- 2Q17 Reported EPS of $1.34
- Adjusted EPS (non-GAAP) of $1.31
- 2Q17 Net sales increased ~6% to $1.63
billion
- Sales change ex. currency (non-GAAP) of
~7%
- Organic sales change (non-GAAP) of
~3%
- Raised FY17 guidance midpoint for
Reported and Adjusted EPS by $0.25
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its second quarter ended July 1,
2017. All non-GAAP financial measures referenced in this document
are reconciled to GAAP in the attached tables. Unless otherwise
indicated, comparisons are to the same period in the prior
year.
“We continued to make good progress against our strategic and
financial objectives in the second quarter," said Mitch Butier,
Avery Dennison President and CEO. "LGM generated strong
profitability despite a short-term moderation in organic growth;
RBIS had a great quarter, with accelerated sales growth and margin
expansion as our multi-year transformation delivers; and IHM
continues to make progress against its strategic priorities,
including the completion of two acquisitions.
“We have raised our outlook for full-year earnings per share,
reflecting continued strong operating performance and a reduction
in the tax rate," said Butier. "We continue to remain confident
that the consistent execution of our strategies will enable us to
meet our long-term goals for superior value creation through a
balance of profitable growth and capital discipline.”
For more details on the company’s results, see the summary table
accompanying this news release, as well as the supplemental
presentation materials, “Second Quarter 2017 Financial Review and
Analysis,” posted on the company’s website at
www.investors.averydennison.com, and furnished to the SEC on Form
8-K.
Second Quarter 2017 Results by
Segment
Organic sales change refers to the increase or decrease in sales
excluding the estimated impact of currency translation, product
line exits, and acquisitions and divestitures. Adjusted operating
margin refers to income before interest expense and taxes,
excluding restructuring charges and other items, as a percentage of
sales.
Label and Graphic Materials
- Reported sales increased 5.5 percent;
on an organic basis, sales grew an estimated 2.3 percent driven by
solid growth in high value categories, with modest growth in the
base business.
- Operating margin improved 20 basis
points to 13.2 percent. Adjusted operating margin of 13.6 percent
was flat as the benefits from productivity initiatives and
increased volume were offset by higher employee-related costs and
the modest net impact of pricing and raw material costs.
Retail Branding and Information Solutions
- Reported sales increased 4.6 percent;
on an organic basis, sales grew an estimated 5.8 percent driven by
strength in RFID and the base business.
- Operating margin improved 110 basis
points to 7.5 percent. Adjusted operating margin improved 120 basis
points to 8.3 percent driven by productivity and strong volume,
partially offset by higher employee-related costs.
Industrial and Healthcare Materials
- Reported sales increased 8.7 percent;
sales were essentially flat on an organic basis. Sales in
industrial categories increased low-double digits on an organic
basis, offsetting the anticipated decline in healthcare
categories.
- Operating margin declined 580 basis
points to 8.5 percent. Adjusted operating margin declined 400 basis
points to 10.4 percent driven primarily by the impact of the
decline in healthcare categories.
- The company’s acquisitions of Yongle
Tape and Finesse Medical closed during the second quarter and the
integrations are on track.
Other
Share Repurchases / Equity Dilution from Long-Term
Incentives
The company repurchased 0.4 million shares in the second quarter
at an aggregate cost of $36 million. Net of dilution, the company’s
share count decreased 0.5 million in the quarter. The cost of
repurchases, net of proceeds from stock option exercises, was $35
million.
Income Taxes
The second quarter effective tax rate was 19.1 percent,
comparable to prior year. The adjusted tax rate for the quarter was
approximately 26 percent, as the company now anticipates a full
year effective tax rate of approximately 28 percent.
Cost Reduction Actions
In the second quarter, the company realized approximately $15
million in pre-tax savings from restructuring, net of transition
costs, and incurred pre-tax restructuring charges of approximately
$8 million, nearly all of which represents cash charges.
Outlook
In its supplemental presentation materials, “Second Quarter 2017
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its 2017 financial
results. Based on the factors listed and other assumptions, the
company now expects 2017 reported earnings per share of $4.45 to
$4.60. Excluding an estimated $0.30 per share for restructuring
charges and other items, the company now expects adjusted earnings
per share (non-GAAP) of $4.75 to $4.90.
Note: Throughout this release and the supplemental presentation
materials, amounts on a per share basis reflect fully diluted
shares outstanding.
About Avery Dennison
Avery Dennison (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,
and subsequent quarterly reports on Form 10-Q. The forward-looking
statements included in this document are made only as of the date
of this document, and we undertake no obligation to update these
statements to reflect subsequent events or circumstances, other
than as may be required by law.
For more information and to listen to a live broadcast or an
audio replay of the quarterly conference call with analysts, visit
the Avery Dennison website at
www.investors.averydennison.com
Second Quarter Financial Summary - Preliminary,
unaudited (In millions, except % and per share amounts)
% Change vs.
P/Y
2Q 2Q Ex.
2017
2016
Reported
Currency
(a)
Organic
(b)
Net sales, by segment: Label and Graphic Materials
$
1,123.1 $ 1,064.6 5.5 % 6.6 %
2.3 % Retail Branding and Information Solutions
375.1
358.5 4.6 % 5.8 % 5.8 % Industrial and
Healthcare Materials
128.7 118.4
8.7 % 10.3 % (0.1 %) Total net sales
$
1,626.9 $ 1,541.5 5.5 % 6.7 %
2.9 %
As Reported (GAAP) Adjusted Non-GAAP (c)
2Q 2Q %
% of Sales
2Q 2Q %
% of Sales
2017
2016
Change
2017
2016
2017
2016
Change
2017
2016
Operating income (loss) / operating
margins
before interest and taxes, by segment: Label and Graphic Materials
$ 148.0 $ 138.3 13.2 %
13.0 % $ 153.0 $ 144.5 13.6 % 13.6 % Retail Branding
and Information Solutions
28.2 23.1 7.5
% 6.4 % 31.0 25.5 8.3 % 7.1 % Industrial and
Healthcare Materials
11.0 16.9 8.5 %
14.3 % 13.4 17.1 10.4 % 14.4 % Corporate expense
(21.5 ) (63.6 )
(21.5 ) (22.2 ) Total operating income before
interest and taxes / operating margins
$ 165.7
$ 114.7 44 % 10.2 %
7.4 % $ 175.9 $ 164.9 7 % 10.8 % 10.7 %
Interest expense
$ 16.2 $ 15.4 $ 16.2 $
15.4 Income before taxes
$ 149.5 $
99.3 51 % 9.2 % 6.4
% $ 159.7 $ 149.5 7 % 9.8 % 9.7 % Provision for
income taxes (d)
$ 28.6 $ 19.3 $ 41.9 $
50.8 Net income
$ 120.9 $ 80.0
51 % 7.4 % 5.2 % $ 117.8
$ 98.7 19 % 7.2 % 6.4 % Net income per common share,
assuming dilution
$ 1.34 $ 0.88
52 % $ 1.31 $ 1.09 20 %
2017
2016
2Q Free Cash Flow (d)(e) $ 115.1 $ 189.0 YTD Free Cash Flow
(d)(e)
$ 93.0 $ 151.8
See
accompanying schedules A-4 to A-8 for reconciliations from GAAP to
non-GAAP financial measures. (a) Percentage change in sales
excluding the estimated impact of currency translation. (b)
Percentage change in sales excluding the estimated impact of
currency translation, product line exits, acquisitions and
divestitures, and, where applicable, the extra week in our fiscal
year. (c) Excludes restructuring charges and other items.
(d) In the first quarter of 2017, we adopted Accounting
Standards Update (ASU) 2016-09, Improvements to Employee
Share-Based Payment Accounting. This ASU requires that all tax
effects related to share-based payments at settlement or expiration
be recognized through the provision for income taxes, a change from
the previous requirement that certain tax effects be recognized in
shareholders' equity. As required by this ASU, this change has been
applied prospectively after the date of adoption. This ASU
also requires that all tax-related cash flows resulting from
share-based payments be reported as operating activities on the
statements of cash flows, a change from the previous requirement
that windfall tax benefits be presented as an inflow from financing
activities and an outflow from operating activities. As permitted
by this ASU, prior periods have not been retrospectively adjusted
for this change. (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.
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share
amounts)
(UNAUDITED)
Three Months Ended Six Months Ended
Jul. 1, 2017 Jul. 2, 2016 Jul. 1, 2017
Jul. 2, 2016
Net sales $ 1,626.9 $ 1,541.5 $ 3,199.0 $ 3,027.0
Cost of products sold 1,174.3 1,107.4 2,304.0 2,170.3
Gross profit 452.6 434.1 895.0 856.7
Marketing, general & administrative expense 276.7 269.2
560.0 547.4 Interest expense 16.2 15.4 32.9 30.7
Other expense, net(1) 10.2 50.2 16.7 55.8
Income before taxes 149.5 99.3 285.4 222.8
Provision for income taxes(2) 28.6 19.3 52.3 53.2
Net income $ 120.9 $ 80.0
$ 233.1 $ 169.6
Per
share amounts: Net income per common share, assuming
dilution $ 1.34 $ 0.88 $ 2.59 $ 1.87
Weighted average number of common shares outstanding,
assuming dilution 89.9 90.7
90.0 90.9 (1)
"Other expense, net" for the second quarter of 2017 includes
severance and related costs of $7.3, asset impairment and lease
cancellation charges of $.3, and transaction costs of $2.6.
"Other expense, net" for the second quarter of 2016 includes
severance and related costs of $3.6, asset impairment and lease
cancellation charges of $2.8, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale
of asset of $.3. "Other expense, net" for the first half of
2017 includes severance and related costs of $13, asset impairment
and lease cancellation charges of $.3, and transaction costs of
$3.4. "Other expense, net" for the first half of 2016
includes severance and related costs of $8.8, asset impairment and
lease cancellation charges of $3.2, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale
of asset of $.3. (2)
In the first quarter of 2017, we adopted
Accounting Standards Update (ASU) 2016-09, Improvements to Employee
Share-Based Payment Accounting. This ASU requires that all tax
effects related to share-based payments at settlement or expiration
be recognized through the provision for income taxes, a change from
the previous requirement that certain tax effects be recognized in
shareholders' equity. As required by this ASU, this change has been
applied prospectively after the date of adoption.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED)
ASSETS
Jul. 1, 2017
Jul. 2, 2016 Current assets: Cash and
cash equivalents $ 209.4 $ 216.1 Trade accounts receivable, net
1,138.1 1,028.3 Inventories, net 618.5 524.1 Assets held for sale
8.3 4.4 Other current assets 235.5
169.6 Total current assets
2,209.8 1,942.5 Property, plant and equipment, net 1,017.8
838.7 Goodwill and other intangibles resulting from business
acquisitions, net 1,118.5 727.4 Non-current deferred income taxes
325.1 390.4 Other assets 420.6
395.8
$ 5,091.8 $ 4,294.8
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities: Short-term borrowings and current portion of
long-term debt and capital leases $ 444.0 $ 199.0 Accounts payable
930.9 867.9 Other current liabilities 597.5
525.3 Total current liabilities 1,972.4
1,592.2 Long-term debt and capital leases 1,276.3 962.9
Other long-term liabilities 773.3 783.2 Shareholders' equity:
Common stock 124.1 124.1 Capital in excess of par value 845.9 834.4
Retained earnings 2,621.8 2,385.5 Treasury stock at cost (1,805.6 )
(1,698.7 ) Accumulated other comprehensive loss (716.4 )
(688.8 ) Total shareholders' equity
1,069.8 956.5
$ 5,091.8 $
4,294.8
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Six Months Ended
Jul. 1, 2017
Jul. 2, 2016
Operating Activities: Net income $ 233.1 $
169.6 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation 59.7 58.6
Amortization 31.1 30.8 Provision for doubtful
accounts and sales returns 19.8 21.3 Net losses from asset
impairments and sales/disposals of assets 0.6 3.2
Stock-based compensation 13.2 14.1 Loss from settlement of
pension obligations --- 41.4 Other non-cash expense and loss
28.1 24.1 Changes in assets and liabilities and other
adjustments (207.3 ) (147.1 )
Net cash
provided by operating activities
178.3 216.0
Investing
Activities: Purchases of property, plant and equipment
(66.5 ) (61.3 ) Purchases of software and other deferred
charges (14.9 ) (6.1 ) Proceeds from sales of property,
plant and equipment 0.2 3.2 Purchases of investments, net
(4.1 ) --- Payments for acquisitions, net of cash acquired,
and investments in businesses (300.9 ) --- Net cash used in
investing activities (386.2 )
(64.2 )
Financing Activities:
Net (decrease) increase in borrowings (maturities of three months
or less) (159.5 ) 104.6 Additional long-term borrowings
526.6 --- Repayments of long-term debt (1.5 ) (1.2 )
Dividends paid (76.2 ) (69.6 ) Share repurchases (70.3 )
(160.1 ) Proceeds from exercises of stock options, net 17.5
41.4 Tax withholding for and excess tax benefit from
stock-based compensation, net (20.0 )
(8.4 ) Net cash provided by (used in)
financing activities 216.6
(93.3 ) Effect of foreign currency translation
on cash balances 5.6
(1.2 ) Increase in cash and cash equivalents 14.3
57.3 Cash and cash equivalents, beginning of year
195.1 158.8
Cash and cash equivalents, end of period $ 209.4
$ 216.1
In the first quarter of 2017, we adopted the provisions of
Accounting Standards Update (ASU) 2016-09, Improvements to Employee
Share-Based Payment Accounting. This ASU requires that all
tax-related cash flows resulting from share-based payments be
reported as operating activities on the statements of cash flows, a
change from the previous requirement that windfall tax benefits be
presented as an inflow from financing activities and an outflow
from operating activities. As permitted by this ASU, prior periods
have not been retrospectively adjusted.
A-4
Reconciliation of Non-GAAP Financial
Measures in Accordance with SEC Regulations G and S-K
We report our financial results in conformity with accounting
principles generally accepted in the United States of America, or
GAAP, and also communicate with investors using certain non-GAAP
financial measures. These non-GAAP financial measures are not in
accordance with, nor are they a substitute for or superior to, the
comparable GAAP financial measures. These non-GAAP financial
measures are intended to supplement presentation of our financial
results that are prepared in accordance with GAAP. Based upon
feedback from investors and financial analysts, we believe that the
supplemental non-GAAP financial measures we provide are useful to
their assessment of our performance and operating trends, as well
as liquidity.
Our non-GAAP financial measures exclude the impact of certain
events, activities, or strategic decisions. The accounting effects
of these events, activities or decisions, which are included in the
GAAP financial measures, may make it difficult to assess our
underlying performance in a single period. By excluding the
accounting effects, both positive and negative, of certain items
(e.g., restructuring charges, legal settlements, certain effects of
strategic transactions and related costs, losses from debt
extinguishments, losses from curtailment and settlement of pension
obligations, gains or losses on sales of certain assets, and other
items), we believe that we are providing meaningful supplemental
information to facilitate an understanding of our core operating
results and liquidity measures. These non-GAAP financial measures
are used internally to evaluate trends in our underlying
performance, as well as to facilitate comparison to the results of
competitors for a single period. While some of the items we exclude
from GAAP financial measures recur, they tend to be disparate in
amount, frequency, or timing.
We use the following non-GAAP financial measures in the
accompanying news release and presentation:
Sales change ex. currency refers to the increase or decrease in
sales excluding the estimated impact of currency translation. The
estimated impact of currency translation is calculated on a
constant currency basis, with prior period results translated at
current period average exchange rates to exclude the effect of
currency fluctuations.
Organic sales change refers to the increase or decrease in sales
excluding the estimated impact of currency translation, product
line exits, acquisitions and divestitures, and, where applicable,
the extra week in our fiscal year.
We believe that sales change ex. currency and organic sales
change assist investors in evaluating the sales growth from the
ongoing activities of our businesses and provide greater ability to
evaluate our results from period to period.
Adjusted operating margin refers to income before interest
expense and taxes, excluding restructuring charges and other
items, as a percentage of sales.
Adjusted tax rate refers to our anticipated full-year GAAP tax
rate using the most likely scenario in a range of estimated tax
rates for the year. This range includes various items such as the
impact of the discrete rates applicable to the adjustments we make
in calculating our adjusted non-GAAP earnings, changes in uncertain
tax positions and our repatriation assertions on unremitted
earnings, and other items that may impact our full-year GAAP tax
rate.
Adjusted net income refers to income before taxes, tax-effected
at the adjusted tax rate, and adjusted for tax-effected
restructuring charges and other items.
Adjusted net income per common share, assuming dilution
(adjusted EPS) refers to adjusted net income divided by weighted
average number of common shares outstanding, assuming dilution.
We believe that adjusted operating margin, adjusted net income,
and adjusted EPS assist investors in understanding our core
operating trends and comparing our results with those of our
competitors.
Free cash flow refers to cash flow from operations, less
payments for property, plant and equipment, software and other
deferred charges, plus proceeds from sales of property, plant and
equipment, plus (minus) net proceeds from sales (purchases) of
investments. We believe that free cash flow assists investors by
showing the amount of cash we have available for debt reductions,
dividends, share repurchases, and acquisitions.
The following reconciliations are provided in accordance with
Regulations G and S-K and reconcile our non-GAAP financial measures
with the most directly comparable GAAP financial measures.
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 Six Months Ended Jul. 1, 2017
Jul. 2, 2016 Jul. 1, 2017 Jul. 2, 2016
Reconciliation from GAAP to Non-GAAP
Operating Margins: Net sales $ 1,626.9 $ 1,541.5 $
3,199.0 $ 3,027.0
Income before taxes $ 149.5 $ 99.3 $ 285.4 $ 222.8
Income before taxes as a percentage of sales
9.2 % 6.4 % 8.9 %
7.4 %
Adjustment:
Interest expense $ 16.2 $ 15.4 $ 32.9 $ 30.7
Operating income before
interest expense and taxes $ 165.7 $ 114.7 $ 318.3 $ 253.5
Operating Margins 10.2 %
7.4 % 9.9 % 8.4 %
Income before taxes $ 149.5 $ 99.3 $
285.4 $ 222.8 Adjustments: Restructuring charges:
Severance and related costs 7.3 3.6 13.0 8.8 Asset
impairment and lease cancellation charges 0.3 2.8 0.3 3.2
Transaction costs 2.6 2.1 3.4 2.1 Loss from settlement of
pension obligations --- 41.4 --- 41.4 Loss on sale of asset
--- 0.3 --- 0.3 Interest expense 16.2 15.4 32.9 30.7
Adjusted
operating income before interest expense and taxes (non-GAAP) $
175.9 $ 164.9 $ 335.0 $ 309.3
Adjusted Operating Margins
(non-GAAP) 10.8 % 10.7 % 10.5 % 10.2 %
Reconciliation from GAAP to Non-GAAP Net
Income: As reported net income $ 120.9 $ 80.0 $ 233.1 $
169.6 Adjustments: Restructuring charges 7.6 6.4 13.3
12.0 Transaction costs 2.6 2.1 3.4 2.1 Loss from settlement of
pension obligations --- 41.4 --- 41.4 Loss on sale of asset --- 0.3
--- 0.3 Tax effect of pre-tax adjustments and impact of adjusted
tax rate(1) (13.3 ) (31.5 ) (32.3 ) (41.5 )
Adjusted Net Income (non-GAAP) $ 117.8
$ 98.7 $ 217.5 $ 183.9
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 Six Months
Ended Jul. 1, 2017 Jul. 2, 2016 Jul. 1,
2017 Jul. 2, 2016
Reconciliation from GAAP to Non-GAAP Net Income per Common
Share: As reported net income per common share, assuming
dilution $ 1.34 $ 0.88 $ 2.59 $ 1.87 Adjustments per common
share, net of tax:
Restructuring charges, loss from
settlement of pension obligations, transaction costs, and loss on
sale of asset(1)
(0.03 ) 0.21 (0.17 ) 0.15
Adjusted Net Income per Common Share,
assuming dilution (non-GAAP)
$ 1.31 $ 1.09 $ 2.42 $ 2.02
Weighted average number of common shares
outstanding, assuming dilution
89.9 90.7 90.0 90.9
(1) The adjusted tax rate was 26% and 28%
for the three and six months ended July 1, 2017, respectively, and
34% for the three and six months ended July 2, 2016.
(UNAUDITED) Three Months Ended Six
Months Ended Jul. 1, 2017 Jul. 2, 2016
Jul. 1, 2017 Jul. 2, 2016
Reconciliation of Free Cash Flow: Net cash provided
by operating activities $ 163.0 $ 222.3 $ 178.3 $ 216.0
Purchases of property, plant and equipment (36.2 ) (36.1 ) (66.5 )
(61.3 ) Purchases of software and other deferred charges
(8.0 ) (4.1 ) (14.9 ) (6.1 ) Proceeds from sales of
property, plant and equipment 0.2 3.1 0.2 3.2 (Purchases)
sales of investments, net (3.9 ) 3.8 (4.1 ) ---
Free Cash Flow (non-GAAP) $ 115.1 $
189.0 $ 93.0 $ 151.8
A-6
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Second Quarter Ended
NET SALES OPERATING INCOME OPERATING MARGINS
2017 2016
2017 (1)
2016 (2)
2017 2016 Label and Graphic Materials $
1,123.1 $ 1,064.6 $ 148.0 $ 138.3 13.2 % 13.0 % Retail Branding and
Information Solutions 375.1 358.5 28.2 23.1 7.5 % 6.4 % Industrial
and Healthcare Materials 128.7 118.4 11.0 16.9 8.5 % 14.3 %
Corporate Expense N/A N/A (21.5 ) (63.6
) N/A N/A TOTAL FROM OPERATIONS $ 1,626.9 $
1,541.5 $ 165.7 $ 114.7 10.2 % 7.4 % (1)
Operating income for the second quarter of 2017 includes severance
and related costs of $7.3, asset impairment and lease cancellation
charges of $.3, and transaction costs of $2.6. Of the total $10.2,
the Label and Graphic Materials segment recorded $5, the Retail
Branding and Information Solutions segment recorded $2.8, and the
Industrial and Healthcare Materials segment recorded $2.4.
(2) Operating income for the second quarter of 2016 includes
severance and related costs of $3.6, asset impairment and lease
cancellation charges of $2.8, loss from settlement of pension
obligations of $41.4, transaction costs of $2.1, and loss on sale
of asset of $.3. Of the total $50.2, the Label and Graphic
Materials segment recorded $6.2, the Retail Branding and
Information Solutions segment recorded $2.4, the Industrial and
Healthcare Materials segment recorded $.2, and Corporate recorded
$41.4.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION Second Quarter Ended OPERATING INCOME
OPERATING MARGINS 2017 2016 2017
2016
Label and Graphic
Materials
Operating income and margins, as reported $ 148.0 $ 138.3 13.2 %
13.0 % Adjustments: Restructuring charges: Severance and related
costs 4.7 2.1 0.4 % 0.2 % Asset impairment charges 0.1 2.4 --- 0.2
% Transaction costs 0.2 1.7 ---
0.2 % Adjusted operating income and margins (non-GAAP) $ 153.0
$ 144.5 13.6 % 13.6 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 28.2 $ 23.1 7.5 % 6.4 %
Adjustments: Restructuring charges: Severance and related costs 2.6
1.3 0.7 % 0.4 % Asset impairment and lease cancellation charges 0.2
0.4 0.1 % 0.1 % Loss on sale of asset --- 0.3 --- 0.1 % Transaction
costs related to sale of product line --- 0.4
--- 0.1 % Adjusted operating income and margins
(non-GAAP) $ 31.0 $ 25.5 8.3 % 7.1 %
Industrial and
Healthcare Materials
Operating income and margins, as reported $ 11.0 $ 16.9 8.5 % 14.3
% Adjustments: Restructuring charges: Severance and related costs
--- 0.2 --- 0.1 % Transaction costs 2.4 ---
1.9 % --- Adjusted operating income and margins
(non-GAAP) $ 13.4 $ 17.1 10.4 % 14.4 %
A-7
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Six Months
Year-to-Date NET SALES OPERATING INCOME OPERATING
MARGINS 2017 2016
2017 (1)
2016 (2)
2017 2016 Label and Graphic
Materials $ 2,212.7 $ 2,077.2 $ 283.8 $ 264.9 12.8 % 12.8 % Retail
Branding and Information Solutions 741.9 718.0 54.8 44.6 7.4 % 6.2
% Industrial and Healthcare Materials 244.4 231.8 23.8 32.5 9.7 %
14.0 % Corporate Expense N/A N/A (44.1 )
(88.5 ) N/A N/A TOTAL
FROM OPERATIONS $ 3,199.0 $ 3,027.0 $ 318.3 $ 253.5
9.9 % 8.4 % (1) Operating income for the first half
of 2017 includes severance and related costs of $13, asset
impairment and lease cancellation charges of $.3, and transaction
costs of $3.4. Of the total $16.7, the Label and Graphic Materials
segment recorded $7.2, the Retail Branding and Information
Solutions segment recorded $6.6, and the Industrial and Healthcare
Materials segment recorded $2.9. (2) Operating income for
the first half of 2016 includes severance and related costs of
$8.8, asset impairment and lease cancellation charges of $3.2, loss
from settlement of pension obligations of $41.4, transaction costs
of $2.1, and loss on sale of asset of $.3. Of the total $55.8, the
Label and Graphic Materials segment recorded $8.3, the Retail
Branding and Information Solutions segment recorded $5.6, the
Industrial and Healthcare Materials segment recorded $.5, and
Corporate recorded $41.4.
RECONCILIATION FROM GAAP TO NON-GAAP
SUPPLEMENTARY INFORMATION
Six Months Year-to-Date
OPERATING INCOME OPERATING MARGINS 2017
2016 2017 2016
Label and Graphic
Materials
Operating income and margins, as reported $ 283.8 $ 264.9 12.8 %
12.8 % Adjustments: Restructuring charges: Severance and related
costs 6.7 4.2 0.3 % 0.2 % Asset impairment charges 0.1 2.4 --- 0.1
% Transaction costs 0.4 1.7 0.1
% 0.1 % Adjusted operating income and margins (non-GAAP) $
291.0 $ 273.2 13.2 % 13.2 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 54.8 $ 44.6 7.4 % 6.2 %
Adjustments:
Restructuring charges: Severance and related costs 6.1 4.1 0.8 %
0.6 % Asset impairment and lease cancellation charges 0.2 0.8 ---
0.1 % Loss on sale of asset --- 0.3 --- --- Transaction costs
related to sale of product line 0.3 0.4
0.1 % 0.1 % Adjusted operating income and margins
(non-GAAP) $ 61.4 $ 50.2 8.3 % 7.0 %
Industrial and
Healthcare Materials
Operating income and margins, as reported $ 23.8 $ 32.5 9.7 % 14.0
% Adjustments: Restructuring charges: Severance and related costs
0.2 0.5 0.1 % 0.2 % Transaction costs 2.7
--- 1.1 % --- Adjusted operating
income and margins (non-GAAP) $ 26.7 $ 33.0
10.9 % 14.2 %
A-8
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (UNAUDITED)
Second Quarter 2017
Total
Company
Label andGraphicMaterials
Retail Brandingand
InformationSolutions
Industrial andHealthcareMaterials
Reconciliation of GAAP to Non-GAAP sales change Reported
sales change 5.5 % 5.5 % 4.6 % 8.7 % Foreign currency translation
1.1 % 1.1 % 1.2 % 1.6 % Sales
change ex. currency (non-GAAP)(1) 6.7 % 6.6 % 5.8 % 10.3 %
Acquisitions (3.7 %) (4.3 %) ---
(10.4 %) Organic sales change (non-GAAP)(1)
2.9 % 2.3 % 5.8 % (0.1 %)
(1)Totals may not sum due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170725005547/en/
Avery Dennison CorporationMedia Relations:Rob Six,
626-304-2361rob.six@averydennison.comorInvestor Relations:Cynthia
S. Guenther, 626-304-2204investorcom@averydennison.com
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