AVY
$80.55
Avery Dennison
$.94
1.18%
Earnings Details
4th Quarter December 2016
Wednesday, February 01, 2017 6:45:02 AM
Tweet Share Watch
Summary

Avery Dennison Sees 2017 Earnings Above Estimates

Avery Dennison (AVY) reported 4th Quarter December 2016 earnings of $0.99 per share on revenue of $1.6 billion. The consensus earnings estimate was $0.93 per share on revenue of $1.5 billion. Revenue grew 6.6% on a year-over-year basis.

The company said it expects 2017 earnings of $4.30 to $4.50 per share. The current consensus earnings estimate is $4.26 per share for the year ending December 31, 2017.

Avery Dennison Corp is engaged in the production of pressure-sensitive materials, office products and a variety of tickets, tags, labels and other converted products.

Results
Reported Earnings
$0.99
Earnings Whisper
-
Consensus Estimate
$0.93
Reported Revenue
$1.55 Bil
Revenue Estimate
$1.50 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Avery Dennison Announces Fourth Quarter and Full Year 2016 Results

4Q16 Net sales increased ~7 percent to $1.55 billion Organic sales growth (non-GAAP) of ~5 percent

--FY16 Reported EPS of $3.54 Adjusted EPS (non-GAAP) of $4.02

FY16 Net sales increased ~2 percent to $6.09 billion Organic sales growth (non-GAAP) of ~4 percent

--Expect FY17 Reported EPS of $4.10 to $4.30 Adjusted EPS (non-GAAP) of $4.30 to $4.50

Avery Dennison Corporation (AVY) today announced preliminary, unaudited results for its fourth quarter and year ended December 31, 2016. 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 periods in the prior year.

"I am pleased to report another year of progress toward our long-term goals," said Mitch Butier, President and CEO. "We drove strong organic sales growth and margin expansion through our strategy to accelerate growth in high value categories and disciplined execution in our base businesses.

"Label and Graphic Materials had another outstanding year and the transformation of Retail Branding and Information Solutions is on track. Results in our newly created Industrial and Healthcare Materials segment were as anticipated, and it is well positioned for profitable growth. I would like to thank our employees for their dedication and focus on our continued success.

"In 2017, we expect to again deliver solid sales and earnings growth," said Butier. "We remain confident that the consistent execution of our strategies will enable us to achieve our long-term goal of 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, "Fourth Quarter and Full Year 2016 Financial Review and Analysis," posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.

Fourth Quarter 2016 Results by Segment

Prior period amounts have been reclassified to reflect the company’s new operating structure. The Label and Graphic Materials segment includes Label and Packaging Materials, Graphics Solutions, and Reflective Solutions (all previously reported in Pressure-sensitive Materials). The Industrial and Healthcare Materials segment includes Performance Tapes (previously reported in Pressure-sensitive Materials), Fasteners Solutions (previously reported in Retail Branding and Information Solutions), and Vancive Medical Technologies (previously reported as a standalone segment). Retail Branding and Information Solutions now includes tickets, tags, and labels for apparel, radio-frequency identification, and Printer Solutions.

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 approximately 10 percent; on an organic basis, sales grew approximately 7 percent. Within the segment, sales in Label and Packaging Materials increased mid-single digits and the combined Graphics and Reflective businesses increased low-double digits on an organic basis.

Operating margin improved 70 basis points to 11.3 percent, driven primarily by the impact of higher volume. Adjusted operating margin also improved 70 basis points.

Retail Branding and Information Solutions

Reported sales increased approximately 3 percent; on an organic basis, sales grew approximately 5 percent.

Operating margin improved 610 basis points to 9.3 percent, primarily due to lower restructuring charges. Adjusted operating margin improved 220 basis points as the net savings associated with the business model transformation and the impact of higher volume were partially offset by higher employee-related costs.

Industrial and Healthcare Materials

Reported sales decreased approximately 8 percent; on an organic basis, sales declined approximately 10 percent, as expected. Strong growth in industrial was more than offset by an expected decline in healthcare categories.

Operating margin declined 360 basis points to 8.8 percent as the impact of lower volume was only partially offset by the benefit of productivity initiatives.

Other

Share Repurchases / Equity Dilution from Long-Term Incentives

In 2016, the company repurchased 3.8 million shares at an aggregate cost of $262 million. Net of dilution, the company reduced its share count by 2 million. The cost of repurchases, net of proceeds from stock option exercises, was $191 million.

Income Taxes

The 2016 full year tax rate was 32.8 percent, in-line with our previous expectation of 33 percent. The tax rate in 2017 is expected to be in the low-thirty percent range.

Cost Reduction Actions

In 2016, the company realized approximately $82 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $20 million, the majority of which represent cash charges.

Outlook

In its supplemental presentation materials, "Fourth Quarter and Full Year 2016 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 expects 2017 earnings per share of $4.10 to $4.30.

Excluding an estimated $0.20 per share for restructuring charges and other items, the company expects adjusted earnings per share (non-GAAP) of $4.30 to $4.50.

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 not limited to risks and uncertainties relating to the following: fluctuations in demand affecting sales to customers; worldwide and local economic conditions; 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; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; integration of acquisitions and completion of potential dispositions; 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; changes in governmental laws and regulations; protection and infringement of intellectual property; changes in political conditions; 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; and (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.

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 2015 Form 10-K, filed on February 24, 2016 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.

Fourth Quarter Financial Summary - Preliminary, unaudited
(in millions, except % and per share amounts)
4Q
4Q
% Change vs. P/Y
2016
2015
Reported
Organic (a)
Net sales, by segment:
Label and Graphic Materials
$
1,063.8
$
970.6
10 %
7 %
Retail Branding and Information Solutions
375.9
363.2
3 %
5 %
Industrial and Healthcare Materials
111.1
121.0
(8 %)
(10 %)
Total net sales
$
1,550.8
$
1,454.8
7 %
5 %
As Reported (GAAP)
Adjusted Non-GAAP (b)
4Q
4Q
%
% of Sales
4Q
4Q
%
% of Sales
2016
2015
Change
2016
2015
2016
2015
Change
2016
2015
Operating income (loss) / operating margins before interest and
taxes, by segment:
Label and Graphic Materials
$
120.6
$
102.5
11.3 %
10.6 %
$
122.6
$
104.8
11.5 %
10.8 %
Retail Branding and Information Solutions
34.8
11.8
9.3 %
3.2 %
37.5
28.2
10.0 %
7.8 %
Industrial and Healthcare Materials
9.8
15.0
8.8 %
12.4 %
10.8
15.5
9.7 %
12.8 %
Corporate expense
(24.4 )
(22.6 )
(25.3 )
(22.5 )
Total operating income before interest and taxes / operating
$
140.8
$
106.7
32 %
9.1 %
7.3 %
$
145.6
$
126.0
16 %
9.4 %
8.7 %
margins
Interest expense
$
14.5
$
15.2
$
14.5
$
15.2
Income from continuing operations before taxes
$
126.3
$
91.5
38 %
8.1 %
6.3 %
$
131.1
$
110.8
18 %
8.5 %
7.6 %
Provision for income taxes
$
64.3
$
35.0
$
42.1
$
32.5
Income from continuing operations
$
62.0
$
56.5
10 %
4.0 %
3.9 %
$
89.0
$
78.3
14 %
5.7 %
5.4 %
Income from discontinued operations (c)
$
0.5
n/m
Net income
$
62.0
$
57.0
9 %
4.0 %
3.9 %
Net income per common share, assuming dilution:
Continuing operations
$
0.69
$
0.61
13 %
$
0.99
$
0.85
16 %
Discontinued operations
0.01
n/m
Total Company
$
0.69
$
0.62
11 %
2016
2015
4Q Free Cash Flow from Continuing Operations (d)
$
139.4
$
138.3
Previously reported segment results have been reclassified to
reflect our new operating structure.
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
currency translation, product line exits, acquisitions and
divestitures, and, where applicable, the extra week in our fiscal
year.
(b)
Excludes restructuring charges and other items.
(c)
Relates to the 2013 sale of our former Office and Consumer Products
and Designed and Engineered Solutions businesses.
(d)
Free cash flow refers to cash flow from continuing 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, plus (minus) free cash outflow (inflow) from
discontinued operations.
Full Year Financial Summary - Preliminary, unaudited
(in millions, except % and per share amounts)
FY
FY
% Change vs. P/Y
2016
2015
Reported
Organic (a)
Net sales, by segment:
Label and Graphic Materials
$
4,187.3
$
4,032.1
4 %
5 %
Retail Branding and Information Solutions
1,445.4
1,443.4
--
3 %
Industrial and Healthcare Materials
453.8
491.4
(8 %)
(8 %)
Total net sales
$
6,086.5
$
5,966.9
2 %
4 %
As Reported (GAAP)
Adjusted Non-GAAP (b)
FY
FY
%
% of Sales
FY
FY
%
% of Sales
2016
2015
Change
2016
2015
2016
2015
Change
2016
2015
Operating income (loss) / operating margins before interest and
taxes, by segment:
Label and Graphic Materials
$
516.2
$
453.4
12.3 %
11.2 %
$
529.2
$
465.5
12.6 %
11.5 %
Retail Branding and Information Solutions
102.6
51.6
7.1 %
3.6 %
112.4
97.3
7.8 %
6.7 %
Industrial and Healthcare Materials
54.6
57.1
12.0 %
11.6 %
56.5
65.1
12.5 %
13.2 %
Corporate expense
(136.4 )
(92.7 )
(95.9 )
(91.2 )
Total operating income before interest and taxes / operating
$
537.0
$
469.4
14 %
8.8 %
7.9 %
$
602.2
$
536.7
12 %
9.9 %
9.0 %
margins
Interest expense
$
59.9
$
60.5
$
59.9
$
60.5
Income from continuing operations before taxes
$
477.1
$
408.9
17 %
7.8 %
6.9 %
$
542.3
$
476.2
14 %
8.9 %
8.0 %
Provision for income taxes
$
156.4
$
134.5
$
177.8
$
156.7
Income from continuing operations
$
320.7
$
274.4
17 %
5.3 %
4.6 %
$
364.5
$
319.5
14 %
6.0 %
5.4 %
Income from discontinued operations (c)
($0.1 )
n/m
Net income
$
320.7
$
274.3
17 %
5.3 %
4.6 %
Net income per common share, assuming dilution:
Continuing operations
$
3.54
$
2.95
20 %
$
4.02
$
3.44
17 %
Discontinued operations
n/m
Total Company
$
3.54
$
2.95
20 %
2016
2015
Free Cash Flow from Continuing Operations (d)
$
387.1
$
329.4
Previously reported segment results have been reclassified to
reflect our new operating structure.
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
currency translation, product line exits, acquisitions and
divestitures, and, where applicable, the extra week in our fiscal
year.
(b)
Excludes restructuring charges and other items.
(c)
Relates to the 2013 sale of our former Office and Consumer Products
and Designed and Engineered Solutions businesses.
(d)
Free cash flow refers to cash flow from continuing 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, plus (minus) free cash outflow (inflow) from
discontinued operations.
A-1
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended
Twelve Months Ended
Dec. 31, 2016
Jan. 02, 2016
Dec. 31, 2016
Jan. 02, 2016
Net sales
$
1,550.8
$
1,454.8
$
6,086.5
$
5,966.9
Cost of products sold
1,125.4
1,062.5
4,386.8
4,321.1
Gross profit
425.4
392.3
1,699.7
1,645.8
Marketing, general & administrative expense
279.8
266.3
1,097.5
1,108.1
Interest expense
14.5
15.2
59.9
60.5
Other expense, net(1)
4.8
19.3
65.2
68.3
Income from continuing operations before taxes
126.3
91.5
477.1
408.9
Provision for income taxes
64.3
35.0
156.4
134.5
Income from continuing operations
62.0
56.5
320.7
274.4
Income (loss) from discontinued operations
0.5
(0.1 )
Net income
$
62.0
$
57.0
$
320.7
$
274.3
Per share amounts:
Net income per common share, assuming dilution
Continuing operations
$
0.69
$
0.61
$
3.54
$
2.95
Discontinued operations
0.01
Net income per common share, assuming dilution
$
0.69
$
0.62
$
3.54
$
2.95
Weighted average number of common shares outstanding, assuming
90.1
92.5
90.7
92.9
dilution
(1)
"Other expense, net" for the fourth quarter of 2016 includes
severance and related costs of $4, asset impairment and lease
cancellation charges of $1.3, and transaction costs of $.9,
partially offset by gain on sale of assets of $1.4.
"Other expense, net" for the fourth quarter of 2015 includes
severance and related costs of $17.5, asset impairment and lease
cancellation charges of $1.5, and net loss from curtailment and
settlement of pension obligations of $.3.
"Other expense, net" for fiscal year 2016 includes severance and
related costs of $14.7, asset impairment and lease cancellation
charges of $5.2, loss from settlement of pension obligations of
$41.4, and transaction costs of $5, partially offset by net gain on
sales of assets of $1.1.
"Other expense, net" for fiscal year 2015 includes severance and
related costs of $52.5, asset impairment and lease cancellation
charges of $7, loss on sale of product line and related exit costs
of $10.5, and net loss from curtailment and settlement of pension
obligations of $.3, partially offset by gain on sale of asset of
$1.7 and legal settlements of $.3.
A-2
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(UNAUDITED)
ASSETS
Dec. 31, 2016
Jan. 02, 2016
Current assets:
Cash and cash equivalents
$
195.1
$
158.8
Trade accounts receivable, net
1,001.0
964.7
Inventories, net
519.1
478.7
Assets held for sale
6.8
2.5
Other current assets
182.8
170.7
Total current assets
1,904.8
1,775.4
Property, plant and equipment, net
915.2
847.9
Goodwill
793.6
686.2
Other intangibles resulting from business acquisitions, net
66.7
45.8
Non-current deferred income taxes
313.2
372.2
Other assets
402.9
406.2
$
4,396.4
$
4,133.7
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt and
$
579.1
$
95.3
capital leases
Accounts payable
841.9
814.6
Other current liabilities
583.3
549.2
Total current liabilities
2,004.3
1,459.1
Long-term debt and capital leases
713.4
963.6
Other long-term liabilities
753.2
745.3
Shareholders’ equity:
Common stock
124.1
124.1
Capital in excess of par value
852.0
834.0
Retained earnings
2,473.3
2,277.6
Treasury stock at cost
(1,772.0 )
(1,587.0 )
Accumulated other comprehensive loss
(751.9 )
(683.0 )
Total shareholders’ equity
925.5
965.7
$
4,396.4
$
4,133.7
A-3
AVERY DENNISON CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(UNAUDITED)
Twelve Months Ended
Dec. 31, 2016
Jan. 02, 2016
Operating Activities:
Net income
$
320.7
$
274.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
117.5
125.2
Amortization
62.6
63.1
Provision for doubtful accounts and sales returns
54.4
46.5
Net losses from asset impairments and sales/disposals of assets
1.5
12.2
Stock-based compensation
27.2
26.3
Loss from settlement of pension obligations
41.4
Other non-cash expense and loss
46.2
50.1
Changes in assets and liabilities and other adjustments
(86.2 )
(124.0 )
Net cash provided by operating activities
585.3
473.7
Investing Activities:
Purchases of property, plant and equipment
(176.9 )
(135.8 )
Purchases of software and other deferred charges
(29.7 )
(15.7 )
Proceeds from sales of property, plant and equipment
8.5
7.6
Purchases of investments, net
(0.1 )
(0.5 )
Payments for acquisitions and equity method investments, net of cash
(237.2 )
acquired
Other
1.5
Net cash used in investing activities
(435.4 )
(142.9 )
Financing Activities:
Net increase (decrease) in borrowings (maturities of 3 months or
234.9
(98.4 )
less)
Payments of debt (maturities greater than 3 months)
(2.7 )
(7.4 )
Dividends paid
(142.5 )
(133.1 )
Share repurchases
(262.4 )
(232.3 )
Proceeds from exercises of stock options, net
71.0
104.0
Other
(4.5 )
(0.1 )
Net cash used in financing activities
(106.2 )
(367.3 )
Effect of foreign currency translation on cash balances
(7.4 )
(11.9 )
Increase (decrease) in cash and cash equivalents
36.3
(48.4 )
Cash and cash equivalents, beginning of year
158.8
207.2
Cash and cash equivalents, end of year
$
195.1
$
158.8
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:
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. 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. We
believe that organic sales change assists investors in evaluating
the sales growth from the ongoing activities of our businesses and
provides greater ability to evaluate our results from period to
period.
Adjusted operating margin refers to income from continuing
operations before interest expense and taxes, excluding
restructuring charges and other items, as a percentage of sales.
Adjusted income from continuing operations refers to reported
income from continuing operations tax-effected at the full year tax
rate, and adjusted for tax-effected restructuring charges and other
items.
Adjusted EPS refers to reported income from continuing
operations per common share, assuming dilution, tax-effected at the
full year tax rate, and adjusted for tax-effected restructuring
charges and other items.
We believe that adjusted operating margin, adjusted income from
continuing operations, 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, plus (minus) free cash outflow (inflow) from
discontinued operations. 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.
A-5
AVERY DENNISON CORPORATION
PRELIMINARY RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL
MEASURES
(In millions, except % and per share amounts)
(UNAUDITED)
Three Months Ended
Twelve Months Ended
Dec. 31, 2016
Jan. 02, 2016
Dec. 31, 2016
Jan. 02, 2016
Reconciliation from GAAP to Non-GAAP Operating Margins:
Net sales
$
1,550.8
$
1,454.8
$
6,086.5
$
5,966.9
Income from continuing operations before taxes
$
126.3
$
91.5
$
477.1
$
408.9
Income from continuing operations before taxes as a percentage of
8.1 %
6.3 %
7.8 %
6.9 %
sales
Adjustment:
Interest expense
$
14.5
$
15.2
$
59.9
$
60.5
Operating income from continuing operations before interest expense
$
140.8
$
106.7
$
537.0
$
469.4
and taxes
Operating Margins
9.1 %
7.3 %
8.8 %
7.9 %
As reported income from continuing operations before taxes
$
126.3
$
91.5
$
477.1
$
408.9
Adjustments(1)
N/A
N/A
N/A
(1.0 )
Previously reported income from continuing operations before taxes
N/A
N/A
N/A
407.9
Adjustments:
Restructuring charges:
Severance and related costs
4.0
17.5
14.7
52.5
Asset impairment and lease cancellation charges
1.3
1.5
5.2
7.0
Loss from settlement and curtailment of pension obligations
0.3
41.4
0.3
Other items(2)
(0.5 )
3.9
8.5
Interest expense
14.5
15.2
59.9
60.5
Adjusted operating income from continuing operations before interest
$
145.6
$
126.0
$
602.2
$
536.7
expense and taxes (non-GAAP)
Adjusted Operating Margins (non-GAAP)
9.4 %
8.7 %
9.9 %
9.0 %
Reconciliation from GAAP to Non-GAAP Income from Continuing
Operations:
As reported income from continuing operations
$
62.0
$
56.5
$
320.7
$
274.4
Adjustments(1)
N/A
N/A
N/A
(0.6 )
Previously reported income from continuing operations
N/A
N/A
N/A
273.8
Adjustments:
Restructuring charges
5.3
19.0
19.9
59.5
Loss from settlement and curtailment of pension obligations
0.3
41.4
0.3
Other items(2)
(0.5 )
3.9
8.5
Tax effect of pre-tax adjustments
22.2
2.5
(21.4 )
(22.6 )
Adjusted Income from Continuing Operations (non-GAAP)
$
89.0
$
78.3
$
364.5
$
319.5
A-5
(continued)
AVERY DENNISON CORPORATION
PRELIMINARY RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL
MEASURES
(In millions, except % and per share amounts)
(UNAUDITED)
Three Months Ended
Twelve Months Ended
Dec. 31, 2016
Jan. 02, 2016
Dec. 31, 2016
Jan. 02, 2016
Reconciliation from GAAP to Non-GAAP Income per Common Share from
Continuing Operations:
As reported income per common share from continuing operations,
$
0.69
$
0.61
$
3.54
$
2.95
assuming dilution
Adjustments(1)
N/A
N/A
N/A
Previously reported income per common share from continuing
N/A
N/A
N/A
2.95
operations, assuming dilution
Adjustments per common share, net of tax:
Restructuring charges, loss from settlement and curtailment of
0.30
0.24
0.48
0.49
pension obligations, and other items(2)
Adjusted Income per Common Share from Continuing Operations,
$
0.99
$
0.85
$
4.02
$
3.44
assuming dilution (non-GAAP)
Weighted average number of common shares outstanding, assuming
90.1
92.5
90.7
92.9
dilution
(1)
GAAP adjustment for 2015 reflects the previously disclosed impact
of the third quarter of 2015 revision to certain benefit plan
balances, which had an immaterial impact to the non-GAAP amounts.
(2)
Includes transaction costs, loss on sale of product line and
related exit costs, gain/loss on sales of assets, and legal
settlements.
(UNAUDITED)
Three Months Ended
Twelve Months Ended
Dec. 31, 2016
Jan. 02, 2016
Dec. 31, 2016
Jan. 02, 2016
Reconciliation of Free Cash Flow:
Net cash provided by operating activities
$
219.6
$
191.5
$
585.3
$
473.7
Purchases of property, plant and equipment
(72.0 )
(46.2 )
(176.9 )
(135.8 )
Purchases of software and other deferred charges
(13.1 )
(6.7 )
(29.7 )
(15.7 )
Proceeds from sales of property, plant and equipment
4.2
0.5
8.5
7.6
Sales (purchases) of investments, net
0.7
(0.3 )
(0.1 )
(0.5 )
Plus: free cash (inflow) outflow from discontinued operations
(0.5 )
0.1
Free Cash Flow - Continuing Operations (non-GAAP)
$
139.4
$
138.3
$
387.1
$
329.4
A-6
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions, except %)
(UNAUDITED)
Fourth Quarter Ended
NET SALES
OPERATING INCOME
OPERATING MARGINS
2016
2015
2016 (1)
2015 (2)
2016
2015
Label and Graphic Materials
$ 1,063.8
$
970.6
$
120.6
$
102.5
11.3 %
10.6 %
Retail Branding and Information Solutions
375.9
363.2
34.8
11.8
9.3 %
3.2 %
Industrial and Healthcare Materials
111.1
121.0
9.8
15.0
8.8 %
12.4 %
Corporate Expense
N/A
N/A
(24.4 )
(22.6 )
N/A
N/A
TOTAL FROM CONTINUING OPERATIONS
$ 1,550.8
$ 1,454.8
$
140.8
$
106.7
9.1 %
7.3 %
(1) Operating income for the fourth quarter of 2016
includes severance and related costs of $4, asset impairment and
lease cancellation charges of $1.3, and transaction costs of $.9,
partially offset by gain on sale of assets of $1.4. Of the total
$4.8, the Label and Graphic Materials segment recorded $2, the
Retail Branding and Information Solutions segment recorded $2.7, the
Industrial and Healthcare Materials segment recorded $1, and
Corporate recorded ($.9).
(2) Operating income for the fourth quarter of 2015
includes severance and related costs of $17.5, asset impairment and
lease cancellation charges of $1.5, and net loss from curtailment
and settlement of pension obligations of $.3. Of the total $19.3,
the Label and Graphic Materials segment recorded $2.3, the Retail
Branding and Information Solutions segment recorded $16.4, the
Industrial and Healthcare Materials segment recorded $.5, and
Corporate recorded $.1.
Previously reported segment results have been reclassified to
reflect our new operating structure.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Fourth Quarter Ended
OPERATING INCOME
OPERATING MARGINS
2016
2015
2016
2015
Label and Graphic Materials
Operating income and margins, as reported
$
120.6
$
102.5
11.3 %
10.6 %
Adjustments:
Restructuring charges:
Severance and related costs
1.0
1.5
0.1 %
0.1 %
Asset impairment charges
0.2
0.6
0.1 %
Transaction costs
0.8
0.1 %
Net loss from curtailment and settlement of pension obligations
0.2
Adjusted operating income and margins (non-GAAP)
$
122.6
$
104.8
11.5 %
10.8 %
Retail Branding and Information Solutions
Operating income and margins, as reported
$
34.8
$
11.8
9.3 %
3.2 %
Adjustments:
Restructuring charges:
Severance and related costs
3.0
15.5
0.8 %
4.3 %
Asset impairment and lease cancellation charges
1.1
0.9
0.3 %
0.3 %
Gain on sale of assets
(1.4 )
(0.4 %)
Adjusted operating income and margins (non-GAAP)
$
37.5
$
28.2
10.0 %
7.8 %
Industrial and Healthcare Materials
Operating income and margins, as reported
$
9.8
$
15.0
8.8 %
12.4 %
Adjustments:
Restructuring charges:
Severance and related costs
0.5
0.4 %
Transaction costs
1.0
0.9 %
Adjusted operating income and margins (non-GAAP)
$
10.8
$
15.5
9.7 %
12.8 %
A-7
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions, except %)
(UNAUDITED)
Twelve Months Year-to-Date
NET SALES
OPERATING INCOME
OPERATING MARGINS
2016
2015
2016 (1)
2015 (2)
2016
2015
Label and Graphic Materials
$ 4,187.3
$ 4,032.1
$
516.2
$
453.4
12.3 %
11.2 %
Retail Branding and Information Solutions
1,445.4
1,443.4
102.6
51.6
7.1 %
3.6 %
Industrial and Healthcare Materials
453.8
491.4
54.6
57.1
12.0 %
11.6 %
Corporate Expense
N/A
N/A
(136.4 )
(92.7 )
N/A
N/A
TOTAL FROM CONTINUING OPERATIONS
$ 6,086.5
$ 5,966.9
$
537.0
$
469.4
8.8 %
7.9 %
(1) Operating income for fiscal year 2016 includes
severance and related costs of $14.7, asset impairment and lease
cancellation charges of $5.2, loss from settlement of pension
obligations of $41.4, and transaction costs of $5, partially offset
by net gain on sales of assets of $1.1. Of the total $65.2, the
Label and Graphic Materials segment recorded $13, the Retail
Branding and Information Solutions segment recorded $9.8, the
Industrial and Healthcare Materials segment recorded $1.9, and
Corporate recorded $40.5.
(2) Operating income for fiscal year 2015 includes
severance and related costs of $52.5, asset impairment and lease
cancellation charges of $7, loss on sale of product line and related
exit costs of $10.5, and net loss from curtailment and settlement of
pension obligations of $.3, partially offset by gain on sale of
asset of $1.7 and legal settlements of $.3. Of the total $68.3, the
Label and Graphic Materials segment recorded $12.1, the Retail
Branding and Information Solutions segment recorded $45.7, the
Industrial and Healthcare Materials segment recorded $8, and
Corporate recorded $2.5.
Previously reported segment results have been reclassified to
reflect our new operating structure.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Twelve Months Year-to-Date
OPERATING INCOME
OPERATING MARGINS
2016
2015
2016
2015
Label and Graphic Materials
Operating income and margins, as reported
$
516.2
$
453.4
12.3 %
11.2 %
Adjustments:
Restructuring charges:
Severance and related costs
5.8
12.8
0.1 %
0.3 %
Asset impairment charges
2.7
0.8
0.1 %
Transaction costs
4.5
0.1 %
Gain on sale of asset
(1.7 )
Net loss from curtailment and settlement of pension obligations
0.2
Adjusted operating income and margins (non-GAAP)
$
529.2
$
465.5
12.6 %
11.5 %
Retail Branding and Information Solutions
Operating income and margins, as reported
$
102.6
$
51.6
7.1 %
3.6 %
Adjustments:
Restructuring charges:
Severance and related costs
8.4
34.1
0.6 %
2.3 %
Asset impairment and lease cancellation charges
2.1
1.6
0.2 %
0.1 %
Net gain on sales of assets
(1.1 )
(0.1 %)
Loss on sale of product line and related transaction and exit costs
0.4
10.5
0.7 %
Legal settlement
(0.5 )
Adjusted operating income and margins (non-GAAP)
$
112.4
$
97.3
7.8 %
6.7 %
Industrial and Healthcare Materials
Operating income and margins, as reported
$
54.6
$
57.1
12.0 %
11.6 %
Adjustments:
Restructuring charges:
Severance and related costs
0.5
3.4
0.1 %
0.7 %
Asset impairment charges
0.4
4.6
0.1 %
0.9 %
Transaction costs
1.0
0.3 %
Adjusted operating income and margins (non-GAAP)
$
56.5
$
65.1
12.5 %
13.2 %
A-8
AVERY DENNISON CORPORATION
PRELIMINARY SUPPLEMENTARY INFORMATION
(UNAUDITED)
Fourth Quarter 2016
Total
Label and
Retail Branding
Industrial and
Company
Graphic Materials
and Information
Healthcare
Solutions
Materials
Reconciliation of GAAP to Non-GAAP sales change
Reported sales change
7 %
10 %
3 %
(8 %)
Foreign currency translation
1 %
1 %
1 %
1 %
Acquisitions/divestitures
(3 %)
(3 %)
(3 %)
Organic sales change (non-GAAP)(1)
5 %
7 %
5 %
(10 %)
Full Year 2016
Total
Label and
Retail Branding
Industrial and
Company
Graphic Materials
and Information
Healthcare
Solutions
Materials
Reconciliation of GAAP to Non-GAAP sales change
Reported sales change
2 %
4 %
(8 %)
Foreign currency translation
3 %
3 %
2 %
2 %
Acquisitions/divestitures
(1 %)
(1 %)
2 %
(2 %)
Organic sales change (non-GAAP)(1)
4 %
5 %
3 %
(8 %)
(1) Totals may not sum due to rounding.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170201005460r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170201005460/en/

SOURCE: Avery Dennison Corporation

Avery Dennison Corporation
Media Relations:
Rob Six, 626-304-2361
rob.six@averydennison.com
or
Investor Relations:
Garrett Gabel, 626-304-2399
investorcom@averydennison.com