-
1Q17 Reported EPS of $1.25
-
Adjusted EPS (non-GAAP) of $1.11
-
1Q17 Net sales increased ~6% to $1.57 billion
-
Organic sales growth (non-GAAP) of ~4%
-
Raised FY17 guidance midpoint for Reported EPS by $0.08
-
Raised FY17 guidance midpoint for Adjusted EPS (non-GAAP) by $0.18
GLENDALE, Calif. -- (Business Wire)
Avery Dennison Corporation (NYSE:AVY) today announced preliminary,
unaudited results for its first quarter ended April 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 are off to a strong start to the year, with solid top-line
performance and double-digit earnings growth,” said Mitch Butier, Avery
Dennison President and CEO. “Label and Graphic Materials delivered
another strong quarter; Retail Branding and Information Solutions
continues to drive volume growth and improved profitability; and, within
Industrial and Healthcare Materials, solid growth in industrial
categories mostly offset the anticipated decline in healthcare.
“Our consistent achievement of our financial targets, reflected in
another consecutive quarter of strong earnings growth and increase to
our guidance for the full year, reflects the resilience of our market
positions, depth of talent in the company, and strategic foundations
we’ve laid,” Butier added.
For more details on the company’s results, see the summary table
accompanying this news release, as well as the supplemental presentation
materials, “First 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.
First 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 7.6 percent; on an organic basis, sales grew
an estimated 4.9 percent. Sales on an organic basis increased
mid-single digits in Label and Packaging Materials and increased
low-single digits in the combined Graphics and Reflective Solutions
businesses.
-
Operating margin of 12.5 percent was flat to prior year as the
benefits of increased volume and productivity initiatives were offset
by unfavorable mix and higher employee costs. Adjusted operating
margin of 12.7 percent was flat to prior year.
Retail Branding and Information Solutions
-
Reported sales increased 2.0 percent; on an organic basis, sales grew
an estimated 2.9 percent.
-
Operating margin improved 130 basis points to 7.3 percent as the
benefits of productivity initiatives and increased volume were
partially offset by increased employee costs. Adjusted operating
margin improved 140 basis points to 8.3 percent.
Industrial and Healthcare Materials
-
Reported sales increased 2.0 percent; sales declined an estimated 1.3
percent on an organic basis. Sales in industrial categories increased
mid-single digits on an organic basis, mostly offsetting the
anticipated decline in healthcare categories.
-
Operating margin declined 270 basis points to 11.1 percent largely due
to the expected decline in sales for healthcare categories. Adjusted
operating margin declined 250 basis points to 11.5 percent.
-
The company expects the previously announced acquisition of Yongle
Tape to close in the middle of this year.
Other
Financing
In March, the company issued €500 million of 1.25% Senior Notes due
2025. The company used approximately €200 million of the net proceeds
from the offering to repay commercial paper borrowings that were used to
finance a portion of its acquisition of the European business of Mactac
in August 2016 and plans to use the remainder for general corporate
purposes, including other acquisitions.
Income Taxes
The first quarter effective tax rate was 17.4 percent, lower than prior
year due to the company’s adoption of Accounting Standards Update (ASU)
2016-09, Improvements to Employee Share-Based Payment Accounting,
which requires that all tax effects related to share-based payments at
settlement or expiration be recognized through the income statement. The
adjusted tax rate for the first quarter was 30 percent, consistent with
the company’s expectation for the full year tax rate.
Share Repurchases / Equity Dilution from Long-Term Incentives
The company repurchased 0.5 million shares in the first quarter of 2017
at an aggregate cost of $35 million. Net of dilution, including the
dilutive effect of the adoption of ASU 2016-09, the company’s share
count increased 0.6 million in the first quarter. The cost of
repurchases, net of proceeds from stock option exercises, was $18
million.
Cost Reduction Actions
In the first quarter, the company realized approximately $11 million in
pre-tax savings from restructuring, net of transition costs, and
incurred pre-tax restructuring charges of approximately $6 million, all
of which represent cash charges.
Outlook
In its supplemental presentation materials, “First 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 $4.20 to $4.35. Excluding an estimated
$0.30 per share for restructuring charges and other items, the company
now expects adjusted earnings per share (non-GAAP) of $4.50 to $4.65.
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 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. 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
|
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| |
| |
| |
| | |
| | First Quarter Financial Summary - Preliminary, unaudited | | | | | | | | | | |
| |
(In millions, except % and per share amounts)
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | 1Q | | 1Q | | % Change vs. P/Y | | | | | | | | | |
| | | | |
| 2017 |
| |
| 2016 |
| | Reported | | Organic (a) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | |
| |
Net sales, by segment:
| | | | | | | | | | | | | | | | | |
| | | |
Label and Graphic Materials
| $ | 1,089.6 | | | $ | 1,012.6 | | | 7.6 | % | |
4.9
|
%
| | | | | | | | | | |
| | | |
Retail Branding and Information Solutions
| | 366.8 | | | | 359.5 | | | 2.0 | % | |
2.9
|
%
| | | | | | | | | | |
| | | |
Industrial and Healthcare Materials
|
| 115.7 |
|
|
| 113.4 |
| | 2.0 | % | |
(1.3
|
%)
| | | | | | | | | | |
| |
Total net sales
| $ | 1,572.1 | | | $ | 1,485.5 | | | 5.8 | % | |
3.9
|
%
| | | | | | | | | | |
| | | | |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| | | | | As Reported (GAAP) | | Adjusted Non-GAAP (b) |
| | | | | 1Q | | 1Q | | % | | | % of Sales | | 1Q | | 1Q | | % | | | % 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
| $ | 135.8 | | | $ | 126.6 | | | | | 12.5 | % | 12.5 | % | |
$
|
138.0
| | |
$
|
128.7
| | | | |
12.7
|
%
|
12.7
|
%
|
| | | |
Retail Branding and Information Solutions
| | 26.6 | | | | 21.5 | | | | | 7.3 | % | 6.0 | % | | |
30.4
| | | |
24.7
| | | | |
8.3
|
%
|
6.9
|
%
|
| | | |
Industrial and Healthcare Materials
| | 12.8 | | | | 15.6 | | | | | 11.1 | % | 13.8 | % | | |
13.3
| | | |
15.9
| | | | |
11.5
|
%
|
14.0
|
%
|
| | | |
Corporate expense
|
| (22.6 | ) | |
| (24.9 | ) | | | | | | |
|
(22.6
|
)
| |
|
(24.9
|
)
| | | | | |
| |
Total operating income before
| | | | | | | | | | | | | | | | | |
| |
interest and taxes / operating margins
| $ | 152.6 | | | $ | 138.8 | | | 10 | % | | 9.7 | % | 9.3 | % | |
$
|
159.1
| | |
$
|
144.4
| | |
10
|
%
| |
10.1
|
%
|
9.7
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
| |
Interest expense
| $ | 16.7 | | | $ | 15.3 | | | | | | | |
$
|
16.7
| | |
$
|
15.3
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| |
Income before taxes
| $ | 135.9 | | | $ | 123.5 | | | 10 | % | | 8.6 | % | 8.3 | % | |
$
|
142.4
| | |
$
|
129.1
| | |
10
|
%
| |
9.1
|
%
|
8.7
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
| |
Provision for income taxes (c)
| $ | 23.7 | | | $ | 33.9 | | | | | | | |
$
|
42.7
| | |
$
|
43.9
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| |
Net income
| $ | 112.2 | | | $ | 89.6 | | | 25 | % | | 7.1 | % | 6.0 | % | |
$
|
99.7
| | |
$
|
85.2
| | |
17
|
%
| |
6.3
|
%
|
5.7
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
| |
Net income per common share, assuming dilution
| $ | 1.25 | | | $ | 0.98 | | | 28 | % | | | | |
$
|
1.11
| | |
$
|
0.94
| | |
18
|
%
| | | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| 2017 |
| |
| 2016 |
| | | | | |
| |
1Q Free Cash Flow (c) (d)
| | | | | | | | | |
$
|
(22.1
|
)
| |
$
|
(37.2
|
)
| | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | |
See accompanying schedules A-4 to A-7 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 transaction costs.
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| |
(c)
| |
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 of the ASU.
|
| | | | | | | | | | | | | | | | | | | | |
|
| | | |
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
this change.
|
| | | | | | | | | | | | | | | | | | | | |
|
| |
(d)
| |
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.
|
| | | |
|
A-1
|
AVERY DENNISON CORPORATION |
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(In millions, except per share amounts) |
|
| | |
| | | | |
| | | | | | | |
|
| | | | | | | |
|
| | | | | | (UNAUDITED) |
| | | | | | | |
|
| | | | | | Three Months Ended |
| | | | | |
|
| | | | | | Apr. 01, 2017 | | Apr. 02, 2016 |
|
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|
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|
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|
|
| | | | | | | |
|
Net sales
| | |
$
|
1,572.1
|
$
|
1,485.5
|
| | | | | | | |
|
Cost of products sold
| | | |
1,129.7
| |
1,062.9
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Gross profit
| | | |
442.4
| |
422.6
|
| | | | | | | |
|
Marketing, general & administrative expense
| | |
283.3
| |
278.2
|
| | | | | | | |
|
Interest expense
| | | |
16.7
| |
15.3
|
| | | | | | | |
|
Other expense, net(1) | | | |
6.5
| |
5.6
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Income before taxes
| | | |
135.9
| |
123.5
|
| | | | | | | |
|
Provision for income taxes(2) | | |
23.7
| |
33.9
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Net income | | |
$
|
112.2
|
$
|
89.6
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Per share amounts: | | | | | | |
| | | | | | | |
|
Net income per common share, assuming dilution
| |
$
|
1.25
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Weighted average number of common shares outstanding,
| | | | | |
|
|
assuming dilution
|
|
|
|
90.0
|
|
91.1
|
| | | | | | | |
|
| | | | | | | |
|
(1) | | |
"Other expense, net" for the first quarter of 2017 includes
severance and related costs of
| |
| | |
$5.7 and transaction costs of $.8.
| |
| | | | | | | |
|
| |
"Other expense, net" for the first quarter of 2016 includes
severance and related costs of $5.2 and asset impairment and lease
cancellation charges of $.4.
|
| | | | | | | |
|
| | | | | | | |
|
(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 of the ASU.
|
| | |
|
A-2
|
AVERY DENNISON CORPORATION |
| PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS |
(In millions) |
| | | | |
| | | |
|
| | |
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
| | | | | | |
| (UNAUDITED) |
| | | | | | | | | | | |
|
ASSETS | | | |
| | | Apr. 01, 2017 | |
| | Apr. 02, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Current assets:
| | | | | | | | | | |
|
Cash and cash equivalents
| | | | |
$
|
294.9
| | | |
$
|
169.6
| |
|
Trade accounts receivable, net
| | | | | |
1,099.5
| | | | |
1,019.1
| |
|
Inventories, net
| | | | | |
579.9
| | | | |
519.5
| |
|
Assets held for sale
| | | | | |
8.0
| | | | |
2.5
| |
|
Other current assets
| | | | | |
202.3
| | | | |
176.7
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | |
Total current assets
| | | |
2,184.6
| | | | |
1,887.4
| |
| | | | | | | | | | | |
|
Property, plant and equipment, net
| | | | | |
940.3
| | | | |
847.9
| |
Goodwill
| | | | | | |
826.4
| | | | |
695.1
| |
Other intangibles resulting from business acquisitions, net
| | | |
83.4
| | | | |
41.3
| |
Non-current deferred income taxes
| | | | | |
317.8
| | | | |
381.8
| |
Other assets
| | | | | |
413.4
| | | | |
395.9
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | |
$
|
4,765.9
| | | |
$
|
4,249.4
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Current liabilities:
| | | | | | | | | | |
|
Short-term borrowings and current portion of long-term debt and
capital leases
|
$
|
333.2
| | | |
$
|
264.9
| |
|
Accounts payable
| | | | | |
906.1
| | | | |
836.9
| |
|
Other current liabilities
| | | | | |
520.0
| | | | |
492.4
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | |
Total current liabilities
| | | |
1,759.3
| | | | |
1,594.2
| |
| | | | | | | | | | | |
|
Long-term debt and capital leases
| | | | | |
1,250.2
| | | | |
963.3
| |
Other long-term liabilities
| | | | | |
741.8
| | | | |
723.6
| |
Shareholders' equity:
| | | | | | | | | | |
|
Common stock
| | | | | |
124.1
| | | | |
124.1
| |
|
Capital in excess of par value
| | | | | |
839.2
| | | | |
828.7
| |
|
Retained earnings
| | | | | |
2,537.9
| | | | |
2,329.7
| |
|
Treasury stock at cost
| | | | | |
(1,774.1
|
)
| | | |
(1,653.0
|
)
|
|
Accumulated other comprehensive loss
| | | | |
(712.5
|
)
| | | |
(661.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | |
Total shareholders' equity
| | | |
1,014.6
| | | | |
968.3
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | |
$
|
4,765.9
| | | |
$
|
4,249.4
| |
| | | | | | | | | | | | | |
|
A-3
|
AVERY DENNISON CORPORATION |
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
|
| | | | | | | |
|
| | |
| | | | | | | | | | | |
|
| | | | | | | (UNAUDITED) |
| | | | | | |
|
| | | | | | | Three Months Ended |
| | | | | | | | | | | |
|
| | | | | |
| | Apr. 01, 2017 | |
| | Apr. 02, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
Operating Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Net income
| | | | |
$
|
112.2
| | | |
$
|
89.6
| |
| | | | | | | | | | | |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
| | | | | | |
| | | | | | | | | | | |
|
|
Depreciation
| | | | | |
28.8
| | | | |
29.0
| |
| | | | | | | | | | | |
|
|
Amortization
| | | | | |
15.8
| | | | |
15.3
| |
| | | | | | | | | | | |
|
|
Provision for doubtful accounts and sales returns
| | |
11.5
| | | | |
11.2
| |
| | | | | | | | | | | |
|
|
Net losses from asset impairments and sales/disposals of assets
| |
0.7
| | | | |
0.6
| |
| | | | | | | | | | | |
|
|
Stock-based compensation
| | | |
5.6
| | | | |
7.5
| |
| | | | | | | | | | | |
|
|
Other non-cash expense and loss
| | | |
15.2
| | | | |
12.8
| |
| | | | | | | | | | | |
|
Changes in assets and liabilities and other adjustments
| |
(174.5
|
)
| | | |
(172.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash provided by (used in) operating activities
| | |
15.3
| | | | |
(6.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Investing Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Purchases of property, plant and equipment
| | |
(30.3
|
)
| | | |
(25.2
|
)
|
| | | | | | | | | | | |
|
Purchases of software and other deferred charges
| | |
(6.9
|
)
| | | |
(2.0
|
)
|
| | | | | | | | | | | |
|
Proceeds from sales of property, plant and equipment
| | |
---
| | | | |
0.1
| |
| | | | | | | | | | | |
|
Purchases of investments, net
| | | |
(0.2
|
)
| | | |
(3.8
|
)
|
| | | | | | | | | | | |
|
Payments for acquisitions, net of cash acquired, and investments in
businesses
| |
(74.6
|
)
| | | |
---
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash used in investing activities
| | | |
(112.0
|
)
| | | |
(30.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Financing Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Net (decrease) increase in borrowings (maturities of three months or
less)
| |
(256.8
|
)
| | | |
169.4
| |
| | | | | | | | | | | |
|
Additional borrowings (maturities greater than three months)
| |
526.7
| | | | |
---
| |
| | | | | | | | | | | |
|
Repayments of debt (maturities greater than three months)
| |
(0.8
|
)
| | | |
(0.5
|
)
|
| | | | | | | | | | | |
|
Dividends paid
| | | | | |
(36.4
|
)
| | | |
(33.0
|
)
|
| | | | | | | | | | | |
|
Share repurchases
| | | | | |
(34.6
|
)
| | | |
(95.6
|
)
|
| | | | | | | | | | | |
|
Proceeds from exercises of stock options, net
| | |
16.4
| | | | |
16.0
| |
| | | | | | | | | | | |
|
Tax withholding for and excess tax benefit from stock-based
compensation, net
| |
(19.8
|
)
| | | |
(9.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash provided by financing activities
| | | |
194.7
| | | | |
47.1
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Effect of foreign currency translation on cash balances
| |
1.8
| | | | |
0.9
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Increase in cash and cash equivalents
| | | |
99.8
| | | | |
10.8
| |
| | | | | | | | | | | |
|
Cash and cash equivalents, beginning of year
| | |
195.1
| | | | |
158.8
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Cash and cash equivalents, end of period
| | |
$
|
294.9
| | | |
$
|
169.6
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
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.
|
|
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.
|
|
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 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.
|
|
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 |
| | | | | | | |
|
| | | | | | Apr. 01, 2017 | | Apr. 02, 2016 |
|
|
|
|
|
|
|
|
|
Reconciliation from GAAP to Non-GAAP Operating Margins: | | | | |
| | | | | | | |
|
Net sales
| |
$
|
1,572.1
| |
$
|
1,485.5
| |
| | | | | |
|
|
|
| | | | | | | |
|
Income before taxes
|
$
|
135.9
| |
$
|
123.5
| |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Income before taxes as a percentage of sales
| | 8.6 | % | | 8.3 | % |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
|
Adjustment:
| | | | |
| | | | | | | |
|
|
Interest expense
|
$
|
16.7
| |
$
|
15.3
| |
| | | | | |
|
|
|
| | | | | | | |
|
Operating income before interest expense and taxes
|
$
|
152.6
| |
$
|
138.8
| |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Operating Margins | | 9.7 | % | | 9.3 | % |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
| | | | | | | |
|
Income before taxes
|
$
|
135.9
| |
$
|
123.5
| |
| | | | | | | |
|
|
Adjustments:
| | | | |
| | | | | | | |
|
|
Restructuring charges:
| | | | |
| | | | | | | |
|
| | |
Severance and related costs
| |
5.7
| | |
5.2
| |
| | | | | | | |
|
| | |
Asset impairment and lease cancellation charges
| |
---
| | |
0.4
| |
| | | | | | | |
|
|
Transaction costs
| |
0.8
| | |
---
| |
| | | | | | | |
|
|
Interest expense
| |
16.7
| | |
15.3
| |
| | | | | |
|
|
|
| | | | | | | |
|
Adjusted operating income before interest expense and taxes
(non-GAAP)
|
$
|
159.1
| |
$
|
144.4
| |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Adjusted Operating Margins (non-GAAP)
| |
10.1
|
%
| |
9.7
|
%
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
| | | | | | | |
|
| | | | | | | |
|
Reconciliation from GAAP to Non-GAAP Net Income: | | | | |
| | | | | | | |
|
As reported net income
|
$
|
112.2
| |
$
|
89.6
| |
| | | | | | | |
|
|
Adjustments:
| | | | |
| | | | | | | |
|
| |
Restructuring charges
| |
5.7
| | |
5.6
| |
| |
Transaction costs
| |
0.8
| | |
---
| |
| |
Tax effect of pre-tax adjustments and impact of adjusted tax rate(1) | |
(19.0
|
)
| |
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Adjusted Net Income (non-GAAP)
|
$
|
99.7
| |
$
|
85.2
| |
| | | | | |
|
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 |
| | | | | | | |
|
| | | | | Apr. 01, 2017 | | | Apr. 02, 2016 |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Reconciliation from GAAP to Non-GAAP Net Income per Common Share: | | | | | |
| | | | | | | |
|
As reported net income per common share, assuming dilution
|
$
|
1.25
| | |
$
|
0.98
| |
| | | | | | | |
|
|
Adjustments per common share, net of tax:
| | | | | |
| | | | | | | |
|
| |
Restructuring charges and transaction costs(1) | |
(0.14
|
)
| | |
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
| | | | | | | |
|
Adjusted Net Income per Common Share, assuming dilution (non-GAAP)
|
$
|
1.11
| | |
$
|
0.94
| |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Weighted average number of common shares outstanding, assuming
dilution
| |
90.0
| | | |
91.1
| |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
| | | | | | | |
|
(1) |
|
The adjusted tax rate was 30% and 34% for the three months ended
Apr. 01, 2017 and Apr. 02, 2016, respectively.
| | | |
| | | | | | | |
|
| | | | | | | |
|
| | | | | (UNAUDITED) |
| | | | | | | |
|
| | | | | Three Months Ended |
| | | | | | | |
|
| | | | | Apr. 01, 2017 | | | Apr. 02, 2016 |
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
Reconciliation of Free Cash Flow: | | | | | |
| | | | | | | |
|
Net cash provided by (used in) operating activities
|
$
|
15.3
| | |
$
|
(6.3
|
)
|
| | | | | | | |
|
Purchases of property, plant and equipment
| |
(30.3
|
)
| | |
(25.2
|
)
|
| | | | | | | |
|
Purchases of software and other deferred charges
| |
(6.9
|
)
| | |
(2.0
|
)
|
| | | | | | | |
|
Proceeds from sales of property, plant and equipment
| |
---
| | | |
0.1
| |
| | | | | | | |
|
Purchases of investments, net
| |
(0.2
|
)
| | |
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
Free Cash Flow (non-GAAP)
|
$
|
(22.1
|
)
|
|
$
|
(37.2
|
)
|
| | | | | | |
|
A-6
|
AVERY DENNISON CORPORATION |
PRELIMINARY SUPPLEMENTARY INFORMATION |
(In millions, except %) |
(UNAUDITED) |
|
| | |
| | |
| | |
| | First Quarter Ended |
| | | | | | | | |
|
| |
NET SALES
| |
OPERATING INCOME
| |
OPERATING MARGINS
|
| |
|
2017
|
|
2016
| |
|
2017 (1) |
|
|
2016 (2) |
| |
2017
|
|
2016
|
|
| | | | | | | | |
|
Label and Graphic Materials
| |
$
|
1,089.6
|
$
|
1,012.6
| |
$
|
135.8
| |
$
|
126.6
| | |
12.5
|
%
|
12.5
|
%
|
Retail Branding and Information Solutions
| | |
366.8
| |
359.5
| | |
26.6
| | |
21.5
| | |
7.3
|
%
|
6.0
|
%
|
Industrial and Healthcare Materials
| | |
115.7
| |
113.4
| | |
12.8
| | |
15.6
| | |
11.1
|
%
|
13.8
|
%
|
Corporate Expense
| |
|
N/A
|
|
N/A
| |
|
(22.6
|
)
|
|
(24.9
|
)
| |
N/A
|
|
N/A
|
|
| | | | | | | | |
|
TOTAL FROM OPERATIONS
| |
$
|
1,572.1
|
$
|
1,485.5
| |
$
|
152.6
|
|
$
|
138.8
|
| |
9.7
|
%
|
9.3
|
%
|
| | | | | | | | |
|
(1) Operating income for the first quarter of
2017 includes severance and related costs of $5.7 and transaction
costs of $.8. Of the total $6.5, the Label and Graphic Materials
segment recorded $2.2, the Retail Branding and Information
Solutions segment recorded $3.8, and the Industrial and Healthcare
Materials segment recorded $.5.
|
| | | | | | | | |
|
(2) Operating income for the first quarter of
2016 includes severance and related costs of $5.2 and asset
impairment and lease cancellation charges of $.4. Of the total
$5.6, the Label and Graphic Materials segment recorded $2.1, the
Retail Branding and Information Solutions segment recorded $3.2,
and the Industrial and Healthcare Materials segment recorded $.3.
|
| | | | | | | | |
|
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION |
| | | | | | | | |
|
| | | | | First Quarter Ended |
| | | | |
OPERATING INCOME
|
|
OPERATING MARGINS
|
| | | | | | | | |
|
| | | | |
|
2017
|
|
|
2016
|
| |
2017
|
|
2016
|
|
Label and Graphic Materials | | | | | | | | | |
Operating income and margins, as reported
| | | | |
$
|
135.8
| |
$
|
126.6
| | |
12.5
|
%
|
12.5
|
%
|
Adjustments:
| | | | | | | | | |
Restructuring charges:
| | | | | | | | | |
Severance and related costs
| | | | | |
2.0
| | |
2.1
| | |
0.2
|
%
|
0.2
|
%
|
Transaction costs
| | | | |
|
0.2
|
|
|
---
|
| |
---
|
|
---
|
|
Adjusted operating income and margins (non-GAAP)
| | | | |
$
|
138.0
|
|
$
|
128.7
|
| |
12.7
|
%
|
12.7
|
%
|
| | | | | | | | |
|
Retail Branding and Information Solutions | | | | | | | | | |
Operating income and margins, as reported
| | | | |
$
|
26.6
| |
$
|
21.5
| | |
7.3
|
%
|
6.0
|
%
|
Adjustments:
| | | | | | | | | |
Restructuring charges:
| | | | | | | | | |
Severance and related costs
| | | | | |
3.5
| | |
2.8
| | |
0.9
|
%
|
0.8
|
%
|
Asset impairment and lease cancellation charges
| | | | | |
---
| | |
0.4
| | |
---
| |
0.1
|
%
|
Transaction costs
| | | | |
|
0.3
|
|
|
---
|
| |
0.1
|
%
|
---
|
|
Adjusted operating income and margins (non-GAAP)
| | | | |
$
|
30.4
|
|
$
|
24.7
|
| |
8.3
|
%
|
6.9
|
%
|
| | | | | | | | |
|
Industrial and Healthcare Materials | | | | | | | | | |
Operating income and margins, as reported
| | | | |
$
|
12.8
| |
$
|
15.6
| | |
11.1
|
%
|
13.8
|
%
|
Adjustments:
| | | | | | | | | |
Restructuring charges:
| | | | | | | | | |
Severance and related costs
| | | | | |
0.2
| | |
0.3
| | |
0.2
|
%
|
0.2
|
%
|
Transaction costs
| | | | |
|
0.3
|
|
|
---
|
| |
0.2
|
%
|
---
|
|
Adjusted operating income and margins (non-GAAP)
| | | | |
$
|
13.3
|
|
$
|
15.9
|
| |
11.5
|
%
|
14.0
|
%
|
| | | | | | | | | | | | | | |
|
A-7
|
AVERY DENNISON CORPORATION |
PRELIMINARY SUPPLEMENTARY INFORMATION |
(UNAUDITED) |
| |
|
| |
|
| |
|
| |
| First Quarter 2017 |
|
Total Company
|
|
|
Label and Graphic Materials
|
|
|
Retail Branding and Information Solutions
|
|
|
Industrial and Healthcare Materials
|
Reconciliation of GAAP to Non-GAAP sales change | | | | | | | | | | |
Reported sales change
|
5.8
|
%
| | |
7.6
|
%
| | |
2.0
|
%
| | |
2.0
|
%
|
Foreign currency translation
|
1.1
|
%
|
|
|
1.1
|
%
|
|
|
0.9
|
%
|
|
|
1.7
|
%
|
Sales change (ex. currency) (non-GAAP)(1) |
6.9
|
%
| | |
8.7
|
%
| | |
2.9
|
%
| | |
3.8
|
%
|
Acquisitions
|
(3.0
|
%)
|
|
|
(3.8
|
%)
|
|
|
---
|
|
|
|
(5.0
|
%)
|
| | | | | | | | | |
|
Organic sales change (non-GAAP)(1) |
3.9
|
%
|
|
|
4.9
|
%
|
|
|
2.9
|
%
|
|
|
(1.3
|
%)
|
|
|
(1)Totals may not sum due to rounding.
| | | | | | | | | | |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170426005448/en/
Contacts:
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
Source: Avery Dennison Corporation
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