Avery Dennison Announces Fourth Quarter and Full-Year 2012 Results

Avery Dennison Announces Fourth Quarter and Full-Year 2012 Results

  • 4Q12 Reported EPS (including discontinued operations) of $0.48
    • Adjusted EPS (non-GAAP, continuing operations) of $0.54
  • 4Q12 Net sales grew approx. 5 percent to $1.53 billion
    • Net sales up approx. 7 percent on organic basis
  • FY12 Reported EPS (including discontinued operations) up approx. 17 percent
    • Adjusted EPS (non-GAAP, continuing operations) up approx. 20 percent on 4 percent organic sales growth
  • Returned $346 million of cash to shareholders, with increased dividend and repurchase of approx. 7 percent of outstanding shares in FY12
  • Restructuring program on track to achieve more than $100 million in annualized savings by mid-2013
  • Expect 2013 growth in adjusted EPS (non-GAAP, continuing operations) of 15 to 35 percent

PASADENA, Calif.--(BUSINESS WIRE)-- Avery Dennison Corporation (NYS: AVY) today announced preliminary, unaudited fourth quarter and full-year 2012 results. 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.

"Avery Dennison delivered strong earnings improvement in 2012," said Dean Scarborough, Avery Dennison chairman, president and CEO. "Both Pressure-sensitive Materials and Retail Branding and Information Solutions delivered solid sales growth and expanded margins, and we returned $346 million of cash to shareholders through share repurchases and an increased dividend.

"We also took actions that position us well for significant profit growth in 2013, even in a soft economic environment," Scarborough said. "We remain committed to delivering on our long-term goals, including double-digit earnings growth and higher returns."

For more details on the company's results, see the summary table accompanying this news release, as well as the supplemental presentation materials, "Fourth Quarter and Full-Year 2012 Financial Review and Analysis," posted on the company's website atwww.investors.averydennison.com, and furnished on Form 8-K with the SEC.

Fourth Quarter 2012 Results by Segment

All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, acquisitions and divestitures. Adjusted operating margin refers to earnings before interest expense and taxes, excluding restructuring costs and other items, as a percentage of sales.

Prior period amounts have been realigned to reflect the company's new operating structure, which includes a new corporate expense allocation methodology.

Pressure-sensitive Materials (PSM)

The PSM segment now includes the Performance Tapes business, previously reported in other specialty converting businesses.

  • PSM segment sales increased approximately 6 percent. Within the segment, Label and Packaging Materials sales increased mid-single digits, as did the combined sales for other product lines (Graphics, Reflective, Performance Tapes).
  • Operating margin improved 100 basis points to 7.8 percent as the benefit of higher volume and productivity initiatives more than offset the impact of changes in product mix and higher employee-related expenses. Adjusted operating margin improved 100 basis points.

Retail Branding and Information Solutions (RBIS)

The RBIS segment now includes all of the radio-frequency identification (RFID) business, previously reported in other specialty converting businesses.

  • Sales increased approximately 10 percent compared to prior year driven by increased demand from U.S. and European retailers and brands, including accelerating RFID adoption.
  • Operating margin improved 120 basis points to 3.0 percent as the benefit of higher volume and productivity initiatives more than offset higher employee-related expenses and an impairment charge. Adjusted operating margin improved 270 basis points.

Other specialty converting businesses

As indicated above, other specialty converting businesses no longer include the Performance Tapes and RFID businesses.

  • Sales increased approximately 15 percent due to higher volume.
  • Operating margin declined 70 basis points to 2.3 percent due to the impact of a prior year gain on sale of a product line, as well as current year costs associated with exiting product lines and restructuring, partially offset by the benefit of higher volume. Adjusted operating margin improved by more than 12 points to 6.4 percent.


Share Repurchases

The company repurchased 7.9 million shares during 2012 at an aggregate cost of $235 million (approximately 7 percent of shares outstanding).

Results of Discontinued Operations

Earnings from OCP and certain costs associated with its anticipated divestiture are reported as income or loss from discontinued operations (net of tax) in the consolidated income statement. Designed and Engineered Solutions (DES) results are currently reported in Other specialty converting businesses, but will be reclassified as discontinued operations as of the first quarter of 2013.

Earnings per share from discontinued operations increased from $(0.06) to $0.15. Adjusted earnings per share from discontinued operations increased from $0.03 to $0.17, primarily due to an adjustment in the tax rate for discontinued operations in the fourth quarter of 2011.

Income Taxes

The full-year adjusted tax rate was approximately 34 percent, in line with expectations and comparable to 2011.

Cost Reduction Actions

In the first half of 2012, the company began a restructuring program to reduce costs across all segments of the business. The company currently anticipates more than $100 million in annualized savings from this program by mid-2013. To implement these actions, the company incurred restructuring costs and other items of approximately $56 million in 2012, and expects to incur $25 million in 2013.


In the company's supplemental presentation materials, "Fourth Quarter and Full-Year 2012 Financial Review and Analysis," the company provides a list of factors that it believes will contribute to its 2013 financial results. Based on the factors listed and other assumptions, the company expects 2013 earnings per share from continuing operations of $2.23 to $2.63. Excluding an estimated $0.17 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $2.40 to $2.80. The company expects free cash flow from continuing operations in the range of $275 million to $325 million. The company's guidance includes operating results from DES and excludes the impact of share repurchase using net proceeds from divestitures.

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 (NYS: AVY) helps make brands more inspiring and the world more intelligent. For more than 75 years the company has been a global leader in pressure-sensitive technology and materials and retail branding and information solutions. A FORTUNE 500 company with sales of $6 billion from continuing operations in 2012, Avery Dennison is based in Pasadena, California, and has employees in over 50 countries. For more information, visit 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; ability of the company to generate sustained productivity improvement; ability of the company to achieve and sustain targeted cost reductions; impact of competitive products and pricing; loss of significant contract(s) or customer(s); 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 foreign currency exchange rates and other risks associated with foreign operations; integration of acquisitions and completion of pending 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; volatility of financial markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; ability of the company 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 the company's customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.

The company believes that the most significant risk factors that could affect its financial performance in the near-term include (1) the impact of economic conditions on underlying demand for the company's 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 the company's 2011 Form 10-K, filed on February 27, 2012 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 the company undertakes no obligation to update these statements to reflect subsequent events or circumstances.

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 atwww.investors.averydennison.com.

Fourth Quarter Financial Summary - Preliminary
(in millions, except per share amounts)
    4Q    4Q% Change vs. P/Y
20122011ReportedOrganic (a)
Net sales, by segment:
Pressure-sensitive Materials$1,060.1$1,024.14%6%
Retail Branding and Information Solutions406.6370.510%10%
Other specialty converting businesses 65.5     60.09%15%
Total net sales$1,532.2$1,454.65%7%
    As Reported (GAAP)  Adjusted Non-GAAP (b)
4Q  4Q  % Change  % of Sales4Q  4Q  % Change  % of Sales
20122011Fav(Unf)2012  201120122011Fav(Unf)2012  2011

Operating income before interest and taxes, by segment:

Pressure-sensitive Materials$82.7$69.27.8%6.8%$92.2$79.08.7%7.7%
Retail Branding and Information Solutions12.16.63.0%1.8%25.312.96.2%3.5%
Other specialty converting businesses1.51.82.3%3.0%4.2(3.7)6.4%-6.2%
Corporate expense (23.2)   (22.6) (20.3)   (17.3)

Total operating income before interest and taxes / operating margin

Interest expense17.917.917.917.9

Income from operations before taxes

Provision for income taxes$21.8$8.1$28.9$14.9
Net income from continuing operations$33.4$29.015%2.2%2.0%$54.6$38.143%3.6%2.6%

Income (loss) from discontinued operations, net of tax







Net income$49.0$22.2121%3.2%1.5%$71.4$41.273%4.7%2.8%
Net income (loss) per common share, assuming dilution:
Continuing operations$0.33$0.2722%$0.54$0.3650%
Discontinued operations$0.15



Total Company$0.48$0.21129%$0.71$0.3982%
(a)  Percentage change in sales excluding the estimated impact of foreign currency translation, acquisitions and divestitures.
(b)Excludes restructuring costs and other items (see accompanying schedules A-2 and A-5 for reconciliation to GAAP financial measures).
Previously reported segment results and corporate expense have been realigned to reflect new operating structure.
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