Avery Dennison Reports Second Quarter 2005 Results.PASADENA, Calif. -- Avery Dennison Avery Dennison Corporation (NYSE: AVY) produces pressure-sensitive materials (such as self-adhesive labels), office products, and various paper products. R. Stanton Avery founded Avery in 1935. Avery Dennison Corporation was created in 1990 by merger of Avery and Dennison. Corporation (NYSE NYSE See: New York Stock Exchange :AVY AVY may refer to:
An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.89, compared with $0.68 for the second quarter of 2004. The second quarter 2005 earnings include a negative impact of $0.02 per share from asset impairments, transition costs associated with a previously announced plant shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down , and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs, while prior-year second quarter earnings include a negative impact of $0.10 per share from a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. primarily related to the integration of an acquisition. Excluding these costs, second quarter earnings per share increased by more than 16 percent over the comparable quarter. (See Attachment See attach a file. A-3: "Preliminary Reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). to Non-GAAP Measures".) Sales for the second quarter of $1.4 billion were in line with the Company's expectations, an increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 7 percent over the same quarter a year ago, with core unit volumes increasing by approximately 1 percent. Profitability increased due to both improved gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. and control of operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . "Our disciplined pricing actions and focus on expense management have proven effective in the short term, particularly in light of soft market conditions," said Dean A. Scarborough Scarborough, town (1991 pop. 36,665) and district, North Yorkshire, NE England, on the North Sea. The town, primarily a resort, is also an important conference and retirement center. The area was recognized at an early time for its strategic location. , president and chief executive officer of Avery Dennison. "We remain committed to our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategies to accelerate top-line growth and continue productivity improvement." Financial highlights for the second quarter of 2005: --Earnings per share, on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, were $0.89, compared with $0.68 in the same quarter a year ago, including the negative impact of restructuring, asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and plant transition costs totaling $0.02 per share and $0.10 per share in the current and prior years, respectively. While results for the second quarter of 2005 include a $0.04 per share benefit from a reduction in the tax rate compared with the first quarter of 2005, the effective tax rate for the second quarter was comparable to the same period a year ago. --Net income was $89.4 million, compared with $68.5 million in the second quarter of 2004, including the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. impact of restructuring, asset impairment and plant transition costs totaling $2.4 million and $10.0 million in the current and prior years, respectively. --Sales grew approximately 7 percent over the prior year, reaching $1.4 billion for the second quarter of 2005, compared with $1.3 billion in the second quarter of 2004. The impact of currency translation contributed approximately 45 percent of the sales growth during the quarter, while price and mix contributed approximately 30 percent. Local currency sales in the emerging markets of Asia, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. were up 13 percent over the same period last year. --Core unit volume grew an estimated 1 percent over the prior-year second quarter, below the Company's expectations, reflecting generally weak industry conditions and share loss related to price increases in several businesses. --Gross profit margin improved 50 basis points compared with the second quarter of 2004 due to the completion of the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. manufacturing consolidation in the prior year and other productivity improvement efforts. Higher raw material costs were fully offset with selling price increases. --Marketing, general and administrative expenses as a percent of sales improved by 10 basis points compared to the same quarter a year ago, and 110 basis points compared to the first quarter of 2005, due in part to spending controls implemented during the quarter. --Operating margin improved by 70 basis points over the second quarter of 2004, excluding restructuring, asset impairment and plant transition costs recognized in both periods, due to the factors affecting gross profit margin and marketing, general and administrative expenses described above. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".) --The tax rate for the second quarter was 22.7 percent, reflecting a reduction of 200 basis points in the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. tax rate due to geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. income mix and other factors. Financial highlights for the first six months of 2005: --Earnings per share, on a diluted basis, were $1.46, compared with $1.21 for the first half of 2004. Excluding restructuring, asset impairment and plant transition costs (offset by a small gain on sale of assets in the first quarter of 2005), earnings per share were $1.52, compared with $1.46 for the first six months of 2004. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".) --Net income was $147.1 million, compared with $121.1 million for the first six months of 2004, including the after-tax impact of restructuring, asset impairment and plant transition costs (offset by a small gain on sale of assets in the first quarter of 2005) totaling $5.5 million and $25.5 million in the current and prior years, respectively. --Sales grew approximately 8 percent to $2.8 billion, compared with $2.6 billion in the first half of the prior year. The impact of currency translation contributed approximately 40 percent of the sales growth during the first six months, while price and mix contributed approximately 30 percent. --Core unit volume rose approximately 2 percent compared with the same period a year ago. Segment results The Company's Pressure-sensitive Materials segment reported sales of approximately $806 million, up nearly 9 percent over the second quarter of 2004. Slightly more than half of the increase in segment revenue reflects unit volume growth and a positive contribution from price and mix. The balance of the growth is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the impact of currency translation, primarily the Euro. Before the effects of currency translation, sales in the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. pressure-sensitive roll materials business declined by approximately 3 percent, with the benefit of price increases more than offset by a decline in volume. The volume decline affected most business segments within the North American pressure-sensitive roll materials business with the exception of films, which continued to benefit from growth in the beverage label market. Sales in the European pressure-sensitive roll materials business grew approximately 12 percent in local currency, driven by strong unit volume growth, due in part to share gain related to a paper industry strike in Finland Finland, Finnish Suomi (swô`mē), officially Republic of Finland, republic (2005 est. pop. 5,223,000), 130,119 sq mi (337,009 sq km), N Europe. that negatively affected some of the Company's competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. . Strong growth in the Eastern European region also contributed to this result. The roll materials business in Asia reported double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" growth in local currency sales, while this business in Latin America grew at a high single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. rate. Sales in the graphics and reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. materials business declined by approximately 2 percent before the effect of currency. Excluding restructuring and asset impairment costs, operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the segment increased to 9.4 percent compared with 8.6 percent a year ago, due to productivity improvement initiatives, including a plant closure completed in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). during the second quarter
of 2004, as well as spending controls. The benefit of price increases
covered higher raw material costs. (See Attachment A-4:
"Preliminary Supplementary Information, Reconciliation of GAAP to
Non-GAAP Supplementary Information".)
The Office and Consumer Products segment reported sales of approximately $300 million, an increase of more than 4 percent over the second quarter of 2004. Slightly more than half of the revenue growth for the segment reflects selling price increases. The balance of the sales growth is attributable to the impact of currency translation, primarily the Euro. The segment benefited from earlier than usual shipment of back-to-school orders. An estimated $10 million in customer orders related to the back-to-school season were shipped earlier than the prior year, shifting an estimated $0.03 of earnings per share from the third quarter into the second. Excluding restructuring and plant transition costs, operating margin for the segment increased to 17.0 percent compared with 14.1 percent a year ago, reflecting productivity improvement efforts and spending controls. Price increases, effective January January: see month. 1 of this year, have covered cumulative raw material cost inflation for the segment. (See Attachment A-4: "Preliminary Supplementary Information, Reconciliation of GAAP to Non-GAAP Supplementary Information".) The Retail Information Services See Information Systems. segment reported sales of approximately $182 million, an increase of slightly more than 10 percent over the second quarter of 2004. Approximately two-thirds of the growth is due to the combined effect of the Rinke acquisition and currency translation, with the balance due to core unit volume growth. Excluding restructuring costs, operating margin for the segment increased to 10.4 percent in the second quarter, compared with 10.1 percent a year ago, reflecting productivity improvement efforts, including movement of production from Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. to lower cost operations in mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. China, as well as spending controls. (See Attachment A-4: "Preliminary Supplementary Information, Reconciliation of GAAP to Non-GAAP Supplementary Information".) Businesses in the other specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. converting group reported sales of approximately $131 million, comparable to the prior year. Excluding asset impairment, operating margin for these businesses declined to 1.9 percent from 8.4 percent a year ago, largely due to higher spending related to the Company's radio frequency identification See RFID. (RFID (Radio Frequency IDentification) A data collection technology that uses electronic tags for storing data. The tag, also known as an "electronic label," "transponder" or "code plate," is made up of an RFID chip attached to an antenna. ) division. (See Attachment A-4: "Preliminary Supplementary Information, Reconciliation of GAAP to Non-GAAP Supplementary Information".) Outlook Reflecting improved profitability and the reduction in its tax rate, Avery Dennison is raising its earnings-per-share guidance for the full year to $2.95 to $3.20, from its previously announced expectation of $2.85 to $3.15. The Company's earnings guidance excludes the impact of restructuring and asset impairment charges. Year-to-date charges and transition costs, net of gain on sale of assets, total $0.06 per share. Additionally, the Company anticipates modest costs associated with restructuring actions in the third quarter of 2005, with the possibility of more significant actions in the fourth quarter of 2005. The Company said its outlook anticipates continued weakness in core volume growth, with the expectation of relatively stable raw material costs. "Given modest expectations for unit volume growth in the short term, we will continue to focus on expense management and we are in the process of evaluating new opportunities for reducing our cost structure," said Scarborough. "While some of the second quarter spending cuts Noun 1. spending cut - the act of reducing spending cut - the act of reducing the amount or number; "the mayor proposed extensive cuts in the city budget" are not sustainable over the long term, we expect to secure additional sources of cost savings as a result of a number of key initiatives currently underway across the Company." "Our long-term opportunities for growth are excellent. We are confident that improved economic conditions, our leadership position in growing emerging markets, innovations from our Horizons growth program and the expansion of our RFID business will accelerate demand for our products and services in the future," said Scarborough. Avery Dennison is a global leader in pressure-sensitive labeling materials, office products and retail tag, ticketing and branding systems. Based in Pasadena, Calif., Avery Dennison is a FORTUNE 500 company with 2004 sales of $5.3 billion. Avery Dennison employs more than 21,000 individuals in 47 countries worldwide who apply the Company's technologies to develop, manufacture and market a wide range of products for both consumer and industrial markets. Products offered by Avery Dennison include Avery-brand office products and graphics imaging media, Fasson-brand self-adhesive self-ad·he·sive adj. Having a surface coated with an adhesive and not needing any substance, such as glue or paste, applied to form a bond: self-adhesive wallpaper; self-adhesive labels. materials, peel-and-stick postage stamps This is a list of postage stamps that are especially notable in some way. The best-known stamps:
Goods, such as appliances and automobiles, that have a useful life over a number of periods. Firms that produce durable goods are often subject to wide fluctuations in sales and profits. Also called consumer durables. applications, brand identification and supply chain management products for the retail and apparel industries, and specialty tapes and polymers. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain information presented in this news release may constitute "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements. These statements are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or expected results depending on a variety of factors, including but not limited to fluctuations in cost and availability of raw materials; ability of the Company to achieve and sustain targeted cost reductions; foreign exchange rates; worldwide and local economic conditions; selling prices; impact of legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , including the U.S. Department of Justice ("DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. ") criminal investigation, as well as the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community ("EC") and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Department of Justice investigations, into industry competitive practices and any related proceedings or lawsuits pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to these investigations or to the subject matter thereof (including purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv. class actions seeking treble damages A recovery of three times the amount of actual financial losses suffered which is provided by statute for certain kinds of cases.The statute authorizing treble damages directs the judge to multiply by three the amount of monetary damages awarded by the jury in those cases for alleged unlawful Contrary to or unauthorized by law; illegal. When applied to promises, agreements, or contracts, the term denotes that such agreements have no legal effect. The law disapproves of such conduct because it is immoral or contrary to public policy. competitive practices, and purported class actions related to alleged disclosure violations pertaining to alleged unlawful competitive practices, which were filed after the announcement of the DOJ investigation, as well as a likely fine by the EC in respect of certain employee misconduct MISCONDUCT. Unlawful behaviour by a person entrusted in any degree: with the administration of justice, by which the rights of the parties and the justice of the, case may have been affected. 2. in Europe); impact of epidemiological epidemiological emanating from or pertaining to epidemiology. epidemiological associations the associative relationships between the frequency of occurrence of a disease and its determinants, its predisposing and precipitating events on the economy and the Company's customers and suppliers; successful integration of acquired companies, financial condition and inventory strategies of customers; development, introduction and acceptance of new products; fluctuations in demand affecting sales to customers; and other matters referred to in the Company's SEC filings. The financial information presented in this news release represents preliminary financial results. The Company believes that the most significant risk factors that could affect its ability to achieve its stated financial expectations in the near-term near-term adj. Of, for, or involving a short period of time in the near future. include (1) potential adverse developments in legal proceedings and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. investigations regarding competitive activities; (2) the degree to which higher raw material costs can be passed on to customers through selling price increases (and previously implemented selling price increases can be sustained), without a significant loss of volume; (3) the impact of economic conditions on underlying demand for the Company's products; and (4) ability of the Company to achieve and sustain targeted cost reductions. For more information and to listen to a live broadcast or an audio replay of the 2nd Quarter conference call with analysts, visit the Avery Dennison Web site at www.investors.averydennison.com
AVERY DENNISON
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended Six Months Ended
--------------------- -------------------
July 02, June 26, July 02, June 26,
2005 2004 2005 2004
-------------------------------------------------- -------------------
Net sales $ 1,418.6 $1,324.0 $2,764.9 $2,570.7
Cost of products sold 992.6 933.4 1,951.1 1,813.6
--------------------------- ---------------------- -------------------
Gross profit 426.0 390.6 813.8 757.1
Marketing, general &
administrative expense 292.5 274.0 584.5 531.7
Interest expense 15.8 14.1 30.3 29.0
Other expense, net (1) 2.1 13.8 5.4 35.2
--------------------------- ---------------------- -------------------
Income before taxes 115.6 88.7 193.6 161.2
Taxes on income 26.2 20.2 46.5 40.1
--------------------------- ---------------------- -------------------
Net Income $ 89.4 $ 68.5 $ 147.1 $ 121.1
--------------------------- ---------------------- -------------------
Per share amounts:
Income per common share,
assuming dilution $ 0.89 $ 0.68 $ 1.46 $ 1.21
--------------------------- ---------------------- -------------------
Average common shares outstanding,
assuming dilution 100.6 100.5 100.6 100.4
--------------------------- ---------------------- -------------------
Common shares outstanding
at period end 100.2 99.9 100.2 99.9
--------------------------- ---------------------- -------------------
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
(1) Other expense for the second quarter of 2005 includes $2.1 of
asset impairment charges and restructuring costs.
Other expense for the second quarter of 2004 includes $13.8 of
restructuring costs, asset impairment and lease cancellation
charges.
Other expense, net, for 2005 YTD includes $8.8 of restructuring
costs and asset impairment charges, partially offset by gain on
sale of assets of $(3.4).
Other expense for 2004 YTD includes $35.2 of restructuring costs,
asset impairment and lease cancellation charges.
Reconciliation of Non-GAAP Financial Measures in Accordance
with SEC Regulation G
Avery Dennison reports financial results in accordance with U.S.
GAAP, and herein provides some non-GAAP measures. These non-GAAP
measures are not in accordance with, nor are they a substitute
for, GAAP measures. These non-GAAP measures are intended to
supplement the Company's presentation of its financial results
that are prepared in accordance with GAAP.
Avery Dennison uses the non-GAAP measures presented to evaluate
and manage the Company's operations internally. Avery Dennison is
also providing this information to assist investors in performing
additional financial analysis that is consistent with financial
models developed by research analysts who follow the Company.
The reconciliation set forth below is provided in accordance with
Regulations G and S-K and reconciles the non-GAAP financial
measures with the most directly comparable GAAP financial
measures.
AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended Six Months Ended
-------------------- -----------------
July 02, June 26, July 02, June 26,
2005 2004 2005 2004
--------------------------------------------------- -----------------
Reconciliation of GAAP to Non-
GAAP Operating Margin:
Net sales $ 1,418.6 $1,324.0 $2,764.9 $2,570.7
-------------------- -----------------
Income before taxes $ 115.6 $ 88.7 $ 193.6 $ 161.2
------------------------------ -------------------- -----------------
GAAP Operating Margin 8.1% 6.7% 7.0% 6.3%
--------------------------------------------------- -----------------
Income before taxes $ 115.6 $ 88.7 $ 193.6 $ 161.2
Non-GAAP adjustments:
Restructuring and
transition costs (1) 1.7 7.7 6.5 23.6
Asset impairment and lease
cancellation charges 1.5 6.1 4.2 11.6
Gain on sale of assets --- --- (3.4) ---
Interest expense 15.8 14.1 30.3 29.0
-------------------- -----------------
Adjusted non-GAAP operating
income before taxes and
interest expense $ 134.6 $ 116.6 $ 231.2 $ 225.4
------------------------------ -------------------- -----------------
Adjusted Non-GAAP Operating
Margin 9.5% 8.8% 8.4% 8.8%
--------------------------------------------------- -----------------
Reconciliation of GAAP to Non-GAAP Net Income:
As reported net income $ 89.4 $ 68.5 $ 147.1 $ 121.1
Non-GAAP adjustments, net of taxes:
Restructuring and
transition costs 1.3 5.6 4.9 17.1
Asset impairment and lease
cancellation charges 1.1 4.4 3.2 8.4
Gain on sale of assets --- --- (2.6) ---
------------------------------ -------------------- -----------------
Adjusted Non-GAAP Net Income $ 91.8 $ 78.5 $ 152.6 $ 146.6
--------------------------------------------------- -----------------
Reconciliation of GAAP to Non-GAAP Earnings Per Share:
As reported income per common
share, assuming dilution $ 0.89 $ 0.68 $ 1.46 $ 1.21
Non-GAAP adjustments per
share, net of taxes:
Restructuring and
transition costs 0.01 0.06 0.05 0.17
Asset impairment and lease
cancellation charges 0.01 0.04 0.03 0.08
Gain on sale of assets --- --- (0.02) ---
------------------------------ -------------------- -----------------
Adjusted Non-GAAP income per
common share, assuming
dilution $ 0.91 $ 0.78 $ 1.52 $ 1.46
--------------------------------------------------- -----------------
Average common shares outstanding,
assuming dilution 100.6 100.5 100.6 100.4
--------------------------------------------------- -----------------
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
(1) 2005 QTD includes transition and restructuring costs of $1.1
and $.6, respectively, primarily related to plant closures.
2005 YTD includes restructuring and transition costs of $4.6 and
$1.9, respectively, primarily related to plant closures.
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)
(UNAUDITED)
Second Quarter Ended
----------------------------------------------
NET SALES OPERATING INCOME OPERATING
MARGINS
------------------ ---------------- ----------
2005 2004 2005(1) 2004(2) 2005 2004
------------------ ---------------- -----------
Pressure-sensitive
Materials $805.7 $739.7 $74.9 $50.7 9.3% 6.9%
Office and Consumer
Products 300.2 287.9 49.5 40.2 16.5% 14.0%
Retail Information
Services 181.5 164.9 18.8 16.4 10.4% 9.9%
Other specialty
converting businesses 131.2 131.5 1.8 11.0 1.4% 8.4%
Corporate Expense N/A N/A (13.6) (15.5) N/A N/A
Interest Expense N/A N/A (15.8) (14.1) N/A N/A
------------------ ---------------- -----------
TOTAL $1,418.6 $1,324.0 $115.6 $88.7 8.1% 6.7%
================== ================ ===========
(1) Operating income for the second quarter of 2005 includes $3.2
of asset impairment charges, transition and restructuring costs,
of which the Pressure-sensitive Materials segment recorded $1.1,
the Office and Consumer Products segment recorded $1.4 and Other
specialty converting businesses recorded $.7.
(2) Operating income for the second quarter of 2004 includes
restructuring costs, asset impairment and lease cancellation
charges of $13.8, of which the Pressure-sensitive Materials
segment recorded $13, the Office and Consumer Products segment
recorded $.5 and the Retail Information Services segment recorded
$.3.
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Second Quarter Ended
---------------------------
OPERATING INCOME OPERATING
MARGINS
--------------- -----------
2005 2004 2005 2004
---------------- -----------
Pressure-sensitive Materials
----------------------------
Operating income, as reported $74.9 $50.7 9.3% 6.9%
Non-GAAP adjustments:
Restructuring costs 0.4 6.9 --- 0.9%
Asset impairment and
lease cancellation charges 0.7 6.1 0.1% 0.8%
---------------- -----------
Adjusted non-GAAP
operating income $76.0 $63.7 9.4% 8.6%
================ ===========
Office and Consumer Products
----------------------------
Operating income, as reported $49.5 $40.2 16.5% 14.0%
Non-GAAP adjustments:
Restructuring and
transition costs (1) 1.4 0.5 0.5% 0.1%
---------------- -----------
Adjusted non-GAAP
operating income $50.9 $40.7 17.0% 14.1%
================ ===========
Retail Information Services
---------------------------
Operating income, as reported $18.8 $16.4 10.4% 9.9%
Non-GAAP adjustments:
Restructuring costs --- 0.3 --- 0.2%
---------------- -----------
Adjusted non-GAAP
operating income $18.8 $16.7 10.4% 10.1%
================ ===========
Other specialty converting businesses
-------------------------------------
Operating income, as reported $1.8 $11.0 1.4% 8.4%
Non-GAAP adjustments:
Asset impairment charges 0.7 --- 0.5% ---
---------------- -----------
Adjusted non-GAAP
operating income $2.5 $11.0 1.9% 8.4%
================ ===========
(1) For 2005, amount includes transition and restructuring costs
of $1.1 and $.3, respectively, related to plant closures.
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)
(UNAUDITED)
Six Months Year-to-Date
------------------------------------------------
NET SALES OPERATING INCOME OPERATING
MARGINS
------------------ ---------------- ------------
2005 2004 2005(1) 2004(2) 2005 2004
------------------ ---------------- ------------
Pressure-sensitive
Materials $1,594.6 $1,468.0 $144.5 $88.4 9.1% 6.0%
Office and Consumer
Products 558.9 541.0 77.2 77.4 13.8% 14.3%
Retail Information
Services 338.9 303.1 24.6 25.4 7.3% 8.4%
Other specialty
converting
businesses 272.5 258.6 5.5 24.1 2.0% 9.3%
Corporate Expense N/A N/A (27.9) (25.1) N/A N/A
Interest Expense N/A N/A (30.3) (29.0) N/A N/A
------------------ ---------------- ------------
TOTAL $2,764.9 $2,570.7 $193.6 $161.2 7.0% 6.3%
================== ================ ============
(1) Operating income for 2005 includes $10.7 of restructuring
costs, asset impairment charges and transition costs, partially
offset by gain on sale of assets of $(3.4), of which the
Pressure-sensitive Materials segment recorded $.4, the Office and
Consumer Products segment recorded $6.2 and Other specialty
converting businesses recorded $.7.
(2) Operating income for 2004 includes $35.2 of restructuring
costs, asset impairment and lease cancellation charges, of which
the Pressure-sensitive Materials segment recorded $34.4, the
Office and Consumer Products segment recorded $.5 and the Retail
Information Services segment recorded $.3.
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Six Months Year-to-Date
-----------------------------
OPERATING INCOME OPERATING
MARGINS
---------------- ------------
2005 2004 2005 2004
---------------- ------------
Pressure-sensitive Materials
----------------------------
Operating income, as reported $144.5 $88.4 9.1% 6.0%
Non-GAAP adjustments:
Restructuring costs 0.4 22.8 --- 1.6%
Asset impairment and
lease cancellation charges 3.4 11.6 0.2% 0.8%
Gain on sale of assets (3.4) --- (0.2%) ---
---------------- ------------
Adjusted non-GAAP
operating income $144.9 $122.8 9.1% 8.4%
================ ============
Office and Consumer Products
----------------------------
Operating income, as reported $77.2 $77.4 13.8% 14.3%
Non-GAAP adjustments:
Restructuring and
transition costs (1) 6.2 0.5 1.1% 0.1%
---------------- ------------
Adjusted non-GAAP
operating income $83.4 $77.9 14.9% 14.4%
================ ============
Retail Information Services
---------------------------
Operating income, as reported $24.6 $25.4 7.3% 8.4%
Non-GAAP adjustments:
Restructuring costs --- 0.3 --- 0.1%
---------------- ------------
Adjusted non-GAAP
operating income $24.6 $25.7 7.3% 8.5%
================ ============
Other specialty converting businesses
-------------------------------------
Operating income, as reported $5.5 $24.1 2.0% 9.3%
Non-GAAP adjustments:
Asset impairment charges 0.7 --- 0.3% ---
---------------- ------------
Adjusted non-GAAP
operating income $6.2 $24.1 2.3% 9.3%
================ ============
(1) For 2005, amount includes restructuring and transition costs
of $4.3 and $1.9, respectively, related to plant closures.
AVERY DENNISON PRELIMINARY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(UNAUDITED)
ASSETS July 02, June 26,
2005 2004
---------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 31.0 $ 28.0
Trade accounts receivable, net 899.6 868.3
Inventories, net 473.4 452.7
Other current assets 132.1 142.7
---------------------------------------------------------------------
Total current assets 1,536.1 1,491.7
Property, plant and equipment, net 1,309.5 1,274.2
Goodwill 725.7 709.4
Intangibles resulting from business
acquisitions, net 134.9 143.4
Other assets 564.8 513.0
---------------------------------------------------------------------
$4,271.0 $4,131.7
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------------
Current liabilities:
Short-term and current portion of
long-term debt $ 182.4 $ 445.0
Accounts payable 616.1 578.5
Other current liabilities 506.2 503.9
---------------------------------------------------------------------
Total current
liabilities 1,304.7 1,527.4
Long-term debt 976.6 813.5
Other long-term liabilities 438.5 413.2
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 697.4 802.4
Retained earnings 1,950.8 1,811.9
Accumulated other comprehensive loss (74.9) (83.4)
Cost of unallocated ESOP shares (9.7) (11.6)
Employee stock benefit trusts (539.2) (668.6)
Treasury stock at cost (597.3) (597.2)
---------------------------------------------------------------------
Total shareholders' equity 1,551.2 1,377.6
---------------------------------------------------------------------
$4,271.0 $4,131.7
---------------------------------------------------------------------
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(UNAUDITED)
Six Months Ended
------------------------
July 02, June 26,
2005 2004
----------------------------------------------------------------------
Operating Activities:
Net income $ 147.1 $ 121.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 77.1 73.4
Amortization 23.1 19.2
Deferred taxes (1.2) 10.2
Asset impairment and net (gain) loss on
sale of assets 2.5 11.4
Other non-cash items, net (4.6) (3.3)
------- -------
244.0 232.0
Changes in assets and liabilities (155.9) (51.7)
------- -------
Net cash provided by operating
activities 88.1 180.3
------- -------
Investing Activities:
Purchase of property, plant and
equipment (76.8) (77.2)
Purchase of software and other assets (10.0) (8.8)
Payments for acquisitions (0.6) (2.3)
Proceeds from sale of assets 16.5 5.8
Other 4.1 (4.8)
------- -------
Net cash used in investing activities (66.8) (87.3)
------- -------
Financing Activities:
Net increase in borrowings (maturities of
90 days or less) 55.2 68.7
Additional borrowings (maturities longer
than 90 days) 76.2 151.0
Payments of debt (maturities longer than
90 days) (134.2) (254.0)
Dividends paid (83.9) (81.7)
Purchase of treasury stock --- (0.4)
Proceeds from exercise of stock options, net 3.1 14.0
Other 8.4 7.8
------- -------
Net cash used in financing activities (75.2) (94.6)
------- -------
Effect of foreign currency translation on
cash balances 0.1 0.1
------- -------
Decrease in cash and cash equivalents (53.8) (1.5)
------- -------
Cash and cash equivalents, beginning of
period 84.8 29.5
------- -------
Cash and cash equivalents, end of period $ 31.0 $ 28.0
======= =======
Certain prior year amounts have been reclassified to conform with
the 2005 financial statement presentation.
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