• 3Q19 Reported EPS of $1.71
  
  • Adjusted EPS (non-GAAP) of $1.66
• 3Q19 Net sales increased 0.1% to $1.76 billion
  
  • Organic sales growth (non-GAAP) of 2.1%
• FY 2019 EPS guidance ranges revised
  
  • FY19 reported EPS guidance of $3.15 to $3.25 (previously $3.15 to $3.30)
  • FY19 adjusted EPS guidance of $6.50 to $6.60 (previously $6.50 to $6.65)

Glendale, Calif. – Avery Dennison Corporation today announced preliminary, unaudited results for its third quarter ended September 28, 2019. All non-GAAP financial measures referenced in this document are defined and reconciled to GAAP in the attached pages A-4 through A-8. Unless otherwise indicated, comparisons are to the same period in the prior year.

“We continue to deliver solid profit growth despite soft market demand,” said Mitch Butier, Chairman, President and CEO. “Our focus in this slower growth environment has been to protect our margins in the base business, while driving faster-than-average growth in high value categories like RFID, and we’re executing well on both fronts.

“For the quarter, Label and Graphic Materials delivered modest organic growth, as volumes improved relative to the first half of the year, and operating margin was strong; Retail Branding and Information Solutions delivered solid organic growth, as continued strength in RFID more than offset a slowdown in the base business, and operating margin remained strong; and IHM outperformed expectations on both the top and bottom lines, delivering solid organic growth and strong margin expansion.

“We have revised the high end of our guidance range for 2019 earnings per share, reflecting the incremental negative impact from currency translation, largely offset by stronger operational results and a modestly lower tax rate,” added Butier. “We’re confident in our ability to achieve our long-term targets, reflecting the resilience of our business and ability of our team to adapt to changing market conditions.”

Third Quarter 2019 Results by Segment

Label and Graphic Materials
Reported sales declined 0.8 percent; on an organic basis, sales grew 1.2 percent, as volume/mix improved modestly. On an organic basis, sales were up low-single digits in both Label and Packaging Materials and the combined Graphics and Reflective Solutions businesses.

Reported operating margin increased 60 basis points to 13.4 percent, reflecting the benefit from productivity initiatives, including restructuring and material re-engineering, partially offset by higher restructuring charges, net of reversals, and increased employee-related costs. Adjusted operating margin increased 120 basis points to 13.5 percent.

Retail Branding and Information Solutions
Reported sales increased 2.1 percent; on an organic basis, sales grew 4.1 percent, driven primarily by continued strength in sales of radio frequency identification (RFID) solutions, which increased by approximately 20 percent.

Reported operating margin increased 60 basis points to 11.2 percent, as productivity, higher volume, and lower restructuring charges more than offset higher employee-related costs and growth-related investments. Adjusted operating margin increased 10 basis points to 11.5 percent.

Industrial and Healthcare Materials
Reported sales increased 1.4 percent; on an organic basis, sales increased 3.7 percent, driven by a low-to-mid single digit increase in industrial categories and a high-single digit increase in healthcare categories.

Reported operating margin increased 120 basis points to 10.4 percent, as the benefits from higher volume/mix and productivity more than offset higher restructuring charges and employee-related costs. Adjusted operating margin increased 180 basis points to 11.0 percent.

Other

Share Repurchases / Equity Dilution
The company repurchased 0.8 million shares in the third quarter at an aggregate cost of $87.6 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down by 3.8 million compared to the same time last year.

During the first three quarters of the year, the company returned $346 million in cash to shareholders through a combination of share repurchases and dividends, up from $306 million for the same period last year.

Income Taxes
The company’s third quarter effective tax rate was 19.2 percent, compared to 10.5 percent in the prior year. The adjusted tax rate (non-GAAP) for the quarter was 24.1 percent, reflecting the company’s current expectation for a full year adjusted tax rate of 24.7 percent.

Cost Reduction Actions
In the third quarter, the company realized approximately $18 million in pretax savings from restructuring, net of transition costs, and incurred pretax restructuring charges of approximately $3 million, related to cash severance costs.

Outlook
In its supplemental presentation materials, “Third Quarter 2019 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2019 financial results. Based on the factors listed and other assumptions, the company has revised its guidance range for 2019 reported earnings per share from a range of $3.15 to $3.30 to a range of $3.15 to $3.25.

Excluding an estimated $3.35 per share related to pension settlement charges, restructuring charges and other items, the company’s guidance for adjusted earnings per share has been revised to a range of $6.50 to $6.60.

For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “Third Quarter Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.

Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.