• 4Q19 Reported EPS of $1.92
  
  • Adjusted EPS (non-GAAP) of $1.73
• 4Q19 Net sales increased 0.2% to $1.77 billion
  
  • Organic sales growth (non-GAAP) of 2.1%
• FY19 Reported EPS of $3.57, incl. pension settlement charges
  
  • Adjusted EPS of $6.60
• FY19 Net sales decreased 1.2% to $7.07 billion
  
  • Organic sales growth of 2.0%
• Returned $427 mil. to shareholders via share repurchase and dividends in 2019
• Expect FY20 Reported EPS of $6.75 to $7.00
  
  • Adjusted EPS of $6.90 to $7.15

Glendale, Calif. – Avery Dennison Corporation today announced preliminary, unaudited results for its fourth quarter and year ended December 28, 2019. Non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, comparisons are to the same periods in the prior year.

“We delivered another year of strong adjusted earnings growth in 2019, despite challenging market conditions and significant currency headwinds,” said Mitch Butier, Chairman, President and CEO. “Our focus in this environment is on protecting our margins in the base business, while driving faster-than-average growth and continuing to invest disproportionately in high value categories like RFID. We are executing well on both fronts.

“Label and Graphic Materials delivered solid volume improvement in the second half while expanding margins, recapturing share that we ceded at the tail end of the last inflationary cycle, as planned. Retail Branding and Information Solutions delivered mid-teens profit growth, reflecting both strong top-line performance and continued margin expansion. And, in a difficult year for industrial end markets, Industrial and Healthcare Materials posted modest sales growth while expanding margins significantly.

“For 2020, we are targeting continued progress toward our 2021 goals,” added Butier. “We anticipate solid earnings growth, benefiting from our improved volume trend. We continue our relentless pursuit of productivity, triggering the next wave of restructuring savings, while investing to drive future growth and strengthen our competitive advantage, including our recently announced acquisition of Smartrac.

“We remain confident that the consistent execution of our strategies will enable us to continue to deliver for all of our key stakeholders. I would like to thank our employees for their dedication to creating superior value for our customers, investors, and the communities in which we operate through their constant focus on innovation and operational excellence.”

Fourth Quarter 2019 Results by Segment

Label and Graphic Materials
Reported sales decreased 0.4 percent. On an organic basis, sales grew 1.5 percent, driven by volume/mix, partially offset by pricing. Sales increased low-single digits on an organic basis in Label and Packaging Materials, and decreased low-single digits on an organic basis in the combined Graphics and Reflective Solutions businesses.

Reported operating margin decreased 70 basis points to 12.0 percent as the benefits of productivity initiatives and the net impact of raw material deflation and pricing were more than offset by higher restructuring charges and unfavorable product mix. Adjusted operating margin increased 40 basis points to 13.3 percent.

Retail Branding and Information Solutions
Reported sales increased 3.6 percent; on an organic basis, sales grew 5.2 percent, driven by continued strength in RFID and external embellishments.

Reported operating margin decreased 10 basis points to 11.5 percent as the benefits from increased volume and productivity were more than offset by higher employee-related costs, restructuring charges, and growth-related investments. Adjusted operating margin increased 140 basis points to 13.6 percent.

Industrial and Healthcare Materials
Reported sales declined 3.1 percent. On an organic basis, sales fell 1.1 percent, reflecting a mid-single digit decline in healthcare categories, partially offset by a low-single digit increase in industrial categories.

Reported operating margin decreased 310 basis points to 7.2 percent, reflecting higher restructuring charges and employee-related costs that more than offset the benefits of productivity gains and strategic pricing initiatives. Adjusted operating margin increased 60 basis points to 10.2 percent.

Other
Share Repurchases / Equity Dilution from Long-Term Incentives

For the fourth quarter and full year 2019, the company repurchased 0.3 and 2.2 million shares, respectively, at an aggregate cost of $33 million and $238 million, respectively. Net of dilution, the company’s share count decreased by 1.5 million for the year.

In 2019, the company returned $427 million in cash to shareholders through a combination of share repurchases and dividends.

Income Taxes

The company’s reported effective tax rate was positive 1.3 percent for the fourth quarter and negative 22.7 percent for the full year. The company’s adjusted (non-GAAP) tax rate was 24.2 percent for the fourth quarter and 24.6 percent for the full year; these rates exclude a fourth quarter net tax benefit of $48 million from a discrete foreign structuring transaction, while the full year rate also excludes a net tax benefit of $179 million associated with the termination of our U.S. pension plan.

The company’s 2020 adjusted tax rate is expected to be in the mid-twenty percent range.

Cost Reduction Actions

In the fourth quarter and full year 2019, the company realized approximately $18 million and $53 million, respectively, in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $29 million and $50 million, respectively, the vast majority of which represents cash charges.

Outlook

In its supplemental presentation materials, “Fourth Quarter and Full Year 2019 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2020 financial results. Based on the factors listed and other assumptions, the company expects 2020 reported earnings per share of $6.75 to $7.00.

Excluding an estimated $0.15 per share related to restructuring charges and other items, the company expects adjusted earnings per share of $6.90 to $7.15.

For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “Fourth Quarter and Full Year 2019 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.