• 4Q17 Reported EPS of ($0.66), incl. impact of the U.S. tax legislation change
  • Adjusted EPS (non-GAAP) of $1.33
• 4Q17 Net sales increased 11.9% to $1.74 billion
  • Sales change ex. currency (non-GAAP) of 9.1%
  • Organic sales change (non-GAAP) of 4.7%
• FY17 Reported EPS of $3.13
  • Adjusted EPS of $5.00
• FY17 Net sales increased 8.7% to $6.61 billion
  • Sales change ex. currency of 8.2%
  • Organic sales change of 4.2%
• Expect FY18 Reported EPS of $5.50 to $5.75
  • Adjusted EPS of $5.70 to $5.95

GLENDALE, Calif.--(BUSINESS WIRE)--Jan. 31, 2018-- Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its fourth quarter and year ended December 30, 2017. All non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, comparisons are to the same period in the prior year.

“2017 marked the company’s sixth consecutive year of strong top-line growth, margin expansion, and double-digit adjusted EPS growth,” said Mitch Butier, President and CEO. “Strong top-line performance in 2017 reflected a balance of contributions from acquisitions and organic growth, driven by our focus on faster-growing high value categories and large presence in emerging markets.

“Label and Graphic Materials delivered another year of strong growth and continued margin expansion. Retail Branding and Information Solutions’ operating income rose significantly, reflecting outstanding performance in terms of both top-line growth and margin expansion. And we expanded the platform for Industrial and Healthcare Materials, through both acquisitions and a return to solid organic growth in the back half of the year.

“In 2018, we expect to once again deliver a strong top-line and double-digit EPS growth, while further increasing our level of investment for the future,” said Butier. “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. We remain confident that the consistent execution of our strategies will enable us to continue this momentum for years to come.”

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 2017 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 2017 Results by Segment

Sales change ex. currency refers to the increase or decrease in sales excluding the estimated impact of currency translation. The estimated impact of currency translation is calculated on a constant currency basis, with prior period results translated at current period average exchange rates to exclude the effect of currency fluctuations. Organic sales change refers to the increase or decrease in sales excluding the estimated impact of currency translation, product line exits, and acquisitions and divestitures. Adjusted operating margin refers to income before interest expense and taxes, excluding restructuring charges and other items, as a percentage of sales.

Label and Graphic Materials

• Reported sales increased 9.2 percent. Sales ex. currency increased 5.6 percent; on an organic basis, sales grew 4.6 percent. Sales increased mid-single digits on an organic basis in Label and Packaging Materials, as well as in the combined Graphics and Reflective Solutions businesses.
• Reported operating margin increased 60 basis points to 11.9 percent as the benefits of increased volume and productivity more than offset higher employee-related costs and the net impact of pricing and raw material costs. Adjusted operating margin increased 70 basis points to 12.2 percent.

Retail Branding and Information Solutions

• Reported sales increased 5.2 percent; on an organic basis, sales grew 4.7 percent driven by strength in both RFID and the base business.
• Reported operating margin increased 150 basis points to 10.8 percent as the benefits from productivity, increased volume, and reduced amortization expense were partially offset by higher employee-related costs and the net impact of pricing and raw material costs. Adjusted operating margin increased 190 basis points to 11.9 percent.

Industrial and Healthcare Materials

• Reported sales increased 60.3 percent. Sales ex. currency increased 56.9 percent; on an organic basis, sales grew 5.7 percent. Sales on an organic basis increased high-single digits in industrial categories and increased low-single digits in healthcare categories.
• Reported operating margin declined 160 basis points to 7.2 percent, with roughly half of the decline due to acquisitions, and the balance reflecting near-term operational challenges and investments. Adjusted operating margin declined 210 basis points to 7.6 percent.

Other

Share Repurchases / Equity Dilution from Long-Term Incentives

In 2017, the company repurchased 1.5 million shares at an aggregate cost of $130 million ($108 million net of proceeds from stock option exercises). Net of dilution, the company’s share count increased by 0.1 million.

Income Taxes

The enactment of the Tax Cuts and Jobs Act (“TCJA”) in December 2017 resulted in a charge of $172 million in the fourth quarter. This charge includes a tax on deemed repatriation of accumulated untaxed foreign earnings and the revaluation of deferred tax assets and liabilities, reflecting the company’s provisional estimate of the new legislation’s impact under recent SEC guidance. As new information becomes available, including issuance of interpretations by regulatory bodies, the company may update this estimate.

The company’s effective tax rate, including the impact of the TCJA, was 138 percent for the fourth quarter, and 52 percent for the full year. The company’s adjusted (non-GAAP) tax rate was 28 percent for both the fourth quarter and full year; this rate excludes the charge associated with the TCJA and incorporates $29 million of estimated charges related to repatriation actions previously planned for the fourth quarter that were not implemented as a result of U.S. tax reform.

The company’s 2018 tax rate is expected to be in the mid-twenty percent range, which reflects the company’s current estimated impact of the TCJA.

Cost Reduction Actions

In 2017, the company realized approximately $59 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $33 million, the majority of which represents cash charges.

Outlook

In its supplemental presentation materials, “Fourth Quarter and Full Year 2017 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2018 financial results. Based on the factors listed and other assumptions, the company expects 2018 reported earnings per share of $5.50 to $5.75.

Excluding an estimated $0.20 per share for restructuring charges and other items, the company expects adjusted earnings per share of $5.70 to $5.95.

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

About Avery Dennison

Avery Dennison (NYSE:AVY) is a global materials science company specializing in the design and manufacture of a wide variety of labeling and functional materials. The company’s products, which are used in nearly every major industry, include pressure-sensitive materials for labels and graphic applications; tapes and other bonding solutions for industrial, medical, and retail applications; tags, labels, and embellishments for apparel; and radio frequency identification (RFID) solutions serving retail apparel and other markets. Headquartered in Glendale, California, the company employs approximately 30,000 employees in more than 50 countries. Reported sales in 2017 were $6.6 billion. Learn more at www.averydennison.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this document are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and financial or other business targets, are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but are not limited to, risks and uncertainties relating to the following: fluctuations in demand affecting sales to customers; worldwide and local economic conditions; changes in political conditions; changes in governmental laws and regulations; fluctuations in currency exchange rates and other risks associated with foreign operations, including in emerging markets; the financial condition and inventory strategies of customers; changes in customer preferences; fluctuations in cost and availability of raw materials; our ability to generate sustained productivity improvement; our ability to achieve and sustain targeted cost reductions; the impact of competitive products and pricing; loss of significant contracts or customers; collection of receivables from customers; selling prices; business mix shift; execution and integration of acquisitions and completion of potential dispositions; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; amounts of future dividends and share repurchases; customer and supplier concentrations; successful implementation of new manufacturing technologies and installation of manufacturing equipment; disruptions in information technology systems, including cyber-attacks or other intrusions to network security; successful installation of new or upgraded information technology systems; data security breaches; volatility of financial markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; our ability to obtain adequate financing arrangements and maintain access to capital; fluctuations in interest and tax rates; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; outcome of tax audits; fluctuations in pension, insurance, and employee benefit costs; the impact of legal and regulatory proceedings, including with respect to environmental, health and safety; protection and infringement of intellectual property; the impact of epidemiological events on the economy and our customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.

We believe that the most significant risk factors that could affect our financial performance in the near-term include: (1) the impacts of global economic conditions and political uncertainty on underlying demand for our products and foreign currency fluctuations; (2) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through selling price increases, without a significant loss of volume; (3) competitors’ actions, including pricing, expansion in key markets, and product offerings; and (4) the execution and integration of acquisitions.

For a more detailed discussion of these and other factors, see “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in our 2016 Form 10-K, filed on February 23, 2017 with the Securities and Exchange Commission, and subsequent quarterly reports on Form 10-Q. The forward-looking statements included in this document are made only as of the date of this document, and we undertake no obligation to update these statements to reflect subsequent events or circumstances, other than as may be required by law.

For more information and to listen to a live broadcast or an audio replay of the quarterly conference call with analysts, visit the Avery Dennison website at www.investors.averydennison.com.