- 3Q16 Reported EPS of $0.98
- Adjusted EPS (non-GAAP) of $1.01
- 3Q16 Net sales increased approx. 3
percent to $1.51 billion
- Organic sales growth (non-GAAP) of
approx. 3 percent
- Repurchased 2.7 million shares (1 mil.
net of dilution) and paid $106 million in dividends in the first
nine months of 2016
- Raised FY16 guidance midpoint for
Reported and Adjusted (non-GAAP) EPS by $0.10, due in part to lower
tax rate vs. previous expectation
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its third quarter ended October
1, 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 delivered another solid quarter, with EPS above our
expectations,” said Mitch Butier, Avery Dennison president and CEO.
“PSM continues to deliver, with strong emerging market growth and
ongoing operational excellence worldwide. RBIS is making progress
with its business model transformation; however, revenue growth and
margin are short of our expectations amidst a challenging retail
apparel environment.
“Overall, our outlook has improved for full year earnings per
share by ten cents,” Butier added. “The effective execution of our
strategies continues to enhance our competitive advantage, while
driving profitable growth and improving returns."
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 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.
Third 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 4 percent; on an organic basis, sales grew
approximately 3 percent. Within the segment, sales for the Label
and Packaging Materials business grew at a mid-single digit rate on
an organic basis. Sales for the combined Graphics and Performance
Tapes businesses declined at a low-single digit rate on an organic
basis, reflecting an expected program loss in Performance
Tapes.
- Operating margin improved 30 basis
points to 12.3 percent as the benefit of productivity initiatives
and increased volume more than offset the net impact of price and
raw material input costs and unfavorable mix. Adjusted operating
margin improved 50 basis points.
Retail Branding and Information Solutions (RBIS)
- RBIS reported sales increased 1
percent; on an organic basis, sales grew approximately 2
percent.
- Operating margin improved 90 basis
points to 7.7 percent primarily due to the benefit of lower
restructuring charges. Adjusted operating margin improved 20 basis
points as the net savings associated with the business model
transformation and higher volume were largely offset by higher
employee-related costs.
Vancive Medical Technologies
- Sales decline and modest operating loss
for the quarter were in line with expectations.
Other
Share Repurchases / Equity Dilution from Long-Term
Incentives
During the first nine months of 2016, the company repurchased
2.7 million shares at an aggregate cost of $182 million. Net of
dilution, the company reduced its share count by 1.0 million. The
cost of repurchases, net of proceeds from stock option exercises,
was $118 million.
Income Taxes
The third quarter effective tax rate was approximately 30
percent, comparable to prior year. The adjusted tax rate for
the third quarter was approximately 31 percent, as the company now
anticipates a full year effective tax rate of approximately 33
percent, comparable to prior year and consistent with the
assumption reflected in our guidance of a rate in the low to
mid-thirty percent range.
Cost Reduction Actions
In the third 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
$3 million.
Outlook
In its supplemental presentation materials, “Third 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 $3.50 to $3.55.
Excluding an estimated $0.15 per share for restructuring charges
and other items, and $0.30 per share for a non-cash charge to
settle certain U.S. pension obligations in the second quarter, the
company now expects adjusted earnings per share (non-GAAP) of $3.95
to $4.00.
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.
Third Quarter Financial Summary -
Preliminary, unaudited (in millions, except % and per share
amounts)
3Q 3Q
% Change vs.
P/Y
2016
2015
Reported
Organic
(a)
Net sales, by segment: Pressure-sensitive Materials
$
1,123.8 $ 1,083.7 4 % 3 % Retail
Branding and Information Solutions
370.9 366.8
1 % 2 % Vancive Medical Technologies
14.0 17.6 (20 %)
(20 %) Total net sales
$ 1,508.7 $
1,468.1 3 % 3 %
As Reported
(GAAP) Adjusted Non-GAAP (b) 3Q 3Q
% % of Sales 3Q 3Q % % of
Sales
2016
2015
Change
2016
2015
2016
2015
Change
2016
2015
Operating income (loss) / operating
margins before interest and taxes, by segment:
Pressure-sensitive Materials
$ 138.7 $
130.5 12.3 % 12.0 % $ 141.4 $
131.6 12.6 % 12.1 % Retail Branding and Information Solutions
28.4 25.1 7.7 % 6.8 %
29.9 29.0 8.1 % 7.9 % Vancive Medical Technologies
(0.9
) (1.2 ) (6.4 %) (6.8
%) (0.5 ) 0.5 (3.6 %) 2.8 % Corporate expense
(23.5 ) (23.6 )
(23.5 ) (23.3 )
Total operating income before interest and
taxes / operating margins
$ 142.7 $ 130.8 9 %
9.5 % 8.9 % $ 147.3 $ 137.8 7 % 9.8 %
9.4 % Interest expense
$ 14.7 $
14.7 $ 14.7 $ 14.7 Income from continuing operations
before taxes
$ 128.0 $ 116.1 10
% 8.5 % 7.9 % $ 132.6 $ 123.1 8
% 8.8 % 8.4 % Provision for income taxes
$
38.9 $ 34.8 $ 41.0 $ 41.8 Income from
continuing operations
$ 89.1 $ 81.3
10 % 5.9 % 5.5 % $ 91.6 $
81.3 13 % 6.1 % 5.5 % Income from discontinued
operations (c)
--- $ 0.4 n/m Net
income
$ 89.1 $ 81.7 9 %
5.9 % 5.6 % Net income per
common share, assuming dilution: Continuing operations
$ 0.98 $ 0.87 13 % $ 1.01
$ 0.87 16 % Discontinued operations
--- 0.01
n/m Total Company
$ 0.98 $
0.88 11 %
2016
2015
3Q Free Cash Flow from Continuing Operations (d) $ 95.9 $ 77.6
YTD Free Cash Flow from Continuing Operations (d) $ 247.7 $
191.1
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) "Income from discontinued operations" relates to the 2013 sale
of our former Office and Consumer Products and Designed and
Engineered Solutions businesses. (d) Free cash flow refers
to cash flow from operations, less payments for property, plant and
equipment, software and other deferred charges, plus proceeds from
sales of property, plant and equipment, plus (minus) net proceeds
from sales (purchases) of investments, plus (minus) free cash
outflow (inflow) from discontinued operations. Prior year amounts
have been reduced due to a reclassification of certain liquid
short-term bank drafts with maturities greater than three 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 Nine Months
Ended Oct. 01, 2016 Oct. 03, 2015 Oct.
01, 2016 Oct. 03, 2015
Net sales $ 1,508.7 $ 1,468.1 $ 4,535.7
$ 4,512.1 Cost of products sold 1,091.1 1,062.2 3,261.4
3,258.6
Gross profit 417.6 405.9 1,274.3 1,253.5 Marketing, general
& administrative expense 270.3 268.1 817.7 841.8
Interest expense 14.7 14.7 45.4 45.3 Other expense, net(1)
4.6 7.0 60.4 49.0
Income from continuing operations before taxes 128.0 116.1
350.8 317.4 Provision for income taxes 38.9 34.8 92.1 99.5
Income from
continuing operations 89.1 81.3 258.7 217.9 Income (loss)
from discontinued operations --- 0.4 --- (0.6 )
Net income $ 89.1
$ 81.7 $ 258.7 $ 217.3
Per share amounts: Net income (loss)
per common share, assuming dilution Continuing operations $
0.98 $ 0.87 $ 2.85 $ 2.35 Discontinued operations --- 0.01
--- (0.01 )
Net
income per common share, assuming dilution $ 0.98 $ 0.88 $ 2.85 $
2.34
Weighted average number of common shares
outstanding, assuming dilution
90.6 93.2 90.9
92.9
(1)
"Other expense, net" for the third quarter of 2016 includes
severance and related costs of $1.9, asset impairment and lease
cancellation charges of $.7, and transaction costs of $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 2016
YTD includes severance and related costs of $10.7, asset impairment
and lease cancellation charges of $3.9, loss from settlement of
pension obligations of $41.4, transaction costs of $4.1, and loss
on sale of asset of $.3. "Other expense, net" for 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.
A-2
AVERY DENNISON CORPORATION PRELIMINARY
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS
Oct. 01, 2016
Oct. 03, 2015
Current assets: Cash and
cash equivalents $ 189.4 $ 143.8 Trade accounts receivable, net
1,069.7 999.0 Inventories, net 565.3 512.4 Assets held for sale 5.9
--- Other current assets 183.3 260.8
Total current assets 2,013.6 1,916.0 Property,
plant and equipment, net 905.4 840.6 Goodwill 821.6 690.7 Other
intangibles resulting from business acquisitions, net 70.9 50.7
Non-current deferred income taxes 390.7 304.5 Other assets 398.2
433.9
$ 4,600.4 $
4,236.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and
current portion of long-term debt and capital leases $ 587.6 $ 85.1
Accounts payable 866.7 840.4 Other current liabilities 601.8 539.2
Total current liabilities
2,056.1 1,464.7 Long-term debt and capital leases 713.0
963.9 Other long-term liabilities 788.9 755.6 Shareholders' equity:
Common stock 124.1 124.1 Capital in excess of par value 843.1 825.5
Retained earnings 2,444.1 2,244.3 Treasury stock at cost (1,699.9 )
(1,483.5 ) Accumulated other comprehensive loss (669.0 ) (658.2 )
Total shareholders'
equity 1,042.4 1,052.2
$
4,600.4 $ 4,236.4
Certain
prior period amounts have been revised to reflect the impact of
certain 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) Nine
Months Ended
Oct. 01, 2016
Oct. 03, 2015
Operating Activities: Net income
$ 258.7 $ 217.3 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 88.8
95.3 Amortization 46.7 47.5 Provision for doubtful
accounts and sales returns 33.8 36.6 Net losses from asset
impairments and sales/disposals of assets 3.8 10.9
Stock-based compensation 20.1 18.4 Loss from settlement of
pension obligations 41.4 --- Other non-cash expense and loss
34.7 38.9 Changes in assets and liabilities and other
adjustments (162.3 ) (182.7 )
Net cash provided by operating activities 365.7 282.2
Investing Activities:
Purchases of property, plant and equipment (104.9 ) (89.6 )
Purchases of software and other deferred charges (16.6 )
(9.0 ) Proceeds from sales of property, plant and equipment
4.3 7.1 Purchases of investments, net (0.8 ) (0.2 )
Payments for acquisitions, net of cash acquired (227.5 ) ---
Other --- 1.5
Net cash
used in investing activities (345.5 ) (90.2 )
Financing Activities: Net
increase (decrease) in borrowings (maturities of 3 months or less)
242.0 (109.8 ) Payments of debt (maturities greater than 3
months) (1.9 ) (6.2 ) Dividends paid (106.2 ) (99.6 )
Share repurchases (181.5 ) (108.5 ) Proceeds from exercises
of stock options, net 63.4 78.4 Other (4.4 ) (1.2 )
Net cash provided by (used in)
financing activities 11.4 (246.9 )
Effect of foreign currency translation on cash
balances (1.0 ) (8.5 )
Increase (decrease) in cash and cash equivalents 30.6 (63.4 )
Cash and cash equivalents, beginning of year 158.8 207.2
Cash and cash
equivalents, end of period $ 189.4 $ 143.8
Certain prior period amounts have been revised
to reflect the impact of certain 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, plus (minus) free cash
outflow (inflow) from discontinued operations. 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 Nine Months Ended
Oct. 01, 2016 Oct. 03, 2015 Oct. 01, 2016
Oct. 03, 2015
Reconciliation from GAAP to non-GAAP
Operating Margins: Net sales $ 1,508.7 $ 1,468.1 $
4,535.7 $ 4,512.1
Income from continuing operations
before taxes $ 128.0 $ 116.1 $ 350.8 $ 317.4
Income from continuing
operations before taxes as a percentage of sales
8.5
% 7.9 % 7.7 % 7.0
%
Adjustment: Interest expense $ 14.7 $ 14.7 $ 45.4 $
45.3
Operating income from continuing operations before
interest expense and taxes $ 142.7 $ 130.8 $ 396.2 $ 362.7
Operating Margins 9.5 % 8.9 %
8.7 % 8.0 %
As reported income from
continuing operations before taxes $ 128.0 $ 116.1 $ 350.8 $ 317.4
Adjustments(1) N/A N/A
N/A (1.0 ) Previously reported income
from continuing operations before taxes N/A N/A N/A 316.4
Adjustments: Restructuring charges: Severance and
related costs 1.9 4.7 10.7 35.0 Asset impairment and lease
cancellation charges 0.7 1.9 3.9 5.5 Loss from settlement of
pension obligations --- --- 41.4 --- Other items(2) 2.0 0.4
4.4 8.5 Interest expense 14.7 14.7 45.4 45.3
Adjusted operating income from continuing operations before
interest expense and taxes (non-GAAP) $ 147.3 $ 137.8 $ 456.6 $
410.7
Adjusted Operating Margins (non-GAAP) 9.8 % 9.4 % 10.1 % 9.1
%
Reconciliation from GAAP to Non-GAAP Income from
Continuing Operations: As reported income from
continuing operations $ 89.1 $ 81.3 $ 258.7 $ 217.9 Adjustments(1)
N/A N/A N/A
(0.6 ) Previously reported income from continuing
operations N/A N/A N/A 217.3 Adjustments:
Restructuring charges 2.6 6.6 14.6 40.5 Loss from settlement of
pension obligations --- --- 41.4 --- Other items(2) 2.0 0.4 4.4 8.5
Tax effect of pre-tax adjustments and impact of adjusted tax
rate(3) (2.1 ) (7.0 ) (43.6 ) (25.1 )
Adjusted Income from Continuing
Operations (non-GAAP) $ 91.6 $ 81.3
$ 275.5 $ 241.2
A-5
(continued)
AVERY DENNISON CORPORATION PRELIMINARY
RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL MEASURES (In
millions, except % and per share amounts)
(UNAUDITED) Three Months Ended Nine
Months Ended Oct. 01, 2016 Oct. 03, 2015
Oct. 01, 2016 Oct. 03, 2015
Reconciliation from GAAP to Non-GAAP Income per Common Share
from Continuing Operations: As reported income per
common share from continuing operations, assuming dilution $ 0.98 $
0.87 $ 2.85 $ 2.35 Adjustments(1) N/A N/A N/A (0.01 )
Previously reported income per common
share from continuing operations, assuming dilution N/A N/A N/A
2.34 Adjustments per common share, net of tax:
Restructuring charges, loss from settlement of pension obligations,
and other items(3) 0.03 --- 0.18 0.26
Adjusted Income per Common Share from
Continuing Operations, assuming dilution (non-GAAP)
$ 1.01 $ 0.87 $ 3.03 $ 2.60
Weighted average number of common
shares outstanding, assuming dilution 90.6 93.2 90.9 92.9
(1)
GAAP adjustment for 2015 reflects the
previously disclosed impact of the third quarter 2015 revision to
certain of the Company's benefit plan balances, which had an
immaterial impact to the non-GAAP amounts.
(2)
Includes loss on sale of product line and related exit costs,
transaction costs, gain/loss on sale of assets, and legal
settlements.
(3)
The adjusted tax rate was 31% and 33% for the three and nine months
ended Oct. 1, 2016, respectively, and 34% for the three and nine
months ended Oct. 3, 2015.
(UNAUDITED)
Three Months Ended Nine Months Ended Oct.
01, 2016 Oct. 03, 2015
(1)
Oct. 01, 2016 Oct. 03, 2015
(1)
Reconciliation of Free Cash Flow: Net cash provided
by operating activities(1) $ 149.7 $ 111.8 $ 365.7 $ 282.2
Purchases of property, plant and equipment (43.6 ) (33.2 ) (104.9 )
(89.6 ) Purchases of software and other deferred charges
(10.5 ) (5.0 ) (16.6 ) (9.0 ) Proceeds from sales of
property, plant and equipment 1.1 4.3 4.3 7.1 (Purchases)
sales of investments, net (0.8 ) 0.1 (0.8 ) (0.2 ) Plus:
free cash (inflow) outflow from discontinued operations --- (0.4 )
--- 0.6
Free Cash Flow - Continuing Operations (non-GAAP)
$ 95.9 $ 77.6 $ 247.7
$ 191.1 (1)Prior year amounts
have been reduced due to a reclassification of certain liquid
short-term bank drafts with maturities greater than three months to
other current assets.
A-6
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Third Quarter Ended NET
SALES OPERATING INCOME OPERATING MARGINS 2016 2015
2016 (1)
2015 (2)
2016 2015 Pressure-sensitive Materials $ 1,123.8 $
1,083.7 $ 138.7 $ 130.5 12.3 % 12.0 % Retail Branding and
Information Solutions 370.9 366.8 28.4 25.1 7.7 % 6.8 % Vancive
Medical Technologies 14.0 17.6 (0.9 ) (1.2 ) (6.4 %) (6.8 %)
Corporate Expense N/A N/A (23.5 )
(23.6 ) N/A N/A TOTAL
FROM CONTINUING OPERATIONS $ 1,508.7 $ 1,468.1 $ 142.7
$ 130.8 9.5 % 8.9 %
(1) Operating income for the third quarter
of 2016 includes severance and related costs of $1.9, asset
impairment and lease cancellation charges of $.7, and transaction
costs of $2. Of the total $4.6, the Pressure-sensitive Materials
segment recorded $2.7, the Retail Branding and Information
Solutions segment recorded $1.5, and the Vancive Medical
Technologies segment recorded $.4.
(2) 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.
RECONCILIATION FROM GAAP TO NON-GAAP
SUPPLEMENTARY INFORMATION Third Quarter Ended
OPERATING INCOME OPERATING MARGINS 2016 2015 2016
2015
Pressure-sensitive Materials
Operating income and margins, as reported $ 138.7 $ 130.5 12.3 %
12.0 % Adjustments: Restructuring charges: Severance and related
costs 0.6 1.1 0.1 % 0.1 % Asset impairment charges 0.1 --- --- ---
Transaction costs 2.0 --- 0.2 %
--- Adjusted operating income and margins (non-GAAP)
$ 141.4 $ 131.6 12.6 % 12.1 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 28.4 $ 25.1 7.7 % 6.8 %
Adjustments: Restructuring charges: Severance and related costs 1.3
3.5 0.3 % 0.9 % Lease cancellation charges 0.2 0.2 0.1 % 0.1 % Loss
on sale of product line --- 0.2
--- 0.1 % Adjusted operating income and margins
(non-GAAP) $ 29.9 $ 29.0 8.1 % 7.9 %
Vancive Medical
Technologies
Operating loss and margins, as reported $ (0.9 ) $ (1.2 ) (6.4 %)
(6.8 %) Adjustment: Restructuring charges: Asset impairment and
lease cancellation charges 0.4 1.7
2.8 % 9.6 % Adjusted operating (loss) income and
margins (non-GAAP) $ (0.5 ) $ 0.5 (3.6 %) 2.8
%
A-7
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (In millions, except %)
(UNAUDITED) Nine Months Year-to-Date
NET SALES OPERATING INCOME OPERATING MARGINS 2016 2015
2016 (1)
2015 (2)
2016 2015 Pressure-sensitive Materials $ 3,360.9 $
3,318.4 $ 425.6 $ 383.2 12.7 % 11.5 % Retail Branding and
Information Solutions 1,127.0 1,138.7 82.8 54.3 7.3 % 4.8 % Vancive
Medical Technologies 47.8 55.0 (0.2 ) (4.7 ) (0.4 %) (8.5 %)
Corporate Expense N/A N/A (112.0 )
(70.1 ) N/A N/A TOTAL FROM
CONTINUING OPERATIONS $ 4,535.7 $ 4,512.1 $ 396.2
$ 362.7 8.7 % 8.0 %
(1) Operating income for 2016 includes
severance and related costs of $10.7, asset impairment and lease
cancellation charges of $3.9, loss from settlement of pension
obligations of $41.4, transaction costs of $4.1, and loss on sale
of asset of $.3. Of the total $60.4, the Pressure-sensitive
Materials segment recorded $11.2, the Retail Branding and
Information Solutions segment recorded $7.3, the Vancive Medical
Technologies segment recorded $.5, and Corporate recorded
$41.4.
(2) 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.
RECONCILIATION FROM GAAP TO NON-GAAP SUPPLEMENTARY
INFORMATION Nine Months Year-to-Date OPERATING
INCOME OPERATING MARGINS 2016 2015 2016 2015
Pressure-sensitive Materials
Operating income and margins, as reported $ 425.6 $ 383.2 12.7 %
11.5 % Adjustments: Restructuring charges: Severance and related
costs 5.0 12.4 0.1 % 0.4 % Asset impairment charges 2.5 3.1 0.1 %
0.1 % Transaction costs 3.7 --- 0.1 % --- Gain on sale of asset
--- (1.7 ) --- ---
Adjusted operating income and margins (non-GAAP) $ 436.8
$ 397.0 13.0 % 12.0 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 82.8 $ 54.3 7.3 % 4.8 %
Adjustments: Restructuring charges: Severance and related costs 5.6
18.7 0.6 % 1.6 % Asset impairment and lease cancellation charges
1.0 0.7 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
10.5 --- 0.9 % Legal settlement ---
(0.5 ) --- --- Adjusted operating income and
margins (non-GAAP) $ 90.1 $ 83.7 8.0 %
7.4 %
Vancive Medical
Technologies
Operating loss and margins, as reported $ (0.2 ) $ (4.7 ) (0.4 %)
(8.5 %) Adjustment: Restructuring charges: Severance and related
costs 0.1 1.7 0.2 % 3.1 % Asset impairment and lease cancellation
charges 0.4 1.7 0.8 % 3.0
% Adjusted operating income (loss) and margins (non-GAAP) $ 0.3
$ (1.3 ) 0.6 % (2.4 %)
A-8
AVERY DENNISON CORPORATION PRELIMINARY
SUPPLEMENTARY INFORMATION (UNAUDITED)
Third Quarter 2016
Total
Company
Pressure-sensitive Materials Retail Branding and
Information Solutions Vancive Medical Technologies
Reconciliation of GAAP to non-GAAP sales change Reported
sales change 3 % 4 % 1 % (20 %) Foreign currency translation 2 % 2
% 1 % --- Acquisitions (2 %) (2 %) ---
--- Organic sales change (non-GAAP)(1)
3 % 3 % 2 % (20 %) (1)Totals may not sum due
to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161026005435/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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