- 3Q15 Reported and Adjusted EPS of
$0.87
- 3Q15 Net sales declined approximately 6
percent to $1.47 billion
- Net sales up approximately 5 percent on
organic basis
- RBIS transformation underway; targeting
accelerated growth and margin expansion to achieve previously
communicated 2018 financial goals
- Repurchased 1.9 million shares for $109
million and paid $100 million in dividends in the first nine months
of 2015
- Updated FY15 Reported EPS guidance to
$2.80 to $2.90, reflecting increase in estimated restructuring
charges
- Narrowed range of full year guidance
for adjusted EPS to $3.30 to $3.40
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its third quarter ended October
3, 2015. All non-GAAP financial measures referenced in this
document are reconciled to GAAP in the attached tables. Unless
otherwise indicated, the discussion of the company’s results is
focused on its continuing operations, and comparisons are to the
same period in the prior year.
“I’m happy to report another strong quarter, keeping us on track
to achieve our financial targets for the year,” said Dean
Scarborough, Avery Dennison chairman and CEO. “Sales growth for
both of our core businesses was within our long-term target range,
driving total company organic growth of five percent, with 160
basis points of margin expansion.
“Our Pressure-sensitive Materials segment once again delivered
strong results, reflecting the continued execution of our strategy
to leverage our scale and strengths in innovation, quality, and
service across the entire portfolio,” Scarborough
added. “Retail Branding and Information Solutions also made
solid progress in the quarter, in terms of both top-line growth and
margin improvement, with particular strength in radio-frequency
identification products. The team has begun to execute a new
strategy to accelerate growth in the core business through a more
competitive, faster, and simpler model that will better serve the
needs of our customers in all segments of the market.
“Overall, I’m pleased with the progress our team has made. We
delivered double-digit growth in adjusted earnings per share, in
spite of challenging economic conditions in many parts of the world
and significant headwinds from currency translation. I remain
confident that the consistent execution of our strategies,
including the RBIS transformation, 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, “Third Quarter 2015 Financial Review and
Analysis,” posted on the company’s website at
www.investors.averydennison.com, and furnished to the SEC on Form
8-K.
Third Quarter 2015 Results by
Segment
All references to sales reflect comparisons on an organic basis,
which exclude the estimated impact of currency translation, product
line exits, acquisitions and divestitures, and, where applicable,
the extra week in the prior fiscal year. Adjusted operating margin
refers to income before interest expense and taxes, excluding
restructuring costs and other items, as a percentage of sales.
Pressure-sensitive Materials (PSM)
- PSM sales increased approximately 5
percent. Within the segment, sales in both Label and Packaging
Materials and combined Graphics and Performance Tapes increased
mid-single digits.
- Operating margin improved 190 basis
points to 12.0 percent as the impact of productivity initiatives,
higher volume and favorable product mix, and the net benefit from
price and raw material input costs more than offset higher
employee-related costs. Adjusted operating margin improved 180
basis points.
Retail Branding and Information Solutions (RBIS)
- RBIS sales were up approximately 4
percent.
- Operating margin increased 140 basis
points to 6.8 percent as the impact of productivity initiatives and
higher volume more than offset higher employee-related costs.
Adjusted operating margin increased 120 basis points.
Other
Share Repurchases
The company repurchased 0.8 million shares in the third quarter
of 2015 at an aggregate cost of $47 million.
Income Taxes
The third quarter effective tax rate was 30 percent. The
adjusted tax rate for the third 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 third quarter, the company realized $21 million in
pre-tax savings from restructuring, net of transition costs, and
incurred pre-tax restructuring charges of $7 million, approximately
three-quarters of which represent cash costs.
For full year 2015, the company now estimates that it will
realize more than $70 million in pre-tax savings from
restructuring, net of transition costs, and incur pre-tax
restructuring charges of approximately $65 million, most of which
will represent cash costs. This estimate represents an
approximately $10 million increase in the company’s previous
guidance for total restructuring charges for the year, as a result
of further cost reduction actions planned as part of the business
model transformation underway within RBIS.
The new strategy for RBIS is focused on accelerating growth
through a more regionally-driven business model that is more
competitive, faster, and less complex. To achieve these objectives,
the company is implementing a multi-year plan to streamline
decision-making and eliminate management layers, while further
consolidating its manufacturing footprint, to reduce costs across
the global organization.
Combined with other recent actions, the company currently
anticipates 2016 pre-tax savings, net of transition costs, of
approximately $60 million from restructuring actions within RBIS.
The execution of these actions will allow the business to be more
competitive in the less differentiated segments of the market,
facilitating the achievement of RBIS’ previously communicated
financial targets, including an operating margin of ten to eleven
percent by 2018.
Outlook
In its supplemental presentation materials, “Third Quarter 2015
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its 2015 financial
results. Based on the factors listed and other assumptions, the
company has updated its previous guidance for 2015 earnings per
share, narrowing the range and reducing the midpoint by $0.07 to
$2.80 to $2.90, reflecting an increase in estimated restructuring
charges.
Excluding an estimated $0.50 per share for restructuring costs
and other items, the company has narrowed its expectations for
adjusted (non-GAAP) earnings per share to $3.30 to $3.40, with no
change to the midpoint of the range.
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 from continuing operations
of $6.3 billion in 2014. 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 2014 Form 10-K, filed
on February 25, 2015 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.
Third Quarter Financial Summary - Preliminary,
unaudited (in millions, except % and per share amounts)
3Q 3Q
% Change vs. P/Y
2015 2014
Reported Organic
(a) Net sales, by segment:
Pressure-sensitive Materials $ 1,083.7 $ 1,157.0 (6 %) 5 % Retail
Branding and Information Solutions 366.8 383.9 (4 %) 4 % Vancive
Medical Technologies 17.6
18.7 (6 %) 3 % Total net sales $ 1,468.1 $ 1,559.6 (6 %) 5 %
As Reported (GAAP) Adjusted Non-GAAP
(b) 3Q 3Q % of Sales 3Q
3Q % of Sales 2015 2014
(c) % Change
2015 2014 (c)
2015 2014 (d) %
Change 2015 2014
Operating income (loss) before interest
and taxes, by segment:
Pressure-sensitive Materials $ 130.5 $ 116.6 12.0 % 10.1 % $ 131.6
$ 118.7 12.1 % 10.3 % Retail Branding and Information Solutions
25.1 20.6 6.8 % 5.4 % 29.0 25.8 7.9 % 6.7 % Vancive Medical
Technologies (1.2 ) (2.9 ) (6.8 %) (15.5 %) 0.5 (2.8 ) 2.8 % (15.0
%) Corporate expense (23.6 )
(19.8 ) (23.3 ) (17.3 )
Total operating income before interest and
taxes / operating margins
$ 130.8 $ 114.5 14 % 8.9 % 7.3 % $ 137.8 $ 124.4 11 % 9.4 % 8.0 %
Interest expense $ 14.7 $ 15.4 $ 14.7 $ 15.4 Income
from continuing operations before taxes $ 116.1 $ 99.1 17 % 7.9 %
6.4 % $ 123.1 $ 109.0 13 % 8.4 % 7.0 % Provision for income
taxes $ 34.8 $ 38.2 $ 41.8 $ 36.0 Income from continuing
operations $ 81.3 $ 60.9 33 % 5.5 % 3.9 % $ 81.3 $ 73.0 11 % 5.5 %
4.7 %
Income (loss) from discontinued
operations, net of tax (e)
$ 0.4 ($0.7 ) n/m Net income $ 81.7 $ 60.2 36 % 5.6 % 3.9 %
Net income (loss) per common share, assuming dilution:
Continuing operations $ 0.87 $ 0.64 36 % $ 0.87 $ 0.77 13 %
Discontinued operations 0.01 (0.01 ) n/m Total
Company $ 0.88 $ 0.63 40 %
2015
2014 3Q Free Cash Flow from Continuing
Operations (f) $ 85.2 $ 152.9 YTD Free Cash Flow from Continuing
Operations (f) $ 199.2 $ 82.1
(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 the prior fiscal year. (b) Excludes restructuring costs 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 to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
(d) Non-GAAP amounts have not been revised for the adjustments
referenced in note (c) above since the impact is not material. (e)
"Income (loss) from discontinued operations, net of tax" relates to
the 2013 sale of the Office and Consumer Products and Designed and
Engineered Solutions businesses. (f)
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).
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts) (UNAUDITED)
Three Months
Ended Nine Months Ended Oct. 03, 2015
Sep. 27, 2014
(1)
Oct. 03, 2015
(1)
Sep. 27, 2014
(1)
Net sales $ 1,468.1 $ 1,559.6
$
4,512.1
$
4,725.5
Cost of products sold 1,062.2 1,158.9 3,258.6 3,489.4
Gross
profit 405.9 400.7 1,253.5 1,236.1 Marketing, general &
administrative expense 268.1 278.4 841.8 873.1 Interest
expense 14.7 15.4 45.3 46.4 Other expense, net (2) 7.0 7.8
49.0 53.6
Income from continuing operations before taxes 116.1 99.1
317.4 263.0 Provision for income taxes 34.8 38.2 99.5 85.5
Income from continuing operations 81.3 60.9 217.9 177.5
Income (loss) from discontinued operations, net of tax 0.4 (0.7 )
(0.6 ) (3.0 )
Net income $ 81.7 $ 60.2
$
217.3
$
174.5
Per share amounts: Net income (loss) per common
share, assuming dilution Continuing operations $ 0.87 $ 0.64
$
2.35
$
1.84
Discontinued operations 0.01 (0.01 ) (0.01 ) (0.03 )
Net income
per common share, assuming dilution $ 0.88 $ 0.63
$
2.34
$
1.81
Weighted average number of common shares
outstanding, assuming dilution
93.2 95.2
92.9
96.6 (1)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
(2)
"Other expense, net" for the third quarter
of 2015 includes severance and related costs of $4.7, asset
impairment and lease cancellation charges of $1.9, loss on sale of
product line of $.2, and legal settlement of $.2.
"Other expense, net" for the third quarter
of 2014 includes severance and related costs of $5.1, asset
impairment and lease cancellation charges of $1.6, and
indefinite-lived intangible asset impairment charge of $3,
partially offset by gain on sale of assets of $1.9.
"Other expense, net" 2015 YTD includes
severance and related costs of $35, asset impairment and lease
cancellation charges of $5.5, and loss on sale of product line and
related exit costs of $10.5, partially offset by gain on sale of
asset of $1.7 and legal settlements of $.3.
"Other expense, net" 2014 YTD includes
severance and related costs of $48, asset impairment and lease
cancellation charges of $4.5, indefinite-lived intangible asset
impairment charge of $3, and loss from curtailment of pension
obligation of $.6, partially offset by gains on sales of assets of
$2.5.
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 costs, 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 from
continuing operations before interest expense and taxes, excluding
restructuring costs 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 income from continuing
operations refers to reported income from continuing operations
adjusted for tax-effected restructuring costs and other items.
Adjusted EPS refers to reported income from continuing operations
per common share, assuming dilution, adjusted for tax-effected
restructuring costs 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
Nine Months Ended
Oct. 03, 2015 Sep. 27, 2014
(1)
Oct. 03, 2015
(1)
Sep. 27, 2014
(1)
Reconciliation of Operating Margins: Net sales
$ 1,468.1 $ 1,559.6 $ 4,512.1 $ 4,725.5
Income from continuing operations before taxes $ 116.1 $
99.1 $ 317.4 $ 263.0
Income from continuing operations before taxes
as a percentage of sales
7.9 % 6.4 %
7.0 % 5.6 %
Adjustment: Interest
expense $ 14.7 $ 15.4 $ 45.3 $ 46.4
Operating income from continuing
operations before interest expense and taxes $ 130.8 $ 114.5 $
362.7 $ 309.4
Operating Margins 8.9 %
7.3 % 8.0 % 6.5 %
As
reported income from continuing operations before taxes $ 116.1 $
99.1 $ 317.4 $ 263.0 Adjustments (1) N/A 2.1
(1.0 ) 3.1 Previously reported
income from continuing operations before taxes N/A 101.2 316.4
266.1 Adjustments: Restructuring costs:
Severance and related costs 4.7 5.1 35.0 48.0 Asset
impairment and lease cancellation charges 1.9 1.6 5.5 4.5
Other items(2) 0.4 1.1 8.5 1.1 Interest expense 14.7 15.4
45.3 46.4
Adjusted operating income
from continuing operations before interest expense and taxes
(non-GAAP) $ 137.8 $ 124.4 $ 410.7 $ 366.1
Adjusted Operating
Margins (non-GAAP) 9.4 % 8.0 %
9.1 % 7.7 %
Reconciliation
of GAAP to Non-GAAP Income from Continuing Operations:
As reported income from continuing operations $ 81.3 $ 60.9 $ 217.9
$ 177.5 Adjustments (1) N/A 4.1
(0.6 ) 3.5 Previously reported income from
continuing operations N/A 65.0 217.3 181.0 Non-GAAP
adjustments, net of tax: Restructuring costs and other
items(3) --- 8.0 23.9 33.2
Adjusted Non-GAAP Income from
Continuing Operations $ 81.3
$ 73.0 $ 241.2
$ 214.2
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 Nine Months Ended
Oct. 03, 2015 Sep. 27, 2014
(1)
Oct. 03, 2015
(1)
Sep. 27, 2014
(1)
Reconciliation of GAAP to Non-GAAP Income per Common
Share from Continuing Operations: As reported income per
common share from continuing operations, assuming dilution $ 0.87 $
0.64 $ 2.35 $ 1.84
Adjustments (1)
N/A 0.04 (0.01 ) 0.03 Previously
reported income per common share from continuing operations,
assuming dilution N/A 0.68 2.34 1.87 Non-GAAP adjustments
per common share, net of tax: Restructuring costs and other
items(3) --- 0.09 0.26 0.35
Adjusted Non-GAAP Income per Common
Share from Continuing Operations, assuming dilution
$ 0.87 $ 0.77 $ 2.60 $ 2.22
Weighted average number of common
shares outstanding, assuming dilution
93.2 95.2
92.9 96.6 (1)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
(2)
Includes loss on sale of product line and
related exit costs, indefinite-lived intangible asset impairment
charge, loss from curtailment of pension obligation, gains on sales
of assets, and legal settlements.
(3) Reflects restructuring costs and other items,
tax-effected at the adjusted tax rate.
(UNAUDITED)
Three Months Ended Nine Months
Ended Oct. 03, 2015 Sep. 27, 2014 Oct.
03, 2015 Sep. 27, 2014
Reconciliation of GAAP to Non-GAAP
Free Cash Flow: Net cash provided by operating
activities $ 119.4 $ 190.4 $ 290.3 $ 200.2 Purchases of
property, plant and equipment (33.2 ) (33.3 ) (89.6 ) (100.8 )
Purchases of software and other deferred charges (5.0 ) (7.6
) (9.0 ) (22.0 ) Proceeds from sales of property, plant and
equipment 4.3 3.5 7.1 4.1 (Purchases) sales of investments,
net 0.1 (0.1 ) (0.2 ) ---
Plus (minus): divestiture-related payments
and free cash outflow (inflow) from discontinued operations
(0.4 ) --- 0.6 0.6
Free Cash Flow - Continuing Operations
$ 85.2 $ 152.9
$ 199.2 $ 82.1
A-4
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Third Quarter Ended
NET SALES OPERATING INCOME OPERATING
MARGINS 2015 2014
2015 (1)
2014 (2)
2015 2014 Pressure-sensitive Materials $ 1,083.7 $ 1,157.0 $
130.5 $ 116.6 12.0 % 10.1 % Retail Branding and Information
Solutions 366.8 383.9 25.1 20.6 6.8 % 5.4 % Vancive Medical
Technologies 17.6 18.7 (1.2 ) (2.9 ) (6.8 %) (15.5 %) Corporate
Expense N/A N/A (23.6 )
(19.8 )
(3)
N/A N/A TOTAL FROM
CONTINUING OPERATIONS $ 1,468.1 $ 1,559.6 $
130.8 $ 114.5
(3)
8.9 % 7.3 %
(3)
(1)
Operating income for the third quarter of
2015 includes severance and related costs of $4.7, asset impairment
and lease cancellation charges of $1.9, loss on sale of product
line of $.2 and legal settlement of $.2. Of the total $7, the
Pressure-sensitive Materials segment recorded $1.1, the Retail
Branding and Information Solutions segment recorded $3.9, the
Vancive Medical Technologies segment recorded $1.7, and Corporate
recorded $.3.
(2)
Operating income for the third quarter of
2014 includes severance and related costs of $5.1, asset impairment
and lease cancellation charges of $1.6, and indefinite-lived
intangible asset impairment charge of $3, partially offset by gain
on sale of assets of $1.9. Of the total $7.8, the
Pressure-sensitive Materials segment recorded $2.1, the Retail
Branding and Information Solutions segment recorded $5.2, the
Vancive Medical Technologies segment recorded $.1, and Corporate
recorded $.4.
(3)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION Third Quarter
Ended OPERATING INCOME OPERATING MARGINS
2015
2014 2015 2014
Pressure-sensitive Materials
Operating income and margins, as reported $
130.5 $ 116.6 12.0 % 10.1
% Adjustments: Restructuring costs: Severance and related
costs 1.1 2.1 0.1
% 0.2 %
Adjusted operating income and
margins (non-GAAP) $ 131.6
$ 118.7 12.1 %
10.3 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $
25.1 $ 20.6 6.8 % 5.4
% Adjustments: Restructuring costs: Severance and related
costs 3.5 2.5 0.9 % 0.6 % Asset impairment and lease cancellation
charges 0.2 1.6 0.1 % 0.4 % Loss on sale of product line 0.2 ---
0.1 % --- Indefinite-lived intangible asset impairment charge ---
3.0 --- 0.8 % Gain on sale of asset ---
(1.9 ) --- (0.5 %)
Adjusted operating income and margins (non-GAAP) $
29.0 $ 25.8
7.9 % 6.7 %
Vancive Medical
Technologies
Operating loss and margins, as reported $ (1.2
) $ (2.9 ) (6.8 %)
(15.5 %) Adjustments: Restructuring costs: Severance
and related costs --- 0.1 --- 0.5 % Asset impairment charges
1.7 --- 9.6 %
---
Adjusted operating income (loss) and
margins (non-GAAP) $ 0.5
$ (2.8 ) 2.8 %
(15.0 %)
A-5
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Nine Months Year-to-Date
NET SALES OPERATING INCOME OPERATING MARGINS 2015
2014
2015 (1)
2014 (2)
2015 2014 Pressure-sensitive Materials
$ 3,318.4 $ 3,481.4 $ 383.2 $ 315.1 11.5 % 9.1 % Retail Branding
and Information Solutions 1,138.7 1,186.0 54.3 65.5 4.8 % 5.5 %
Vancive Medical Technologies 55.0 58.1 (4.7 ) (7.2 ) (8.5 %) (12.4
%) Corporate Expense N/A N/A
(70.1 )
(3)
(64.0 )
(3)
N/A N/A TOTAL FROM
CONTINUING OPERATIONS $ 4,512.1 $ 4,725.5 $
362.7
(3)
$ 309.4
(3)
8.0 %
(3)
6.5 %
(3)
(1)
Operating income for 2015 includes
severance and related costs of $35, asset impairment and lease
cancellation charges of $5.5, and loss on sale of product line and
related exit costs of $10.5, partially offset by gain on sale of
asset of $1.7 and legal settlements of $.3. Of the total $49, the
Pressure-sensitive Materials segment recorded $13.8, the Retail
Branding and Information Solutions segment recorded $29.4, the
Vancive Medical Technologies segment recorded $3.4, and Corporate
recorded $2.4.
(2)
Operating income for 2014 includes
severance and related costs of $48, asset impairment and lease
cancellation charges of $4.5, indefinite-lived intangible asset
impairment charge of $3, and loss from curtailment of pension
obligation of $.6, partially offset by gains on sales of assets of
$2.5. Of the total $53.6, the Pressure-sensitive Materials segment
recorded $36.3, the Retail Branding and Information Solutions
segment recorded $16.8, the Vancive Medical Technologies segment
recorded $.1, and Corporate recorded $.4.
(3)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION Nine Months
Year-to-Date
OPERATING INCOME
OPERATING MARGINS
2015
2014 2015 2014
Pressure-sensitive Materials
Operating income and margins, as reported $
383.2 $ 315.1 11.5 % 9.1
% Adjustments: Restructuring costs: Severance and related
costs 12.4 34.9 0.4 % 1.0 % Asset impairment charges 3.1 0.8 0.1 %
--- Gain on sale of asset (1.7 ) --- --- --- Loss from curtailment
of pension obligation ---
0.6 --- ---
Adjusted
operating income and margins (non-GAAP) $ 397.0
$ 351.4
12.0 % 10.1 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $
54.3 $ 65.5 4.8 % 5.5
% Adjustments: Restructuring costs: Severance and related
costs 18.7 12.6 1.6 % 1.1 % Asset impairment and lease cancellation
charges 0.7 3.7 0.1 % 0.3 % Loss on sale of product line and
related exit costs 10.5 --- 0.9 % --- Legal settlement (0.5 ) ---
--- --- Indefinite-lived intangible asset impairment charge --- 3.0
--- 0.2 % Gain on sales of assets ---
(2.5 ) --- (0.2 %)
Adjusted operating income and margins (non-GAAP) $
83.7 $ 82.3
7.4 % 6.9 %
Vancive Medical
Technologies
Operating loss and margins, as reported $ (4.7
) $ (7.2 ) (8.5 %)
(12.4 %) Adjustments: Restructuring costs: Severance
and related costs 1.7 0.1 3.1 % 0.2 % Asset impairment charges
1.7 --- 3.0 %
---
Adjusted operating loss and
margins (non-GAAP) $ (1.3 )
$ (7.1 ) (2.4 %)
(12.2 %)
A-6
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED)
ASSETS Oct. 03, 2015 Sep. 27, 2014
(1)
Current assets: Cash and cash equivalents $ 171.7 $ 195.6
Trade accounts receivable, net 999.0 1,087.6 Inventories, net 512.4
547.2 Assets held for sale --- 0.9 Other current assets 232.9 238.5
Total current assets 1,916.0 2,069.8 Property, plant
and equipment, net 840.6 884.1 Goodwill 690.7 742.0 Other
intangibles resulting from business acquisitions, net 50.7 73.9
Non-current deferred income taxes 312.4 247.6 Other assets 438.5
484.9
$ 4,248.9 $ 4,502.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
liabilities: Short-term borrowings and current portion of long-term
debt and capital leases $ 85.1 $ 167.1 Accounts payable 840.4 867.0
Other current liabilities 544.0 598.8
Total current liabilities
1,469.5 1,632.9 Long-term debt and capital leases 968.5
945.1 Other long-term liabilities 755.6 633.8 Shareholders' equity:
Common stock 124.1 124.1 Capital in excess of par value 825.5 818.6
Retained earnings 2,244.3 2,075.9 Treasury stock at cost (1,483.5 )
(1,378.5 ) Accumulated other comprehensive loss (655.1 ) (349.6 )
Total shareholders' equity 1,055.3 1,290.5
$ 4,248.9 $
4,502.3
(1)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
A-7
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Nine
Months Ended
Oct. 03, 2015
(1)
Sep. 27, 2014
(1)
Operating Activities: Net income $
217.3 $ 174.5 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 95.3
99.0 Amortization 47.5 49.5 Provision for doubtful
accounts and sales returns 36.6 32.7 Loss on sale of
businesses --- 3.0 Indefinite-lived intangible asset
impairment charge --- 3.0 Net losses from asset impairments
and sales/disposals of assets 10.9 3.3 Stock-based
compensation 18.4 22.1 Other non-cash expense and loss 38.9
32.1 Changes in assets and liabilities and other adjustments
(174.6 ) (219.0 )
Net cash provided by operating activities
290.3 200.2
Investing Activities: Purchases of
property, plant and equipment (89.6 ) (100.8 ) Purchases of
software and other deferred charges (9.0 ) (22.0 ) Proceeds
from sales of property, plant and equipment 7.1 4.1
Purchases of investments, net (0.2 ) --- Other 1.5 ---
Net cash used in investing activities (90.2 ) (118.7 )
Financing Activities: Net (decrease) increase
in borrowings (maturities of 90 days or less) (109.8 ) 86.3
Payments of debt (maturities longer than 90 days) (6.2 ) (1.1 )
Dividends paid (99.6 ) (93.4 ) Share repurchases
(108.5 ) (247.3 ) Proceeds from exercises of stock options,
net 78.4 22.6 Other (1.2 ) (2.4 )
Net cash used in
financing activities (246.9 ) (235.3 )
Effect of foreign
currency translation on cash balances (8.5 ) (2.2 )
Decrease in
cash and cash equivalents (55.3 ) (156.0 ) Cash and cash
equivalents, beginning of year 227.0 351.6
Cash and cash
equivalents, end of period $ 171.7 $ 195.6
(1)
Certain prior period amounts have been
revised to reflect the impact of adjustments made to certain of the
Company's benefit plan balances and to correct the timing of
previously recorded out-of-period adjustments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151029005378/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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