Company Quick10K Filing
Avery Dennison
Price113.03 EPS2
Shares85 P/E68
MCap9,619 P/FCF21
Net Debt1,260 EBIT140
TEV10,878 TEV/EBIT78
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-03-28 Filed 2020-05-01
10-K 2019-12-28 Filed 2020-02-26
10-Q 2019-09-28 Filed 2019-10-29
10-Q 2019-06-29 Filed 2019-07-30
10-Q 2019-03-30 Filed 2019-04-30
10-K 2018-12-29 Filed 2019-02-27
10-Q 2018-09-29 Filed 2018-10-30
10-Q 2018-06-30 Filed 2018-07-31
10-Q 2018-03-31 Filed 2018-05-01
10-K 2017-12-30 Filed 2018-02-21
10-Q 2017-09-30 Filed 2017-10-31
10-Q 2017-07-01 Filed 2017-08-01
10-Q 2017-04-01 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-10-01 Filed 2016-11-01
10-Q 2016-07-02 Filed 2016-08-02
10-Q 2016-04-02 Filed 2016-05-03
10-K 2016-01-02 Filed 2016-02-24
10-Q 2015-10-03 Filed 2015-11-03
10-Q 2015-07-04 Filed 2015-08-04
10-Q 2015-04-04 Filed 2015-05-05
10-K 2015-01-03 Filed 2015-02-25
10-Q 2014-09-27 Filed 2014-10-29
10-Q 2014-06-28 Filed 2014-07-31
10-Q 2014-03-29 Filed 2014-05-05
10-K 2013-12-28 Filed 2014-02-26
10-Q 2013-09-28 Filed 2013-11-04
10-Q 2013-06-29 Filed 2013-08-07
10-Q 2013-03-30 Filed 2013-05-07
10-K 2012-12-29 Filed 2013-02-27
10-Q 2012-09-29 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-08
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-10-01 Filed 2011-11-08
10-Q 2011-07-02 Filed 2011-08-09
10-Q 2011-04-02 Filed 2011-05-10
10-K 2011-01-01 Filed 2011-02-28
10-Q 2010-10-02 Filed 2010-11-10
10-Q 2010-07-03 Filed 2010-08-11
10-Q 2010-04-03 Filed 2010-05-12
10-K 2010-01-02 Filed 2010-03-01
8-K 2020-04-29
8-K 2020-04-23
8-K 2020-03-25
8-K 2020-03-11
8-K 2020-03-04
8-K 2020-02-24
8-K 2020-02-13
8-K 2020-01-29
8-K 2019-10-23
8-K 2019-07-23
8-K 2019-05-16
8-K 2019-04-25
8-K 2019-04-24
8-K 2019-02-26
8-K 2019-01-30
8-K 2018-12-06
8-K 2018-11-29
8-K 2018-10-23
8-K 2018-09-09
8-K 2018-08-29
8-K 2018-07-24
8-K 2018-07-09
8-K 2018-04-26
8-K 2018-04-19
8-K 2018-01-31

AVY 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. General
Note 2. Acquisitions
Note 3. Goodwill and Other Intangibles Resulting From Business Acquisitions
Note 4. Debt
Note 5. Pension and Other Postretirement Benefits
Note 6. Cost Reduction Actions
Note 7. Financial Instruments
Note 8. Taxes Based on Income
Note 9. Net Income (Loss) per Common Share
Note 10. Supplemental Equity and Comprehensive Income Information
Note 11. Fair Value Measurements
Note 12. Commitments and Contingencies
Note 13. Segment and Disaggregated Revenue Information
Note 14. Supplemental Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 avy-20200331xex10d1.htm
EX-10.2 avy-20200331xex10d2.htm
EX-10.3 avy-20200331xex10d3.htm
EX-10.4 avy-20200331xex10d4.htm
EX-31.1 avy-20200331xex31d1.htm
EX-31.2 avy-20200331xex31d2.htm
EX-32.1 avy-20200331xex32d1.htm
EX-32.2 avy-20200331xex32d2.htm

Avery Dennison Earnings 2020-03-28

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
1.91.51.10.60.2-0.22012201420172020
Rev, G Profit, Net Income
0.50.30.1-0.1-0.3-0.52012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2020.

OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ________________________

Commission file number 1-7685

AVERY DENNISON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

95-1492269

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

207 Goode Avenue

Glendale, California

91203

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (626) 304-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common stock, $1 par value

AVY

New York Stock Exchange

1.25% Senior Notes due 2025

AVY25

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting  company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Number of shares of $1 par value common stock outstanding as of April 25, 2020: 83,340,035

Table of Contents

AVERY DENNISON CORPORATION

FISCAL FIRST QUARTER 2020 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page

SAFE HARBOR STATEMENT

1

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1.

Financial Statements:

Condensed Consolidated Balance Sheets March 28, 2020 and December 28, 2019

2

Condensed Consolidated Statements of Operations Three Months Ended March 28, 2020 and March 30, 2019

3

Condensed Consolidated Statements of Comprehensive Income Three Months Ended March 28, 2020 and March 30, 2019

4

Condensed Consolidated Statements of Cash Flows Three Months Ended March 28, 2020 and March 30, 2019

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Non-GAAP Financial Measures

17

Overview and Outlook

18

Analysis of Results of Operations for the First Quarter

20

Results of Operations by Reportable Segment for the First Quarter

22

Financial Condition

24

Recent Accounting Requirements

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

Exhibits

Table of Contents

Safe Harbor Statement

The matters discussed in this Quarterly Report contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are not statements of historical fact, contain estimates, assumptions, projections and/or expectations regarding future events, which may or may not occur. Words such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “guidance,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “project,” “seek,” “shall,” “should,” “target,” “will,” “would,” or variations thereof, and other expressions that refer to future events and trends, identify forward-looking statements. These forward-looking statements, and financial or other business targets, are subject to certain risks and uncertainties, which could cause our actual results to differ materially from the expected results, performance or achievements expressed or implied by such forward-looking statements.

We believe that the most significant risk factors that could affect our financial performance in the near-term include: (1) the impacts to our business from global economic conditions, political uncertainty, and changes in governmental regulations, including as a result of the coronavirus/COVID-19 pandemic; (2) competitors' actions, including pricing, expansion in key markets, and product offerings; (3) 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; and (4) the execution and integration of acquisitions.

The more significant risks and uncertainties that may impact us are discussed in more detail under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019.  These risks and uncertainties include, but are not limited to the following: the coronavirus/COVID-19 pandemic; fluctuations in demand affecting sales to customers; worldwide and local economic and market conditions; changes in political conditions; fluctuations in foreign currency exchange rates and other risks associated with foreign operations, including in emerging markets; changes in our markets due to competitive conditions, technological developments, laws and regulations, and customer preferences; fluctuations in cost and availability of raw materials and energy; changes in governmental laws and regulations; the impact of competitive products and pricing; the financial condition and inventory strategies of customers; our ability to generate sustained productivity improvement; our ability to achieve and sustain targeted cost reductions; loss of significant contracts or customers; collection of receivables from customers; selling prices; business mix shift; execution and integration of acquisitions; 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; amounts of future dividends and share repurchases; customer and supplier concentrations  or consolidations; fluctuations in interest and 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; successful implementation of new manufacturing technologies and installation of manufacturing equipment; disruptions in information technology systems, including cyber-attacks or other intrusions to network security; successful installation of new or upgraded information technology systems; data security breaches; volatility of financial markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; our ability to obtain adequate financing arrangements and maintain access to capital; the realization of deferred tax assets; fluctuations in interest rates; compliance with our debt covenants; fluctuations in pension, insurance, and employee benefit costs; goodwill impairment; the impact of legal and regulatory proceedings, including with respect to environmental, health and safety, anti-corruption and trade compliance; protection and infringement of intellectual property; the impact of epidemiological events on the economy and our customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.

Our forward-looking statements are made only as of the date hereof. We assume no duty to update these forward-looking statements to reflect new, changed or unanticipated events or circumstances, other than as may be required by law.

1

Table of Contents

Avery Dennison Corporation

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except per share amount)

    

March 28, 2020

    

December 28, 2019

Assets

Current assets:

Cash and cash equivalents

$

742.0

$

253.7

Trade accounts receivable, less allowances of $46.3 and $27.1 at March 28, 2020 and December 28, 2019, respectively

 

1,222.5

 

1,212.2

Inventories, net

 

723.3

 

663.0

Other current assets

 

225.8

 

211.7

Total current assets

 

2,913.6

 

2,340.6

Property, plant and equipment, net

1,232.0

1,210.7

Goodwill

 

1,028.1

 

930.8

Other intangibles resulting from business acquisitions, net

 

197.6

 

126.5

Deferred tax assets

 

224.8

 

225.4

Other assets

 

664.8

 

654.8

$

6,260.9

$

5,488.8

Liabilities and Shareholders’ Equity

Current liabilities:

Short-term borrowings and current portion of long-term debt and finance leases

$

832.3

$

440.2

Accounts payable

 

1,030.8

 

1,066.1

Accrued payroll and employee benefits

189.2

220.4

Other current liabilities

 

507.8

 

527.1

Total current liabilities

 

2,560.1

 

2,253.8

Long-term debt and finance leases

 

1,988.0

 

1,499.3

Long-term retirement benefits and other liabilities

 

416.5

 

421.4

Deferred tax liabilities and income taxes payable

 

122.9

 

110.3

Commitments and contingencies (see Note 12)

Shareholders’ equity:

Common stock, $1 par value per share, authorized - 400,000,000 shares at March 28, 2020 and December 28, 2019; issued - 124,126,624 shares at March 28, 2020 and December 28, 2019; outstanding - 83,321,087 shares and 83,366,840 shares at March 28, 2020 and December 28, 2019, respectively

 

124.1

 

124.1

Capital in excess of par value

 

852.5

 

874.0

Retained earnings

 

3,064.8

 

2,979.1

Treasury stock at cost, 40,805,537 shares and 40,759,784 shares at March 28, 2020 and December 28, 2019, respectively

 

(2,456.0)

 

(2,425.1)

Accumulated other comprehensive loss

 

(412.0)

 

(348.1)

Total shareholders’ equity

 

1,173.4

 

1,204.0

$

6,260.9

$

5,488.8

See Notes to Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

(In millions, except per share amounts)

    

March 28, 2020

    

March 30, 2019

Net sales

$

1,723.0

$

1,740.1

Cost of products sold

 

1,237.9

 

1,274.7

Gross profit

 

485.1

 

465.4

Marketing, general and administrative expense

 

281.0

 

276.3

Other expense, net

 

4.9

 

7.5

Interest expense

18.8

19.5

Other non-operating expense, net

(.5)

446.5

Income (loss) before taxes

 

180.9

 

(284.4)

Provision for (benefit from) income taxes

 

46.3

 

(138.4)

Equity method investment losses

(.4)

(.9)

Net income (loss)

$

134.2

$

(146.9)

Per share amounts:

Net income (loss) per common share

$

1.61

$

(1.74)

Net income (loss) per common share, assuming dilution

$

1.60

$

(1.74)

Weighted average number of shares outstanding:

 

Common shares

83.3

84.3

Common shares, assuming dilution

84.1

84.3

See Notes to Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

(In millions)

    

March 28, 2020

    

March 30, 2019

Net income (loss)

$

134.2

$

(146.9)

Other comprehensive (loss) income, net of tax:

Foreign currency translation

 

(68.6)

 

22.1

Pension and other postretirement benefits

 

.6

 

300.7

Cash flow hedges

 

4.1

 

(.2)

Other comprehensive (loss) income, net of tax

 

(63.9)

 

322.6

Total comprehensive income, net of tax

$

70.3

$

175.7

See Notes to Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

(In millions)

    

March 28, 2020

    

March 30, 2019

Operating Activities

Net income (loss)

$

134.2

$

(146.9)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation

 

36.8

 

34.9

Amortization

 

10.7

 

9.6

Provision for credit losses and sales returns

31.2

14.8

Stock-based compensation

 

6.3

 

7.6

Pension plan settlements and related charges

 

 

446.9

Deferred taxes and other non-cash taxes

6.4

(172.8)

Other non-cash expense and loss (income and gain), net

 

4.4

 

3.3

Changes in assets and liabilities and other adjustments

 

(225.6)

 

(162.0)

Net cash provided by operating activities

 

4.4

 

35.4

Investing Activities

Purchases of property, plant and equipment

 

(33.2)

 

(41.8)

Purchases of software and other deferred charges

 

(6.2)

 

(5.5)

Proceeds from sales of property, plant and equipment

 

 

7.3

Proceeds from insurance and sales (purchases) of investments, net

 

(.3)

 

4.5

Payments for acquisition, net of cash acquired, and investments in businesses

 

(245.9)

 

(6.5)

Net cash used in investing activities

 

(285.6)

 

(42.0)

Financing Activities

Net (decrease) increase in borrowings (maturities of three months or less)

 

(106.0)

 

155.4

Additional borrowings under revolving credit facility

500.0

Additional long-term borrowings

494.4

Repayments of long-term debt and finance leases

 

(1.1)

 

(1.8)

Dividends paid

 

(48.4)

 

(43.9)

Share repurchases

 

(45.2)

 

(88.7)

Net (tax withholding) proceeds related to stock-based compensation

 

(20.0)

 

(20.1)

Payments of contingent consideration

(1.6)

Net cash provided by (used in) financing activities

 

773.7

 

(.7)

Effect of foreign currency translation on cash balances

 

(4.2)

 

1.0

Increase (decrease) in cash and cash equivalents

 

488.3

 

(6.3)

Cash and cash equivalents, beginning of year

 

253.7

 

232.0

Cash and cash equivalents, end of period

$

742.0

$

225.7

See Notes to Unaudited Condensed Consolidated Financial Statements

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  General

The unaudited Condensed Consolidated Financial Statements and notes thereto in this Quarterly Report on Form 10-Q are presented as permitted by Article 10 of Regulation S-X and do not contain certain information included in the audited Consolidated Financial Statements and notes thereto in our 2019 Annual Report on Form 10-K, which should be read in conjunction with this Quarterly Report on Form 10-Q. The accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments of a normal and recurring nature necessary for a fair statement of our interim results. Interim results of operations are not necessarily indicative of future results.  

We expect the effects of the coronavirus/COVID-19 pandemic (collectively referred to herein as "COVID-19") to adversely impact our financial position, results of operations, and cash flows in fiscal year 2020. The unaudited Condensed Consolidated Financial Statements presented herein reflect our current estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of sales and expenses during the reporting periods presented.

Fiscal Periods

The first quarters of 2020 and 2019 consisted of thirteen-week periods ending March 28, 2020 and March 30, 2019, respectively.  

Accounting Guidance Updates

Credit Losses

In the first quarter of 2020, we adopted, using the modified retrospective approach, amended accounting guidance that required credit losses on financial instruments, including trade receivables, to be measured based on an expected credit loss model instead of the incurred loss model.  The expected credit loss model requires us to consider forward-looking information to estimate our allowance for credit losses. Our adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

Note 2. Acquisitions

On February 28, 2020, we completed the acquisition of Smartrac’s Transponder (RFID Inlay) division ("Smartrac"), a manufacturer of radio-frequency identification (“RFID”) products, for consideration, subject to customary adjustments, of approximately $253 million (€230 million), approximately $7 million of which became payable as of March 28, 2020. We believe this acquisition will enhance our research and development capabilities, expand product lines, and provide added manufacturing capacity. Consistent with the time allowed to complete our assessment, the valuation of certain acquired assets and liabilities, including tangible and intangible assets, environmental liabilities and income taxes, is preliminary. This acquisition was not material to our unaudited Condensed Consolidated Financial Statements.

Note 3.  Goodwill and Other Intangibles Resulting from Business Acquisitions

Changes in the net carrying amount of goodwill for the three months ended March 28, 2020 by reportable segment are shown below.

Label and

Retail Branding

Industrial and

Graphic

and Information

Healthcare

(In millions)

    

Materials

    

Solutions

    

Materials

    

Total

Goodwill as of December 28, 2019

$

407.8

$

349.3

$

173.7

$

930.8

Acquisition(1)

20.1

91.6

111.7

Translation adjustments

 

(9.5)

 

(3.4)

(1.5)

 

(14.4)

Goodwill as of March 28, 2020

$

418.4

$

437.5

$

172.2

$

1,028.1

(1)Goodwill acquired related to the acquisition of Smartrac, which is based on a preliminary allocation to the Label and Graphic Materials and Retail Branding and Information Solutions reportable segments. The amount of goodwill recognized is not expected to be deductible for income tax purposes.

The duration and severity of COVID-19 could result in future impairment charges to our reportable segments’ goodwill balances. While we have concluded that a triggering event did not occur during the three months ended March 28, 2020, a prolonged pandemic could impact our results of operations and result in changes to assumptions utilized in the determination of the estimated fair values of goodwill that could be significant enough to trigger an impairment.

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Finite-Lived Intangible Assets

In connection with the Smartrac acquisition, we acquired approximately $76 million of identifiable intangible assets, which consisted of customer relationships, trade names and trademarks, and patents and other acquired technology. We utilized the income approach to estimate the fair values of the identifiable intangibles associated with the acquisition, primarily using Level 3 inputs. The discount rate we used to value these assets was 13.5%.

The table below summarizes the amounts and useful lives of these intangible assets as of the acquisition date.

    

    

Amortization

Amount 

period

 (in millions)

(in years)

Patents and other acquired technology

$

60.0

 

11

Customer relationships

 

14.0

 

6

Trade names and trademarks

 

2.0

 

5

Refer to Note 2, “Acquisitions,” to the unaudited Condensed Consolidated Financial Statements for more information.

Note 4.  Debt

In March 2020, we issued $500 million of senior notes, due April 2030. The senior notes bear an interest rate of 2.65%  per year, payable semiannually in arrears. Our net proceeds from the offering, after deducting underwriting discounts and offering expenses, were $494.4  million, which we used to repay existing indebtedness under our commercial paper program, used to fund our Smartrac acquisition, and, subsequent to the end of the first quarter of 2020, the $250 million aggregate principal amount of senior notes that matured on April 15, 2020.

The estimated fair value of our long-term debt is primarily based on the credit spread above U.S. Treasury securities or euro government bond securities, as applicable, on notes with similar rates, credit ratings, and remaining maturities. The fair value of short-term borrowings, which include commercial paper issuances and short-term lines of credit, approximates their carrying value given the short duration of these obligations.  The fair value of our total debt was $2.84 billion at March 28, 2020 and $2.05 billion at December 28, 2019. Fair values were determined based primarily on Level 2 inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable.

In February 2020, we amended and restated our $800 million revolving credit facility (the “Revolver”), eliminating one of the financial covenant requirements and extending the maturity date to February 13, 2025. The maturity date may be extended for a one-year period under certain circumstances. The commitments under the Revolver may be increased by up to $400 million, subject to lender approvals and customary requirements. The outstanding utilized balance under the Revolver was $500 million as of March 28, 2020. No balance was outstanding under the Revolver as of December 28, 2019. As of both March 28, 2020 and December 28, 2019, we were in compliance with our financial covenants under the Revolver.

Note 5.  Pension and Other Postretirement Benefits

Defined Benefit Plans

We sponsor a number of defined benefit plans, the accrual of benefits under some of which has been frozen, covering eligible employees in the U.S. and certain other countries.  Benefits payable to an employee are based primarily on years of service and the employee’s compensation during his or her employment with us.  For the three months ended March 28, 2020, the net periodic benefit cost related to our U.S. and international plans was not material. For the three months ended March 30, 2019, the net periodic benefit cost related to our U.S. and international plans was $447.7 million and $3.3 million, respectively.  Included in the net periodic benefit cost for our U.S. plans for the three months ended March 30, 2019 was a loss on settlement of $446.9 million related to the termination of the Avery Dennison Pension Plan (the “ADPP”), a U.S. defined benefit plan. This loss was partially offset by related tax benefits of approximately $179 million.  Refer to Note 8, “Taxes Based on Income,” to the unaudited Condensed Consolidated Financial Statements for more information.

In connection with the ADPP termination in 2019, we settled approximately $753 million of ADPP liabilities by entering into an agreement to purchase annuities primarily from American General Life Insurance Company and through a combination of annuities and direct funding to the Pension Benefit Guaranty Corporation for a small portion of former employees and their beneficiaries.

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Service cost and components of net periodic benefit cost (credit) other than service cost were included in “Marketing, general and administrative expense” and “Other non-operating expense” in the unaudited Condensed Consolidated Statements of Operations, respectively.

We are also obligated to pay unfunded termination indemnity benefits to certain employees outside of the U.S., which are subject to applicable agreements, laws and regulations.  We have not incurred significant costs related to these benefits.

Note 6.  Cost Reduction Actions

2019/2020 Actions

During the three months ended March 28, 2020, we recorded $2.6 million in restructuring charges related to our 2019/2020 actions. These charges consisted of severance and related costs for the reduction of approximately 60 positions.

2018/2019 Actions

During the three months ended March 28, 2020, we recorded $.2 million in net restructuring reversals related to our 2018/2019 actions.

During the three months ended March 28, 2020, restructuring charges and payments were as follows:

Accrual at

Charges,

Foreign

Accrual at

December 28,

Net of

Cash

Non-cash

Currency

March 28,

(In millions)

    

2019

    

Reversals

    

Payments

    

Impairment

    

Translation

    

2020

2019/2020 Actions

Severance and related costs

$

21.9

$

2.6

$

(4.5)

$

$

$

20.0

2018/2019 Actions

Severance and related costs

6.5

(.2)

(6.0)

.1

.4

Lease cancellation costs

.3

.3

Total

$

28.7

$

2.4

$

(10.5)

$

$

.1

$

20.7

Accruals for severance and related costs and lease cancellation costs were included in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets. Asset impairment charges were based on the estimated market value of the assets, less selling costs, if applicable. Restructuring charges were included in “Other expense, net” in the unaudited Condensed Consolidated Statements of Income.

The table below shows the total amount of restructuring charges, net of reversals, incurred by reportable segment.

Three Months Ended

(In millions)

    

March 28, 2020

    

March 30, 2019

Restructuring charges, net of reversals, by reportable segment

Label and Graphic Materials

$

.4

$

8.3

Retail Branding and Information Solutions

 

1.5

 

.5

Industrial and Healthcare Materials

 

.5

 

1.9

Total

$

2.4

$

10.7

Note 7. Financial Instruments

We enter into foreign exchange hedge contracts to reduce our risk from foreign exchange rate fluctuations associated with receivables, payables, loans and firm commitments denominated in certain foreign currencies that arise primarily as a result of our operations outside the U.S.  We also enter into futures contracts to hedge certain price fluctuations for a portion of our anticipated domestic purchases of natural gas.  The impacts of these foreign exchange and commodities hedge activities on our unaudited Condensed Consolidated Financial Statements were not significant.

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Following our Smartrac acquisition and our issuance of the March 2020 senior notes, we entered into U.S. dollar to euro cross-currency swap contracts with a total notional amount of $250 million to have an effect of converting fixed-rate U.S. dollar-denominated debt to euro-denominated debt, including semiannual interest payments and the payment of principal at maturity. During the term of the contract, which ends on April 30, 2030, we pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars.  These contracts have been designated as cash flow hedges.  The fair value of these contracts as of March 28, 2020 was $8.6 million and was included in “Other assets” in the unaudited Condensed Consolidated Balance Sheets. Refer to Note 11, “Fair Value Measurements,” to the unaudited Condensed Consolidated Financial Statements for more information.

Note 8.  Taxes Based on Income

The following table summarizes our income (loss) before taxes, provision for (benefit from) income taxes, and effective tax rate:

Three Months Ended

(In millions, except percentages)

    

March 28, 2020

    

March 30, 2019

Income (loss) before taxes

$

180.9

$

(284.4)

Provision for (benefit from) income taxes

 

46.3

 

(138.4)

Effective tax rate

 

25.6

%  

 

48.7

%

Our provision for income taxes for the three months ended March 28, 2020 included $7.2 million of net tax charge related to the tax on global intangible low-taxed income (“GILTI”) of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived intangible income (“FDII”).  Our provision for income taxes for the three months ended March 28, 2020 also included the following discrete items: (i) $2.7 million of tax benefit related to excess tax benefits associated with stock-based payments; (ii) $2.7 million of net tax benefit from decreases in reserves primarily as a result of closing tax years, partially offset by additional interest and penalty accruals; and (iii) $2.5 million of tax benefit related to a change in a foreign withholding tax rate and the impact of foreign currency movements.

Our provision for income taxes for the three months ended March 28, 2020 was not materially affected by COVID-19.  Moreover, our ability to generate sufficient taxable income was not adversely affected in certain jurisdictions where a significant portion of our net deferred tax assets is concentrated.  Our provision for income taxes for the three months ended March 28, 2020 was not materially impacted by the stimulus packages enacted to provide economic relief to businesses in the U.S. and other countries in response to COVID-19.

Our benefit from income taxes for the three months ended March 30, 2019 included $5.4 million of net tax charge related to the tax on GILTI of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from FDII.  Effective in 2019, we implemented certain structural changes to align with operational strategies, one benefit of which was to reduce our base erosion payments below the statutory minimum threshold.  As a result, our benefit from income taxes for the three months ended March 30, 2019 did not include tax charges related to Base Erosion Antiabuse Tax.  Our benefit from income taxes for the three months ended March 30, 2019 also included the following discrete items: (i) $6.9 million of tax benefit related to excess tax benefits associated with stock-based payments and (ii) approximately $179 million of tax benefit related to the effective settlement of the ADPP, $102 million of which was the related tax effect on the pretax charge of $446.9 million and $77 million of which was related to the release of stranded tax effects in “Accumulated other comprehensive loss” through the income statement. The tax effects were stranded primarily as a result of the U.S. federal tax rate change under the U.S. Tax Cuts and Jobs Act. Refer to Note 5, “Pension and Other Postretirement Benefits,” to the unaudited Condensed Consolidated Financial Statements for more information on the termination of the ADPP.

The amount of income taxes we pay is subject to ongoing audits by taxing jurisdictions around the world.  Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time.  We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters.  However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate.  The final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our tax provision and the related liabilities.  To date, we and our U.S. subsidiaries have completed the IRS’ Compliance Assurance Process Program through 2016.  With limited exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2009.

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It is reasonably possible that, during the next 12 months, we may realize a decrease in our uncertain tax positions, including interest and penalties, of approximately $15 million, primarily as a result of audit settlements and closing tax years.

Note 9.  Net Income (Loss) Per Common Share

Net income (loss) per common share was computed as follows:

        

Three Months Ended

(In millions, except per share amounts)

    

March 28, 2020

    

March 30, 2019

(A)

Net income (loss)

$

134.2

$

(146.9)

(B)

Weighted average number of common shares outstanding

 

83.3

 

84.3

Dilutive shares (additional common shares issuable under stock-based awards)

 

.8

 

(C)

Weighted average number of common shares outstanding, assuming dilution

 

84.1

 

84.3

Net income (loss) per common share: (A) ÷ (B)

$

1.61

$

(1.74)

Net income (loss) per common share, assuming dilution: (A) ÷ (C) 

$

1.60

$

(1.74)

Certain stock-based compensation awards were not included in the computation of net income (loss) per common share, assuming dilution, because they would not have had a dilutive effect. Stock-based compensation awards excluded from the computation were not significant for the three months ended March 28, 2020.

For the first quarter of 2019, the effect of dilutive shares (additional common shares issuable under stock-based awards) was not included in the computation of net loss per common share, assuming dilution, because we had a net loss. We excluded 1.1 million shares related to stock-based compensation awards from the computation for the three months ended  March 30, 2019.

Note 10. Supplemental Equity and Comprehensive Income Information

Consolidated Changes in Shareholders’ Equity

Three Months Ended

(In millions)

    

March 28, 2020

    

March 30, 2019

Common stock issued, $1 par value per share

$

124.1

$

124.1

Capital in excess of par value

Beginning balance

$

874.0

$

872.0

Issuance of shares under stock-based compensation plans(1)

 

(21.5)

 

(20.5)

Ending balance

$

852.5

$

851.5

Retained earnings

Beginning balance

$

2,979.1

$

2,864.9

Net income (loss)

 

134.2

 

(146.9)

Issuance of shares under stock-based compensation plans(1)

 

(4.2)

 

(14.3)

Contribution of shares to 401(k) Plan(1)

 

4.1

 

3.7

Dividends

 

(48.4)

 

(43.9)

Ending balance

$

3,064.8

$

2,663.5

Treasury stock at cost

Beginning balance

$

(2,425.1)

$

(2,223.9)

Repurchase of shares for treasury

 

(45.2)

 

(88.7)

Issuance of shares under stock-based compensation plans

 

12.0

 

22.3

Contribution of shares to 401(k) Plan(1)

 

2.3

 

2.5

Ending balance

$

(2,456.0)

$

(2,287.8)

Accumulated other comprehensive loss

Beginning balance

$

(348.1)

$

(682.0)

Other comprehensive (loss) income, net of tax(2)

 

(63.9)

 

322.6

Ending balance

$

(412.0)

$

(359.4)

(1)We fund a portion of our employee-related expenses using shares of our common stock held in treasury.  We reduce capital in excess of par value based on the grant date fair value of the awards vested and record net gains or losses associated with our use of treasury shares to retained earnings.

(2)In the first quarter of 2019, we effectively settled our remaining obligations under the ADPP. Refer to Note 5, "Pension and Other Postretirement Benefits,” to the unaudited Condensed Consolidated Financial Statements for more information.

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Dividends per common share were as follows:

Three Months Ended

    

March 28, 2020

    

March 30, 2019

Dividends per common share

$

.58

$

.52

Changes in Accumulated Other Comprehensive Loss

The changes in “Accumulated other comprehensive loss” (net of tax) for the three-month period ended March 28, 2020 were as follows:

Pension and

Foreign

Other

Currency

Postretirement

Cash Flow

(In millions)

    

Translation

    

Benefits

    

Hedges

    

Total

Balance as of December 28, 2019

$

(245.1)

$

(101.8)

$

(1.2)

$

(348.1)

Other comprehensive (loss) income before reclassifications, net of tax

 

(68.6)

 

 

4.7

 

(63.9)

Reclassifications to net income, net of tax

 

 

.6

 

(.6)

 

Net current-period other comprehensive (loss) income, net of tax

 

(68.6)

 

.6

 

4.1

 

(63.9)

Balance as of March 28, 2020

$

(313.7)

$

(101.2)

$

2.9

$

(412.0)

The changes in “Accumulated other comprehensive loss” (net of tax) for the three-month period ended March 30, 2019 were as follows:

Pension and

Foreign

Other

Currency

Postretirement

Cash Flow

(In millions)

    

Translation

    

Benefits

    

Hedges

    

Total

Balance as of December 29, 2018

$

(247.4)

$

(434.3)

$

(.3)

$

(682.0)

Other comprehensive income before reclassifications, net of tax(1)

 

22.1

 

36.0

 

.1

 

58.2

Reclassifications to net loss, net of tax

 

 

264.7

 

(.3)

 

264.4

Net current-period other comprehensive income (loss), net of tax

 

22.1

 

300.7

 

(.2)

 

322.6

Balance as of March 30, 2019

$

(225.3)

$

(133.6)

$

(.5)

$

(359.4)

(1)Other comprehensive income before reclassifications, net of tax, for pension and other postretirement benefits related to the remeasurement of the ADPP’s net pension obligations.

The amounts reclassified from “Accumulated other comprehensive loss” to increase (decrease) net income were as follows:

Amounts Reclassified from Accumulated

Other Comprehensive Loss

Three Months Ended

Statements of Operations

(In millions)

    

March 28, 2020

    

March 30, 2019

    

Location

Cash flow hedges:

Foreign exchange contracts

$

1.1

$

.4

 

Cost of products sold

Commodity contracts

(.3)

 

 

Cost of products sold

Total before tax

.8

 

.4

 

Tax

(.2)

 

(.1)

 

Provision for (benefit from) income taxes

Net of tax

.6

.3

Pension and other postretirement benefits

(.8)

 

(443.8)

Other non-operating expense, net

Tax

.2

 

179.1

 

Provision for (benefit from) income taxes

Net of tax

(.6)

 

(264.7)

 

Total reclassifications for the period

$

$

(264.4)

 

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The following table sets forth the income tax (benefit) expense allocated to each component of other comprehensive (loss) income:

Three Months Ended

(In millions)

    

March 28, 2020

    

March 30, 2019

Foreign currency translation

$

(6.8)

$

(4.4)

Pension and other postretirement benefits

 

.2

 

189.8

Cash flow hedges

 

1.2

 

(.1)

Income tax (benefit) expense allocated to components of other comprehensive (loss) income

$

(5.4)

$

185.3

Note 11.  Fair Value Measurements

Recurring Fair Value Measurements

The following table provides the assets and liabilities carried at fair value, measured on a recurring basis, as of March 28, 2020:

Fair Value Measurements Using

Significant 

Significant 

Quoted Prices 

Other

Other

in Active

Observable

Unobservable

 Markets

 Inputs

 Inputs

(In millions)

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets

Trading securities

$

30.7

$

26.0

$

4.7

$

Derivative assets

 

27.8

 

 

27.8

 

Bank drafts

17.8

17.8

Liabilities

Derivative liabilities

$

22.0

$

.3

$

21.7

$

The following table provides the assets and liabilities carried at fair value, measured on a recurring basis, as of December 28, 2019:

Fair Value Measurements Using

Significant 

Significant 

Quoted Prices 

Other

Other

in Active

Observable

Unobservable

 Markets

 Inputs

 Inputs

(In millions)

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets

Trading securities

$

30.6

$

26.0

$

4.6

$

Derivative assets

 

5.2

 

 

5.2

 

Bank drafts

21.3

21.3

Liabilities

Derivative liabilities

$

6.0

$

.4

$

5.6

$

Trading securities include fixed income securities (primarily U.S. government and corporate debt securities) measured at fair value using quoted prices/bids and a money market fund measured at fair value using net asset value.  As of March 28, 2020, trading securities of $0.8 million and $29.9 million were included in “Cash and cash equivalents” and “Other current assets,” respectively, in the unaudited Condensed Consolidated Balance Sheets. As of December 28, 2019, trading securities of $.4 million and $30.2 million were included in “Cash and cash equivalents” and “Other current assets,” respectively, in the unaudited Condensed Consolidated Balance Sheets.  Derivatives that are exchange-traded are measured at fair value using quoted market prices and classified within Level 1 of the valuation hierarchy. Derivatives measured based on foreign exchange rate inputs that are readily available in public markets are classified within Level 2 of the valuation hierarchy. Bank drafts (maturities greater than three months) are valued at face value due to their short-term nature and were included in “Other current assets” in the unaudited Condensed Consolidated Balance Sheets.

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Note 12.  Commitments and Contingencies

Legal Proceedings

We are involved in various lawsuits, claims, inquiries, and other regulatory and compliance matters, most of which are routine to the nature of our business.  When it is probable that a loss will be incurred and where a range of the loss can be reasonably estimated, the best estimate within the range is accrued. When the best estimate within the range cannot be determined, the low end of the range is accrued. The ultimate resolution of these claims could affect future results of operations should our exposure be materially different from our estimates or should liabilities be incurred that were not previously accrued. Potential insurance reimbursements are not offset against potential liabilities.

Because of the uncertainties associated with claims resolution and litigation, future expenses to resolve these matters could be higher than the liabilities we have accrued; however, we are unable to reasonably estimate a range of potential expenses.  If information were to become available that allowed us to reasonably estimate a range of potential expenses in an amount higher or lower than what we have accrued, we would adjust our accrued liabilities accordingly.  Additional lawsuits, claims, inquiries, and other regulatory and compliance matters could arise in the future.  The range of expenses for resolving any future matters would be assessed as they arise; until then, a range of potential expenses for such resolution cannot be determined. Based upon current information, we believe that the impact of the resolution of these matters would not be, individually or in the aggregate, material to our financial position, results of operations or cash flows.

Environmental Expenditures

Environmental expenditures are generally expensed. However, environmental expenditures for newly acquired assets and those that extend or improve the economic useful life of existing assets are capitalized and amortized over the shorter of the estimated useful life of the acquired asset or the remaining life of the existing asset. We review our estimates of the costs of complying with environmental laws related to remediation and cleanup of various sites, including sites in which governmental agencies have designated us as a potentially responsible party (“PRP”). When it is probable that a loss will be incurred and where a range of the loss can be reasonably estimated, the best estimate within the range is accrued. When the best estimate within the range cannot be determined, the low end of the range is accrued. Potential insurance reimbursements are not offset against potential liabilities.

As of March 28, 2020, we have been designated by the U.S. Environmental Protection Agency (“EPA”) and/or other responsible state agencies as a PRP at