Earnings Release
Avery Dennison Announces Second Quarter 2017 Results
•2Q17 Net sales increased ~6% to $1.63 billion Sales change ex. currency (non-GAAP) of ~7%
--Organic sales change (non-GAAP) of ~3%
--Raised FY17 guidance midpoint for Reported and Adjusted EPS by $0.25
Avery Dennison Corporation (AVY) today announced preliminary,
unaudited results for its second quarter ended July 1, 2017. All
non-GAAP financial measures referenced in this document are reconciled
to GAAP in the attached tables. Unless otherwise indicated, comparisons
are to the same period in the prior year.
"We continued to make good progress against our strategic and financial
objectives in the second quarter," said Mitch Butier, Avery Dennison
President and CEO. "LGM generated strong profitability despite a
short-term moderation in organic growth; RBIS had a great quarter, with
accelerated sales growth and margin expansion as our multi-year
transformation delivers; and IHM continues to make progress against its
strategic priorities, including the completion of two acquisitions.
"We have raised our outlook for full-year earnings per share, reflecting
continued strong operating performance and a reduction in the tax rate,"
said Butier. "We continue to remain confident that the consistent
execution of our strategies will enable us to meet our long-term goals
for superior value creation through a balance of profitable growth and
capital discipline."
For more details on the company’s results, see the summary table
accompanying this news release, as well as the supplemental presentation
materials, "Second Quarter 2017 Financial Review and Analysis," posted
on the company’s website at www.investors.averydennison.com,
and furnished to the SEC on Form 8-K.
Second Quarter 2017 Results by Segment
Organic sales change refers to the increase or decrease in sales
excluding the estimated impact of currency translation, product line
exits, and acquisitions and divestitures. Adjusted operating margin
refers to income before interest expense and taxes, excluding
restructuring charges and other items, as a percentage of sales.
Label and Graphic Materials
•
Reported sales increased 5.5 percent; on an organic basis, sales grew
an estimated 2.3 percent driven by solid growth in high value
categories, with modest growth in the base business.
•
Operating margin improved 20 basis points to 13.2 percent. Adjusted
operating margin of 13.6 percent was flat as the benefits from
productivity initiatives and increased volume were offset by higher
employee-related costs and the modest net impact of pricing and raw
material costs.
Retail Branding and Information Solutions
•
Reported sales increased 4.6 percent; on an organic basis, sales grew
an estimated 5.8 percent driven by strength in RFID and the base
business.
•
Operating margin improved 110 basis points to 7.5 percent. Adjusted
operating margin improved 120 basis points to 8.3 percent driven by
productivity and strong volume, partially offset by higher
employee-related costs.
Industrial and Healthcare Materials
•
Reported sales increased 8.7 percent; sales were essentially flat on
an organic basis. Sales in industrial categories increased low-double
digits on an organic basis, offsetting the anticipated decline in
healthcare categories.
•
Operating margin declined 580 basis points to 8.5 percent. Adjusted
operating margin declined 400 basis points to 10.4 percent driven
primarily by the impact of the decline in healthcare categories.
•
The company’s acquisitions of Yongle Tape and Finesse Medical closed
during the second quarter and the integrations are on track.
Other
Share Repurchases / Equity Dilution from Long-Term Incentives
The company repurchased 0.4 million shares in the second quarter at an
aggregate cost of $36 million. Net of dilution, the company’s share
count decreased 0.5 million in the quarter. The cost of repurchases, net
of proceeds from stock option exercises, was $35 million.
Income Taxes
The second quarter effective tax rate was 19.1 percent, comparable to
prior year. The adjusted tax rate for the quarter was approximately 26
percent, as the company now anticipates a full year effective tax rate
of approximately 28 percent.
Cost Reduction Actions
In the second quarter, the company realized approximately $15 million in
pre-tax savings from restructuring, net of transition costs, and
incurred pre-tax restructuring charges of approximately $8 million,
nearly all of which represents cash charges.
Outlook
In its supplemental presentation materials, "Second Quarter 2017
Financial Review and Analysis," the company provides a list of factors
that it believes will contribute to its 2017 financial results. Based on
the factors listed and other assumptions, the company now expects 2017
reported earnings per share of $4.45 to $4.60. Excluding an estimated
$0.30 per share for restructuring charges and other items, the company
now expects adjusted earnings per share (non-GAAP) of $4.75 to $4.90.
Note: Throughout this release and the supplemental presentation
materials, amounts on a per share basis reflect fully diluted shares
outstanding.
About Avery Dennison
Avery Dennison (AVY) is a global leader in pressure-sensitive
label and functional materials and labeling solutions for apparel. The
company’s applications and technologies are an integral part of products
used in every major industry. With operations in more than 50 countries
and more than 25,000 employees worldwide, Avery Dennison serves
customers in the consumer packaging, graphical display, logistics,
apparel, industrial and healthcare industries. Headquartered in
Glendale, California, the company reported sales of $6.1 billion in
2016. Learn more at www.averydennison.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
Certain statements contained in this document are "forward-looking
statements" intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements, and financial or other business
targets, are subject to certain risks and uncertainties. Actual results
and trends may differ materially from historical or anticipated results
depending on a variety of factors, including but are not limited to,
risks and uncertainties relating to the following: fluctuations in
demand affecting sales to customers; worldwide and local economic
conditions; changes in political conditions; changes in governmental
laws and regulations; fluctuations in currency exchange rates and other
risks associated with foreign operations, including in emerging markets;
the financial condition and inventory strategies of customers; changes
in customer preferences; fluctuations in cost and availability of raw
materials; our ability to generate sustained productivity improvement;
our ability to achieve and sustain targeted cost reductions; the impact
of competitive products and pricing; loss of significant contracts or
customers; collection of receivables from customers; selling prices;
business mix shift; execution and integration of acquisitions and
completion of potential dispositions; 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; 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;
fluctuations in interest and tax rates; changes in tax laws and
regulations, and uncertainties associated with interpretations of such
laws and regulations; outcome of tax audits; fluctuations in pension,
insurance, and employee benefit costs; the impact of legal and
regulatory proceedings, including with respect to environmental, health
and safety; 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.
We believe that the most significant risk factors that could affect our
financial performance in the near-term include: (1) the impacts of
global economic conditions and political uncertainty on underlying
demand for our products and foreign currency fluctuations; (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 selling
price increases, without a significant loss of volume; and (4) the
execution and integration of acquisitions.
For a more detailed discussion of these and other factors, see "Risk
Factors" and "Management’s Discussion and Analysis of Results of
Operations and Financial Condition" in our 2016 Form 10-K, filed on
February 23, 2017 with the Securities and Exchange Commission, and
subsequent quarterly reports on Form 10-Q. The forward-looking
statements included in this document are made only as of the date of
this document, and we undertake no obligation to update these statements
to reflect subsequent events or circumstances, other than as may be
required by law.
For more information and to listen to a live broadcast or an audio
replay of the quarterly conference call with analysts, visit the Avery
Dennison website at www.investors.averydennison.com
Second Quarter Financial Summary - Preliminary, unaudited
(In millions, except % and per share amounts)
2017
2016
Reported
Currency (a)
Organic (b)
Label and Graphic Materials
$ 1,123.1
$ 1,064.6
5.5 %
6.6 %
2.3 %
Retail Branding and Information Solutions
375.1
358.5
4.6 %
5.8 %
5.8 %
Industrial and Healthcare Materials
128.7
118.4
8.7 %
10.3 %
(0.1 %)
Total net sales
$ 1,626.9
$ 1,541.5
5.5 %
6.7 %
2.9 %
As Reported (GAAP)
Adjusted Non-GAAP (c)
2Q
2Q
%
% of Sales
2Q
2Q
%
% of Sales
2017
2016
Change
2017
2016
2017
2016
Change
2017
2016
Operating income (loss) / operating margins
before interest and taxes, by segment:
Label and Graphic Materials
$
148.0
$
138.3
13.2 %
13.0 %
$
153.0
$
144.5
13.6 %
13.6 %
Retail Branding and Information Solutions
28.2
23.1
7.5 %
6.4 %
31.0
25.5
8.3 %
7.1 %
Industrial and Healthcare Materials
11.0
16.9
8.5 %
14.3 %
13.4
17.1
10.4 %
14.4 %
Corporate expense
(21.5 )
(63.6 )
(21.5 )
(22.2 )
Total operating income before
interest and taxes / operating margins
$
165.7
$
114.7
44 %
10.2 %
7.4 %
$
175.9
$
164.9
7 %
10.8 %
10.7 %
Interest expense
$
16.2
$
15.4
$
16.2
$
15.4
Income before taxes
$
149.5
$
99.3
51 %
9.2 %
6.4 %
$
159.7
$
149.5
7 %
9.8 %
9.7 %
Provision for income taxes (d)
$
28.6
$
19.3
$
41.9
$
50.8
Net income
$
120.9
$
80.0
51 %
7.4 %
5.2 %
$
117.8
$
98.7
19 %
7.2 %
6.4 %
Net income per common share, assuming dilution
$
1.34
$
0.88
52 %
$
1.31
$
1.09
20 %
2Q Free Cash Flow (d)(e)
$
115.1
$
189.0
YTD Free Cash Flow (d)(e)
$
93.0
$
151.8
See accompanying schedules A-4 to A-8 for reconciliations from GAAP
to non-GAAP financial measures.
(a)
Percentage change in sales excluding the estimated impact of
(b)
Percentage change in sales excluding the estimated impact of
currency translation, product line exits, acquisitions and
divestitures, and, where applicable, the extra week in our fiscal
(c)
Excludes restructuring charges and other items.
(d)
In the first quarter of 2017, we adopted Accounting Standards Update
(ASU) 2016-09, Improvements to Employee Share-Based Payment
Accounting. This ASU requires that all tax effects related to
share-based payments at settlement or expiration be recognized
through the provision for income taxes, a change from the previous
requirement that certain tax effects be recognized in shareholders’
equity. As required by this ASU, this change has been applied
prospectively after the date of adoption.
This ASU also requires that all tax-related cash flows resulting
from share-based payments be reported as operating activities on the
statements of cash flows, a change from the previous requirement
that windfall tax benefits be presented as an inflow from financing
activities and an outflow from operating activities. As permitted by
this ASU, prior periods have not been retrospectively adjusted for
(e)
Free cash flow refers to cash flow from operations, less payments
for property, plant and equipment, software and other deferred
charges, plus proceeds from sales of property, plant and equipment,
plus (minus) net proceeds from sales (purchases) of investments.
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Three Months Ended
Six Months Ended
Jul. 1, 2017
Jul. 2, 2016
Jul. 1, 2017
Jul. 2, 2016
Net sales
$
1,626.9
$
1,541.5
$
3,199.0
$
3,027.0
Cost of products sold
1,174.3
1,107.4
2,304.0
2,170.3
Gross profit
452.6
434.1
895.0
856.7
Marketing, general & administrative expense
276.7
269.2
560.0
547.4
Interest expense
16.2
15.4
32.9
30.7
Other expense, net(1)
10.2
50.2
16.7
55.8
Income before taxes
149.5
99.3
285.4
222.8
Provision for income taxes(2)
28.6
19.3
52.3
53.2
Net income
$
120.9
$
80.0
$
233.1
$
169.6
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Net income per common share, assuming dilution
$
1.34
$
0.88
$
2.59
$
1.87
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Weighted average number of common shares outstanding,
assuming dilution
89.9
90.7
90.0
90.9
============================================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
(1)
"Other expense, net" for the second quarter of 2017 includes
severance and related costs of $7.3, asset impairment and lease
cancellation charges of $.3, and transaction costs of $2.6.
"Other expense, net" for the second quarter of 2016 includes
severance and related costs of $3.6, asset impairment and lease
cancellation charges of $2.8, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale of
"Other expense, net" for the first half of 2017 includes severance
and related costs of $13, asset impairment and lease cancellation
charges of $.3, and transaction costs of $3.4.
"Other expense, net" for the first half of 2016 includes severance
and related costs of $8.8, asset impairment and lease cancellation
charges of $3.2, loss from settlement of pension obligations of
$41.4, transaction costs of $2.1, and loss on sale of asset of $.3.
(2)
In the first quarter of 2017, we adopted Accounting Standards
Update (ASU) 2016-09, Improvements to Employee Share-Based
Payment Accounting. This ASU requires that all tax effects
related to share-based payments at settlement or expiration be
recognized through the provision for income taxes, a change from
the previous requirement that certain tax effects be recognized in
shareholders’ equity. As required by this ASU, this change has
been applied prospectively after the date of adoption.
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Jul. 1, 2017
Jul. 2, 2016
Cash and cash equivalents
$
209.4
$
216.1
Trade accounts receivable, net
1,138.1
1,028.3
Inventories, net
618.5
524.1
Assets held for sale
8.3
4.4
Other current assets
235.5
169.6
Total current assets
2,209.8
1,942.5
Property, plant and equipment, net
1,017.8
838.7
Goodwill and other intangibles resulting from business acquisitions,
1,118.5
727.4
Non-current deferred income taxes
325.1
390.4
==================== ==================== ==================== ==================== ==================== ==================== ========== ==================== ==================== ==================== ==================== ========== ====================
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term borrowings and current portion of long-term debt and
$
444.0
$
199.0
Accounts payable
930.9
867.9
Other current liabilities
597.5
525.3
Total current liabilities
1,972.4
1,592.2
Long-term debt and capital leases
1,276.3
962.9
Other long-term liabilities
773.3
783.2
Capital in excess of par value
845.9
834.4
Retained earnings
2,621.8
2,385.5
Treasury stock at cost
(1,805.6 )
(1,698.7 )
Accumulated other comprehensive loss
(716.4 )
(688.8 )
Total shareholders’ equity
1,069.8
956.5
==================== ==================== ==================== ==================== ==================== ==================== ========== ==================== ==================== ==================== ==================== ========== ====================
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Adjustments to reconcile net income to net cash provided by
Provision for doubtful accounts and sales returns
19.8
21.3
Net losses from asset impairments and sales/disposals of assets
0.6
3.2
Stock-based compensation
13.2
14.1
Loss from settlement of pension obligations
41.4
Other non-cash expense and loss
28.1
24.1
Changes in assets and liabilities and other adjustments
(207.3 )
(147.1 )
Net cash provided by operating activities
178.3
216.0
Purchases of property, plant and equipment
(66.5 )
(61.3 )
Purchases of software and other deferred charges
(14.9 )
(6.1 )
Proceeds from sales of property, plant and equipment
0.2
3.2
Purchases of investments, net
(4.1 )
Payments for acquisitions, net of cash acquired, and investments in
(300.9 )
Net cash used in investing activities
(386.2 )
(64.2 )
Net (decrease) increase in borrowings (maturities of three months or
(159.5 )
104.6
Additional long-term borrowings
526.6
Repayments of long-term debt
(1.5 )
(1.2 )
Dividends paid
(76.2 )
(69.6 )
Share repurchases
(70.3 )
(160.1 )
Proceeds from exercises of stock options, net
17.5
41.4
Tax withholding for and excess tax benefit from stock-based
(20.0 )
(8.4 )
Net cash provided by (used in) financing activities
216.6
(93.3 )
Effect of foreign currency translation on cash balances
5.6
(1.2 )
Increase in cash and cash equivalents
14.3
57.3
Cash and cash equivalents, beginning of year
195.1
158.8
Cash and cash equivalents, end of period
$
209.4
$
216.1
============================================================================================================================= ==================== ==================== ========== ==================== ==================== ==================== ==================== ========== ====================
In the first quarter of 2017, we adopted the provisions of Accounting
Standards Update (ASU) 2016-09, Improvements to Employee Share-Based
Payment Accounting. This ASU requires that all tax-related cash flows
resulting from share-based payments be reported as operating activities
on the statements of cash flows, a change from the previous requirement
that windfall tax benefits be presented as an inflow from financing
activities and an outflow from operating activities. As permitted by
this ASU, prior periods have not been retrospectively adjusted.
A-4
Reconciliation of Non-GAAP Financial Measures in Accordance with SEC
Regulations G and S-K
We report our financial results in conformity with accounting principles
generally accepted in the United States of America, or GAAP, and also
communicate with investors using certain non-GAAP financial measures.
These non-GAAP financial measures are not in accordance with, nor are
they a substitute for or superior to, the comparable GAAP financial
measures. These non-GAAP financial measures are intended to supplement
presentation of our financial results that are prepared in accordance
with GAAP. Based upon feedback from investors and financial analysts, we
believe that the supplemental non-GAAP financial measures we provide are
useful to their assessment of our performance and operating trends, as
well as liquidity.
Our non-GAAP financial measures exclude the impact of certain events,
activities, or strategic decisions. The accounting effects of these
events, activities or decisions, which are included in the GAAP
financial measures, may make it difficult to assess our underlying
performance in a single period. By excluding the accounting effects,
both positive and negative, of certain items (e.g., restructuring
charges, legal settlements, certain effects of strategic transactions
and related costs, losses from debt extinguishments, losses from
curtailment and settlement of pension obligations, gains or losses on
sales of certain assets, and other items), we believe that we are
providing meaningful supplemental information to facilitate an
understanding of our core operating results and liquidity measures.
These non-GAAP financial measures are used internally to evaluate trends
in our underlying performance, as well as to facilitate comparison to
the results of competitors for a single period. While some of the items
we exclude from GAAP financial measures recur, they tend to be disparate
in amount, frequency, or timing.
We use the following non-GAAP financial measures in the accompanying
news release and presentation:
Sales change ex. currency refers to the increase or decrease in
sales excluding the estimated impact of currency translation. The
estimated impact of currency translation is calculated on a constant
currency basis, with prior period results translated at current period
average exchange rates to exclude the effect of currency fluctuations.
Organic sales change refers to the increase or decrease in sales
excluding the estimated impact of currency translation, product line
exits, acquisitions and divestitures, and, where applicable, the extra
week in our fiscal year.
We believe that sales change ex. currency and organic sales change
assist investors in evaluating the sales growth from the ongoing
activities of our businesses and provide greater ability to evaluate our
results from period to period.
Adjusted operating margin refers to income before interest
expense and taxes, excluding restructuring charges and other items, as a
percentage of sales.
Adjusted tax rate refers to our anticipated full-year GAAP tax
rate using the most likely scenario in a range of estimated tax rates
for the year. This range includes various items such as the impact of
the discrete rates applicable to the adjustments we make in calculating
our adjusted non-GAAP earnings, changes in uncertain tax positions and
our repatriation assertions on unremitted earnings, and other items that
may impact our full-year GAAP tax rate.
Adjusted net income refers to income before taxes, tax-effected
at the adjusted tax rate, and adjusted for tax-effected restructuring
charges and other items.
Adjusted net income per common share, assuming dilution (adjusted EPS)
refers to adjusted net income divided by weighted average number of
common shares outstanding, assuming dilution.
We believe that adjusted operating margin, adjusted net income, and
adjusted EPS assist investors in understanding our core operating trends
and comparing our results with those of our competitors.
Free cash flow refers to cash flow from operations, less payments
for property, plant and equipment, software and other deferred charges,
plus proceeds from sales of property, plant and equipment, plus (minus)
net proceeds from sales (purchases) of investments. We believe that free
cash flow assists investors by showing the amount of cash we have
available for debt reductions, dividends, share repurchases, and
acquisitions.
The following reconciliations are provided in accordance with
Regulations G and S-K and reconcile our non-GAAP financial measures with
the most directly comparable GAAP financial measures.
AVERY DENNISON CORPORATION
PRELIMINARY RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL
(In millions, except % and per share amounts)
Three Months Ended
Six Months Ended
Jul. 1, 2017
Jul. 2, 2016
Jul. 1, 2017
Jul. 2, 2016
Reconciliation from GAAP to Non-GAAP Operating Margins:
Net sales
$
1,626.9
$
1,541.5
$
3,199.0
$
3,027.0
Income before taxes
$
149.5
$
99.3
$
285.4
$
222.8
Income before taxes as a percentage of sales
9.2 %
6.4 %
8.9 %
7.4 %
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Interest expense
$
16.2
$
15.4
$
32.9
$
30.7
Operating income before interest expense and taxes
$
165.7
$
114.7
$
318.3
$
253.5
Operating Margins
10.2 %
7.4 %
9.9 %
8.4 %
=========================================================== ==================== ==================== ==================== ==================================================== ==================================================== ==================== ==================================================== ================================
Income before taxes
$
149.5
$
99.3
$
285.4
$
222.8
Severance and related costs
7.3
3.6
13.0
8.8
Asset impairment and lease cancellation charges
0.3
2.8
0.3
3.2
Transaction costs
2.6
2.1
3.4
2.1
Loss from settlement of pension obligations
41.4
41.4
Loss on sale of asset
0.3
0.3
Interest expense
16.2
15.4
32.9
30.7
Adjusted operating income before interest expense and taxes
$
175.9
$
164.9
$
335.0
$
309.3
Adjusted Operating Margins (non-GAAP)
10.8 %
10.7 %
10.5 %
10.2 %
=========================================================== ==================== ==================== ==================== ==================================================== ==================================================== ==================== ==================================================== ================================
Reconciliation from GAAP to Non-GAAP Net Income:
As reported net income
$
120.9
$
80.0
$
233.1
$
169.6
Restructuring charges
7.6
6.4
13.3
12.0
Transaction costs
2.6
2.1
3.4
2.1
Loss from settlement of pension obligations
41.4
41.4
Loss on sale of asset
0.3
0.3
Tax effect of pre-tax adjustments and impact of adjusted tax rate(1)
(13.3 )
(31.5 )
(32.3 )
(41.5 )
Adjusted Net Income (non-GAAP)
$
117.8
$
98.7
$
217.5
$
183.9
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AVERY DENNISON CORPORATION
PRELIMINARY RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL
(In millions, except % and per share amounts)
Three Months Ended
Six Months Ended
Jul. 1, 2017
Jul. 2, 2016
Jul. 1, 2017
Jul. 2, 2016
Reconciliation from GAAP to Non-GAAP Net Income per Common Share:
As reported net income per common share, assuming dilution
$
1.34
$
0.88
$
2.59
$
1.87
Adjustments per common share, net of tax:
Restructuring charges, loss from settlement of pension
obligations, transaction costs, and loss on sale of asset(1)
Adjusted Net Income per Common Share, assuming dilution (non-GAAP)
$
1.31
$
1.09
$
2.42
$
2.02
Weighted average number of common shares outstanding, assuming
89.9
90.7
90.0
90.9
(1) The adjusted tax rate was 26% and 28% for the three
and six months ended July 1, 2017, respectively, and 34% for the
three and six months ended July 2, 2016.
Three Months Ended
Six Months Ended
Jul. 1, 2017
Jul. 2, 2016
Jul. 1, 2017
Jul. 2, 2016
Reconciliation of Free Cash Flow:
Net cash provided by operating activities
$
163.0
$
222.3
$
178.3
$
216.0
Purchases of property, plant and equipment
(36.2 )
(36.1 )
(66.5 )
(61.3 )
Purchases of software and other deferred charges
(8.0 )
(4.1 )
(14.9 )
(6.1 )
Proceeds from sales of property, plant and equipment
0.2
3.1
0.2
3.2
(Purchases) sales of investments, net
(3.9 )
3.8
(4.1 )
Free Cash Flow (non-GAAP)
$
115.1
$
189.0
$
93.0
$
151.8
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
NET SALES
OPERATING INCOME
OPERATING MARGINS
2017
2016
2017 (1)
2016 (2)
2017
2016
Label and Graphic Materials
$ 1,123.1
$ 1,064.6
$
148.0
$
138.3
13.2 %
13.0 %
Retail Branding and Information Solutions
375.1
358.5
28.2
23.1
7.5 %
6.4 %
Industrial and Healthcare Materials
128.7
118.4
11.0
16.9
8.5 %
14.3 %
Corporate Expense
N/A
N/A
(21.5 )
(63.6 )
N/A
N/A
TOTAL FROM OPERATIONS
$ 1,626.9
$ 1,541.5
$
165.7
$
114.7
10.2 %
7.4 %
(1) Operating income for the second quarter of 2017
includes severance and related costs of $7.3, asset impairment and
lease cancellation charges of $.3, and transaction costs of $2.6. Of
the total $10.2, the Label and Graphic Materials segment recorded
$5, the Retail Branding and Information Solutions segment recorded
$2.8, and the Industrial and Healthcare Materials segment recorded
(2) Operating income for the second quarter of 2016
includes severance and related costs of $3.6, asset impairment and
lease cancellation charges of $2.8, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale of
asset of $.3. Of the total $50.2, the Label and Graphic Materials
segment recorded $6.2, the Retail Branding and Information Solutions
segment recorded $2.4, the Industrial and Healthcare Materials
segment recorded $.2, and Corporate recorded $41.4.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
OPERATING INCOME
OPERATING MARGINS
Label and Graphic Materials
Operating income and margins, as reported
$
148.0
$
138.3
13.2 %
13.0 %
Severance and related costs
4.7
2.1
0.4 %
0.2 %
Asset impairment charges
0.1
2.4
0.2 %
Transaction costs
0.2
1.7
0.2 %
Adjusted operating income and margins (non-GAAP)
$
153.0
$
144.5
13.6 %
13.6 %
Retail Branding and Information Solutions
Operating income and margins, as reported
$
28.2
$
23.1
7.5 %
6.4 %
Severance and related costs
2.6
1.3
0.7 %
0.4 %
Asset impairment and lease cancellation charges
0.2
0.4
0.1 %
0.1 %
Loss on sale of asset
0.3
0.1 %
Transaction costs related to sale of product line
0.4
0.1 %
Adjusted operating income and margins (non-GAAP)
$
31.0
$
25.5
8.3 %
7.1 %
Industrial and Healthcare Materials
Operating income and margins, as reported
$
11.0
$
16.9
8.5 %
14.3 %
Severance and related costs
0.2
0.1 %
Transaction costs
2.4
1.9 %
Adjusted operating income and margins (non-GAAP)
$
13.4
$
17.1
10.4 %
14.4 %
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
NET SALES
OPERATING INCOME
OPERATING MARGINS
2017
2016
2017 (1)
2016 (2)
2017
2016
Label and Graphic Materials
$
2,212.7
$ 2,077.2
$
283.8
$
264.9
12.8 %
12.8 %
Retail Branding and Information Solutions
741.9
718.0
54.8
44.6
7.4 %
6.2 %
Industrial and Healthcare Materials
244.4
231.8
23.8
32.5
9.7 %
14.0 %
Corporate Expense
N/A
N/A
(44.1 )
(88.5 )
N/A
N/A
TOTAL FROM OPERATIONS
$
3,199.0
$ 3,027.0
$
318.3
$
253.5
9.9 %
8.4 %
(1) Operating income for the first half of 2017 includes
severance and related costs of $13, asset impairment and lease
cancellation charges of $.3, and transaction costs of $3.4. Of the
total $16.7, the Label and Graphic Materials segment recorded $7.2,
the Retail Branding and Information Solutions segment recorded $6.6,
and the Industrial and Healthcare Materials segment recorded $2.9.
(2) Operating income for the first half of 2016 includes
severance and related costs of $8.8, asset impairment and lease
cancellation charges of $3.2, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale of
asset of $.3. Of the total $55.8, the Label and Graphic Materials
segment recorded $8.3, the Retail Branding and Information Solutions
segment recorded $5.6, the Industrial and Healthcare Materials
segment recorded $.5, and Corporate recorded $41.4.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
OPERATING INCOME
OPERATING MARGINS
Label and Graphic Materials
Operating income and margins, as reported
$
283.8
$
264.9
12.8 %
12.8 %
Severance and related costs
6.7
4.2
0.3 %
0.2 %
Asset impairment charges
0.1
2.4
0.1 %
Transaction costs
0.4
1.7
0.1 %
0.1 %
Adjusted operating income and margins (non-GAAP)
$
291.0
$
273.2
13.2 %
13.2 %
Retail Branding and Information Solutions
Operating income and margins, as reported
$
54.8
$
44.6
7.4 %
6.2 %
Severance and related costs
6.1
4.1
0.8 %
0.6 %
Asset impairment and lease cancellation charges
0.2
0.8
0.1 %
Transaction costs related to sale of product line
0.3
0.4
0.1 %
0.1 %
Adjusted operating income and margins (non-GAAP)
$
61.4
$
50.2
8.3 %
7.0 %
Industrial and Healthcare Materials
Operating income and margins, as reported
$
23.8
$
32.5
9.7 %
14.0 %
Severance and related costs
0.2
0.5
0.1 %
0.2 %
Transaction costs
2.7
1.1 %
Adjusted operating income and margins (non-GAAP)
$
26.7
$
33.0
10.9 %
14.2 %
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
Total
Label and
Retail Branding
Industrial and
Company
Graphic
and Information
Healthcare
Materials
Solutions
Materials
Reconciliation of GAAP to Non-GAAP sales change
Reported sales change
5.5 %
5.5 %
4.6 %
8.7 %
Foreign currency translation
1.1 %
1.1 %
1.2 %
1.6 %
Sales change ex. currency (non-GAAP)(1)
6.7 %
6.6 %
5.8 %
10.3 %
Acquisitions
(3.7 %)
(4.3 %)
(10.4 %)
Organic sales change (non-GAAP)(1)
2.9 %
2.3 %
5.8 %
(0.1 %)
=============================================== ==================== ==================== ==== === ==================== ==== ==== ==================== ======= ==================== ==================== ========== =========
(1)Totals may not sum due to rounding.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170725005547r1&sid=cmtx6&distro=nx&
View source version on businesswire.com: http://www.businesswire.com/news/home/20170725005547/en/
SOURCE: Avery Dennison Corporation
Avery Dennison Corporation
rob.six@averydennison.com
Cynthia S. Guenther, 626-304-2204
investorcom@averydennison.com
