-
1Q16 Reported EPS of $0.98
-
Adjusted EPS (non-GAAP) of $0.94
-
1Q16 Net sales declined approx. 3 percent to $1.49 billion
-
Sales increased approx. 4 percent on organic basis
-
Repurchased 1.5 million shares (0.8 mil. net of dilution) and paid $33
million in dividends
-
Increased midpoint of guidance range for FY16 Reported and Adjusted
(non-GAAP) EPS by $0.08
GLENDALE, Calif. -- (Business Wire)
Avery Dennison Corporation (NYSE:AVY) today announced preliminary,
unaudited results for its first quarter ended April 2, 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 period in the prior year.
“We’re off to a very good start to the year,” said Dean Scarborough,
Avery Dennison chairman and CEO. “Both of our core businesses delivered
solid organic sales growth and significant margin expansion, driving
mid-teens growth in adjusted EPS, above our expectations for the quarter.
“Our consistently strong performance is testament to the strategic
foundations we have laid, as well as the strength and depth of our
leadership team. I am happy to say that the leadership transition we
have had underway has been seamless, and I hand off my CEO duties to
Mitch with complete confidence,” Scarborough added.
“I am really proud to have been a part of making Avery Dennison the
leading company that it is today, and am as excited about the company’s
future as I was when I joined more than thirty years ago,” said
Scarborough.
“I look forward to working with our board and leadership team to
continue building on our solid foundation," said Mitch Butier, Avery
Dennison president and chief operating officer. "We have excellent
prospects for profitable growth, exemplified by our strong results in
the first quarter.
"PSM's solid earnings growth reflected a return to high single-digit
organic growth in emerging markets, alongside outstanding productivity
gains globally,” Butier added. “RBIS grew through continued momentum in
radio-frequency identification products. While we have not yet met our
objective to accelerate growth in core product sales, the team is
executing well against its aggressive margin improvement plans for the
year.
“We have raised our outlook for full-year adjusted earnings per share,
reflecting some relief from currency translation headwinds, combined
with strong operating performance in the first quarter,” 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, “First Quarter 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.
First Quarter 2016 Results by Segment
All references to sales reflect comparisons on an organic basis, which
exclude 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.
Pressure-sensitive Materials (PSM)
-
PSM sales increased approximately 4 percent. Within the segment, sales
in both Label and Packaging Materials and combined Graphics and
Performance Tapes increased mid-single digits.
-
Operating margin improved 170 basis points to 12.7 percent as the
benefit of productivity initiatives and increased volume more than
offset higher employee-related costs. Adjusted operating margin
improved 140 basis points.
Retail Branding and Information Solutions (RBIS)
-
RBIS sales increased approximately 4 percent.
-
Operating margin increased 200 basis points to 6.9 percent as the
benefit of productivity initiatives and increased volume more than
offset higher employee-related costs. Adjusted operating margin
increased 140 basis points.
Other
Share Repurchases / Equity Dilution from Long-Term Incentives
The company repurchased 1.5 million shares in the first quarter of 2016
at an aggregate cost of $96 million. Net of dilution, the company
reduced its share count by 0.8 million in the first quarter. The cost of
repurchases, net of proceeds from stock option exercises, was $80
million.
Income Taxes
The first quarter effective tax rate was 27 percent. The adjusted tax
rate for the first quarter was 34 percent, consistent with the
anticipated full year tax rate in the low to mid-thirty percent range.
Cost Reduction Actions
In the first quarter, the company realized approximately $27 million in
pre-tax savings from restructuring, net of transition costs, and
incurred pre-tax restructuring charges of approximately $6 million,
nearly all of which represented cash charges.
Pension Liability Settlement Charges
As part of a previously announced long-term strategy to reduce financial
volatility associated with its frozen defined benefit pension plan for
U.S. employees, the company offered eligible former employees the option
to receive their benefits immediately as either a lump sum payment or an
annuity, rather than waiting until they are retirement eligible under
the terms of the plan. Satisfaction of this offer will be made out of
existing plan assets during the second quarter of this year. No
additional contributions to the plan are required to complete the
offering.
This action settles approximately $70 million of the company’s existing
pension liability. The company estimates that it will incur a one-time,
non-cash charge of approximately $40 million, or approximately $0.30 per
share, in the second quarter. This action is not expected to change
required contributions to the pension plan over the next several years.
The company does not anticipate making any contributions to the U.S.
pension plan in 2016, and the amount of contributions to foreign plans
is expected to be similar to recent years.
Outlook
In its supplemental presentation materials, “First Quarter 2016
Financial Review and Analysis,” the company provides a list of factors
that it believes will contribute to its 2016 financial results. Based on
the factors listed and other assumptions, the company now expects 2016
earnings per share of $3.25 to $3.40. Excluding an estimated $0.20 per
share for restructuring charges and other items, and $0.30 per share for
non-cash charges to settle certain U.S. pension obligations, the company
now expects adjusted (non-GAAP) earnings per share of $3.75 to $3.90.
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 (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 over 25,000 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 of
$6.0 billion in 2015. 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
economic conditions 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. 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
| First Quarter Financial Summary - Preliminary, unaudited |
| |
| |
| |
| |
| |
| |
|
(in millions, except % and per share amounts)
|
| |
| | | | | | | | | | | | | |
| | | |
| | | | | | | | | | | | | | | | | |
| | | 1Q | | 1Q | | % Change vs. P/Y | | | | | | | | | | | | |
| | |
| 2016 |
| |
| 2015 |
| | Reported | | Organic (a) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
|
Net sales, by segment:
| | | | | | | | | | | | | | | | | | | |
| |
Pressure-sensitive Materials
|
$
|
1,092.0
| | |
$
|
1,120.6
| | |
(3
|
%)
| |
4
|
%
| | | | | | | | | | | | |
| |
Retail Branding and Information Solutions
| |
378.1
| | | |
388.1
| | |
(3
|
%)
| |
4
|
%
| | | | | | | | | |
| | |
| |
Vancive Medical Technologies
|
|
15.4
|
|
|
|
19.3
|
| |
(20
|
%)
| |
(18
|
%)
| | | | | | | | | | | | |
|
Total net sales
|
$
|
1,485.5
| | |
$
|
1,528.0
| | |
(3
|
%)
| |
4
|
%
| | | | | | | | | | | | |
| | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| | | As Reported (GAAP) | | Adjusted Non-GAAP (b) |
| | | | | | | | | | | | | | | | | | | | |
|
| | | 1Q | | 1Q | | | | % of Sales | | 1Q | | 1Q | | | | % of Sales |
| | |
| 2016 |
| |
| 2015 (c) |
| | % Change |
| | 2016 | | 2015 (c) |
| |
| 2016 |
| |
| 2015 (d) |
| | % Change |
| | 2016 |
| | 2015 (d) |
|
|
Operating income (loss) before
| | | | | | | | | | | | | | | | | | | |
|
interest and taxes, by segment:
| | | | | | | | | | | | | | | | | | | |
| |
Pressure-sensitive Materials
|
$
|
138.5
| | |
$
|
122.9
| | | | |
12.7
|
%
| |
11.0
|
%
| |
$
|
140.6
| | |
$
|
128.5
| | | | |
12.9
|
%
| |
11.5
|
%
|
| |
Retail Branding and Information Solutions
| |
26.1
| | | |
19.2
| | | | |
6.9
|
%
| |
4.9
|
%
| | |
29.5
| | | |
24.7
| | | | |
7.8
|
%
| |
6.4
|
%
|
| |
Vancive Medical Technologies
| |
(0.9
|
)
| | |
(2.1
|
)
| | | |
(5.8
|
%)
| |
(10.9
|
%)
| | |
(0.8
|
)
| | |
(1.0
|
)
| | | |
(5.2
|
%)
| |
(5.2
|
%)
|
| |
Corporate expense
|
|
(24.9
|
)
| |
|
(24.7
|
)
| | | | | | | |
|
(24.9
|
)
| |
|
(23.1
|
)
| | | | | | |
|
Total operating income before
| | | | | | | | | | | | | | | | | | | |
|
interest and taxes / operating margins
|
$
|
138.8
| | |
$
|
115.3
| | |
20
|
%
| |
9.3
|
%
| |
7.5
|
%
| |
$
|
144.4
| | |
$
|
129.1
| | |
12
|
%
| |
9.7
|
%
| |
8.4
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
|
Interest expense
|
$
|
15.3
| | |
$
|
15.3
| | | | | | | | |
$
|
15.3
| | |
$
|
15.3
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
|
Income before taxes
|
$
|
123.5
| | |
$
|
100.0
| | |
24
|
%
| |
8.3
|
%
| |
6.5
|
%
| |
$
|
129.1
| | |
$
|
113.8
| | |
13
|
%
| |
8.7
|
%
| |
7.4
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
|
Provision for income taxes
|
$
|
33.9
| | |
$
|
28.1
| | | | | | | | |
$
|
43.9
| | |
$
|
38.7
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
|
Net income
|
$
|
89.6
| | |
$
|
71.9
| | |
25
|
%
| |
6.0
|
%
| |
4.7
|
%
| |
$
|
85.2
| | |
$
|
75.1
| | |
13
|
%
| |
5.7
|
%
| |
4.9
|
%
|
| | | | | | | | | | | | | | | | | | | | |
|
|
Net income per common share, assuming dilution
|
$
|
0.98
| | |
$
|
0.78
| | |
26
|
%
| | | | | |
$
|
0.94
| | |
$
|
0.81
| | |
16
|
%
| | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| 2016 |
| |
| 2015 |
| | | | | | |
| 1Q Free Cash Flow (e) | | | | | | | | | | | $ | (37.2 | ) | | $ | (19.7 | ) | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Percentage change in sales excluding the estimated impact of
currency translation, product line exits, acquisitions, and
divestitures.
|
|
(b)
|
Excludes restructuring charges and other items (see accompanying
schedules A-2 to A-4 for reconciliation to GAAP financial measures).
|
|
(c)
|
Certain prior period amounts have been revised to reflect the impact
of adjustments made in the third quarter of 2015 to certain of the
Company's benefit plan balances.
|
|
(d)
|
Non-GAAP amounts have not been revised for the adjustments
referenced in note (c) above since the impact was not material.
|
|
(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. Free cash flow excludes uses of cash that do not
directly or immediately support the underlying business,
|
| |
such as discretionary debt reductions, dividends, share repurchases,
and certain effects of acquisitions and divestitures (e.g., cash
flow from discontinued operations, taxes, and transaction costs).
|
| |
Prior year amount has been reduced due to a reclassification of
certain liquid short-term bank drafts with maturities greater than
90 days to other current assets.
|
| | | |
|
AVERY DENNISON CORPORATION |
| | | | | A-1 |
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | |
(In millions, except per share amounts) | | | | | | |
|
| | | | | | | | |
| | | | | | (UNAUDITED) | |
| | | | | | | | |
|
| |
`
| | | | Three Months Ended | |
| | | | | | | | |
|
| | | | | | Apr. 02, 2016 | | Apr. 04, 2015 | (1) |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
| | | | | | | | |
|
Net sales
| | |
$
|
1,485.5
|
$
|
1,528.0
| |
| | | | | | | | |
|
Cost of products sold
| | |
1,062.9
| |
1,098.0
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Gross profit
| | | |
422.6
| |
430.0
| |
| | | | | | | | |
|
Marketing, general & administrative expense
| | |
278.2
| |
300.4
| |
| | | | | | | | |
|
Interest expense
| | | |
15.3
| |
15.3
| |
| | | | | | | | |
|
Other expense, net(2) | | |
5.6
| |
14.3
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Income before taxes
| | |
123.5
| |
100.0
| |
| | | | | | | | |
|
Provision for income taxes
| | |
33.9
| |
28.1
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Net income | | |
$
|
89.6
|
$
|
71.9
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Per share amounts: | | | | | | | |
| | | | | | | | |
|
Net income per common share, assuming dilution
| |
$
|
0.98
|
$
|
0.78
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Weighted average number of common shares outstanding,
| | | | | | |
|
|
assuming dilution
|
|
|
91.1
|
|
92.4
| |
| | | | | | | | |
|
(1) |
| |
Certain prior period amounts have been revised to reflect the impact
of adjustments made in the third quarter of 2015 to certain of the
Company's benefit plan balances.
|
| | | | | | | | |
|
(2) |
| |
"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.
|
| | | | | | | | |
|
| |
"Other expense, net" for the first quarter of 2015 includes
severance and related costs of $13.5, asset impairment charges of
$.4, impairment charges on assets held for sale of $2, and
transaction costs related to a product line divestiture of $.6,
partially offset by gain on sale of asset of $1.7 and legal
settlement of $.5.
|
A-2 |
|
Reconciliation of Non-GAAP Financial Measures in Accordance with
SEC Regulations G and S-K |
|
We report 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 supplemental
non-GAAP financial measures provide information that is useful to
the 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, asset impairments, 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 the prior fiscal year.
|
|
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 the anticipated full-year GAAP
tax rate adjusted for certain events.
|
|
Adjusted net income refers to reported net income adjusted
for tax-effected restructuring charges and other items.
|
|
Adjusted EPS refers to reported net income per common share,
assuming dilution, adjusted for tax-effected restructuring charges
and other items.
|
|
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. Free cash flow excludes uses of cash that do not
directly or immediately support the underlying business, such as
discretionary debt reductions, dividends, share repurchases, and
certain effects of acquisitions and divestitures (e.g., cash flow
from discontinued operations, taxes, and transaction costs).
|
|
The reconciliations set forth below and in the accompanying
presentation 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-3 |
| | | | |
|
AVERY DENNISON CORPORATION | | | | | |
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |
(In millions, except % and per share amounts) | | | | | |
|
|
|
| | | | | | |
| | | | | | (UNAUDITED) | |
| | | | | | | | |
|
| | | | | | Three Months Ended | |
| | | | | | | | |
|
| | | | | | Apr. 02, 2016 | | Apr. 04, 2015 | (1) |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | |
|
| | | | | | | | |
|
Reconciliation of Operating Margins: | | | | | |
| | | | | | | | |
|
Net sales
|
$
|
1,485.5
| |
$
|
1,528.0
| | |
| | | | | |
|
|
| |
| | | | | | | | |
|
Income before taxes
|
$
|
123.5
| |
$
|
100.0
| | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Income before taxes as a percentage of sales
| | 8.3 | % | | 6.5 | % | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
|
Adjustment:
| | | | | |
| | | | | | | | |
|
|
Interest expense
|
$
|
15.3
| |
$
|
15.3
| | |
| | | | | |
|
|
| |
| | | | | | | | |
|
Operating income before interest expense and taxes
|
$
|
138.8
| |
$
|
115.3
| | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Operating Margins | | 9.3 | % | | 7.5 | % | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
| | | | | | | | |
|
As reported income before taxes
|
$
|
123.5
| |
$
|
100.0
| | |
Adjustments(1) | |
N/A
|
|
|
(0.5
|
)
| |
| | | | | | | | |
|
Previously reported income before taxes
| |
N/A
| | |
99.5
| | |
| | | | | | | | |
|
|
Adjustments:
| | | | | |
| | | | | | | | |
|
|
Restructuring charges:
| | | | | |
| | | | | | | | |
|
| | |
Severance and related costs
| |
5.2
| | |
13.5
| | |
| | | | | | | | |
|
| | |
Asset impairment and lease cancellation charges
| |
0.4
| | |
0.4
| | |
| | | | | | | | |
|
|
Other items(2) | |
---
| | |
0.4
| | |
| | | | | | | | |
|
|
Interest expense
| |
15.3
| | |
15.3
| | |
| | | | | |
|
|
| |
| | | | | | | | |
|
Adjusted operating income before interest expense and taxes
(non-GAAP)
|
$
|
144.4
| |
$
|
129.1
| | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Adjusted Operating Margins (non-GAAP) | | 9.7 | % | | 8.4 | % | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
| | | | | | | | |
|
| | | | | | | | |
|
Reconciliation of GAAP to Non-GAAP Net Income: | | | | | |
| | | | | | | | |
|
As reported net income
|
$
|
89.6
| |
$
|
71.9
| | |
Adjustments(1) | |
N/A
|
|
|
(0.3
|
)
| |
| | | | | | | | |
|
Previously reported net income
| |
N/A
| | |
71.6
| | |
| | | | | | | | |
|
|
Non-GAAP adjustments, net of tax:
| | | | | |
| | | | | | | | |
|
| |
Restructuring charges and other items(3) | |
(4.4
|
)
| |
3.5
| | |
|
|
|
|
|
|
|
|
| |
| | | | | | | | |
|
Adjusted Non-GAAP Net Income |
$
|
85.2
| |
$
|
75.1
| | |
| | | | A-3 (continued) |
|
| | | | |
|
AVERY DENNISON CORPORATION | | | | | |
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |
(In millions, except % and per share amounts) | | | | | |
|
| | | | | | | |
| | | | | | | |
|
| | | | | (UNAUDITED) | |
| | | | | | | |
|
| | | | | Three Months Ended | |
| | | | | | | |
|
| | | | | Apr. 02, 2016 | | Apr. 04, 2015 | (1) |
|
|
|
|
|
|
|
|
| |
| | | | | | | |
|
| | | | | | | |
|
Reconciliation of GAAP to Non-GAAP Net Income per Common Share: | | | | | |
| | | | | | | |
|
As reported net income per common share, assuming dilution
|
$
|
0.98
| |
$
|
0.78
| | |
| | | | | | | |
|
Adjustments(1) | | |
N/A
| | |
(0.01
|
)
| |
| | | | |
| |
| |
| | | | | | | |
|
Previously reported net income per common share, assuming dilution
| |
N/A
| | |
0.77
| | |
| | | | | | | |
|
|
Non-GAAP adjustments per common share, net of tax:
| | | | | |
| | | | | | | |
|
| |
Restructuring charges and other items(3) | |
(0.04
|
)
| |
0.04
| | |
|
|
|
|
|
|
|
| |
| | | | | | | |
|
Adjusted Non-GAAP Net Income per Common Share, | | | | | |
| assuming dilution |
$
|
0.94
| |
$
|
0.81
| | |
|
|
|
|
|
|
|
| |
| | | | | | | |
|
Weighted average number of common shares outstanding, assuming
dilution
| |
91.1
| | |
92.4
| | |
|
|
|
|
|
|
|
| |
| | | | | | | |
|
(1) |
|
Certain prior period amounts have been revised to reflect the impact
of adjustments made in the third quarter of 2015 to certain of the
Company's benefit plan balances.
|
| | | | | | | |
|
(2) |
|
Includes impairment charges on assets held for sale, transaction
costs related to a product line divestiture, gain on sale of assets,
and legal settlement.
|
| |
|
(3) |
|
Reflects restructuring charges and other items, tax-effected at the
adjusted tax rate.
| | | |
| | | | | | | |
|
| | | | | | | |
|
| | | | | (UNAUDITED) | |
| | | | | | | |
|
| | | | | Three Months Ended | |
| | | | | | | |
|
| | | | | Apr. 02, 2016 | | Apr. 04, 2015 | (1) |
|
|
|
|
|
|
|
|
| |
Reconciliation of GAAP to Non-GAAP Free Cash Flow: | | | | | |
| | | | | | | |
|
Net cash (used in) provided by operating activities(1) |
$
|
(6.3
|
)
|
$
|
4.6
| | |
| | | | | | | |
|
Purchases of property, plant and equipment
| |
(25.2
|
)
| |
(25.3
|
)
| |
| | | | | | | |
|
Purchases of software and other deferred charges
| |
(2.0
|
)
| |
(1.4
|
)
| |
| | | | | | | |
|
Proceeds from sales of property, plant and equipment
| |
0.1
| | |
2.8
| | |
| | | | | | | |
|
Purchases of investments, net
| |
(3.8
|
)
| |
(0.4
|
)
| |
|
|
|
|
|
|
|
| |
| | | | | | | |
|
Free Cash Flow |
|
$
|
(37.2
|
)
|
$
|
(19.7
|
)
| |
| | | | | | | |
|
(1) Prior year amounts have been reduced due to a
reclassification of certain liquid short-term bank drafts with
maturities greater than 90 days to other current assets.
|
A-4 |
|
AVERY DENNISON CORPORATION |
PRELIMINARY SUPPLEMENTARY INFORMATION |
(In millions, except %) |
(UNAUDITED) |
|
| | |
| | |
| | | |
| | First Quarter Ended | |
| | | | | | | | | |
|
| |
NET SALES
| |
OPERATING INCOME
| |
OPERATING MARGINS
| |
| |
|
2016
|
|
2015
| |
|
2016 (1) |
|
|
2015 (2) |
| |
2016
|
|
2015
|
| |
| | | | | | | | | |
|
Pressure-sensitive Materials
| |
$
|
1,092.0
|
$
|
1,120.6
| |
$
|
138.5
| |
$
|
122.9
| | |
12.7
|
%
|
11.0
|
%
| |
Retail Branding and Information Solutions
| | |
378.1
| |
388.1
| | |
26.1
| | |
19.2
| | |
6.9
|
%
|
4.9
|
%
| |
Vancive Medical Technologies
| | |
15.4
| |
19.3
| | |
(0.9
|
)
| |
(2.1
|
)
| |
(5.8
|
%)
|
(10.9
|
%)
| |
Corporate Expense
| |
|
N/A
|
|
N/A
| |
|
(24.9
|
)
|
|
(24.7
|
)
| (3) |
|
N/A
|
|
N/A
|
| |
| | | | | | | | | |
|
TOTAL FROM OPERATIONS
| |
$
|
1,485.5
|
$
|
1,528.0
| |
$
|
138.8
|
|
$
|
115.3
|
| (3) |
|
9.3
|
%
|
7.5
|
%
| (3) |
|
| | | | | | | | | |
|
(1) 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
Pressure-sensitive Materials segment recorded $2.1, the Retail
Branding and Information Solutions segment recorded $3.4, and the
Vancive Medical Technologies segment recorded $.1.
|
| | | | | | | | | |
|
(2) Operating income for the first quarter of 2015
includes severance and related costs of $13.5, asset impairment
charges of $.4, impairment charges on assets held for sale of $2,
and transaction costs related to a product line divestiture of $.6,
partially offset by gain on sale of asset of $1.7 and legal
settlement of $.5. Of the total $14.3, the Pressure-sensitive
Materials segment recorded $5.6, the Retail Branding and Information
Solutions segment recorded $5.5, the Vancive Medical Technologies
segment recorded $1.1, and Corporate recorded $2.1.
|
| | | | | | | | | |
|
(3) Certain prior period amounts have been revised to
reflect the impact of adjustments made in the third quarter of 2015
to certain of the Company's benefit plan balances.
|
| | | | | | | | | |
|
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION |
| | | | | | | | | |
|
| | | | | First Quarter Ended | |
| | | | |
OPERATING INCOME
| |
OPERATING MARGINS
| |
| | | | | | | | | |
|
| | | | |
|
2016
|
|
|
2015
|
| |
2016
|
|
2015
|
| |
Pressure-sensitive Materials | | | | | | | | | | |
Operating income and margins, as reported | | | | | $ | 138.5 | | $ | 122.9 | | | 12.7 | % | 11.0 | % | |
Adjustments:
| | | | | | | | | | |
Restructuring charges:
| | | | | | | | | | |
Severance and related costs
| | | | | |
2.1
| | |
6.9
| | |
0.2
|
%
|
0.6
|
%
| |
Asset impairment charges
| | | | | |
---
| | |
0.4
| | |
---
| |
---
| | |
Gain on sale of asset
| | | | |
|
---
|
|
|
(1.7
|
)
| |
---
|
|
(0.1
|
%)
| |
Adjusted operating income and margins (non-GAAP) | | | | | $ | 140.6 |
| $ | 128.5 |
| | 12.9 | % | 11.5 | % | |
| | | | | | | | | |
|
Retail Branding and Information Solutions | | | | | | | | | | |
Operating income and margins, as reported | | | | | $ | 26.1 | | $ | 19.2 | | | 6.9 | % | 4.9 | % | |
Adjustments:
| | | | | | | | | | |
Restructuring charges:
| | | | | | | | | | |
Severance and related costs
| | | | | |
3.0
| | |
3.4
| | |
0.8
|
%
|
0.9
|
%
| |
Asset impairment and lease cancellation charges
| | | | | |
0.4
| | |
---
| | |
0.1
|
%
|
---
| | |
Impairment charges on assets held for sale
| | | | | |
---
| | |
2.0
| | |
---
| |
0.5
|
%
| |
Transaction costs related to a product line divestiture
| | | | | |
---
| | |
0.6
| | |
---
| |
0.2
|
%
| |
Legal settlement
| | | | |
|
---
|
|
|
(0.5
|
)
| |
---
|
|
(0.1
|
%)
| |
Adjusted operating income and margins (non-GAAP) | | | | | $ | 29.5 |
| $ | 24.7 |
| | 7.8 | % | 6.4 | % | |
| | | | | | | | | |
|
Vancive Medical Technologies | | | | | | | | | | |
Operating loss and margins, as reported | | | | | $ | (0.9 | ) | $ | (2.1 | ) | | (5.8 | %) | (10.9 | %) | |
Adjustments:
| | | | | | | | | | |
Restructuring charges:
| | | | | | | | | | |
Severance and related costs
| | | | |
|
0.1
|
|
|
1.1
|
| |
0.6
|
%
|
5.7
|
%
| |
Adjusted operating loss and margins (non-GAAP) | | | | | $ | (0.8 | ) | $ | (1.0 | ) | | (5.2 | %) | (5.2 | %) | |
A-5 |
|
AVERY DENNISON CORPORATION |
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS |
(In millions) |
|
| | | | | | | |
|
| | |
| | | | | | |
| (UNAUDITED) |
| | | | | | | | | | | |
|
ASSETS | | |
| | | Apr. 02, 2016 | |
| | Apr. 04, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Current assets:
| | | | | | | | | | |
|
Cash and cash equivalents
| | | |
$
|
169.6
| | | |
$
|
189.0
| |
|
Trade accounts receivable, net
| | | |
1,019.1
| | | | |
988.0
| |
|
Inventories, net
| | | | | |
519.5
| | | | |
508.9
| |
|
Assets held for sale
| | | | | |
2.5
| | | | |
17.7
| |
|
Other current assets
| | | | | |
176.7
| | | | |
260.5
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| |
Total current assets
| | |
1,887.4
| | | | |
1,964.1
| |
| | | | | | | | | | | |
|
Property, plant and equipment, net
| | | | |
847.9
| | | | |
831.2
| |
Goodwill
| | | | | |
695.1
| | | | |
697.0
| |
Other intangibles resulting from business acquisitions, net
| |
41.3
| | | | |
60.9
| |
Non-current deferred income taxes
| | | | |
381.8
| | | | |
306.6
| |
Other assets
| | | | | |
395.9
| | | | |
448.6
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | |
$
|
4,249.4
| | | |
$
|
4,308.4
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Current liabilities:
| | | | | | | | | | |
|
Short-term borrowings and current portion of long-term debt and
capital leases
|
$
|
264.9
| | | |
$
|
265.7
| |
|
Accounts payable
| | | | | |
836.9
| | | | |
825.1
| |
|
Liabilities held for sale
| | | | | |
---
| | | | |
17.8
| |
|
Other current liabilities
| | | | | |
492.4
| | | | |
493.4
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| |
Total current liabilities
| | |
1,594.2
| | | | |
1,602.0
| |
| | | | | | | | | | | |
|
Long-term debt and capital leases
| | | | |
963.3
| | | | |
940.3
| |
Other long-term liabilities
| | | | | |
723.6
| | | | |
759.5
| |
Shareholders' equity:
| | | | | | | | | | |
|
Common stock
| | | | | |
124.1
| | | | |
124.1
| |
|
Capital in excess of par value
| | | | |
828.7
| | | | |
810.4
| |
|
Retained earnings
| | | | | |
2,329.7
| | | | |
2,155.1
| |
|
Treasury stock at cost
| | | | | |
(1,653.0
|
)
| | | |
(1,470.2
|
)
|
|
Accumulated other comprehensive loss
| | | |
(661.2
|
)
| | | |
(612.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| |
Total shareholders' equity
| | |
968.3
| | | | |
1,006.6
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
| | | | | | |
$
|
4,249.4
| | | |
$
|
4,308.4
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Certain prior period amounts have been revised to reflect the impact
of certain adjustments and to correct the timing of previously
recorded out-of-period adjustments.
|
|
In the fourth quarter of 2015, we elected to adopt the provisions of
Accounting Standards Update (ASU) 2015-03, Simplifying the
Presentation of Debt Issuance Costs, earlier than required. This
ASU requires that debt issuance costs related to a recognized debt
liability be classified as a direct deduction from the carrying
amount of that debt liability instead of being recorded separately
in other assets. The new guidance was applied on a retrospective
basis and prior period amounts have been reclassified to conform to
the current year presentation.
|
|
In the fourth quarter of 2015, we also elected to adopt the
provisions of ASU 2015-17, Balance Sheet Classification of
Deferred Taxes, earlier than required. This ASU requires that
all deferred tax assets and liabilities for each jurisdiction, along
with any related valuation allowances, be classified as noncurrent
on the balance sheet. As permitted by this ASU, prior periods have
not been retrospectively adjusted.
|
A-6 |
|
AVERY DENNISON CORPORATION |
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
| | | | | | | | |
|
| | |
| | | | | | | (UNAUDITED) |
| | | | | | | | | | | |
|
| | | | | | | Three Months Ended |
|
|
|
|
|
|
|
| Apr. 02, 2016 |
|
|
| Apr. 04, 2015 |
Operating Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Net income
| | | | |
$
|
89.6
| | | |
$
|
71.9
| |
| | | | | | | | | | | |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
| | | | |
| | | | | | | | | | | |
|
|
Depreciation
| | | | |
29.0
| | | | |
33.2
| |
| | | | | | | | | | | |
|
|
Amortization
| | | | |
15.3
| | | | |
16.1
| |
| | | | | | | | | | | |
|
|
Provision for doubtful accounts and sales returns
| |
11.2
| | | | |
14.8
| |
| | | | | | | | | | | |
|
|
Net losses from asset impairments and sales/disposals of assets
| |
0.6
| | | | |
1.1
| |
| | | | | | | | | | | |
|
|
Stock-based compensation
| | | |
7.5
| | | | |
7.4
| |
| | | | | | | | | | | |
|
|
Other non-cash expense and loss
| | |
12.8
| | | | |
13.6
| |
| | | | | | | | | | | |
|
Changes in assets and liabilities and other adjustments
| |
(172.3
|
)
| | | |
(153.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash (used in) provided by operating activities
| |
(6.3
|
)
| | | |
4.6
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Investing Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Purchases of property, plant and equipment
| |
(25.2
|
)
| | | |
(25.3
|
)
|
| | | | | | | | | | | |
|
Purchases of software and other deferred charges
| |
(2.0
|
)
| | | |
(1.4
|
)
|
| | | | | | | | | | | |
|
Proceeds from sales of property, plant and equipment
| |
0.1
| | | | |
2.8
| |
| | | | | | | | | | | |
|
Purchases of investments, net
| | | |
(3.8
|
)
| | | |
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash used in investing activities
| | |
(30.9
|
)
| | | |
(24.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Financing Activities: | | | | | | | | | |
| | | | | | | | | | | |
|
Net increase in borrowings (maturities of 90 days or less)
| |
169.4
| | | | |
64.2
| |
| | | | | | | | | | | |
|
Payments of debt (maturities longer than 90 days)
| |
(0.5
|
)
| | | |
(0.2
|
)
|
| | | | | | | | | | | |
|
Dividends paid
| | | | |
(33.0
|
)
| | | |
(31.8
|
)
|
| | | | | | | | | | | |
|
Share repurchases
| | | | |
(95.6
|
)
| | | |
(33.8
|
)
|
| | | | | | | | | | | |
|
Proceeds from exercises of stock options, net
| |
16.0
| | | | |
16.0
| |
| | | | | | | | | | | |
|
Other
| | | | | | |
(9.2
|
)
| | | |
(8.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Net cash provided by financing activities
| |
47.1
| | | | |
6.0
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Effect of foreign currency translation on cash balances
| |
0.9
| | | | |
(4.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Increase (decrease) in cash and cash equivalents
| |
10.8
| | | | |
(18.2
|
)
|
| | | | | | | | | | | |
|
Cash and cash equivalents, beginning of year
| |
158.8
| | | | |
207.2
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Cash and cash equivalents, end of period
|
$
|
169.6
| | | |
$
|
189.0
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Certain prior period amounts have been revised to reflect the impact
of certain adjustments and to correct the timing of previously
recorded out-of-period adjustments.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160427005528/en/
Contacts:
Avery Dennison Corporation
Media Relations:
Rob Six, (626)
304-2361
rob.six@averydennison.com
or
Investor
Relations:
Cynthia S. Guenther, (626) 304-2204
investorcom@averydennison.com
Source: Avery Dennison Corporation
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