- 3Q14 Reported EPS (including
discontinued operations) of $0.68
- Adjusted EPS (non-GAAP, continuing
operations) of $0.77
- 3Q14 Net sales grew approximately 4
percent to $1.56 billion
- Net sales up approximately 3 percent on
organic basis
- Returned $341 million of cash to
shareholders through the third quarter, including the repurchase of
5 million shares for $247 million
- Expecting adjusted EPS (non-GAAP,
continuing operations) to grow 12 percent to 14 percent in
2014
Avery Dennison Corporation (NYSE:AVY) today announced
preliminary, unaudited results for its third quarter ended
September 27, 2014. All non-GAAP financial measures referenced in
this document are reconciled to GAAP in the attached tables. Unless
otherwise indicated, the discussion of the company’s results is
focused on its continuing operations, and comparisons are to the
same period in the prior year.
“Third quarter EPS was in line with our expectations, despite a
modest decline in sales in Retail Branding and Information
Solutions, and higher-than-expected transition costs associated
with the consolidation of Pressure-sensitive Materials operations
in Europe,” said Dean A. Scarborough, Avery Dennison chairman,
president and CEO.
“We expect to deliver improved operational performance in the
fourth quarter, with a reduction in the transition costs impacting
PSM,” said Scarborough. “However, given recent top-line trends and
headwinds from currency, we have modestly lowered our guidance for
full-year adjusted earnings per share growth to approximately 13
percent. Meanwhile, we continue to execute our disciplined capital
allocation strategy, reflected in the increased level of share
repurchase during the past quarter.”
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 2014 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 2014 Results by
Segment
All references to sales reflect comparisons on an organic basis,
which exclude the estimated impact of currency translation, product
line exits, acquisitions and divestitures, and, where applicable,
the extra week in the fiscal year. Adjusted operating margin refers
to income before interest expense and taxes, excluding
restructuring costs and other items, as a percentage of sales.
Pressure-sensitive Materials (PSM)
- PSM segment sales increased
approximately 5 percent. Within the segment, Label and Packaging
Materials sales increased mid-single digits. Combined sales for
Graphics, Reflective, and Performance Tapes also increased
mid-single digits.
- Operating margin declined 10 basis
points to 10.1 percent as the net impact of raw material input
costs and pricing, transition costs in Europe, and country and
product mix roughly offset the benefit of higher volume and
productivity. Wage inflation was largely offset by lower incentive
compensation. Adjusted operating margin declined 20 basis
points.
Retail Branding and Information Solutions (RBIS)
- RBIS segment sales were down
approximately 2 percent, reflecting softer demand from U.S.-based
apparel retailers and brands.
- Operating margin improved 220 basis
points to 5.4 percent as the benefit of productivity, lower
restructuring costs, and lower incentive compensation more than
offset the impact of wage inflation and lower volume. Adjusted
operating margin improved 80 basis points.
Other
Share Repurchases
The company repurchased 5 million shares in the first three
quarters of 2014 at an aggregate cost of $247 million.
Discontinued Operations
On July 1, 2013, the company completed the sale of its OCP and
DES businesses.
Income Taxes
The effective tax rates for the third quarter and year-to-date
were 36 percent and 32 percent, respectively. The adjusted tax rate
for both the third quarter and year-to-date was 33 percent.
Cost Reduction Actions
In the third quarter, the company realized approximately $7
million in savings from restructuring, net of transition costs, and
incurred restructuring costs of approximately $7 million. The
company expects to incur cash restructuring costs of approximately
$55 million in 2014.
Outlook
In its supplemental presentation materials, “Third Quarter 2014
Financial Review and Analysis,” the company provides a list of
factors that it believes will contribute to its 2014 financial
results. Based on the factors listed and other assumptions, the
company expects 2014 earnings per share from continuing operations
of $2.60 to $2.65. Excluding an estimated $0.40 per share for
restructuring costs and other items, the company expects adjusted
(non-GAAP) earnings per share from continuing operations of $3.00
to $3.05.
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 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
26,000 employees worldwide, Avery Dennison serves customers with
insights and innovations that help make brands more inspiring and
the world more intelligent. Headquartered in Glendale, California,
the company reported sales from continuing operations of $6.1
billion in 2013. 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; the financial condition and inventory
strategies of customers; changes in customer order patterns;
worldwide and local economic conditions; fluctuations in cost and
availability of raw materials; our ability to generate sustained
productivity improvement; our ability to achieve and sustain
targeted cost reductions; impact of competitive products and
pricing; loss of significant contracts or customers; collection of
receivables from customers; selling prices; business mix shift;
changes in tax laws and regulations, and uncertainties associated
with interpretations of such laws and regulations; outcome of tax
audits; timely development and market acceptance of new products,
including sustainable or sustainably-sourced products; investment
in development activities and new production facilities;
fluctuations in currency exchange rates and other risks associated
with foreign operations; 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; 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; fluctuations in pension, insurance, and
employee benefit costs; impact of legal and regulatory proceedings,
including with respect to environmental, health and safety; changes
in governmental laws and regulations; changes in political
conditions; 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
impact of economic conditions on underlying demand for our
products; (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 2013 Form 10-K, filed
on February 26, 2014 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
2014
2013
Reported
Organic
(a)
Net sales, by segment: Pressure-sensitive Materials $
1,157.0 $ 1,094.0 6 % 5 % Retail Branding and Information Solutions
383.9 391.4 -2 % -2 % Vancive Medical Technologies 18.7
19.5 -4 % -5 % Total net sales $
1,559.6 $ 1,504.9 4 % 3 %
As Reported (GAAP) Adjusted Non-GAAP
(b) 3Q 3Q % of Sales 3Q 3Q
% of Sales
2014
2013
%
Change
2014
2013
2014
2013
%
Change
2014
2013
Operating income (loss) before interest
and taxes, by segment:
Pressure-sensitive Materials $ 116.6 $ 111.7 10.1 % 10.2 % $ 118.7
$ 115.1 10.3 % 10.5 % Retail Branding and Information Solutions
20.6 12.5 5.4 % 3.2 % 25.8 23.0 6.7 % 5.9 % Vancive Medical
Technologies (2.9 ) (0.7 ) -15.5 % -3.6 % (2.8 ) (0.6 ) -15.0 %
-3.1 % Corporate expense (17.7 ) (32.7 )
(17.3 ) (21.0 )
Total operating income before interest and
taxes / operating margin
$ 116.6 $ 90.8 28 % 7.5 % 6.0 % $ 124.4 $ 116.5 7 % 8.0 % 7.7 %
Interest expense $ 15.4 $ 16.0 $ 15.4 $ 16.0 Income
from continuing operations before taxes $ 101.2 $ 74.8 35 % 6.5 %
5.0 % $ 109.0 $ 100.5 8 % 7.0 % 6.7 % Provision for income
taxes $ 36.2 $ 12.8 $ 36.0 $ 31.5 Income from continuing
operations $ 65.0 $ 62.0 5 % 4.2 % 4.1 % $ 73.0 $ 69.0 6 % 4.7 %
4.6 %
Loss from discontinued operations, net of
tax
($0.7 ) ($15.5 ) n/m Net income $ 64.3 $ 46.5 38 % 4.1 % 3.1
%
Net income (loss) per common share,
assuming dilution:
Continuing operations $ 0.68 $ 0.62 10 % $ 0.77 $ 0.69 12 %
Discontinued operations --- ($0.15 ) n/m Total
Company $ 0.68 $ 0.47 45 %
2014
2013
3Q Free Cash Flow from Continuing Operations (c) $ 152.9 $ 58.1 YTD
Free Cash Flow from Continuing Operations (c) $ 82.1 $ 105.2
(a) Percentage change in sales
excluding the estimated impact of currency translation, product
line exits, acquisitions and divestitures. (b) Excludes
restructuring costs and other items (see accompanying schedules A-2
to A-4 for reconciliation to GAAP financial measures). (c)
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 discretionary contributions to
pension plans and charitable contribution to Avery Dennison
Foundation utilizing proceeds from divestitures. Free cash flow
excludes uses of cash that do not directly or immediately support
the underlying business, such as discretionary debt reductions,
dividends, share repurchases, and certain effects of acquisitions
and divestitures (e.g., cash flow from discontinued operations,
taxes, and transaction costs).
A-1
AVERY DENNISON PRELIMINARY CONSOLIDATED STATEMENTS OF
INCOME (In millions, except per share amounts)
(UNAUDITED) Three
Months Ended Nine Months Ended Sep. 27,
2014 Sep. 28, 2013 Sep. 27, 2014 Sep. 28,
2013
Net
sales $ 1,559.6 $ 1,504.9 $ 4,725.5 $ 4,556.1 Cost of
products sold 1,158.9 1,102.7 3,489.4 3,334.7
Gross profit 400.7 402.2 1,236.1
1,221.4 Marketing, general & administrative expense
276.3 285.7 870.0 880.1 Interest expense 15.4 16.0 46.4 43.0
Other expense, net (1) 7.8 25.7 53.6 32.9
Income from continuing
operations before taxes 101.2 74.8 266.1 265.4 Provision for
income taxes 36.2 12.8 85.1 65.8
Income from continuing operations 65.0 62.0
181.0 199.6 Loss from discontinued operations, net of tax
(0.7 ) (15.5 ) (3.0 ) (26.5 )
Net income $ 64.3 $ 46.5 $ 178.0 $
173.1
Per share amounts: Net income (loss) per common
share, assuming dilution Continuing operations $ 0.68 $ 0.62
$ 1.87 $ 1.98 Discontinued operations --- (0.15 ) (0.03 )
(0.26 )
Net
income per common share, assuming dilution $ 0.68 $ 0.47 $ 1.84 $
1.72
Average common shares outstanding,
assuming dilution
95.2 99.6
96.6 100.7 (1)
"Other expense, net" for the third quarter
of 2014 includes severance and related costs of $5.1, asset
impairment and lease cancellation charges of $1.6, and
indefinite-lived intangible asset impairment charge of $3,
partially offset by gain on sale of assets of $1.9.
"Other expense, net" for the third quarter
of 2013 includes severance and related costs of $8.7, asset
impairment, lease and other contract cancellation charges of $8,
charitable contribution to Avery Dennison Foundation of $10, and
certain transaction costs of $1.1, partially offset by gain from
curtailment of pension obligation of $1.6, and gain on sale of
assets of $.5.
"Other expense, net" 2014 YTD includes
severance and related costs of $48, asset impairment and lease
cancellation charges of $4.5, indefinite-lived intangible asset
impairment charge of $3, and loss from curtailment of pension
obligation of $.6, partially offset by gains on sales of assets of
$2.5.
"Other expense, net" 2013 YTD includes
severance and related costs of $20.9, asset impairment, lease and
other contract cancellation charges of $11.7, charitable
contribution to Avery Dennison Foundation of $10, legal settlement
of $2.5, and certain transaction costs of $2.1, partially offset by
gains on sales of assets of $12.7, and gain from curtailment of
pension obligation of $1.6.
A-2
Reconciliation of Non-GAAP Financial Measures in
Accordance with SEC Regulations G and S-K We report
financial results in conformity with accounting principles
generally accepted in the United States of America, or GAAP, and
also communicate with investors using certain non-GAAP financial
measures. These non-GAAP financial measures are not in accordance
with, nor are they a substitute for or superior to, the comparable
GAAP financial measures. These non-GAAP financial measures are
intended to supplement presentation of our financial results that
are prepared in accordance with GAAP. Based upon feedback from
investors and financial analysts, we believe that supplemental
non-GAAP financial measures provide information that is useful to
the assessment of our performance and operating trends, as well as
liquidity.
Our non-GAAP financial measures exclude
the impact of certain events, activities, or strategic decisions.
The accounting effects of these events, activities or decisions,
which are included in the GAAP financial measures, may make it
difficult to assess our underlying performance in a single period.
By excluding the accounting effects, both positive and negative, of
certain items (e.g., restructuring costs, asset impairments, legal
settlements, certain effects of strategic transactions and related
costs, losses from debt extinguishments, losses from curtailment
and settlement of pension obligations, gains or losses on sale of
certain assets, and other items), we believe that we are providing
meaningful supplemental information to facilitate an understanding
of our core operating results and liquidity measures. These
non-GAAP financial measures are used internally to evaluate trends
in our underlying performance, as well as to facilitate comparison
to the results of competitors for a single period. While some of
the items we exclude from GAAP financial measures recur, they tend
to be disparate in amount, frequency, or timing.
We use the following non-GAAP financial measures in the
accompanying news release and presentation: Organic sales
change refers to the increase or decrease in sales excluding the
estimated impact of currency translation, product line exits,
acquisitions and divestitures, and, where applicable, the extra
week in the fiscal year. Adjusted operating margin refers to
income from continuing operations before interest expense and
taxes, excluding restructuring costs and other items, as a
percentage of sales. Adjusted tax rate refers to the
anticipated full year GAAP tax rate adjusted for certain events.
Adjusted income from continuing operations refers to
reported income from continuing operations adjusted for
tax-effected restructuring costs and other items. Adjusted
EPS refers to reported income from continuing operations per common
share, assuming dilution, adjusted for tax-effected restructuring
costs and other items. Free cash flow refers to cash flow
from operations, less payments for property, plant and equipment,
software and other deferred charges, plus proceeds from sales of
property, plant and equipment, plus (minus) net proceeds from sales
(purchases) of investments, plus discretionary contributions to
pension plans and charitable contribution to Avery Dennison
Foundation utilizing proceeds from divestitures. Free cash flow
excludes uses of cash that do not directly or immediately support
the underlying business, such as discretionary debt reductions,
dividends, share repurchases, and certain effects of acquisitions
and divestitures (e.g., cash flow from discontinued operations,
taxes, and transaction costs). The reconciliations set forth
below and in the accompanying presentation are provided in
accordance with Regulations G and S-K and reconcile our non-GAAP
financial measures with the most directly comparable GAAP financial
measures.
A-3
AVERY DENNISON PRELIMINARY RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL MEASURES (In millions, except
% and per share amounts)
(UNAUDITED) Three Months Ended
Nine Months Ended Sep. 27, 2014 Sep.
28, 2013 Sep. 27, 2014 Sep. 28, 2013
Reconciliation of Operating
Margins: Net sales $ 1,559.6 $ 1,504.9 $ 4,725.5 $
4,556.1
Income from continuing operations before taxes
$ 101.2 $ 74.8 $ 266.1 $ 265.4
Income from continuing operations before taxes
as a percentage of sales
6.5 % 5.0 %
5.6 % 5.8 %
Adjustment: Interest expense $ 15.4 $
16.0 $ 46.4 $ 43.0
Operating income from continuing
operations before interest expense and taxes $ 116.6 $ 90.8 $ 312.5
$ 308.4
Operating Margins 7.5 % 6.0 %
6.6 % 6.8 %
Income from continuing
operations before taxes $ 101.2 $ 74.8 $ 266.1 $ 265.4
Adjustments: Restructuring costs: Severance and
related costs 5.1 8.7 48.0 20.9
Asset impairment, lease and other contract cancellation charges 1.6
8.0 4.5 11.7 Other items (1) 1.1 9.0 1.1 0.3 Interest
expense 15.4 16.0 46.4 43.0
Adjusted operating income
from continuing operations before interest expense and taxes
(non-GAAP) $ 124.4 $ 116.5 $ 366.1 $ 341.3
Adjusted Operating Margins
(non-GAAP) 8.0 % 7.7 % 7.7
% 7.5 %
Reconciliation of GAAP to
Non-GAAP Income from Continuing Operations: As reported
income from continuing operations $ 65.0 $ 62.0 $ 181.0 $ 199.6
Non-GAAP adjustments, net of tax: Restructuring costs
and other items (2) 8.0 7.0 33.2 0.9
Adjusted Non-GAAP Income from
Continuing Operations $ 73.0 $ 69.0
$ 214.2 $ 200.5
A-3
(continued)
AVERY DENNISON PRELIMINARY RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL MEASURES (In millions, except
% and per share amounts)
(UNAUDITED) Three Months Ended Nine Months
Ended Sep. 27, 2014 Sep. 28, 2013 Sep.
27, 2014 Sep. 28, 2013
Reconciliation of GAAP to Non-GAAP Income
per Common Share from Continuing Operations: As reported
income per common share from continuing operations, assuming
dilution $ 0.68 $ 0.62 $ 1.87 $ 1.98 Non-GAAP adjustments
per common share, net of tax: Restructuring costs and other
items (2) 0.09 0.07 0.35 0.01
Adjusted Non-GAAP Income per Common
Share from Continuing Operations, assuming dilution
$ 0.77 $ 0.69 $ 2.22 $ 1.99
Average common shares outstanding,
assuming dilution
95.2 99.6
96.6 100.7
(1)
Includes indefinite-lived intangible asset
impairment charge, loss from curtailment of pension obligation,
charitable contribution to Avery Dennison Foundation, legal
settlement, certain transaction costs, gains on sales of assets,
and gain from curtailment of pension obligation.
(2)
Reflects the impact of the adjusted tax rate applied to results
from continuing operations, as well as restructuring costs and
other items, tax-effected at the adjusted tax rate.
(UNAUDITED) Three Months Ended Nine
Months Ended
Sep. 27, 2014 Sep. 28, 2013
Sep. 27, 2014 Sep. 28, 2013
Reconciliation of GAAP to Non-GAAP Free Cash Flow:
Net cash provided by operating activities $ 190.4 $ 49.0 $ 200.2 $
95.7 Purchases of property, plant and equipment (33.3 )
(29.2 ) (100.8 ) (79.1 ) Purchases of software and other
deferred charges (7.6 ) (10.0 ) (22.0 ) (34.6 ) Proceeds
from sales of property, plant and equipment 3.5 5.0 4.1 30.8
(Purchases) sales of investments, net (0.1 ) 0.5 --- 0.6
Plus: charitable contribution to Avery Dennison Foundation
utilizing proceeds from divestitures --- 10.0 --- 10.0 Plus:
divestiture-related payments and free cash outflow from
discontinued operations --- 32.8 0.6 81.8
Free Cash Flow -
Continuing Operations $ 152.9 $ 58.1
$ 82.1 $ 105.2
A-4
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION (In millions,
except %) (UNAUDITED) Third Quarter Ended
NET SALES OPERATING INCOME OPERATING MARGINS 2014
2013
2014 (1)
2013 (2)
2014 2013 Pressure-sensitive Materials
$ 1,157.0 $ 1,094.0 $ 116.6 $ 111.7 10.1 % 10.2 % Retail Branding
and Information Solutions 383.9 391.4 20.6 12.5 5.4 % 3.2 % Vancive
Medical Technologies 18.7 19.5 (2.9 ) (0.7 ) (15.5 %) (3.6 %)
Corporate Expense N/A N/A (17.7 )
(32.7 ) N/A N/A TOTAL FROM CONTINUING
OPERATIONS $ 1,559.6 $ 1,504.9 $ 116.6 $ 90.8
7.5 % 6.0 % (1) Operating income for the third
quarter of 2014 includes severance and related costs of $5.1, asset
impairment and lease cancellation charges of $1.6, and
indefinite-lived intangible asset impairment charge of $3,
partially offset by gain on sale of assets of $1.9. Of the total
$7.8, the Pressure-sensitive Materials segment recorded $2.1, the
Retail Branding and Information Solutions segment recorded $5.2,
the Vancive Medical Technologies segment recorded $.1, and
Corporate recorded $.4. (2) Operating income for the third
quarter of 2013 includes severance and related costs of $8.7, asset
impairment, lease and other contract cancellation charges of $8,
charitable contribution to Avery Dennison Foundation of $10, and
certain transaction costs of $1.1, partially offset by gain from
curtailment of pension obligation of $1.6, and gain on sale of
assets of $.5. Of the total $25.7, the Pressure-sensitive Materials
segment recorded $3.4, the Retail Branding and Information
Solutions segment recorded $10.5, the Vancive Medical Technologies
segment recorded $.1, and Corporate recorded $11.7.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Third Quarter Ended OPERATING INCOME OPERATING
MARGINS 2014 2013 2014
2013
Pressure-sensitive
Materials Operating income and margins, as
reported $ 116.6 $ 111.7
10.1 % 10.2 % Adjustments:
Restructuring costs: Severance and related costs 2.1 1.3 0.2 % 0.1
% Asset impairment and other contract cancellation charges
--- 2.1 --- 0.2 %
Adjusted operating income and margins (non-GAAP) $
118.7 $ 115.1 10.3
% 10.5 % Retail
Branding and Information Solutions Operating income
and margins, as reported $ 20.6 $
12.5 5.4 % 3.2 % Adjustments:
Restructuring costs: Severance and related costs 2.5 7.4 0.6 % 1.9
% Asset impairment, lease and other contract cancellation charges
1.6 5.2 0.4 % 1.3 % Indefinite-lived intangible asset impairment
charge 3.0 --- 0.8 % --- Gain on sales of assets (1.9 ) (0.5 ) (0.5
%) (0.1 %) Gain from curtailment of pension obligation ---
(1.6 ) --- (0.4 %)
Adjusted
operating income and margins (non-GAAP) $ 25.8
$ 23.0 6.7 %
5.9 % Vancive Medical
Technologies Operating loss and margins, as
reported $ (2.9 ) $ (0.7
) (15.5 %) (3.6 %) Adjustments:
Restructuring costs: Severance and related costs 0.1 --- 0.5 % ---
Asset impairment charges --- 0.1
--- 0.5 %
Adjusted operating loss and margins
(non-GAAP) $ (2.8 ) $
(0.6 ) (15.0 %) (3.1
%)
A-5
AVERY DENNISON PRELIMINARY SUPPLEMENTARY
INFORMATION (In millions, except %) (UNAUDITED)
Nine Months Year-to-Date NET SALES OPERATING
INCOME OPERATING MARGINS 2014 2013
2014 (1)
2013 (2)
2014 2013 Pressure-sensitive Materials
$ 3,481.4 $ 3,305.9 $ 315.1 $ 334.1 9.1 % 10.1 % Retail Branding
and Information Solutions 1,186.0 1,193.7 65.5 50.7 5.5 % 4.2 %
Vancive Medical Technologies 58.1 56.5 (7.2 ) (6.2 ) (12.4 %) (11.0
%) Corporate Expense N/A N/A (60.9 )
(70.2 ) N/A N/A TOTAL
FROM CONTINUING OPERATIONS $ 4,725.5 $ 4,556.1 $ 312.5
$ 308.4 6.6 % 6.8 % (1)
Operating income for 2014 includes severance and related costs of
$48, asset impairment and lease cancellation charges of $4.5,
indefinite-lived intangible asset impairment charge of $3, and loss
from curtailment of pension obligation of $.6, partially offset by
gains on sales of assets of $2.5. Of the total $53.6, the
Pressure-sensitive Materials segment recorded $36.3, the Retail
Branding and Information Solutions segment recorded $16.8, the
Vancive Medical Technologies segment recorded $.1, and Corporate
recorded $.4. (2) Operating income for 2013 includes
severance and related costs of $20.9, asset impairment, lease and
other contract cancellation charges of $11.7, charitable
contribution to Avery Dennison Foundation of $10, legal settlement
of $2.5, and certain transaction costs of $2.1, partially offset by
gains on sales of assets of $12.7, and gain from curtailment of
pension obligation of $1.6. Of the total $32.9, the
Pressure-sensitive Materials segment recorded $8.7, the Retail
Branding and Information Solutions segment recorded $19.5, the
Vancive Medical Technologies segment recorded $.1, and Corporate
recorded $4.6.
RECONCILIATION OF GAAP TO NON-GAAP
SUPPLEMENTARY INFORMATION Nine Months
Year-to-Date OPERATING INCOME OPERATING MARGINS
2014 2013 2014
2013
Pressure-sensitive Materials
Operating income and margins, as reported $
315.1 $ 334.1 9.1 % 10.1
% Adjustments: Restructuring costs: Severance and related
costs 34.9 5.4 1.0 % 0.2 % Asset impairment and other contract
cancellation charges 0.8 3.3
---
0.1 % Loss from curtailment of pension obligation 0.6
---
---
---
Adjusted operating income and margins
(non-GAAP) $ 351.4 $
342.8 10.1 % 10.4
%
Retail Branding
and Information Solutions
Operating income and margins, as reported $
65.5 $ 50.7 5.5 % 4.2
% Adjustments: Restructuring costs: Severance and related
costs 12.6 15.2 1.1 % 1.3 % Asset impairment, lease and other
contract cancellation charges 3.7 7.7 0.3 % 0.7 % Indefinite-lived
intangible asset impairment charge 3.0 --- 0.2 % --- Gain on sales
of assets (2.5 ) (1.8 ) (0.2 %) (0.2 %) Gain from curtailment of
pension obligation --- (1.6 ) ---
(0.1 %)
Adjusted operating income and margins
(non-GAAP) $ 82.3 $
70.2 6.9 % 5.9 %
Vancive Medical
Technologies
Operating loss and margins, as reported $ (7.2
) $ (6.2 ) (12.4 %)
(11.0 %) Adjustments: Restructuring costs: Severance
and related costs 0.1 --- 0.2 % --- Asset impairment charges
--- 0.1 --- 0.2 %
Adjusted operating loss and margins
(non-GAAP)
$ (7.1 ) $ (6.1 )
(12.2 %) (10.8 %)
A-6
AVERY DENNISON PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
(UNAUDITED) ASSETS
Sep. 27, 2014
Sep. 28, 2013
Current assets:
Cash and cash equivalents $ 195.6 $ 309.6 Trade accounts
receivable, net 1,087.6 1,055.5 Inventories, net 547.2 531.3 Assets
held for sale 0.9 6.3 Other current assets 238.5 262.2
Total current assets
2,069.8 2,164.9 Property, plant and equipment, net 884.1
912.6 Goodwill 742.0 754.5 Other intangibles resulting from
business acquisitions, net 73.9 103.0 Non-current deferred income
taxes 238.8 322.8 Other assets 484.9 475.0
$ 4,493.5 $ 4,732.8
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities: Short-term borrowings and current
portion of long-term debt and capital leases $ 167.1 $ 114.8
Accounts payable 867.0 833.4 Other current liabilities 598.8 625.2
Total current
liabilities 1,632.9 1,573.4 Long-term debt and capital
leases 945.1 950.9 Other long-term liabilities 608.7 634.6
Shareholders' equity: Common stock 124.1 124.1 Capital in excess of
par value 818.6 804.8 Retained earnings 2,096.2 1,993.6 Treasury
stock at cost (1,378.5 ) (1,121.0 ) Accumulated other comprehensive
loss (353.6 ) (227.6 )
Total shareholders' equity 1,306.8 1,573.9
$ 4,493.5 $
4,732.8
A-7
AVERY DENNISON PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(UNAUDITED) Nine Months Ended
Sep. 27, 2014
Sep. 28, 2013
Operating Activities: Net income $ 178.0 $
173.1 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation 99.0 104.9
Amortization 49.5 50.8 Provision for doubtful
accounts and sales returns 14.8 14.1 Loss (gain) on sale of
businesses 3.0 (52.2 ) Indefinite-lived intangible asset
impairment charge 3.0 --- Net losses (gains) from asset
impairments and sales/disposals of assets 3.3 (5.6 )
Stock-based compensation 22.1 25.4 Other non-cash expense
and loss 32.1 40.2 Other non-cash income and gain --- (12.9
) Changes in assets and liabilities and other adjustments
(204.6 ) (242.1 )
Net cash provided by
operating activities 200.2 95.7
Investing Activities: Purchases of property, plant
and equipment (100.8 ) (79.1 ) Purchases of software and
other deferred charges (22.0 ) (34.6 ) Proceeds from sales
of property, plant and equipment 4.1 30.8 Sales of
investments, net --- 0.6 Proceeds from sale of businesses,
net of cash provided --- 484.0 Other --- 0.8
Net cash (used in) provided by investing activities
(118.7 ) 402.5
Financing
Activities: Net increase (decrease) in borrowings
(maturities of 90 days or less) 86.3 (398.3 ) Additional
borrowings (maturities longer than 90 days) --- 250.0
Payments of debt (maturities longer than 90 days) (1.1 ) (1.4 )
Dividends paid (93.4 ) (84.1 ) Share repurchases
(247.3 ) (223.8 ) Proceeds from exercises of stock options,
net 22.6 40.2 Other (2.4 ) (8.7 )
Net cash used in financing activities (235.3 ) (426.1 )
Effect of foreign currency translation
on cash balances (2.2 ) 2.1
(Decrease)
increase in cash and cash equivalents (156.0 ) 74.2 Cash and
cash equivalents, beginning of year 351.6 235.4
Cash and cash equivalents, end of period $
195.6 $ 309.6
Avery Dennison CorporationMedia Relations:David Frail, (626)
304-2014David.Frail@averydennison.comorInvestor Relations:Eric M.
Leeds, (626) 304-2029investorcom@averydennison.com
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