• 2Q14 Reported EPS (including discontinued operations) of $0.44
  • Adjusted EPS (non-GAAP, continuing operations) of $0.80
• 2Q14 Net sales grew approximately 4 percent on reported and organic basis to $1.62 billion
• Returned $214 million of cash to shareholders in the first half, including the repurchase of 3.1 million shares for $153 million
• Expecting 2014 growth in adjusted EPS (non-GAAP, continuing operations) of 12 percent to 16 percent

GLENDALE, Calif. -- (Business Wire)

Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its second quarter ended June 28, 2014. All non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, the discussion of the company’s results is focused on its continuing operations, and comparisons are to the same period in the prior year.

“Second quarter results were in line with our overall expectations for both sales and earnings,” said Dean Scarborough, Avery Dennison chairman, president and CEO.

“Pressure-sensitive Materials delivered better-than-expected sales growth, driven by strong volume growth in Europe and the emerging markets. Adjusted operating margin was back above 10 percent, within our long-term target range, and we are on track with our consolidation of operations in Europe,” Scarborough added. “While sales were down modestly for Retail Branding and Information Solutions, reflecting soft market conditions in the U.S., the RBIS team continued to make solid progress against its long-term margin improvement goal, and reported another quarter of strong earnings growth.

“I want to thank all our employees for their outstanding contributions to innovation, service excellence, and productivity improvement,” said Scarborough. “With two solid quarters under our belt, we have narrowed our range of guidance for full-year adjusted earnings per share growth to 12 to 16 percent. We look forward to continuing to deliver exceptional value for our customers, employees, and shareholders.”

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 2014 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 2014 Results by Segment

All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, product line exits, acquisitions and divestitures, and, where applicable, the extra week in the fiscal year. Adjusted operating margin refers to income before interest expense and taxes, excluding restructuring costs and other items, as a percentage of sales.

Pressure-sensitive Materials (PSM)

• PSM segment sales increased approximately 6 percent. Within the segment, Label and Packaging Materials sales increased mid-single digits. Combined sales for Graphics, Reflective, and Performance Tapes increased low double digits.
• Operating margin declined 320 basis points to 7.3 percent primarily due to higher restructuring costs. Adjusted operating margin declined 60 basis points as higher employee-related expenses and the impact of changes in product mix more than offset the benefit of higher volume and productivity initiatives. Transition costs related to the restructuring actions in Europe impacted results by 25 basis points in the quarter.

Retail Branding and Information Solutions (RBIS)

• RBIS segment sales decreased approximately 1 percent, with increased demand from Europe-based retailers and brands more than offset by decreased demand from U.S.-based retailers and brands.
• Operating margin increased 120 basis points to 6.8 percent as the benefit of productivity initiatives more than offset higher employee-related expenses and the impact of lower volume. Adjusted operating margin improved 110 basis points.

Other

Share Repurchases

The company repurchased 3.1 million shares in the first half of 2014 at an aggregate cost of $153 million.

Discontinued Operations

On July 1, 2013, the company completed the sale of its OCP and DES businesses.

Income Taxes

The effective tax rates for the second quarter and year-to-date were 42 percent and 30 percent, respectively. The adjusted tax rate for both the second quarter and year-to-date was 33 percent.

Cost Reduction Actions

In the second quarter, the company realized approximately $10 million in savings from restructuring, net of transition costs related to the consolidation of PSM operations in Europe, and incurred restructuring costs of approximately $40 million. The company expects to incur cash restructuring costs of approximately $50 million in 2014.

Outlook

In its supplemental presentation materials, “Second Quarter 2014 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2014 financial results. Based on the factors listed and other assumptions, the company expects 2014 earnings per share from continuing operations of $2.65 to $2.75. Excluding an estimated $0.35 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $3.00 to $3.10.

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 (NYSE:AVY) is a global leader in labeling and packaging materials and solutions. The company’s applications and technologies are an integral part of products used in every major market and industry. With operations in more than 50 countries and 26,000 employees worldwide, Avery Dennison serves customers with insights and innovations that help make brands more inspiring and the world more intelligent. Headquartered in Glendale, California, the company reported sales from continuing operations of $6.1 billion in 2013. 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; the financial condition and inventory strategies of customers; changes in customer order patterns; worldwide and local economic conditions; fluctuations in cost and availability of raw materials; our ability to generate sustained productivity improvement; our ability to achieve and sustain targeted cost reductions; impact of competitive products and pricing; loss of significant contracts or customers; collection of receivables from customers; selling prices; business mix shift; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; outcome of tax audits; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; fluctuations in currency exchange rates and other risks associated with foreign operations; 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; 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; fluctuations in pension, insurance, and employee benefit costs; impact of legal and regulatory proceedings, including with respect to environmental, health and safety; changes in governmental laws and regulations; changes in political conditions; 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 impact of economic conditions on underlying demand for our products; (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 2013 Form 10-K, filed on February 26, 2014 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.

Contacts:

Avery Dennison Corporation
Media Relations:
David Frail, 626-304-2014
David.Frail@averydennison.com
or
Investor Relations:
Eric M. Leeds, 626-304-2029
investorcom@averydennison.com

Source: Avery Dennison Corporation