- 2Q16 Reported EPS of $0.88
- Adjusted EPS (non-GAAP) of $1.09
- 2Q16 Net sales increased approx. 2
percent to $1.54 billion
- Organic sales growth (non-GAAP) of
approx. 4%
- Repurchased 2.4 million shares (1.2
mil. net of dilution) and paid $70 million in dividends in the
first half of 2016
- Raised FY16 guidance midpoint for
Reported EPS by $0.10
- Raised FY16 guidance midpoint for
Adjusted EPS (non-GAAP) by $0.05
- Previously announced acquisition of
Mactac Europe on track for August close
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its second quarter ended July 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 had another solid quarter, with earnings above our
expectations,” said Mitch Butier, Avery Dennison president and CEO.
“PSM delivered exceptional profitability, reflecting strong organic
growth in the emerging markets, and productivity gains globally,”
Butier added. “Amidst challenging apparel market conditions, RBIS
earnings came in as expected. The team continues to make good
progress with the transformation of this business.
“We have raised our outlook for full year earnings per share,
reflecting the strong operating performance in the second quarter,”
said Butier. “We remain confident that the consistent execution of
our strategies will enable us to continue meeting 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 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.
Second Quarter 2016 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.
Pressure-sensitive Materials (PSM)
- PSM reported sales increased
approximately 3 percent; on an organic basis, sales grew
approximately 5 percent. Within the segment, organic sales growth
was mid-single digit for Label and Packaging Materials, and
low-single digit for combined Graphics and Performance Tapes.
- Operating margin improved 130 basis
points to 13 percent as the benefit of productivity initiatives and
increased volume more than offset higher employee-related costs and
the net impact of price and raw material input costs. Adjusted
operating margin improved 120 basis points.
Retail Branding and Information Solutions (RBIS)
- RBIS reported sales decreased 2
percent; on an organic basis, sales grew approximately 2
percent.
- Operating margin increased by nearly
five points to 7.5 percent, largely due to the benefit of lower
restructuring charges. Adjusted operating margin improved 30 basis
points as the net savings associated with the business model
transformation and higher volume were partially offset by the
impact of strategic pricing actions and higher employee-related
costs.
Other
Share Repurchases / Equity Dilution from Long-Term
Incentives
The company repurchased 0.9 million shares in the second quarter
of 2016 at an aggregate cost of $64 million. Net of dilution, the
company reduced its share count by 0.3 million in the second
quarter. The cost of repurchases, net of proceeds from stock option
exercises, was $39 million.
Income Taxes
The second quarter effective tax rate was approximately 19
percent, compared to approximately 36 percent last year,
reflecting the release of a valuation allowance associated
with structural simplification efforts, and favorable outcomes for
tax filing positions with certain foreign tax
jurisdictions. The adjusted tax rate for the second 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 second quarter, the company realized approximately $21
million in pre-tax savings from restructuring, net of transition
costs, and incurred pre-tax restructuring charges of approximately
$6 million, approximately two-thirds of which represented cash
charges.
Pension Settlement Charge
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 were retirement eligible under the terms of the plan.
This action was completed during the second quarter, with payments
made out of existing plan assets.
This action resulted in the settlement of approximately $70
million of the company’s pension liability, and a one-time,
non-cash charge of approximately $41 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, “Second 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 $3.35 to $3.50.
Excluding an estimated $0.15 per share for restructuring charges
and other items, and $0.30 per share for the non-cash charge to
settle the U.S. pension obligations, the company now expects
adjusted earnings per share (non-GAAP) of $3.80 to $3.95.
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,
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)
2Q
2Q % Change vs. P/Y
2016 2015
Reported Organic (a)
Net sales, by segment: Pressure-sensitive Materials
$
1,145.1 $ 1,114.1 3 % 5 % Retail
Branding and Information Solutions
378.0 383.8
(2 %) 2 % Vancive Medical Technologies
18.4 18.1
2 % --- Total net sales
$ 1,541.5
$ 1,516.0 2 % 4 %
As Reported (GAAP)
Adjusted Non-GAAP (b) 2Q 2Q
% % of Sales 2Q
2Q % %
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
$ 148.4 $
129.8 13.0 % 11.7 % $ 154.8 $
136.9 13.5 % 12.3 % Retail Branding and Information Solutions
28.3 10.0 7.5 % 2.6 %
30.7 30.0 8.1 % 7.8 % Vancive Medical Technologies
1.6
(1.4 ) 8.7 % (7.7 %) 1.6
(0.8 ) 8.7 % (4.4 %) Corporate expense
(63.6 )
(21.8 ) (22.2 )
(22.3 )
Total operating income before interest and
taxes / operating margins
$ 114.7 $ 116.6 (2 %)
7.4 % 7.7 % $ 164.9 $ 143.8 15 % 10.7 %
9.5 % Interest expense
$ 15.4 $
15.3 $ 15.4 $ 15.3 Income from continuing operations
before taxes
$ 99.3 $ 101.3 (2
%) 6.4 % 6.7 % $ 149.5 $ 128.5
16 % 9.7 % 8.5 % Provision for income taxes
$
19.3 $ 36.6 $ 50.8 $ 43.7 Income from
continuing operations
$ 80.0 $ 64.7
24 % 5.2 % 4.3 % $ 98.7 $
84.8 16 % 6.4 % 5.6 % Loss from discontinued
operations (e)
--- ($1.0 ) n/m
Net income
$ 80.0 $ 63.7 26
% 5.2 % 4.2 % Net income
(loss) per common share, assuming dilution: Continuing
operations
$ 0.88 $ 0.69 28
% $ 1.09 $ 0.91 20 % Discontinued operations
--- (0.01 ) n/m Total Company
$ 0.88 $ 0.68 29 %
2016 2015 2Q Free Cash Flow
from Continuing Operations (f) $ 189.0 $ 133.2 YTD Free Cash
Flow from Continuing Operations (f) $ 151.8 $ 113.5
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, product line exits,
acquisitions and divestitures, and, where applicable, the extra
week in our fiscal year.
(b) Excludes restructuring charges and other items.
(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 is not material. (e) "Loss from
discontinued operations" 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. Prior year amount has been reduced due
to a reclassification of certain liquid short-term bank drafts with
maturities greater than 3 months to other current assets.
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.
02, 2016
Jul. 04, 2015(1)
Jul. 02, 2016
Jul. 04, 2015(1)
Net
sales $ 1,541.5 $ 1,516.0 $ 3,027.0 $ 3,044.0 Cost of
products sold 1,107.4 1,098.4 2,170.3 2,196.4
Gross
profit 434.1 417.6 856.7 847.6 Marketing, general &
administrative expense 269.2 273.3 547.4 573.7 Interest
expense 15.4 15.3 30.7 30.6 Other expense, net(2) 50.2 27.7
55.8 42.0
Income from continuing operations before taxes
99.3 101.3 222.8 201.3 Provision for income taxes 19.3 36.6
53.2 64.7
Income from continuing operations 80.0 64.7
169.6 136.6 Loss from discontinued operations --- (1.0 ) ---
(1.0 )
Net income $ 80.0 $ 63.7 $ 169.6 $
135.6
Per share amounts: Net income
(loss) per common share, assuming dilution Continuing
operations $ 0.88 $ 0.69 $ 1.87 $ 1.47 Discontinued
operations --- (0.01 ) --- (0.01 )
Net income per
common share, assuming dilution $ 0.88 $ 0.68 $ 1.87 $ 1.46
Weighted average number of common shares
outstanding, assuming dilution
90.7 93.0
90.9 92.8 (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 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 second quarter
of 2015 includes severance and related costs of $16.8, asset
impairment and lease cancellation charges of $3.2, and loss on sale
of product line and related exit costs of $7.7. "Other
expense, net" 2016 YTD 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. "Other expense,
net" 2015 YTD includes severance and related costs of $30.3, asset
impairment and lease cancellation charges of $3.6, and loss on sale
of product line and related exit costs of $10.3, partially offset
by gain on sale of asset of $1.7 and legal settlement of $.5.
A-2
AVERY DENNISON CORPORATION PRELIMINARY
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS Jul. 02,
2016 Jul. 04, 2015
Current assets: Cash and cash
equivalents $ 216.1 $ 225.7 Trade accounts receivable, net 1,028.3
1,011.4 Inventories, net 524.1 512.1 Assets held for sale 4.4 2.0
Other current assets 169.6 246.9
Total current assets 1,942.5 1,998.1
Property, plant and equipment, net 838.7 851.7 Goodwill
691.0 698.4 Other intangibles resulting from business acquisitions,
net 36.4 55.7 Non-current deferred income taxes 390.4 300.9 Other
assets 395.8 444.6
$ 4,294.8 $
4,349.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and current portion of
long-term debt and capital leases $ 199.0 $ 182.2 Accounts payable
867.9 856.0 Other current liabilities 525.3 507.8
Total current
liabilities 1,592.2 1,546.0 Long-term debt and capital
leases 962.9 964.7 Other long-term liabilities 783.2 761.1
Shareholders' equity: Common stock 124.1 124.1 Capital in excess of
par value 834.4 818.0 Retained earnings 2,385.5 2,193.3 Treasury
stock at cost (1,698.7 ) (1,455.2 ) Accumulated other comprehensive
loss (688.8 ) (602.6 )
Total shareholders' equity 956.5 1,077.6
$ 4,294.8
$ 4,349.4
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-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Six Months Ended
Jul. 02, 2016
Jul. 04, 2015
Operating
Activities: Net income $ 169.6 $ 135.6
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 58.6 64.9 Amortization 30.8 31.8
Provision for doubtful accounts and sales returns 21.3 24.9 Net
losses from asset impairments and sales/disposals of assets 3.2
11.1 Stock-based compensation 14.1 13.2 Loss from settlement of
pension obligations 41.4 --- Other non-cash expense and loss 24.1
26.7 Changes in assets and liabilities and other adjustments (147.1
) (137.8 )
Net cash provided by
operating activities 216.0 170.4
Investing Activities: Purchases of property, plant and
equipment (61.3 ) (56.4 ) Purchases of software and other deferred
charges (6.1 ) (4.0 ) Proceeds from sales of property, plant and
equipment 3.2 2.8 Purchases of investments, net --- (0.3 ) Other
--- 1.5
Net cash used in
investing activities (64.2 ) (56.4 )
Financing Activities: Net increase (decrease) in
borrowings (maturities of 3 months or less) 104.6 (15.8 ) Payments
of debt (maturities longer than 3 months) (1.2 ) (5.5 ) Dividends
paid (69.6 ) (65.7 ) Share repurchases (160.1 ) (61.5 ) Proceeds
from exercises of stock options, net 41.4 61.3 Other (8.4 ) (4.0 )
Net cash used in financing
activities (93.3 ) (91.2 )
Effect of foreign currency translation on cash balances (1.2 ) (4.3
)
Increase in cash and cash
equivalents 57.3 18.5 Cash and cash equivalents, beginning of year
158.8 207.2
Cash and cash
equivalents, end of period $ 216.1
$ 225.7
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.
A-4
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 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, 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 our fiscal year. The
estimated impact of currency translation is calculated on a
constant currency basis, with prior period results translated at
current period average exchange rates to exclude the effect of
currency fluctuations. We believe that organic sales change assists
investors in evaluating the sales growth from the ongoing
activities of our businesses and provides improved comparability of
our results from period to period.
Adjusted operating margin refers to income from
continuing operations 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 income from continuing operations
refers to reported income from continuing operations tax-effected
at the adjusted tax rate, and adjusted for tax-effected
restructuring charges and other items.
Adjusted EPS refers to reported income from
continuing operations per common share, assuming dilution,
tax-effected at the adjusted tax rate, and adjusted for
tax-effected restructuring charges and other items.
We believe that adjusted operating margin,
adjusted income from continuing operations, 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. 02, 2016
Jul. 04, 2015(1)
Jul. 02, 2016
Jul. 04, 2015(1)
Reconciliation of Operating Margins: Net sales
$ 1,541.5 $ 1,516.0 $ 3,027.0 $ 3,044.0
Income from continuing operations before taxes $ 99.3 $
101.3 $ 222.8 $ 201.3
Income from continuing operations before taxes
as a percentage of sales
6.4 % 6.7 %
7.4 % 6.6 %
Adjustment: Interest expense $
15.4 $ 15.3 $ 30.7 $ 30.6
Operating
income from continuing operations before interest expense and taxes
$ 114.7 $ 116.6 $ 253.5 $ 231.9
Operating Margins 7.4
% 7.7 % 8.4 % 7.6
%
As reported income from continuing operations before
taxes $ 99.3 $ 101.3 $ 222.8 $ 201.3 Adjustments(1) N/A
(0.5 ) N/A
(1.0 ) Previously reported income from
continuing operations before taxes N/A 100.8 N/A 200.3
Adjustments: Restructuring charges: Severance and related costs 3.6
16.8 8.8 30.3 Asset impairment and lease cancellation charges 2.8
3.2 3.2 3.6 Loss from settlement of pension obligations 41.4 ---
41.4 --- Other items(2) 2.4 7.7 2.4 8.1 Interest expense 15.4 15.3
30.7 30.6
Adjusted operating income
from continuing operations before interest expense and taxes
(non-GAAP) $ 164.9 $ 143.8 $ 309.3 $ 272.9
Adjusted Operating
Margins (non-GAAP) 10.7 % 9.5 % 10.2 % 9.0 %
Reconciliation from
GAAP to Non-GAAP Income from Continuing Operations: As
reported income from continuing operations $ 80.0 $ 64.7 $ 169.6 $
136.6 Adjustments(1) N/A (0.4 )
N/A (0.7 )
Previously reported income from continuing operations N/A 64.3 N/A
135.9 Adjustments: Restructuring charges 6.4 20.0 12.0 33.9
Loss from settlement of pension obligations 41.4 --- 41.4 --- Other
items(2) 2.4 7.7 2.4 8.1 Tax effect of pre-tax adjustments and
impact of adjusted tax rate(3) (31.5 ) (7.2 ) (41.5 ) (18.0 )
Adjusted Income from Continuing Operations (non-GAAP)
$ 98.7 $ 84.8 $ 183.9
$ 159.9
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. 02, 2016
Jul. 04, 2015(1)
Jul. 02, 2016
Jul. 04, 2015(1)
Reconciliation from
GAAP to Non-GAAP Income per Common Share from Continuing
Operations: As reported income per common share from
continuing operations, assuming dilution $ 0.88 $ 0.69 $ 1.87 $
1.47 Adjustments(1) N/A --- N/A (0.01 )
Previously reported income per common share from
continuing operations, assuming dilution N/A 0.69 N/A 1.46
Adjustments per common share, net of tax: Restructuring
charges, loss from settlement of pension obligations, and other
items(3) 0.21 0.22 0.15 0.26
Adjusted Income per Common Share from
Continuing Operations, assuming dilution (non-GAAP)
$ 1.09 $ 0.91 $ 2.02 $ 1.72
Weighted average number of common shares outstanding, assuming
dilution 90.7 93.0
90.9 92.8 (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 loss on sale of product line and related exit costs,
transaction costs, gain/loss on sale of assets, and legal
settlement. (3) The adjusted tax rate for 2016 and 2015 was
34%.
(UNAUDITED) Three Months Ended Six
Months Ended Jul. 02, 2016
Jul. 04, 2015(1)
Jul. 02, 2016
Jul. 04, 2015(1)
Reconciliation of Free Cash Flow: Net cash provided
by operating activities(1) $ 222.3 $ 165.8 $ 216.0 $ 170.4
Purchases of property, plant and equipment (36.1 ) (31.1 ) (61.3 )
(56.4 ) Purchases of software and other deferred charges (4.1 )
(2.6 ) (6.1 ) (4.0 ) Proceeds from sales of property, plant and
equipment 3.1 --- 3.2 2.8 Sales (purchases) of investments, net 3.8
0.1 --- (0.3 ) Plus: free cash outflow from discontinued operations
--- 1.0 --- 1.0
Free Cash Flow - Continuing Operations (non-GAAP)
$ 189.0 $ 133.2
$ 151.8 $ 113.5
(1)
Prior year amounts have been reduced due
to a reclassification of certain liquid short-term bank drafts with
maturities greater than 3 months to other current assets.
A-6
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Second Quarter Ended NET SALES OPERATING
INCOME OPERATING MARGINS 2016 2015
2016(1)
2015(2)
2016 2015 Pressure-sensitive Materials
$ 1,145.1 $ 1,114.1 $ 148.4 $ 129.8 13.0 % 11.7 % Retail Branding
and Information Solutions 378.0 383.8 28.3 10.0 7.5 % 2.6 % Vancive
Medical Technologies 18.4 18.1 1.6 (1.4 ) 8.7 % (7.7 %) Corporate
Expense N/A N/A (63.6 )
(21.8
)(3)
N/A N/A TOTAL FROM
CONTINUING OPERATIONS $ 1,541.5 $ 1,516.0 $
114.7
$
116.6
(3)
7.4 %
7.7
%(3)
(1)
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 Pressure-sensitive
Materials segment recorded $6.4, the Retail Branding and
Information Solutions segment recorded $2.4, and Corporate recorded
$41.4.
(2)
Operating income for the second quarter of
2015 includes severance and related costs of $16.8, asset
impairment and lease cancellation charges of $3.2, and loss on sale
of product line and related exit costs of $7.7. Of the total $27.7,
the Pressure-sensitive Materials segment recorded $7.1, the Retail
Branding and Information Solutions segment recorded $20, and the
Vancive Medical Technologies segment recorded $.6.
(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 FROM GAAP TO
NON-GAAP SUPPLEMENTARY INFORMATION
Second Quarter Ended
OPERATING INCOME OPERATING MARGINS 2016
2015 2016 2015
Pressure-sensitive Materials
Operating income and margins, as reported $ 148.4 $ 129.8 13.0 %
11.7 % Adjustments: Restructuring charges: Severance and related
costs 2.3 4.4 0.2 % 0.4 % Asset impairment charges 2.4 2.7 0.2 %
0.2 % Transaction costs 1.7 ---
0.1 % --- Adjusted operating
income and margins (non-GAAP) $ 154.8 $ 136.9
13.5 % 12.3 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 28.3 $ 10.0 7.5 % 2.6 %
Adjustments: Restructuring charges: Severance and related costs 1.3
11.8 0.3 % 3.1 % Asset impairment and lease cancellation charges
0.4 0.5 0.1 % 0.1 % Loss on sale of asset 0.3 --- 0.1 % --- Loss on
sale of product line and related transaction and exit costs
0.4 7.7 0.1 %
2.0 % Adjusted operating income and margins (non-GAAP) $
30.7 $ 30.0 8.1 %
7.8 %
Vancive Medical
Technologies
Operating income (loss) and margins, as reported $ 1.6 $ (1.4 ) 8.7
% (7.7 %) Adjustment: Restructuring charges: Severance and related
costs --- 0.6 ---
3.3 % Adjusted operating income (loss) and
margins (non-GAAP) $ 1.6 $ (0.8 ) 8.7 %
(4.4 %)
A-7
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Six Months Year-to-Date NET SALES OPERATING
INCOME OPERATING MARGINS 2016 2015
2016(1)
2015(2)
2016 2015 Pressure-sensitive Materials
$ 2,237.1 $ 2,234.7 $ 286.9 $ 252.7 12.8 % 11.3 % Retail Branding
and Information Solutions 756.1 771.9 54.4 29.2 7.2 % 3.8 % Vancive
Medical Technologies 33.8 37.4 0.7 (3.5 ) 2.1 % (9.4 %) Corporate
Expense N/A N/A (88.5 )
(46.5
)(3)
N/A N/A TOTAL FROM
CONTINUING OPERATIONS $ 3,027.0 $ 3,044.0 $
253.5
$
231.9
(3)
8.4 %
7.6
%(3)
(1)
Operating income for 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 Pressure-sensitive
Materials segment recorded $8.5, the Retail Branding and
Information Solutions segment recorded $5.8, the Vancive Medical
Technologies segment recorded $.1, and Corporate recorded
$41.4.
(2)
Operating income for 2015 includes
severance and related costs of $30.3, asset impairment and lease
cancellation charges of $3.6, and loss on sale of product line and
related exit costs of $10.3, partially offset by gain on sale of
asset of $1.7 and legal settlement of $.5. Of the total $42, the
Pressure-sensitive Materials segment recorded $12.7, the Retail
Branding and Information Solutions segment recorded $25.5, the
Vancive Medical Technologies segment recorded $1.7, 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 FROM GAAP TO NON-GAAP
SUPPLEMENTARY INFORMATION
Six Months
Year-to-Date OPERATING INCOME OPERATING MARGINS 2016
2015 2016 2015
Pressure-sensitive Materials
Operating income and margins, as reported $ 286.9 $ 252.7 12.8 %
11.3 % Adjustments: Restructuring charges: Severance and related
costs 4.4 11.3 0.2 % 0.5 % Asset impairment charges 2.4 3.1 0.1 %
0.2 % Transaction costs 1.7 --- 0.1 % --- Gain on sale of asset
--- (1.7 ) ---
(0.1 %) Adjusted operating income and margins
(non-GAAP) $ 295.4 $ 265.4 13.2 %
11.9 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 54.4 $ 29.2 7.2 % 3.8 %
Adjustments: Restructuring charges: Severance and related costs 4.3
15.2 0.6 % 2.0 % Asset impairment and lease cancellation charges
0.8 0.5 0.1 % 0.1 % Loss on sale of asset 0.3 --- --- --- Loss on
sale of product line and related transaction and exit costs 0.4
10.3 0.1 % 1.3 % Legal settlement ---
(0.5 ) --- (0.1 %) Adjusted
operating income and margins (non-GAAP) $ 60.2
$ 54.7 8.0 % 7.1 %
Vancive Medical
Technologies
Operating income (loss) and margins, as reported $ 0.7 $ (3.5 ) 2.1
% (9.4 %) Adjustment: Restructuring charges: Severance and related
costs 0.1 1.7 0.3 %
4.6 % Adjusted operating income (loss) and
margins (non-GAAP) $ 0.8 $ (1.8 ) 2.4 %
(4.8 %)
A-8
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (UNAUDITED) Second Quarter
2016
Total
Company
Pressure-
sensitive
Materials
Retail Branding
and Information
Solutions
Vancive Medical
Technologies
Reconciliation of reported sales change to organic sales
change Reported sales change 2 % 3 % (2 %) 2 % Foreign currency
translation 2 % 2 % 1 % (1 %) Product line divestiture
1 % ---
2 % --- Organic sales
change* 4 % 5 %
2 % ---
* Totals may not sum due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160726005579/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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