at |
||||||||
Less amount classified as current |
– | |||||||
Total long-term debt (2) |
$ | $ |
(1) |
These senior notes are euro-denominated. |
(2) |
Includes unamortized debt issuance cost s and debt discounts of $year-end 2021 and $year-end 2020. |
Year |
(In millions) |
|||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
2027 and thereafter |
Avery Dennison Corporation |
| |
2021 Annual Report |
33 |
|
Asset |
|
Liability |
|||||||||||||||||||||
(In millions) |
Balance Sheet Location |
2021 |
2020 |
|
Balance Sheet Location |
2021 |
2020 |
|||||||||||||||||
Foreign exchange contracts |
Other current assets | $ | $ | Other current liabilities | $ | $ | ||||||||||||||||||
Commodity contracts |
Other current assets | – | Other current liabilities | – | ||||||||||||||||||||
$ | $ | $ | $ |
34 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
Statements of Income Location |
2021 |
2020 |
2019 |
||||||||||
Foreign exchange contracts |
Cost of products sold |
$ | $ | $ | ( |
) | ||||||||
Foreign exchange contracts |
Marketing, general and administrative expense |
( |
) | |||||||||||
$ | $ | ( |
) | $ |
NOTE 6. PENSION AND OTHER POSTRETIREMENT BENEFITS Defined Benefit Plans |
Avery Dennison Corporation |
| |
2021 Annual Report |
35 |
Fair Value Measurements Using |
||||||||||||||||
(In millions) |
Total |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
||||||||||||
2021 |
||||||||||||||||
Cash |
$ | $ | $ | – | $ | – | ||||||||||
Insurance contracts |
– | – | ||||||||||||||
Pooled funds – real estate investment trusts |
– |
– |
||||||||||||||
Pooled funds – fixed income securities (1) |
||||||||||||||||
Pooled funds – equity securities (1) |
||||||||||||||||
Pooled funds – other investments (1) |
|
|
|
|
|
|
|
|
| |||||||
Total international plan assets at fair value |
$ | |||||||||||||||
2020 |
||||||||||||||||
Cash |
$ | $ | $ | – | $ | – | ||||||||||
Insurance contracts |
– | – | ||||||||||||||
Pooled funds – fixed income securities (1) |
||||||||||||||||
Pooled funds – equity securities (1) |
||||||||||||||||
Pooled funds – other investments (1) |
|
|
|
|
|
|
|
|
| |||||||
Total international plan assets at fair value |
$ |
(1) |
Pooled funds that are measured at fair value using the NAV per unit (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to reconcile to total international plan assets. |
Level 3 Assets |
||||||||||||
(In millions) |
Insurance Contracts |
Pooled Funds – Real Estate Investment Trusts |
Total |
|||||||||
Balance at January 2, 2021 |
$ | |
$ |
– |
$ |
|||||||
Net realized and unrealized gain |
|
– |
||||||||||
Purchases |
|
– |
||||||||||
Settlements |
( |
) | |
– |
( |
) | ||||||
Transfers into Level 3 (1) |
– |
|||||||||||
Impact of changes in foreign currency exchange rates |
( |
) | |
– |
( |
) | ||||||
Balance at January 1, 2022 |
$ | |
$ |
$ |
(1) |
Transfers into Level 3 were primarily driven by the use of unobservable inputs in the pricing of the underlying assets. |
36 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Pension Benefits |
||||||||||||||||||||||||||||
|
2021 |
|
2020 |
|||||||||||||||||||||||||
(In millions) |
U.S. |
|
Int’l |
|
U.S. |
|
Int’l |
|||||||||||||||||||||
Change in projected benefit obligations |
||||||||||||||||||||||||||||
Projected benefit obligations at beginning of year |
$ | $ | $ | $ | ||||||||||||||||||||||||
Service cost |
– | – | ||||||||||||||||||||||||||
Interest cost |
||||||||||||||||||||||||||||
Participant contribution |
– | – | ||||||||||||||||||||||||||
Amendments |
– | ( |
) | – | ||||||||||||||||||||||||
Actuarial (gain) loss |
( |
) | ( |
) | ||||||||||||||||||||||||
Benefits paid |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Settlements |
– | ( |
) | – | ( |
) | ||||||||||||||||||||||
Foreign currency translation |
– | ( |
) | – | ||||||||||||||||||||||||
Projected benefit obligations at end of year |
$ | $ | $ | $ | ||||||||||||||||||||||||
Accumulated benefit obligations at end of year |
$ | |
$ | |
$ | $ |
|
Pension Benefits |
|||||||||||||||||||||||||||
|
2021 |
2020 |
||||||||||||||||||||||||||
(In millions) |
U.S. |
|
Int’l |
|
U.S. |
|
Int’l |
|||||||||||||||||||||
Change in plan assets |
||||||||||||||||||||||||||||
Plan assets at beginning of year |
$ | – | $ | $ | – | $ | ||||||||||||||||||||||
Actual return on plan assets |
– | – | ||||||||||||||||||||||||||
Employer contributions |
||||||||||||||||||||||||||||
Participant contributions |
– | – | ||||||||||||||||||||||||||
Benefits paid |
( |
) | ( |
) | ( |
) | ( |
|||||||||||||||||||||
Settlements |
– | ( |
) | – | ( |
|||||||||||||||||||||||
Foreign currency translation |
– | ( |
) | – | ||||||||||||||||||||||||
Plan assets at end of year |
$ | – | $ | $ | – | $ |
Avery Dennison Corporation |
| |
2021 Annual Report |
37 |
|
Pension Benefits |
|||||||||||||||||||||||||||
|
2021 |
|
2020 |
|||||||||||||||||||||||||
(In millions) |
U.S. |
|
Int’l |
|
U.S. |
|
Int’l |
|||||||||||||||||||||
Funded status of the plans |
||||||||||||||||||||||||||||
Other assets |
$ | – | $ | $ | – | $ | ||||||||||||||||||||||
Other accrued liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Long-term retirement benefits and other liabilities (1) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Plan assets less than benefit obligations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
(1) |
In accordance with our funding strategy, we have the option to fund certain of our U.S. liabilities with proceeds from our company-owned life insurance policies. |
Pension Benefits |
||||||||||||||||
|
2021 |
2020 |
||||||||||||||
|
U.S. |
Int’l |
U.S. |
Int’l |
||||||||||||
Weighted average assumptions used to determine year-end benefit obligations |
||||||||||||||||
Discount rate |
% | % | % | % | ||||||||||||
Compensation rate increase |
– | – |
Pension Benefits |
||||||||||||||||
|
2021 |
2020 |
||||||||||||||
(In millions) |
U.S. |
Int’l |
U.S. |
Int’l |
||||||||||||
Net actuarial loss |
$ | $ | $ | $ | ||||||||||||
Prior service (credit) cost |
– | ( |
) | – | ( |
) | ||||||||||
Net amount recognized in accumulated other comprehensive loss |
$ | $ | $ | $ |
Pension Benefits |
||||||||||||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||||||||||
(In millions) |
U.S. |
Int’l |
U.S. |
Int’l |
U.S. |
Int’l |
||||||||||||||||||
Net actuarial loss (gain) |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
|||||||||
Prior service credit |
– | ( |
) | – | – | |||||||||||||||||||
Amortization of unrecognized: |
||||||||||||||||||||||||
Net actuarial gain |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
|||||||||||||
Prior service credit (cost) |
– | – | – | |||||||||||||||||||||
Settlements |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net amount recognized in other comprehensive loss (income) |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) |
38 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Pension Benefits |
||||||||||||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||||||||||
(In millions) |
U.S. |
Int’l |
U.S. |
Int’l |
U.S. |
Int’l |
||||||||||||||||||
Service cost |
$ | – | $ | $ | – | $ | $ | – | $ | |||||||||||||||
Interest cost |
||||||||||||||||||||||||
Actuarial loss (gain) |
( |
) | – | – | – | |||||||||||||||||||
Expected return on plan assets |
– | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||
Amortization of actuarial loss |
||||||||||||||||||||||||
Amortization of prior service (credit) cost |
– | ( |
) | – | ( |
) | – | ( |
) | |||||||||||||||
Recognized loss on settlements (1) |
||||||||||||||||||||||||
Net periodic benefit cost (credit) |
$ | $ | $ | $ | $ | $ |
(1) |
In 2021, settlements in the U.S. related to a non-qualified plan; settlements in our international plans related to lump-sum payments in Belgium and Switzerland. In 2020, settlements in the U.S. related to a non-qualified plan; settlements in our international plans related to lump-sum payments in Belgium, France and for certain expatriate employees. In 2019, settlements in the U.S. related to the ADPP termination; settlements in our international plans related to lump-sum payments in Switzerland. |
Pension Benefits |
||||||||||||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||||||||||
|
U.S. |
Int’l |
U.S. |
Int’l |
U.S. |
Int’l |
||||||||||||||||||
Discount rate |
% | % | % | % | % | % | ||||||||||||||||||
Expected return on assets |
– | – | – | |||||||||||||||||||||
Compensation rate increase |
– | – | – |
(In millions) |
|
|||
|
||||
U.S. pension plans |
$ | |||
International pension plans |
|
Pension Benefits |
|||||||
(In millions) |
U.S. |
Int’l |
||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
2027-2031 |
Avery Dennison Corporation |
| |
2021 Annual Report |
39 |
(In millions) |
2021 |
|
|
2020 |
|
|
2019 |
|||||||||||||||||||||
Operating lease costs |
$ | $ | $ |
40 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
Balance Sheet Location |
2021 |
2020 |
|||||||
Assets |
||||||||||
Operating |
$ |
$ |
||||||||
Finance (1) |
||||||||||
Total leased assets |
$ |
$ |
||||||||
|
|
|
|
|
|
|
|
|
| |
Liabilities |
||||||||||
Current: |
||||||||||
Operating |
$ |
$ |
||||||||
Finance |
||||||||||
Non-current: |
||||||||||
Operating |
||||||||||
Finance |
||||||||||
Total lease liabilities |
$ |
$ |
(1) |
Finance lease assets are net of accumulated amortization of $ |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Cash paid for amounts included in the measurement of operating lease liabilities |
$ |
$ |
$ |
|||||||||
Operating lease assets obtained in exchange for operating lease liabilities |
|
2021 |
2020 |
||||||
Weighted average remaining lease term (in years): |
||||||||
Operating |
|
|
|
|||||
Finance |
|
|
|
|||||
Weighted average discount rate (percentage): |
|
|
|
|||||
Operating |
% |
|
|
|
% | |||
Finance |
|
|
|
(In millions) |
Operating Leases |
Finance Leases |
||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
2027 and thereafter |
– | |||||||
Total lease payments |
||||||||
Less: imputed interest |
( |
) |
( |
) | ||||
Present value of lease liabilities |
$ | $ |
Avery Dennison Corporation |
| |
2021 Annual Report |
41 |
(In millions) |
2021 |
2020 |
||||||
Balance at beginning of year |
$ | $ | ||||||
Charges, net of reversals |
||||||||
Payments |
( |
) | ( |
) | ||||
Balance at end of year |
$ | $ |
42 |
2021 Annual Report |
| |
Avery Dennison Corporation |
|
|
|
Fair Value Measurements Using |
|||||||||||||||||||||||||
(In millions) |
Total |
|
Quoted Prices in Active Markets (Level 1) |
|
Significant Other Observable Inputs (Level 2) |
|
Significant Other Unobservable Inputs (Level 3) |
|||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Investments |
$ | $ | $ | $ | – | |||||||||||||||||||||||
Derivative assets |
– | |||||||||||||||||||||||||||
Bank drafts |
– | – | ||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Cross-currency swap |
$ | $ | – | $ | $ | – | ||||||||||||||||||||||
Derivative liabilities |
– | – | ||||||||||||||||||||||||||
Contingent consideration liabilities |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|||||||||||||||||||||||||
(In millions) |
Total |
|
Quoted Prices in Active Markets (Level 1) |
|
Significant Other Observable Inputs (Level 2) |
|
Significant Other Unobservable Inputs ( Level 3) |
|||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Investments |
$ | $ | $ | $ | – | |||||||||||||||||||||||
Derivative assets |
– | |||||||||||||||||||||||||||
Bank drafts |
– | – | ||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Cross-currency swap |
$ | $ | – | $ | $ | – | ||||||||||||||||||||||
Derivative liabilities |
– |
Avery Dennison Corporation |
| |
2021 Annual Report |
43 |
(In millions) |
|
|||
Acquisition |
$ |
|||
Payments |
( |
) | ||
Adjustments |
( |
) | ||
Balance at year end |
$ |
(In millions, except per share amounts) |
2021 |
2020 |
2019 |
|||||||||
(A) Net income |
$ | $ | $ | |||||||||
(B) Weighted average number of common shares outstanding |
||||||||||||
Dilutive shares (additional common shares issuable under stock-based awards) |
||||||||||||
(C) Weighted average number of common shares outstanding, assuming dilution |
||||||||||||
Net income per common share (A) ÷ (B) |
$ | $ | $ | |||||||||
Net income per common share, assuming dilution (A) ÷ (C) |
$ | $ | $ |
44 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
Foreign Currency Translation |
Pension and Other Postretirement Benefits |
Cash Flow Hedges |
Total |
||||||||||||
Balance as of December 28, 2019 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Other comprehensive income (loss) before reclassifications, net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
Reclassifications to net income, net of tax |
( |
) | ||||||||||||||
Net current-period other comprehensive income (loss), net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
Balance as of January 2, 2021 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Other comprehensive income (loss) before reclassifications, net of tax |
||||||||||||||||
Reclassifications to net income, net of tax |
( |
) | ||||||||||||||
Net current-period other comprehensive income (loss), net of tax |
||||||||||||||||
Balance as of January 1, 2022 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
(In millions) |
2021 |
2020 |
2019 |
Statements of Income Location |
| |||||||||||
Cash flow hedges: |
||||||||||||||||
Foreign exchange contracts |
$ | $ | $ | Cost of products sold | ||||||||||||
Commodity contracts |
( |
) | ( |
) | Cost of products sold | |||||||||||
Total before tax |
||||||||||||||||
Tax |
( |
) | ( |
) | Provision for (benefit from) income taxes | |||||||||||
Net of tax |
||||||||||||||||
Pension and other postretirement benefits |
( |
) | ( |
) | ( |
) | Other non-operating expense (income), net |
|||||||||
Tax |
Provision for (benefit from) income taxes | |||||||||||||||
Net of tax |
( |
) | ( |
) | ( |
) | ||||||||||
Total reclassifications for the period |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
(In millions) |
2021 |
|
|
2020 |
|
|
2019 |
|||||||||||||||||||||
Foreign currency translation: |
||||||||||||||||||||||||||||
Translation gain (loss) |
$ | ( |
) | $ | $ | ( |
) | |||||||||||||||||||||
Pension and other postretirement benefits: |
||||||||||||||||||||||||||||
Net gain recognized from actuarial gain/loss and prior service cost/credit |
||||||||||||||||||||||||||||
Reclassifications to net income |
||||||||||||||||||||||||||||
Cash flow hedges: |
||||||||||||||||||||||||||||
Gains (losses) recognized on cash flow hedges |
( |
) | ||||||||||||||||||||||||||
Reclassifications to net income |
( |
) | ( |
) | ||||||||||||||||||||||||
Income tax (benefit) expense allocated to components of other comprehensive income (loss) |
$ | ( |
) | $ | $ |
Avery Dennison Corporation |
| |
2021 Annual Report |
45 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Stock-based compensation expense |
$ | $ | $ | |||||||||
Tax benefit |
|
Number of options (in thousands) |
Weighted average exercise price |
Weighted average remaining contractual life (in years) |
Aggregate intrinsic value (in millions) |
||||||||||||
Outstanding at January 2, 2021 |
$ | $ | ||||||||||||||
Exercised |
( |
) | ||||||||||||||
Outstanding at January 1, 2022 |
$ | $ | ||||||||||||||
Options vested and expected to vest at January 1, 2022 |
||||||||||||||||
Options exercisable at January 1, 2022 |
$ | $ |
46 |
2021 Annual Report |
| |
Avery Dennison Corporation |
|
Number of PUs (in thousands) |
Weighted average grant-date fair value |
||||||
Unvested at January 2, 2021 |
$ | |||||||
Granted at target |
||||||||
Adjustment for above-target performance (1) |
||||||||
Vested |
( |
) | ||||||
Forfeited/cancelled |
( |
) | ||||||
Unvested at January 1, 2022 |
$ |
(1) |
Reflects adjustments for the vesting of awards based on above-target performance for the 201 8 -2020 performance period. |
|
Number of MSUs (in thousands) |
Weighted average grant- date fair value |
||||||
Unvested at January 2, 2021 |
$ | |||||||
Granted at target |
||||||||
Adjustments for above-target performance (1) |
||||||||
Vested |
( |
) | ||||||
Forfeited/cancelled |
( |
) | ||||||
Unvested at January 1, 2022 |
$ |
(1) |
Reflects adjustments for the vesting of awards based on above-target performance for each of the tranches of awards vesting in 2021. |
|
Number of RSUs (in thousands) |
Weighted average grant-date fair value |
||||||
Unvested at January 2, 2021 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited/cancelled |
( |
) | ||||||
Unvested at January 1, 2022 |
$ |
Avery Dennison Corporation |
| |
2021 Annual Report |
47 |
48 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
Accrual at January 2, 2021 |
Charges, Net of Reversals |
Cash Payments |
Non-cash Impairment |
Foreign Currency Translation |
Accrual at January 1, 2022 |
||||||||||||||||||
2019/2020 Actions |
||||||||||||||||||||||||
Severance and related costs |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Asset impairment charges |
( |
) | ||||||||||||||||||||||
Lease cancellation costs |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
2018/2019 Actions |
||||||||||||||||||||||||
Lease cancellation costs |
( |
) |
||||||||||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ |
(In millions) |
Accrual at December 28, 2019 |
Charges, Net of Reversals |
Cash Payments |
Non-cash Impairment |
Foreign Currency Translation |
Accrual at January 2, 2021 |
||||||||||||||||||
2019/2020 Actions |
||||||||||||||||||||||||
Severance and related costs |
$ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||
Asset impairment charges |
( |
) | ||||||||||||||||||||||
2018/2019 Actions |
||||||||||||||||||||||||
Severance and related costs |
( |
) | ( |
) | ||||||||||||||||||||
Lease cancellation costs |
||||||||||||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ |
(In millions) |
2021 |
|
2020 |
|
2019 |
|||||||||||||||
Restructuring charges by reportable segment and Corporate |
||||||||||||||||||||
Label and Graphic Materials |
$ | |
$ | |
$ | |
||||||||||||||
Retail Branding and Information Solutions |
||||||||||||||||||||
Industrial and Healthcare Materials |
||||||||||||||||||||
Corporate |
||||||||||||||||||||
Total |
$ | $ | $ |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Current: |
||||||||||||
U.S. federal tax |
$ | $ | $ | |||||||||
State taxes |
||||||||||||
International taxes |
||||||||||||
Deferred: |
||||||||||||
U.S. federal tax |
( |
) | ( |
) | ||||||||
State taxes |
( |
) | ( |
) | ||||||||
International taxes |
( |
) | ( |
) | ||||||||
( |
) | |||||||||||
Provision for (benefit from) income taxes |
$ | $ | $ | ( |
) |
Avery Dennison Corporation |
| |
2021 Annual Report |
49 |
(In millions) |
2021 |
|
2020 |
|
2019 |
|||||||||||||||
Tax provision computed at U.S. federal statutory rate (1) |
$ | $ | $ | |||||||||||||||||
Increase (decrease) in taxes resulting from: |
||||||||||||||||||||
State taxes, net of federal tax benefit (1) |
( |
) | ||||||||||||||||||
U.S. pension plan settlements and related charges (1) |
– | – | ( |
) | ||||||||||||||||
Foreign earnings taxed at different rates (2) |
||||||||||||||||||||
GILTI high-tax exclusion election, net(3) |
( |
) | ( |
) | – | |||||||||||||||
Foreign tax structuring and planning transactions (4) |
– | – | ( |
) | ||||||||||||||||
Excess tax benefits associated with stock-based payments |
( |
) | ( |
) | ( |
) | ||||||||||||||
Valuation allowance |
( |
) | ( |
) | ||||||||||||||||
U.S. federal research and development tax credits |
( |
) | ( |
) | ( |
) | ||||||||||||||
Tax contingencies and audit settlements |
( |
) | ( |
) | ||||||||||||||||
Other items, net |
( |
) | ( |
) | ( |
) | ||||||||||||||
Provision for (benefit from) income taxes |
$ | $ | $ | ( |
) |
(1) |
Included in 2019 are tax effects of the pension plan settlement charges associated with the termination of the ADPP. In 2019, tax benefit o f $ million on the pretax charge was reflected in the tax provision computed at U.S. federal statutory rate and state taxes, net of federal tax benefit. Moreover, in 2019, the tax benefit of $ million related to the release of stranded tax effects in AOCI through the income statement was reflected in U.S. pension plan settlements and related charges. |
( 2 ) |
All years included certain U.S. international tax provisions and foreign earnings taxed in the U.S., net of credits. |
( 3 ) |
In 2021, we recognized $ million and $ we planned to make on our amended 2019 U.S. federal tax return. |
( 4 ) |
In 2019, we recognized a net tax benefit of $ million related to a foreign structuring transaction. This net benefit resulted from the elimination of recapture conditions to which our previously recognized net operating losses were subject. By eliminating these conditions, our losses became permanent, and the offsetting deferred tax liability related to future recapture was released. |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
U.S. |
$ | $ | $ | ( |
) | |||||||
International |
||||||||||||
Income before taxes |
$ | $ | $ |
50 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
||||||
Accrued expenses not currently deductible |
$ | $ | ||||||
Net operating loss carryforwards |
||||||||
Tax credit carryforwards |
||||||||
Stock-based compensation |
||||||||
Pension and other postretirement benefits |
||||||||
Inventory reserve |
||||||||
Lease liabilities |
||||||||
Other assets |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Total deferred tax assets (1) |
||||||||
Depreciation and amortization |
( |
) | ( |
) | ||||
Repatriation accrual |
( |
) | ( |
) | ||||
Foreign operating loss recapture |
( |
) | ( |
) | ||||
Lease assets |
( |
) | ( |
) | ||||
Total deferred tax liabilities (1) |
( |
) | ( |
) | ||||
Total net deferred tax assets (liabilities) (2) |
$ | ( |
) | $ |
(1) |
Reflect gross amounts before jurisdictional netting of deferred tax assets and liabilities. |
(2) |
2021 included deferred tax liabilities recognized as a result of the acquisition of Vestcom described in Note 2, “Acquisitions.” |
(In millions) |
Net Operating Losses (1) |
Tax Credits |
||||||
Year of Expiry |
|
|
||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
2027-2041 |
||||||||
Indefinite life/no expiry |
||||||||
Total |
$ | $ |
(1) |
Net operating losses are presented before tax effects and valuation allowance. |
Avery Dennison Corporation |
| |
2021 Annual Report |
51 |
(In millions) |
2021 |
2020 |
||||||
Balance at beginning of year |
$ | $ | ||||||
Additions for tax positions of current year |
||||||||
Additions (reductions) for tax positions of prior years, net |
||||||||
Settlements with tax authorities |
( |
) | ( |
) | ||||
Expirations of statutes of limitations |
( |
) | ( |
) | ||||
Changes due to translation of foreign currencies |
( |
) | ||||||
Balance at end of year |
$ | $ |
• | Label and Graphic Materials – manufactures and sells pressure-sensitive label and packaging materials and films for graphic and reflective products; |
• | Retail Branding and Information Solutions – designs, manufactures and sells a wide variety of branding and information solutions, including brand and price tickets, tags and labels (including RFID inlays), and related services, supplies and equipment; and |
• |
Industrial and Healthcare Materials – manufactures and sells performance tapes and other adhesive products for industrial, medical and other applications, as well as fastener solutions. |
52 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net sales to unaffiliated customers |
||||||||||||
Label and Graphic Materials: |
||||||||||||
U.S. |
$ |
$ |
$ |
|||||||||
Europe |
||||||||||||
Asia |
||||||||||||
Latin America |
||||||||||||
Other international |
||||||||||||
Total Label and Graphic Materials |
||||||||||||
Retail Branding and Information Solutions: |
||||||||||||
Apparel |
||||||||||||
Identification Solutions (1) and Vestcom |
||||||||||||
Total Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Net sales to unaffiliated customers |
$ |
$ |
$ |
(1) |
Previously referred to as Printer Solutions |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Net sales to unaffiliated customers |
||||||||||||
U.S. |
$ |
$ |
$ |
|||||||||
Europe |
||||||||||||
Asia |
||||||||||||
Latin America |
||||||||||||
Other international |
||||||||||||
Net sales to unaffiliated customers |
$ |
$ |
$ |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Intersegment sales |
||||||||||||
Label and Graphic Materials |
$ |
$ |
$ |
|||||||||
Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Intersegment sales |
$ |
$ |
$ |
|||||||||
Income before taxes |
||||||||||||
Label and Graphic Materials |
$ |
$ |
$ |
|||||||||
Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Corporate expense |
( |
) |
( |
) |
( |
) | ||||||
Interest expense |
( |
) |
( |
) |
( |
) | ||||||
Other non-operating expense (income), net |
( |
) |
( |
) | ||||||||
Income before taxes |
$ |
$ |
$ |
|||||||||
Capital expenditures (1) (2) |
||||||||||||
Label and Graphic Materials |
$ |
$ |
$ |
|||||||||
Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Capital expenditures |
$ |
$ |
$ |
|||||||||
Depreciation and amortization expense (1) |
||||||||||||
Label and Graphic Materials |
$ |
$ |
$ |
|||||||||
Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Depreciation and amortization expense |
$ |
$ |
$ |
|||||||||
Other expense (income), net by reportable segment |
||||||||||||
Label and Graphic Materials |
$ |
( |
) |
$ |
$ |
|||||||
Retail Branding and Information Solutions |
||||||||||||
Industrial and Healthcare Materials |
||||||||||||
Corporate |
( |
) |
||||||||||
Other expense (income), net |
$ |
$ |
$ |
|||||||||
(1) |
Corporate capital expenditures and depreciation and amortization expense are allocated to the reportable segments based on their percentage of consolidated net sales. |
(2) |
Capital expenditures for property, plant and equipment include accruals. |
Avery Dennison Corporation |
| |
2021 Annual Report |
53 |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Other expense (income), net by type |
||||||||||||
Restructuring charges: |
||||||||||||
Severance and related costs |
$ |
$ |
$ |
|||||||||
Asset impairment charges and lease cancellation costs |
||||||||||||
Other items: |
||||||||||||
Transaction and related costs |
||||||||||||
Loss (gain) on sales of assets, net |
( |
) |
( |
) | ||||||||
Gain on venture investments, net |
( |
) |
( |
) |
– |
|||||||
Gain on sale of product line |
( |
) |
– |
– |
||||||||
Outcomes of legal proceedings, net (1) |
( |
) |
– |
|||||||||
Other expense (income), net |
$ |
$ |
$ |
(1) |
2021 includes an indirect tax credit based on a Brazilian Federal Supreme Court ruling in our favor in the amount of $ |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Property, plant and equipment, net |
||||||||||||
U.S. |
$ | $ | $ | |||||||||
International |
||||||||||||
Property, plant and equipment, net |
$ | $ | $ |
(In millions) |
2021 |
2020 |
||||||
Raw materials |
$ | $ | ||||||
Work-in-progress |
||||||||
Finished goods |
||||||||
Inventories |
$ | $ |
(In millions) |
2021 |
2020 |
||||||
Land |
$ |
$ |
||||||
Buildings and improvements |
||||||||
Machinery and equipment |
||||||||
Construction-in-progress |
||||||||
Property, plant and equipment |
||||||||
Accumulated depreciation |
( |
) |
( |
) | ||||
Property, plant and equipment, net |
$ |
$ |
(In millions) |
2021 |
2020 |
||||||
Cost |
$ | $ | ||||||
Accumulated amortization |
( |
) | ( |
) | ||||
Software, net |
$ | $ |
(In millions) |
2021 |
2020 |
||||||
Balance at beginning of year |
$ | $ | ||||||
(Reversal of) provision for credit losses (1) |
( |
) |
||||||
Amounts written off |
( |
) | ( |
) | ||||
Other, including foreign currency translation |
||||||||
Balance at end of year |
$ | $ |
(1) |
For 2020, our provision for credit losses reflected impacts on customers as a result of COVID-19. |
54 |
2021 Annual Report |
| |
Avery Dennison Corporation |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Research and development expense |
$ | |
$ | |
$ | |
(In millions) |
2021 |
2020 |
2019 |
|||||||||
Interest |
$ | $ | $ | |||||||||
Income taxes, net of refunds |
(In millions) |
January 1, 2022 |
January 2, 2021 |
||||||
Other current liabilities |
$ |
$ |
||||||
Long-term retirement benefits and other liabilities |
||||||||
Total deferred revenue |
$ |
$ |
Avery Dennison Corporation |
| |
2021 Annual Report |
55 |
/s/ Mitchell R. Butier |
/s/ Gregory S. Lovins | |
Mitchell R. Butier |
Gregory S. Lovins | |
Chairman, President and Chief Executive Officer |
Senior Vice President and Chief Financial Officer |
56 |
2021 Annual Report |
| |
Avery Dennison Corporation |
Avery Dennison Corporation |
| |
2021 Annual Report |
57 |
58 |
2021 Annual Report |
| |
Avery Dennison Corporation |
|
|
February 23, 2022 |
Avery Dennison Corporation |
| |
2021 Annual Report |
59 |
|
2021 |
2020 |
||||||
Dividends per Common Share |
||||||||
First Quarter |
$ | .62 | $ | .58 | ||||
Second Quarter |
.68 | .58 | ||||||
Third Quarter |
.68 | .58 | ||||||
Fourth Quarter |
.68 | .62 | ||||||
$ | 2.66 | $ | 2.36 | |||||
Number of shareholders of record as of fiscal year-end |
3,952 | 4,195 |
60 |
2021 Annual Report |
| |
Avery Dennison Corporation |