Avery Dennison Announces Third Quarter 2015 Results
Friday, October 30, 2015
Press release from the issuing company
GLENDALE, Calif. - Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its third quarter ended October 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.
“I’m happy to report another strong quarter, keeping us on track to achieve our financial targets for the year,” said Dean Scarborough, Avery Dennison chairman and CEO. “Sales growth for both of our core businesses was within our long-term target range, driving total company organic growth of five percent, with 160 basis points of margin expansion.
“Our Pressure-sensitive Materials segment once again delivered strong results, reflecting the continued execution of our strategy to leverage our scale and strengths in innovation, quality, and service across the entire portfolio,” Scarborough added. “Retail Branding and Information Solutions also made solid progress in the quarter, in terms of both top-line growth and margin improvement, with particular strength in radio-frequency identification products. The team has begun to execute a new strategy to accelerate growth in the core business through a more competitive, faster, and simpler model that will better serve the needs of our customers in all segments of the market.
“Overall, I’m pleased with the progress our team has made. We delivered double-digit growth in adjusted earnings per share, in spite of challenging economic conditions in many parts of the world and significant headwinds from currency translation. I remain confident that the consistent execution of our strategies, including the RBIS transformation, will enable us to meet our long-term goals for superior value creation through a balance of profitable growth 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, “Third Quarter 2015 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 2015 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 prior 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)
Retail Branding and Information Solutions (RBIS)
The company repurchased 0.8 million shares in the third quarter of 2015 at an aggregate cost of $47 million.
The third quarter effective tax rate was 30 percent. The adjusted tax rate for the third quarter was 34 percent, consistent with the anticipated full year tax rate in the low to mid-thirty percent range.
Cost Reduction Actions
In the third quarter, the company realized $21 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of $7 million, approximately three-quarters of which represent cash costs.
For full year 2015, the company now estimates that it will realize more than $70 million in pre-tax savings from restructuring, net of transition costs, and incur pre-tax restructuring charges of approximately $65 million, most of which will represent cash costs. This estimate represents an approximately $10 million increase in the company’s previous guidance for total restructuring charges for the year, as a result of further cost reduction actions planned as part of the business model transformation underway within RBIS.
The new strategy for RBIS is focused on accelerating growth through a more regionally-driven business model that is more competitive, faster, and less complex. To achieve these objectives, the company is implementing a multi-year plan to streamline decision-making and eliminate management layers, while further consolidating its manufacturing footprint, to reduce costs across the global organization.
Combined with other recent actions, the company currently anticipates 2016 pre-tax savings, net of transition costs, of approximately $60 million from restructuring actions within RBIS. The execution of these actions will allow the business to be more competitive in the less differentiated segments of the market, facilitating the achievement of RBIS’ previously communicated financial targets, including an operating margin of ten to eleven percent by 2018.
In its supplemental presentation materials, “Third Quarter 2015 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 has updated its previous guidance for 2015 earnings per share, narrowing the range and reducing the midpoint by $0.07 to $2.80 to $2.90, reflecting an increase in estimated restructuring charges.
Excluding an estimated $0.50 per share for restructuring costs and other items, the company has narrowed its expectations for adjusted (non-GAAP) earnings per share to $3.30 to $3.40, with no change to the midpoint of the range.
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