The **more than doubling** of **short-term borrowings** in Q1 2024 was primarily due to the **reclassification of €500 million senior notes**—originally recorded as long-term debt—to short-term borrowings, which significantly increased the balance from **$622.2 million as of Q4 2023** to **$1,170.5 million as of Q1 2024**.  **[0000008818-24-000009_avy-20240330.htm:5]** **[0000008818-24-000009_avy-20240330.htm:7]** 

Why did short-term borrowings more than double in Q1 2024?

The sharp decline in long-term debt in Q1 2024 was primarily due to the **reclassification of €500 million senior notes** from long-term debt to short-term borrowings, which significantly reduced the long-term debt balance on the balance sheets.  **[0000008818-24-000009_avy-20240330.htm:7]** 

What led to the sharp decline in long-term debt in Q1 2024?

In Q1 2024, **cash and cash equivalents dropped by $29.3 million** because the company experienced a mix of cash flows: it generated **$119.8 million in net cash from operating activities** but simultaneously **used $62.0 million in investing activities** and **$85.0 million in financing activities**, in addition to a **negative effect of $2.1 million** from foreign currency translation.  **[0000008818-24-000009_avy-20240330.htm:5]** **[0000008818-24-000009_avy-20240330.htm:6]** 

Why did cash and cash equivalents drop in Q1 2024?

9a97bb17e5e5550f53ff24aaff095ffa81afd2f6487ae6e8aaa76b40537cce00

In Q1 2024, Income Before Taxes was significantly high at **$234.4 million**, mainly due to several positive operational factors compared to Q1 2023.  **[0000008818-24-000009_avy-20240330.htm:9]** **[0000008818-24-000009_avy-20240330.htm:20]**  The company benefited from a **4% increase in net sales** (3% organically), which drove higher revenues.  **[0001193125-24-108400_d827475dex991.htm:0]** **[AVY_3380455_2]**  It also achieved **improved margins**, with the Adjusted EBITDA margin rising by **270 basis points** to **16.3%**, and realized **$19 million in pre-tax savings** through restructuring actions.  **[0001193125-24-108400_d827475dex991.htm:1]** **[AVY_3380455_2]**  Additionally, the normalization of inventory destocking in the Materials Group spurred low double-digit volume growth, while robust performances from both the Materials Group—with an **18.3% adjusted EBITDA margin** up 410 basis points—and the Solutions Group—achieving **10% sales growth ex-currency**—further contributed to the high income before taxes.  **[0001193125-24-108400_d827475dex991.htm:0]** **[AVY_3380455_2]** 

Why was Income Before Taxes so high in Q1 2024?

In Q1 2024, Avery Dennison’s net income increase was driven by several factors. The company experienced **higher volume and productivity** along with **sales growth**—net sales increased by 4% excluding currency effects and 3% on an organic basis—which boosted overall performance.  **[AVY_3380455_2]**  Improved margins also played a critical role, with the **adjusted EBITDA margin** rising to **16.3%** (up 270 basis points) and a **25%** increase in adjusted EBITDA dollars compared to the previous year.  **[AVY_3380455_2]**  Additionally, Avery Dennison realized approximately **$19 million** in pre-tax **cost savings** from restructuring actions  **[0001193125-24-108400_d827475dex991.htm:1]** , incurred lower restructuring charges  **[0000008818-24-000009_avy-20240330.htm:21]** , and benefited from a lower **effective tax rate** of **26.5%** (down from 28.0%) due to tax impacts from Blue Chip Swap transactions in Argentina.  **[0000008818-24-000009_avy-20240330.htm:20]**  These combined factors led to the net income rising from **$121.2 million** in Q1 2023 to **$172.4 million** in Q1 2024.  **[0000008818-23-000009_avy-20230401.htm:5]** **[0000008818-24-000009_avy-20240330.htm:5]** 

What drove the increase in Net Income in Q1 2024?

The jump in **EPS** (Net Income per Common Share) in Q2 2024 was driven by several factors. The company experienced **higher volume and productivity**, leading to improved operational efficiency. **Sales growth** also played a key role, with net sales increasing and providing a stronger revenue base. Additionally, there was significant **margin expansion**—with both the Materials and Solutions Groups benefiting from cost leverage—and the company achieved considerable **cost savings through restructuring**, realizing approximately **$36 million in pre-tax savings**. Finally, a reduction in the **effective tax rate** from **28.4% to 25.8%** further contributed to higher profitability, resulting in the increased EPS.  **[0001193125-24-182566_d841269dex991.htm:0]** **[0001193125-24-182566_d841269dex992.htm:5]** **[AVY_3393956_3]** **[0001193125-24-182566_d841269dex991.htm:1]** **[0000008818-24-000015_avy-20240629.htm:22]** 

Why did EPS jump in Q2 2024?

The increased MG&A expense in Q1 2024 was primarily due to **higher employee-related costs and growth investments**, although these were partially offset by benefits from productivity initiatives, including savings from restructuring actions net of transition costs.  **[0000008818-24-000009_avy-20240330.htm:19]** 

What caused higher MG&A expense in Q1 2024?

e2ad36ad2901e415267f12833614131d0ae2d5a66d0a49206b8a615907da4e89

Based on the available documents, while we can see that the net cash provided by operating activities decreased from **$311.9 million in Q4 2023**  **[0000008818-24-000003_avy-20231230.htm:67]**  to **$119.8 million in Q1 2024**  **[0000008818-24-000009_avy-20240330.htm:6]** , no document provides a specific explanation for this quarterly drop. The only detailed discussion explains factors that improved Q1 2024’s operating cash flow compared to **Q1 2023** (including higher net income, reduced incentive compensation, lower tax payments, and less unfavorable working capital changes).  **[0000008818-24-000009_avy-20240330.htm:6]** **[0000008818-24-000009_avy-20240330.htm:21]**  Therefore, there is no definitive answer from the provided information as to why Operating Cash Flow dropped sharply from Q4 2023 to Q1 2024.

Why did Operating Cash Flow drop so sharply in Q1 2024?

The massive increase in long-term debt repayments in Q3 2024 was driven by the repayment of **$300 million of senior notes** at maturity in August 2024. This repayment was funded using cash flows from operations and commercial paper borrowings, contributing to the significant change compared to the previous period.  **[0000008818-24-000017_avy-20240928.htm:29]** **[0000008818-24-000017_avy-20240928.htm:8]** 

What drove the massive increase in long-term debt repayments in Q3 2024?

AVY’s short-term borrowings swung positive due to a combination of factors. In Q3 2024, the company repaid **$300 million of senior notes** in August using cash flows from operations, which increased reliance on short-term borrowings. Additionally, AVY used commercial paper borrowings for various corporate purposes, such as **dividend payments, share repurchases, capital expenditures, and acquisitions**, further contributing to the increase, resulting in a net positive swing of **210.40  **[0000008818-24-000017_avy-20240928.htm:6]** **.  **[0000008818-24-000017_avy-20240928.htm:29]** 

Why did short-term borrowings swing to a positive 210.40 in Q3 2024?

The documents do not provide a specific explanation for the turnaround. They note that the deferred taxes and other non-cash taxes item improved from a negative value in Q3 2023 to a near-neutral one in Q3 2024, and they mention that changes in temporary differences, adjustments in tax rates, and timing differences in recognizing tax expenses can typically drive such fluctuations. However, no detailed reasons were provided in the documents.  **[0001193125-24-241428_d846693dex991.htm:6]** **[0000008818-24-000017_avy-20240928.htm:28]** 

What explains the turnaround in deferred taxes in Q3 2024?

In **Q1 2024**, capital expenditures were significantly lower because **Avery Dennison** shifted its investment focus and reduced overall spending. The company concentrated its investments on buildings and equipment in key growth markets—specifically targeting the U.S. and certain countries in Europe for its Materials Group, and focusing on Asia Pacific, the U.S., and Latin America for its Solutions Group—rather than spreading investments more broadly across various regions as it did in **Q1 2023**.  **[0000008818-24-000009_avy-20240330.htm:22]** 

Why were capital expenditures significantly lower in Q1 2024?

0951c4bed112b6c346818159ca576c8040d04ad4d64a00357bb239897c78d4a5

Cash and cash equivalents (USD, millions)

Trade accounts receivable, less allowances (USD, millions)

Inventories (USD, millions)

Other current assets (USD, millions)

Total current assets (USD, millions)

Property, plant and equipment, net (USD, millions)

Deferred tax assets (USD, millions)

Other assets (USD, millions)

Total Assets (USD, millions)

Short-term borrowings and current portion of long-term debt and finance leases (USD, millions)

Accounts payable (USD, millions)

Other current liabilities (USD, millions)

Total current liabilities (USD, millions)

Long-term debt and finance leases (USD, millions)

Long-term retirement benefits and other liabilities (USD, millions)

Capital in excess of par value (USD, millions)

Retained earnings (USD, millions)

Treasury stock at cost, ... (USD, millions)

Accumulated other comprehensive loss (USD, millions)

Total shareholders’ equity (USD, millions)

Total Liabilities and Shareholders’ Equity (USD, millions)

649b3d6913356958aae67c7e7791f53be161e1fba03b354682c5ebbffe2d6321

Net income [USD, millions]

Depreciation [USD, millions]

Amortization [USD, millions]

Provision for credit losses and sales returns [USD, millions]

Stock-based compensation [USD, millions]

Deferred taxes and other non-cash taxes [USD, millions]

Other non-cash expense and loss (income and gain), net [USD, millions]

Changes in assets and liabilities and other adjustments [USD, millions]

Net cash provided by operating activities [USD, millions]

Purchases of property, plant and equipment [USD, millions]

Purchases of software and other deferred charges [USD, millions]

Purchases of Argentine Blue Chip Swap securities [USD, millions]

Proceeds from sales of Argentine Blue Chip Swap securities [USD, millions]

Proceeds from sales of property, plant and equipment [USD, millions]

Proceeds from insurance and sales (purchases) of investments, net [USD, millions]

Payments for acquisitions, net of cash acquired, and venture investments [USD, millions]

Net cash used in investing activities [USD, millions]

Net increase (decrease) in borrowings with maturities of three months or less [USD, millions]

Repayments of long-term debt and finance leases [USD, millions]

Dividends paid [USD, millions]

Share repurchases [USD, millions]

Net (tax withholding) proceeds related to stock-based compensation [USD, millions]

Other [USD, millions]

Net cash used in financing activities [USD, millions]

Effect of foreign currency translation on cash balances [USD, millions]

Increase (decrease) in cash and cash equivalents [USD, millions]

Cash and cash equivalents, beginning of year [USD, millions]

Cash and cash equivalents, end of period [USD, millions]

73a201b606645a508b32bec244845d73199da9ca078652fd37315530df80c8e6

Net Sales (USD, millions)

Cost of Products Sold (USD, millions)

Gross Profit (USD, millions)

Marketing, General and Administrative Expense (USD, millions)

Other Expense (Income), Net (USD, millions)

Interest Expense (USD, millions)

Other Non-Operating Expense (Income), Net (USD, millions)

Income Before Taxes (USD, millions)

Provision for Income Taxes (USD, millions)

Net Income (USD, millions)

Net Income per Common Share, Assuming Dilution (USD)

b023b58f9a2fb692689be6f8e38fa3624923d94ad59c176e90bf937f065ddb89

6df82aa66884a2d2549cac6f9bdeb24449230a92f46b87488424fa1a2708e52d

beb70d697a7ee71ba53f41434552e1e184945546000157eb51f28865f044581a

Adjustments for Non-Cash Items

Stock-Based Compensation [USD, Millions]

Changes in Working Capital

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Per Share]

Net Change in Cash [USD, Millions]

e07da819b4bcf1f851474074d4d63ad8aa956cf75a0f550fb458cb4f43023af8

Organic Sales Change (Total Company) (percentage)

Sales Change Ex. Currency (Total Company) (percentage)

Organic Sales Change (Materials Group) (percentage)

Sales Change Ex. Currency (Materials Group) (percentage)

Organic Sales Change (Solutions Group) (percentage)

Sales Change Ex. Currency (Solutions Group) (percentage)

Operational Working Capital as a Percentage of Annualized Current-Quarter Net Sales (percentage)

Average Number of Days Sales Outstanding (days)

Average Inventory Turnover (ratio (turns per year))

Average Number of Days Payable Outstanding (days)

061d669a946bdc16fa117650809934528e6ba6afd52dd602ca6572ba29ab4d69

U.S.

Europe, Middle East, Africa

Asia

Latin America

Other

- Sales in China (including Hong Kong)

Total Revenue

35e65f275f7972d7254834a1a278e37fa9629a58599cbb8d9b7ddfac97dfebb5

Materials Group

- Labels, graphics and reflectives

- Tapes and adhesives

- Other

Solutions Group

- Apparel

- Identification Solutions and Vestcom

Industrial and Healthcare Materials

Pressure-sensitive Materials

Retail Branding and Information Solutions

Vancive Medical Technologies

Enterprise-Wide Intelligent Labels

246425ed912f67f32fb81c516700d5ef6540bca076430a696fa3c46edc39f4e7

Avery Dennison (AVY)

Financials