- 1Q18 Reported EPS of $1.40
- Adjusted EPS (non-GAAP) of $1.44
- 1Q18 Net sales increased 13.0% to $1.78
billion
- Sales change ex. currency (non-GAAP) of
6.8%
- Organic sales change (non-GAAP) of
3.4%
- FY18 Reported EPS guidance midpoint
reduced by $0.63, reflecting higher anticipated restructuring
charges
- Raised FY18 guidance midpoint for
Adjusted EPS by $0.13
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its first quarter ended March
31, 2018. 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 are off to a good start to the year, with adjusted EPS up 30
percent driven by a combination of solid operating results,
currency translation tailwinds, and a lower tax rate,” said Mitch
Butier, President and CEO. “Label and Graphic Materials delivered
solid organic growth and sustained its strong operating margin;
Retail Branding and Information Solutions expanded its margin
significantly, with solid organic growth driven by strength in
RFID; and Industrial and Healthcare Materials results were in line
with expectations, with revenue up nearly 50 percent, largely due
to acquisitions, while operating margin declined.
“We have initiated a large, multi-year restructuring plan
associated with the consolidation of LGM’s European footprint,
designed to further enhance our competitive position in the
region,” said Butier. “Excluding the incremental charges from this
action, our current year outlook has improved, reflecting a
continuation of strong operating performance and an increased
benefit from currency translation.”
For more details on the company’s results, see the summary table
accompanying this news release, as well as the supplemental
presentation materials, “First Quarter 2018 Financial Review and
Analysis,” posted on the company’s website at
www.investors.averydennison.com, and furnished to the SEC on Form
8-K.
First Quarter 2018 Results by
Segment
Sales change ex. currency refers to the increase or decrease in
sales excluding the estimated impact of foreign currency
translation. The estimated impact of foreign currency translation
is calculated on a constant currency basis, with prior period
results translated at current period average exchange rates to
exclude the effect of currency fluctuations. Organic sales change
refers to the increase or decrease in sales excluding the estimated
impact of foreign currency translation, product line exits, and
acquisitions and divestitures. Adjusted operating margin refers to
income before interest expense, other non-operating expense, and
taxes, excluding restructuring charges and other items, as a
percentage of sales.
Label and Graphic Materials
- Reported sales increased 11.8 percent.
Sales ex. currency increased 4.2 percent; on an organic basis,
sales grew 3.6 percent. Sales on an organic basis increased
mid-single digits in Label and Packaging Materials and increased
low-single digits in the combined Graphics and Reflective Solutions
businesses.
- Reported operating margin decreased 30
basis points to 12.3 percent, reflecting the impact of
restructuring actions. Adjusted operating margin increased 20 basis
points to 13.0 percent as the benefits of increased volume and
productivity more than offset higher employee-related costs and the
net impact of pricing and raw material costs.
Retail Branding and Information Solutions
- Reported sales increased 5.2 percent;
on an organic basis, sales grew 3.1 percent driven by strength in
radio frequency identification (RFID) solutions.
- Reported operating margin increased 160
basis points to 9.0 percent as the benefits from productivity,
reduced amortization expense, and increased volume were partially
offset by higher employee-related costs and investments. Adjusted
operating margin increased 170 basis points to 10.2 percent.
Industrial and Healthcare Materials
- Reported sales increased 48.8 percent.
Sales ex. currency increased 42.2 percent; on an organic basis,
sales grew 2.8 percent. Sales in industrial categories grew more
than 50 percent ex. currency and mid-single digits on an organic
basis. Sales in healthcare categories grew roughly 10 percent ex.
currency and were relatively unchanged on an organic basis.
- Reported operating margin declined 390
basis points to 7.5 percent as the impact of acquisitions,
increased investments, and the net impact of pricing and raw
material costs were partially offset by increased volume. Adjusted
operating margin declined 430 basis points to 7.5 percent.
Other
Share Repurchases / Equity Dilution
The company repurchased 0.4 million shares in the first quarter
at an aggregate cost of $52 million. Net of dilution from long-term
incentives, the company’s share count decreased 0.2 million in the
quarter.
Income Taxes
The first quarter effective tax rate was 20.9 percent, up from
17.4 percent in the prior year. The adjusted tax rate for the
quarter was 25 percent, consistent with the company’s expectation
for the full year tax rate.
Cost Reduction Actions
In the first quarter, the company realized approximately $11
million in pretax savings from restructuring, net of transition
costs, and incurred pretax restructuring charges of approximately
$13 million, roughly half of which represented cash charges.
The company approved a restructuring plan associated with the
consolidation of the European footprint of its Label and Graphic
Materials segment, which is expected to result in a net reduction
in headcount of approximately 150 positions. The company expects
this plan to be largely complete by the end of 2019.
Total pretax restructuring charges associated with this plan are
estimated at approximately $70 million. Of these charges, $6.9
million represents non-cash asset impairment charges, all of which
were recorded in the first quarter of 2018. The remaining charges,
which relate to cash costs primarily for severance, will largely be
recognized during the second quarter of 2018; the vast majority of
the cash payments associated with these accruals will be made in
2019.
The company expects to realize approximately $25 million in
annualized savings from this plan, beginning in 2020.
Pension Accounting Change
In the first quarter of 2018, the company adopted ASU 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, on a retrospective basis.
This ASU requires the net periodic benefit cost of defined benefit
plans, other than service cost, to be presented below operating
income. These changes in presentation do not change net income or
earnings per share, but have a modest favorable impact on both
reported and adjusted operating margins for the total company and
its segments.
A summary of historical reclassified results, “Supplemental
Historical Results (ASU 2017-07 Reclassification),” has been posted
on the company’s website at www.investors.averydennison.com.
Outlook
In its supplemental presentation materials, “First Quarter 2018
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its 2018 financial
results. Based on the factors listed and other assumptions, the
company now expects 2018 reported earnings per share of $4.90 to
$5.10. Excluding an estimated $0.95 per share for restructuring
charges and other items, the company now expects adjusted earnings
per share (non-GAAP) of $5.85 to $6.05.
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 materials science company
specializing in the design and manufacture of a wide variety of
labeling and functional materials. The company’s products, which
are used in nearly every major industry, include pressure-sensitive
materials for labels and graphic applications; tapes and other
bonding solutions for industrial, medical, and retail applications;
tags, labels, and embellishments for apparel; and radio frequency
identification (RFID) solutions serving retail apparel and other
markets. Headquartered in Glendale, California, the company employs
approximately 30,000 employees in more than 50 countries. Reported
sales in 2017 were $6.6 billion. Learn more at
www.averydennison.com.
“Safe Harbor” Statement under the Private
Securities Litigation Reform Act of 1995
Certain statements contained in this document are
"forward-looking statements" intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements,
and financial or other business targets, are subject to certain
risks and uncertainties. Actual results and trends may differ
materially from historical or anticipated results depending on a
variety of factors, including but are not limited to, risks and
uncertainties relating to the following: fluctuations in demand
affecting sales to customers; worldwide and local economic
conditions; changes in political conditions; changes in
governmental laws and regulations; fluctuations in foreign currency
exchange rates and other risks associated with foreign operations,
including in emerging markets; the financial condition and
inventory strategies of customers; changes in customer preferences;
fluctuations in cost and availability of raw materials; our ability
to generate sustained productivity improvement; our ability to
achieve and sustain targeted cost reductions; the impact of
competitive products and pricing; loss of significant contracts or
customers; collection of receivables from customers; selling
prices; business mix shift; execution and integration of
acquisitions; timely development and market acceptance of new
products, including sustainable or sustainably-sourced products;
investment in development activities and new production facilities;
amounts of future dividends and share repurchases; customer and
supplier concentrations; successful implementation of new
manufacturing technologies and installation of manufacturing
equipment; disruptions in information technology systems, including
cyber-attacks or other intrusions to network security; successful
installation of new or upgraded information technology systems;
data security breaches; volatility of financial markets; impairment
of capitalized assets, including goodwill and other intangibles;
credit risks; our ability to obtain adequate financing arrangements
and maintain access to capital; fluctuations in interest and tax
rates; changes in tax laws and regulations, including the Tax Cuts
and Jobs Act, and uncertainties associated with interpretations of
such laws and regulations; outcome of tax audits; fluctuations in
pension, insurance, and employee benefit costs; the impact of legal
and regulatory proceedings, including with respect to
environmental, health and safety; protection and infringement of
intellectual property; the impact of epidemiological events on the
economy and our customers and suppliers; acts of war, terrorism,
and natural disasters; and other factors.
We believe that the most significant risk factors that could
affect our financial performance in the near-term include: (1) the
impacts of global economic conditions and political uncertainty on
underlying demand for our products and foreign currency
fluctuations; (2) 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; (3)
competitors' actions, including pricing, expansion in key markets,
and product offerings; and (4) the execution and integration of
acquisitions.
For a more detailed discussion of these and other factors, see
“Risk Factors” and “Management’s Discussion and Analysis of Results
of Operations and Financial Condition” in our 2017 Form 10-K, filed
with the Securities and Exchange Commission on February 21, 2018.
The forward-looking statements included in this document are made
only as of the date of this document, and we undertake no
obligation to update these statements to reflect subsequent events
or circumstances, other than as may be required by law.
For more information and to listen to a live broadcast or an
audio replay of the quarterly conference call with analysts, visit
the Avery Dennison website at
www.investors.averydennison.com.
First
Quarter Financial Summary - Preliminary, unaudited (In
millions, except % and per share amounts)
% Change vs. P/Y 1Q
1Q Ex. 2018
2017 Reported
Currency (a) Organic (b)
Net sales, by segment: Label and Graphic Materials
$
1,218.2 $ 1,089.6 11.8 % 4.2 %
3.6 % Retail Branding and Information Solutions
386.0
366.8 5.2 % 3.1 % 3.1 % Industrial and
Healthcare Materials
172.2
115.7 48.8 % 42.2 % 2.8 % Total
net sales
$ 1,776.4 $ 1,572.1
13.0 % 6.8 % 3.4 %
As Reported
(GAAP) Adjusted Non-GAAP (c) 1Q 1Q
% % of Sales 1Q 1Q % % of
Sales 2018 2017
Change 2018
2017 2018
2017 Change
2018 2017
Operating income (loss) / operating
margins before interest, other non-operating expense, and taxes, by
segment:
Label and Graphic Materials
$ 149.7 $
137.7 12.3 % 12.6 % $ 157.8 $
139.9 13.0 % 12.8 % Retail Branding and Information Solutions
34.7 27.3 9.0 % 7.4 %
39.4 31.1 10.2 % 8.5 % Industrial and Healthcare Materials
13.0 13.2 7.5 % 11.4 %
13.0 13.7 7.5 % 11.8 % Corporate expense
(21.8
) (22.1 ) (21.8 )
(22.1 )
Total operating income before interest,
other non-operating expense, and taxes / operating margins
$ 175.6 $ 156.1 12 %
9.9 % 9.9 % $ 188.4 $ 162.6 16 % 10.6 %
10.3 % Interest expense
$ 13.2 $
16.7 $ 13.2 $ 16.7 Other non-operating expense (d)
$ 3.3 $ 3.5 $ 2.8 $ 3.5 Income
before taxes
$ 159.1 $ 135.9 17
% 9.0 % 8.6 % $ 172.4 $ 142.4 21
% 9.7 % 9.1 % Provision for income taxes (e)
$
33.3 $ 23.7 $ 43.1 $ 42.7 Equity method
investment net losses
($0.6 ) --- ($0.6 ) ---
Net income
$ 125.2 $ 112.2 12
% 7.0 % 7.1 % $ 128.7 $ 99.7 29
% 7.2 % 6.3 % Net income per common share, assuming dilution
$ 1.40 $ 1.25 12 % $ 1.44
$ 1.11 30 %
2018
2017 1Q Free Cash Flow (f) $ (19.7 ) $ (22.1 )
See accompanying schedules A-4 to A-7 for
reconciliations from GAAP to non-GAAP financial measures.
(a) Percentage change in sales excluding the estimated impact of
foreign currency translation. (b) Percentage change in sales
excluding the estimated impact of foreign currency translation,
product line exits, acquisitions and divestitures, and, where
applicable, the extra week in our fiscal year. (c) Excludes
impact of restructuring charges and other items. (d) In the
first quarter of 2018, we adopted ASU No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost, on a retrospective basis. This ASU
requires employers with defined benefit plans to present the
components of net periodic benefit cost other than service cost,
outside of operating income. Prior year results have been
reclassified as required by the guidance. "Other
non-operating expense" for the first quarter of 2018 includes
pension settlement of $.5. (e) We continue to assess our
fourth quarter 2017 provisional estimate defined under SEC Staff
Accounting Bulletin No. 118 related to the Tax Cut and Jobs Act of
2017. There was no significant impact to our provisional estimate
as of the end of first quarter 2018. We expect to complete our
assessment within the allowable one-year measurement period.
(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 and proceeds from insurance.
A-1
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (In millions, except per
share amounts)
(UNAUDITED) Three
Months Ended Mar. 31, 2018 Apr. 1, 2017
Net
sales $ 1,776.4 $ 1,572.1 Cost of products sold 1,293.0
1,129.7
Gross profit 483.4 442.4 Marketing, general and
administrative expense 295.0 279.8 Other expense, net(1)
12.8 6.5 Interest expense 13.2 16.7 Other
non-operating expense(2) 3.3 3.5
Income before taxes 159.1 135.9
Provision for income taxes(3) 33.3 23.7 Equity method
investment net losses (0.6 ) ---
Net income $ 125.2 $ 112.2
Per share amounts:
Net income per common share, assuming dilution $ 1.40 $ 1.25
Weighted average number of common shares
outstanding, assuming dilution
89.6
90.0 (1)
"Other expense, net" for the first quarter of 2018 includes
severance and related costs of $4.3, asset impairment and lease
cancellation charges of $8.4, and other restructuring related
charge of $.5, partially offset by net gain on sales of assets of
$.4. "Other expense, net" for the first quarter of 2017
includes severance and related costs of $5.7 and transaction costs
of $.8. (2) In the first quarter of 2018, we adopted
Accounting Standards Update (ASU) No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost, on a retrospective basis. This ASU
requires employers with defined benefit plans to present the
components of net periodic benefit cost other than service cost,
outside of operating income. Prior year results have been
reclassified as required by the guidance. "Other non-operating
expense" for the first quarter of 2018 includes pension settlement
of $.5. (3) We continue to assess our fourth quarter 2017
provisional estimate defined under SEC Staff Accounting Bulletin
No. 118 related to the Tax Cut and Jobs Act of 2017. There was no
significant impact to our provisional estimate as of the end of
first quarter 2018. We expect to complete our assessment within the
allowable one-year measurement period.
A-2
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED)
ASSETS
Mar. 31, 2018
Apr. 1, 2017
Current assets: Cash and cash equivalents $ 187.5 $
294.9 Trade accounts receivable, net 1,240.0 1,099.5 Inventories,
net 678.2 579.9 Assets held for sale 1.1 8.0 Other current assets
225.5 202.3 Total current assets 2,332.3 2,184.6
Property, plant and equipment, net 1,117.6 940.3 Goodwill
and other intangibles resulting from business acquisitions, net
1,172.3 909.8 Non-current deferred income taxes 215.5 317.8 Other
assets 442.8 413.4 $ 5,280.5 $ 4,765.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and current portion of
long-term debt and capital leases $ 370.3 $ 333.2 Accounts payable
1,064.4 906.1 Other current liabilities 646.7 520.0
Total current liabilities 2,081.4 1,759.3 Long-term debt and
capital leases 1,342.7 1,250.2 Other long-term liabilities 766.7
741.8 Shareholders' equity: Common stock 124.1 124.1 Capital in
excess of par value 848.4 839.2 Retained earnings 2,647.8 2,537.9
Treasury stock at cost (1,891.0 ) (1,774.1 ) Accumulated other
comprehensive loss (639.6 ) (712.5 ) Total
shareholders' equity 1,089.7 1,014.6 $ 5,280.5 $
4,765.9
In the first quarter of 2018, we adopted ASU No. 2016-16,
Intra-entity Transfer of Assets Other Than Inventory, on a modified
retrospective basis. This ASU requires companies to recognize the
income tax effects of intra-entity sales and transfers of assets
other than inventory in the period in which they occur. Upon
adoption, we derecognized tax-related deferred charges and
recognized deferred tax assets related to certain intra-entity
asset transfers as a net reduction to retained earnings.
A-3
AVERY DENNISON CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Three Months Ended
Mar. 31, 2018
Apr. 1, 2017
Operating Activities: Net income $
125.2 $ 112.2 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 34.3
28.8 Amortization 10.2 15.8 Provision for doubtful
accounts and sales returns 12.9 11.5 Net losses from
impairments, sales of assets, and investment settlements 9.8 0.2
Stock-based compensation 7.4 5.6 Loss from settlement
of pension obligations 0.5 --- Deferred income taxes (8.0 )
3.4 Other non-cash expense and loss 14.2 15.2 Changes
in assets and liabilities and other adjustments (190.5 ) (178.8 )
Net cash provided by operating activities 16.0 13.9
Investing Activities: Purchases of
property, plant and equipment (35.6 ) (30.3 ) Purchases of
software and other deferred charges (7.3 ) (6.9 ) Proceeds
from sales of property, plant and equipment 6.9 --- Sales of
investments and proceeds from insurance, net 0.3 1.2
Payments for acquisitions, net of cash acquired, and investments in
businesses (0.1 ) (74.6 ) Net cash used in investing
activities (35.8 ) (110.6 )
Financing
Activities: Net increase (decrease) in borrowings
(maturities of three months or less) 104.3 (256.8 )
Additional long-term borrowings --- 526.7 Repayments of
long-term debt (1.0 ) (0.8 ) Dividends paid (39.6 ) (36.4 )
Share repurchases (51.6 ) (34.6 ) Proceeds from
exercises of stock options, net 0.2 16.4 Tax withholding for
stock-based compensation (31.6 ) (19.8 ) Payment of
contingent consideration (2.5 ) --- Net cash (used
in) provided by financing activities (21.8 ) 194.7
Effect of foreign currency translation on cash balances 4.7 1.8
(Decrease) increase in cash and cash equivalents
(36.9 ) 99.8 Cash and cash equivalents, beginning of year
224.4 195.1 Cash and cash equivalents, end of period
$ 187.5 $ 294.9
In the first quarter of 2018, we adopted ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments, on a
retrospective basis. This ASU reduces the diversity in the
presentation and classification of certain cash receipts and cash
payments in the statement of cash flows. Prior year results have
been reclassified as required by the guidance.
A-4
Reconciliation of Non-GAAP Financial Measures in
Accordance with SEC Regulations G and S-K We report our
financial results in conformity with accounting principles
generally accepted in the United States of America, or GAAP, and
also communicate with investors using certain non-GAAP financial
measures. These non-GAAP financial measures are not in accordance
with, nor are they a substitute for or superior to, the comparable
GAAP financial measures. These non-GAAP financial measures are
intended to supplement presentation of our financial results that
are prepared in accordance with GAAP. Based upon feedback from
investors and financial analysts, we believe that the supplemental
non-GAAP financial measures we provide are useful to their
assessment of our performance and operating trends, as well as
liquidity. Our non-GAAP financial measures exclude the
impact of certain events, activities or strategic decisions. The
accounting effects of these events, activities or decisions, which
are included in the GAAP financial measures, may make it difficult
to assess our underlying performance in a single period. By
excluding the accounting effects, both positive or negative, of
certain items (e.g., restructuring charges, legal settlements,
certain effects of strategic transactions and related costs, losses
from debt extinguishments, gains and 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 that facilitates an
understanding of our core operating results and liquidity measures.
These non-GAAP financial measures are used internally to evaluate
trends in our underlying performance, as well as to facilitate
comparison to the results of competitors for a single period. While
some of the items we exclude from GAAP financial measures recur,
they tend to be disparate in amount, frequency, or timing.
We use the following non-GAAP financial measures in the
accompanying news release and presentation: Sales change ex.
currency refers to the increase or decrease in sales excluding the
estimated impact of foreign currency translation. The estimated
impact of foreign currency translation is calculated on a constant
currency basis, with prior period results translated at current
period average exchange rates to exclude the effect of currency
fluctuations. Organic sales change refers to the increase or
decrease in sales excluding the estimated impact of foreign
currency translation, product line exits, acquisitions and
divestitures, and, where applicable, the extra week in our fiscal
year. We believe that sales change ex. currency and organic
sales change assist investors in evaluating the sales growth from
the ongoing activities of our businesses and provide greater
ability to evaluate our results from period to period.
Adjusted operating income refers to income before interest expense,
other non-operating expense, and taxes, excluding restructuring
charges and other items. Adjusted operating margin refers to
adjusted operating income as a percentage of sales. Adjusted
tax rate refers to our anticipated full-year GAAP tax rate using
the most likely scenario in a range of estimated tax rates for the
year. This range includes various items such as the impact of the
discrete rates applicable to the adjustments we make in calculating
our adjusted non-GAAP earnings, changes in uncertain tax positions
and our repatriation assertions on unremitted earnings, and other
items that may impact our full-year GAAP tax rate. Adjusted
net income refers to income before taxes, tax-effected at the
adjusted tax rate, and adjusted for tax-effected restructuring
charges and other items. Adjusted net income per common
share, assuming dilution (adjusted EPS) refers to adjusted net
income divided by weighted average number of common shares
outstanding, assuming dilution. We believe that adjusted
operating margin, adjusted net income, and adjusted EPS assist
investors in understanding our core operating trends and comparing
our results with those of our competitors. Free cash flow
refers to cash flow from operations, less payments for property,
plant and equipment, software and other deferred charges, plus
proceeds from sales of property, plant and equipment, plus (minus)
net proceeds from sales (purchases) of investments and proceeds
from insurance. 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
Mar. 31, 2018 Apr. 1, 2017
Reconciliation from GAAP to Non-GAAP operating margins:
Net sales $ 1,776.4 $ 1,572.1
Income before taxes $ 159.1 $
135.9 Income before taxes as a percentage of sales
9.0 % 8.6 % Adjustments: Interest expense $ 13.2 $
16.7 Other non-operating expense 3.3 3.5
Operating income before
interest expense, other non-operating expense, and taxes $ 175.6 $
156.1 Operating margins 9.9 % 9.9 %
Income before taxes $ 159.1 $ 135.9 Adjustments:
Restructuring charges: Severance and related costs
4.3 5.7 Asset impairment and lease cancellation charges 8.4
--- Other restructuring related charge 0.5 --- Net
gain on sales of assets (0.4 ) --- Transaction costs --- 0.8
Interest expense 13.2 16.7 Other non-operating
expense 3.3 3.5
Adjusted operating income before interest
expense, other non-operating expense, and taxes (non-GAAP)
$ 188.4 $ 162.6 Adjusted operating margins (non-GAAP)
10.6 % 10.3 %
Reconciliation from GAAP to
Non-GAAP net income: As reported net income $ 125.2 $
112.2 Adjustments: Restructuring charges 12.7 5.7
Other restructuring related charge 0.5 --- Net gain on sales of
assets (0.4 ) --- Transaction costs --- 0.8 Pension settlement 0.5
--- Tax effect on pre-tax adjustments and impact of adjusted tax
rate(1) (9.8 ) (19.0 ) Adjusted net income (non-GAAP)
$ 128.7 $ 99.7
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 Mar.
31, 2018 Apr. 1, 2017 Reconciliation
from GAAP to Non-GAAP net income per common share: As
reported net income per common share, assuming dilution $ 1.40 $
1.25 Adjustments per common share, net of tax:
Restructuring charges, other restructuring
related charge and pension settlement, transaction costs, and net
gain on sales of assets(1)
0.04 (0.14 ) Adjusted net income per common
share, assuming dilution (non-GAAP) $ 1.44 $ 1.11
Weighted average number of common shares outstanding, assuming
dilution 89.6 90.0 (1) The adjusted tax rate was 25% and 30%
for the three months ended Mar. 31, 2018 and Apr. 1, 2017,
respectively.
(UNAUDITED) Three
Months Ended Mar. 31, 2018 Apr. 1, 2017
Reconciliation of free cash flow: Net
cash provided by operating activities $ 16.0 $ 13.9
Purchases of property, plant and equipment (35.6 ) (30.3 )
Purchases of software and other deferred charges (7.3 ) (6.9 )
Proceeds from sales of property, plant and equipment 6.9 ---
Sales of investments and proceeds from insurance, net 0.3
1.2 Free cash flow (non-GAAP) $
(19.7 ) $ (22.1 )
A-6
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
First Quarter Ended NET SALES OPERATING INCOME (LOSS)
OPERATING MARGINS 2018 2017
2018(1)
2017(2)
2018 2017 Label and Graphic Materials $
1,218.2 $ 1,089.6 $ 149.7 $ 137.7 12.3 % 12.6 % Retail Branding and
Information Solutions 386.0 366.8 34.7 27.3 9.0 % 7.4 % Industrial
and Healthcare Materials 172.2 115.7 13.0 13.2 7.5 % 11.4 %
Corporate Expense N/A N/A
(21.8 ) (22.1 ) N/A
N/A TOTAL FROM OPERATIONS $ 1,776.4
$ 1,572.1 $ 175.6
$ 156.1 9.9 % 9.9 % (1)
Operating income for the first quarter of 2018 includes severance
and related costs of $4.3, asset impairment and lease cancellation
charges of $8.4, and other restructuring related charge of $.5,
partially offset by net gain on sales of assets of $.4. Of the
total $12.8, the Label and Graphic Materials segment recorded $8.1
and the Retail Branding and Information Solutions segment recorded
$4.7. (2) Operating income for the first quarter of 2017
includes severance and related costs of $5.7 and transaction costs
of $.8. Of the total $6.5, the Label and Graphic Materials segment
recorded $2.2, the Retail Branding and Information Solutions
segment recorded $3.8, and the Industrial and Healthcare Materials
segment recorded $.5.
RECONCILIATION
FROM GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
First
Quarter Ended OPERATING INCOME OPERATING MARGINS 2018
2017 2018 2017
Label and Graphic
Materials
Operating income and margins, as reported $ 149.7 $ 137.7 12.3 %
12.6 % Adjustments: Restructuring charges: Severance and related
costs 0.6 2.0 0.1 % 0.2 % Asset impairment charges 6.9 --- 0.6 %
--- Other restructuring related charge 0.5 --- --- --- Loss on sale
of assets 0.1 --- --- --- Transaction costs ---
0.2 --- ---
Adjusted operating income and margins (non-GAAP) $ 157.8
$ 139.9 13.0 %
12.8 %
Retail Branding
and Information Solutions
Operating income and margins, as reported $ 34.7 $ 27.3 9.0 % 7.4 %
Adjustments: Restructuring charges: Severance and related costs 3.7
3.5 0.9 % 1.0 % Asset impairment and lease cancellation charges 1.5
--- 0.4 % --- Net gain on sales of assets (0.5 ) --- (0.1 %) ---
Transaction costs --- 0.3
--- 0.1 % Adjusted operating income and
margins (non-GAAP) $ 39.4 $ 31.1 10.2 %
8.5 %
Industrial and
Healthcare Materials
Operating income and margins, as reported $ 13.0 $ 13.2 7.5 % 11.4
% Adjustments: Restructuring charges: Severance and related costs
--- 0.2 --- 0.2 % Transaction costs ---
0.3 --- 0.2 % Adjusted
operating income and margins (non-GAAP) $ 13.0
$ 13.7 7.5 % 11.8 %
A-7
AVERY DENNISON CORPORATION PRELIMINARY SUPPLEMENTARY
INFORMATION (UNAUDITED)
First
Quarter 2018 Total
Company
Label and
Graphic
Materials
Retail Branding
and Information
Solutions
Industrial and
Healthcare
Materials
Reconciliation of GAAP to Non-GAAP sales change Reported
sales change 13.0 % 11.8 % 5.2 % 48.8 % Foreign currency
translation (6.2 %) (7.6
%) (2.1 %) (6.7 %) Sales
change ex. currency (non-GAAP)(1) 6.8 % 4.2 % 3.1 % 42.2 %
Acquisitions (3.3 %) (0.6
%) --- (39.3 %)
Organic sales change (non-GAAP)(1) 3.4
% 3.6 % 3.1 %
2.8 %
(1) Totals may not sum due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180425005473/en/
Avery DennisonMedia Relations:Rob Six, (626)
304-2361rob.six@averydennison.comorInvestor
Relations:Cynthia S. Guenther, (626)
304-2204investorcom@averydennison.com
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