GLENDALE, Calif. - Avery Dennison Corporation today announced preliminary, unaudited results for its fourth quarter and full year ended January 3, 2015. 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. Results reflect classification of former Office and Consumer Products (OCP) and Designed and Engineered Solutions (DES) businesses as discontinued operations. The company completed the sale of these businesses on July 1, 2013.
“I’m happy to report another year of solid progress toward our long-term goals, and I want to thank our employees for their contributions to our ongoing success,” said Dean Scarborough, Avery Dennison chairman and CEO. "In 2014, we delivered 16 percent growth in adjusted earnings per share, significantly increased return on capital, and distributed over $480 million of cash to shareholders.
“Pressure-sensitive Materials delivered its third consecutive year of strong volume growth, while maintaining its profitability and high return on capital. We are taking further actions to improve PSM's long-term competitive position as we continue to invest in growth.
“Retail Branding and Information Solutions faced top-line growth challenges this year, reflecting share loss in the value and contemporary segments of the market, offset by solid growth in RFID and the performance segment,” Scarborough added. “We are focusing our sales efforts to recapture share, while reducing fixed costs and aligning resources to better serve all segments of the market. We expect to see an improvement in our growth trajectory by mid-year and to resume our strong record for margin expansion, with no change to our 2018 goals for the business.
“We expect to increase earnings per share in 2015, despite a significant headwind from currency translation,” said Scarborough. "We remain committed to achieving our long-term financial targets, growing through innovation and differentiated quality and service, with a continued focus on cost and capital discipline."
For more details on the company’s results, see the summary table accompanying this news release, as well as the supplemental presentation materials, “Fourth Quarter and Full Year 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.
Fourth 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 2 percent. Within the segment, Label and Packaging Materials increased low single digits. Combined sales of Graphics and Performance Tapes increased mid-single digits.
- Operating margin improved 60 basis points to 10.1 percent as the benefit from productivity initiatives and higher volume was partially offset by the net impact of raw material input costs and pricing along with higher restructuring costs. Adjusted operating margin improved 100 basis points.
Retail Branding and Information Solutions (RBIS)
- RBIS segment sales were down approximately 5 percent due to lower volume in Europe and North America.
- Operating margin declined 190 basis points to 5.5 percent as the impact of lower volume, a prior year gain on sale of assets, and other factors more than offset the benefit from productivity initiatives and lower employee costs. Adjusted operating margin declined 70 basis points.
The company repurchased 7.4 million shares in 2014 at an aggregate cost of $356 million.
The full year tax rate was 31.1 percent, below previous expectations of 33 percent, due primarily to benefits associated with tax planning in the fourth quarter. The tax rate in 2015 is expected to be in the low to mid-thirty percent range.
Cost Reduction Actions
In 2014, the company realized approximately $35 million in savings from restructuring, net of transition costs, and incurred restructuring costs of approximately $66 million, $55 million of which represents cash charges.
In its supplemental presentation materials, “Fourth Quarter and Full Year 2014 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2015 financial results. Based on the factors listed and other assumptions, the company expects 2015 earnings per share of $2.95 to $3.15. Excluding an estimated $0.25 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share of $3.20 to $3.40.
Note: Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.