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All non-GAAP terms are reconciled to GAAP in the attached tables.
Third Quarter Financial Summary - Preliminary
($ millions, except per share amounts)
3Q 3Q % Change vs. P/Y
2009 2008 Reported Organic (a)
Net sales, by segment:
Pressure-sensitive Materials $ 851.0 $ 936.2 -9 % -3 %
Retail Information Services 325.2 379.1 -14 % -11 %
Office and Consumer Products 242.8 260.4 -7 % -4 %
Other specialty converting businesses 130.3 149.1 -13 % -10 %
Total net sales $ 1,549.3 $ 1,724.8 -10 % -6 %
As Reported (GAAP) Adjusted Non-GAAP (b)
% of Sales % of Sales
2009 2008 % Change 2009 2008 2009 2008 % Change 2009 2008
Operating income (loss) before
interest and taxes, by segment:
Pressure-sensitive Materials $ 75.7 $ 62.8 21 % 8.9 % 6.7 % $ 84.0 $ 68.5 23 % 9.9 % 7.3 %
Retail Information Services (29.1 ) 0.5 -5920 % -8.9 % 0.1 % (6.8 ) 7.1 -196 % -2.1 % 1.9 %
Office and Consumer Products 41.0 41.5 -1 % 16.9 % 15.9 % 40.8 45.4 -10 % 16.8 % 17.4 %
Other specialty converting businesses 0.9 1.2 -25 % 0.7 % 0.8 % 6.0 2.7 122 % 4.6 % 1.8 %
Corporate expense (11.1 ) (9.7 ) (11.1 ) (9.7 )
Total operating income before
interest and taxes $ 77.4 $ 96.3 -20 % 5.0 % 5.6 % $ 112.9 $ 114.0 -1 % 7.3 % 6.6 %
Interest expense 19.1 29.0 19.1 29.0
Income from operations
before taxes $ 58.3 $ 67.3 -13 % 3.8 % 3.9 % $ 93.8 $ 85.0 10 % 6.1 % 4.9 %
(Benefit from) Provision for income taxes ($4.2 ) $ 4.6 $ 7.0 $ 4.6
Net income $ 62.5 $ 62.7 0 % 4.0 % 3.6 % $ 86.8 $ 80.4 8 % 5.6 % 4.7 %
Net income per common share, assuming dilution
$ 0.59 $ 0.63 -6 % $ 0.82 $ 0.81 1 %
2009 2008
YTD Free Cash Flow (c) $ 250.1 $ 251.5
a) Percentage change in sales before the impact of acquisitions and foreign currency translation
b) Excludes restructuring and asset impairment charges, transition costs associated with acquisition integrations, and other items (see accompanying schedules A-3 and A-4 for reconciliation to GAAP measures).
c) Free Cash Flow (a non-GAAP measure) as used herein is defined as net cash provided by operating activities (as reported), less purchase of property, plant, equipment, software, and other deferred charges, plus proceeds from sale of investments, net (see accompanying schedule A-3 for reconciliation to GAAP measure).
"In the face of continuing tough market conditions we increased operating margin, reflecting the strength of our franchise businesses and the effectiveness of our operating model," said Dean A. Scarborough, president and chief executive officer of Avery Dennison. "The combination of fixed-cost reductions and increasing variable margins positions the Company for strong profit growth when markets improve."
"While the rate of volume decline in the third quarter improved compared with the first half of the year, this was largely due to a slowdown in inventory reductions," Scarborough said. "Our end-markets remain soft, and we continue to be cautious about the pace of their recovery."
"I want to note the excellent performance of our employees in such uncertain times," Scarborough said. "They have maintained their focus on serving our customers, operating our businesses, and laying the groundwork for the future. This has been hard work, and they've done a tremendous job."
For more details on the Company's results for the quarter, see the Company's supplemental presentation materials, "Third Quarter 2009 Financial Review and Analysis," posted at the Company's Web site at www.investors.averydennison.com, and furnished under Form 8-K with the SEC.
Third Quarter, 2009 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the impact of acquisitions and foreign currency translation. All references to operating margin exclude the impact of restructuring, asset impairment charges, lease cancellation costs, and other items.
Pressure-sensitive Materials (PSM)
-- Roll Materials sales declined, reflecting weakness in end-markets. Sales continued to decline in the more economically sensitive Graphics and Reflective Products division.
-- Operating margin increased as productivity offset the impact of reduced fixed-cost leverage, while the effects of pricing and raw material trends continued to cover the cumulative impact of 2008 inflation.
Retail Information Services (RIS)
-- The decline in sales primarily reflected reduced demand for apparel in the U.S. and in Europe, and caution on the part of retailers.
-- The decline in operating margin reflected reduced fixed-cost leverage, pricing, and other factors that more than offset the benefit of restructuring and productivity actions.
-- The Company is continuing initiatives to reduce fixed costs in light of current market conditions, while introducing new products and improving value-added services to increase its share of this large market.
Office and Consumer Products (OCP)
-- The decline in sales reflected weak end-market demand, led by slower corporate purchase activity. The sales decline was partially offset by strong back-to-school sales, due in part to expanded distribution and consumer trade-up to more durable binders.
-- Operating margin declined as the benefit of productivity actions was more than offset by the impact of reduced fixed-cost leverage.
Other specialty converting businesses
-- The decline in sales is primarily attributable to lower volume of products sold to the housing and construction industries.
-- The increase in operating margin reflected restructuring and productivity improvements that more than offset reduced fixed-cost leverage.
Consolidated Items and Actions
-- In the fourth quarter of 2008, the Company began a restructuring program expected to reduce costs across all segments of the business. The Company is targeting $160 million in annualized savings by mid-2010 (estimating $75 million benefit, net of transition costs, in 2009). The Company estimates that it will incur approximately $130 million of total restructuring charges associated with these actions, with approximately $110 million to be incurred in 2009. In addition to the savings from these new actions, the Company expects approximately $40 million of carryover savings in the year from previously implemented actions. At the end of the third quarter of 2009, the Company achieved run-rate savings representing approximately 70 percent of its restructuring target.
-- The effective tax rate in the third quarter was negative 7 percent, while the adjusted tax rate was positive 7.5 percent. The effective and adjusted tax rates for the full year are expected to be in the low single-digits and low double-digits, respectively. The ongoing annual tax rate is expected to be in the low 20 percent range, varying significantly from quarter to quarter.
Avery Dennison is a recognized industry leader that develops innovative identification and decorative solutions for businesses and consumers worldwide. The Company's products include pressure-sensitive labeling materials; graphics imaging media; retail apparel ticketing and branding systems; RFID inlays and tags; office products; specialty tapes; and a variety of specialized labels for automotive, industrial and durable goods applications. A FORTUNE 500 Company with sales of $6.7 billion in 2008, Avery Dennison is based in Pasadena, California and has employees in over 60 countries. For more information, visit 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. Such 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 not limited to risks and uncertainties relating to investment in development activities and new production facilities; fluctuations in cost and availability of raw materials; ability of the Company to achieve and sustain targeted cost reductions; ability of the Company to generate sustained productivity improvement; successful integration of acquisitions; successful implementation of new manufacturing technologies and installation of manufacturing equipment; the financial condition and inventory strategies of customers; customer and supplier concentrations; changes in customer order patterns; loss of significant contract(s) or customer(s); timely development and market acceptance of new products; fluctuations in demand affecting sales to customers; impact of competitive products and pricing; selling prices; business mix shift; volatility of capital and credit markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; ability of the Company to obtain adequate financing arrangements and to maintain access to capital; fluctuations in interest and tax rates; fluctuations in pension, insurance and employee benefit costs; impact of legal proceedings, including a previous government investigation into industry competitive practices, and any related proceedings or lawsuits pertaining thereto or to the subject matter thereof related to the concluded investigation by the U.S. Department of Justice ("DOJ") (including purported class actions seeking treble damages for alleged unlawful competitive practices, which were filed after the announcement of the DOJ investigation), as well as the impact of potential violations of the U.S. Foreign Corrupt Practices Act; changes in tax laws and regulations; changes in governmental regulations; changes in political conditions; fluctuations in foreign currency exchange rates and other risks associated with foreign operations; worldwide and local economic conditions; impact of epidemiological events on the economy and the Company's customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.
The Company believes that the most significant risk factors that could affect its financial performance in the near-term include (1) the impact of economic conditions on underlying demand for the Company's products and on the carrying value of its assets; (2) the impact of competitors' actions, including pricing, expansion in key markets, and product offerings; (3) 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; (4) the impact of an increase in costs associated with the Company's debt; and (5) the ability of the Company to achieve and sustain targeted cost reductions.
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 the Company's most recent Form 10-K, filed on February 25, 2009, with the Securities and Exchange Commission. The forward-looking statements included in this document are made only as of the date of this document, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
For more information and to listen to a live broadcast or an audio replay of the Third Quarter conference call with analysts, visit the Avery Dennison Web site at www.investors.averydennison.com.
A-1
AVERY DENNISON
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended Nine Months Ended
Oct. 3, 2009 Sep. 27, 2008 Oct. 3, 2009 Sep. 27, 2008
(13 Weeks) (13 Weeks) (40 Weeks) (39 Weeks)
Net sales $ 1,549.3 $ 1,724.8 $ 4,430.9 $ 5,198.9
Cost of products sold 1,113.3 1,290.5 3,259.5 3,850.3
Gross profit 436.0 434.3 1,171.4 1,348.6
Marketing, general & administrative expense 323.1 325.5 927.4 994.5
Goodwill and indefinite-lived intangible asset impairment charges --- --- 832.0 ---
Interest expense 19.1 29.0 67.0 87.8
Other expense, net (1) 35.5 12.5 162.4 23.9
Income (loss) from operations before taxes 58.3 67.3 (817.4 ) 242.4
(Benefit from) provision for income taxes (4.2 ) 4.6 (20.8 ) 18.9
Net income (loss) $ 62.5 $ 62.7 $ (796.6 ) $ 223.5
Per share amounts:
Net income (loss) per common share, assuming dilution $ 0.59 $ 0.63 $ (7.73 ) $ 2.26
Average common shares outstanding, assuming dilution 106.0 98.9 103.1 98.9
Common shares outstanding at period end 105.2 98.3 105.2 98.3
(1) Other expense for the third quarter of 2009 includes $33.5 of
restructuring costs, asset impairment and lease cancellation
charges and legal settlement costs of $2.
Other expense for the third quarter of 2008 includes $12.5 of
restructuring costs, asset impairment and lease cancellation charges.
Other expense for 2009 YTD includes $102.2 of restructuring costs,
asset impairment and lease cancellation charges, legal settlement
costs of $39 and a loss of $21.2 from debt extinguishment.
Other expense, net, for 2008 YTD includes $28.4 of restructuring
costs, asset impairment and lease cancellation charges, partially
offset by ($4.5) related to a gain on sale of investments.
A-2 Reconciliation of Non-GAAP Financial Measures in Accordance with SEC Regulations G and S-K Avery Dennison reports financial results in accordance with U.S. GAAP, and herein provides some non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for, GAAP financial measures. These non-GAAP financial measures are intended to supplement the Company's presentation of its financial results that are prepared in accordance with GAAP. The Company's non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions.The accounting effects of these events, activities or decisions, which are included in the GAAP measures, may make it difficult to assess the underlying performance of the Company in a single period.By excluding certain accounting effects, both positive and negative (e.g. restructuring charges, asset impairments, legal settlement costs, certain effects of acquisitions and related integration costs, loss from debt extinguishment, gains on sales of assets, etc.), from certain of the Company's GAAP measures, the Company believes that it is providing meaningful supplemental information to facilitate an understanding of the Company's "core" or "underlying" operating results.These non-GAAP measures are used internally to evaluate trends in the Company's underlying business, as well as to facilitate comparison to the results of competitors for a single period.The Company adjusts the estimated full-year GAAP tax rate to exclude the tax rate effect of charges for goodwill and indefinite-lived intangible asset impairments to determine its anticipated adjusted non-GAAP tax rate to derive non-GAAP net income. Limitations associated with the use of the Company's non-GAAP measures include (1) the exclusion of items that recur from time to time (e.g. restructuring, asset impairment charges, discontinued operations, etc.) and items that occur infrequently (e.g. legal settlement costs, loss from debt extinguishment) from calculations of the Company's earnings and operating margin; (2) the exclusion of certain effects of acquisitions, including integration costs and certain financing costs; (3) the exclusion of interest expense from the calculation of the Company's operating margin; and (4) the exclusion of any mandatory debt service requirements, as well as the exclusion of other uses of the cash generated by operating activities that do not directly or immediately support the underlying business (such as discretionary debt reductions, dividends, share repurchase, acquisitions, etc.) for calculation of free cash flow.While certain items that the Company excludes from GAAP measures recur, these items tend to be disparate in amount and timing.Based upon feedback from investors and financial analysts, the Company believes that supplemental non-GAAP measures provide information that is useful to the assessment of the Company's performance and operating trends. 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.
A-3
AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended Nine Months Ended
Oct. 3, 2009 Sep. 27, 2008 Oct. 3, 2009 Sep. 27, 2008
(13 Weeks) (13 Weeks) (40 Weeks) (39 Weeks)
Reconciliation of GAAP to Non-GAAP Operating Margin:
Net sales $ 1,549.3 $ 1,724.8 $ 4,430.9 $ 5,198.9
Income (loss) from operations before taxes $ 58.3 $ 67.3 $ (817.4 ) $ 242.4
GAAP Operating Margin 3.8 % 3.9 % (18.4 %) 4.7 %
Income (loss) from operations before taxes $ 58.3 $ 67.3 $ (817.4 ) $ 242.4
Non-GAAP adjustments:
Restructuring costs 27.0 8.7 69.9 19.2
Asset impairment and lease cancellation charges 6.5 3.8 32.3 9.2
Loss from debt extinguishment --- --- 21.2 ---
Legal settlement costs 2.0 --- 39.0 ---
Goodwill and indefinite-lived intangible asset impairment charges --- --- 832.0 ---
Transition costs associated with acquisition integrations (1) --- 5.2 --- 17.9
Other (2) --- --- --- (4.5 )
Interest expense 19.1 29.0 67.0 87.8
Adjusted non-GAAP operating income before taxes and interest expense $ 112.9 $ 114.0 $ 244.0 $ 372.0
Adjusted Non-GAAP Operating Margin 7.3 % 6.6 % 5.5 % 7.2 %
Reconciliation of GAAP to Non-GAAP Net Income:
As reported net income (loss) $ 62.5 $ 62.7 $ (796.6 ) $ 223.5
Non-GAAP adjustments, net of taxes:(4)
Goodwill and indefinite-lived intangible asset impairment charges --- --- 812.6 ---
All other (3) 24.3 17.7 141.5 37.9
Adjusted Non-GAAP Net Income $ 86.8 $ 80.4 $ 157.5 $ 261.4
A-3
(continued)
AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
(UNAUDITED)
Three Months Ended Nine Months Ended
Oct. 3, 2009 Sep. 27, 2008 Oct. 3, 2009 Sep. 27, 2008
(13 Weeks) (13 Weeks) (40 Weeks) (39 Weeks)
Reconciliation of GAAP to Non-GAAP Earnings Per Share:
As reported income (loss) per common share, assuming dilution $ 0.59 $ 0.63 $ (7.73 ) $ 2.26
Non-GAAP adjustments per share, net of taxes:
Goodwill and indefinite-lived intangible asset impairment charges --- --- 7.88 ---
All other (3) 0.23 0.18 1.38 0.38
Adjusted Non-GAAP income per common share, assuming dilution $ 0.82 $ 0.81 $ 1.53 $ 2.64
Average common shares outstanding, assuming dilution 106.0 98.9 103.1 98.9
(1) 2008 QTD and YTD includes transition costs associated with
acquisition integrations and change-in-control costs reported in
marketing, general & administrative expense.
(2) 2008 YTD includes a gain on sale of investments.
(3) Reflects after-tax effect on restructuring costs, asset impairment
and lease cancellation charges, legal settlement costs, loss from
debt extinguishment, transition costs associated with acquisition
integrations and gain on sale of investments.
(4) The Company adjusts the estimated full-year GAAP tax rate to
exclude the tax rate effect of charges for goodwill and
indefinite-lived intangible asset impairments to determine its
anticipated adjusted non-GAAP tax rate to derive non-GAAP net
income.
(UNAUDITED)
Nine Months Ended
Oct. 3, 2009 Sep. 27, 2008
(40 Weeks) (39 Weeks)
Reconciliation of GAAP to Non-GAAP Cash Flow:
Net cash provided by operating activities $ 316.9 $ 382.3
Purchase of property, plant and equipment (46.7 ) (97.8 )
Purchase of software and other deferred charges (20.4 ) (49.2 )
Proceeds from sale of investments, net 0.3 16.2
Free Cash Flow $ 250.1 $ 251.5
A-4
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)
(UNAUDITED)
Third Quarter Ended
NET SALES OPERATING INCOME (LOSS) OPERATING MARGINS
2009 2008 2009 (1) 2008 (2) 2009 2008
(13 weeks) (13 weeks) (13 weeks) (13 weeks) (13 weeks) (13 weeks)
Pressure-sensitive Materials $ 851.0 $ 936.2 $ 75.7 $ 62.8 8.9 % 6.7 %
Retail Information Services 325.2 379.1 (29.1 ) 0.5 (8.9 %) 0.1 %
Office and Consumer Products 242.8 260.4 41.0 41.5 16.9 % 15.9 %
Other specialty converting businesses 130.3 149.1 0.9 1.2 0.7 % 0.8 %
Corporate Expense N/A N/A (11.1 ) (9.7 ) N/A N/A
Interest Expense N/A N/A (19.1 ) (29.0 ) N/A N/A
TOTAL FROM OPERATIONS $ 1,549.3 $ 1,724.8 $ 58.3 $ 67.3 3.8 % 3.9 %
(1) Operating income for the third quarter of 2009 includes
$33.5 of restructuring costs, asset impairment and lease
cancellation charges and legal settlement costs of $2; of the
total $35.5, the Pressure-sensitive Materials segment recorded
$8.3, the Retail Information Services segment recorded $22.3, the
Office and Consumer Products segment recorded ($.2) and the other
specialty converting businesses recorded $5.1.
(2) Operating income for the third quarter of 2008 includes
$12.5 of restructuring costs, asset impairment and lease
cancellation charges and $5.2 of transition costs associated with
acquisition integrations; of the total $17.7, the
Pressure-sensitive Materials segment recorded $5.7, the Retail
Information Services segment recorded $6.6, the Office and
Consumer Products segment recorded $3.9 and the other specialty
converting businesses recorded $1.5.
Beginning in 2009, the Company modified its approach to allocating
Corporate costs to its operating segments to better reflect the
costs required to support operations within segment
results.Prior year amounts have been restated to conform with
the new methodology.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Third Quarter Ended
OPERATING INCOME (LOSS) OPERATING MARGINS
2009 2008 2009 2008
Pressure-sensitive Materials
Operating income, as reported $ 75.7 $ 62.8 8.9 % 6.7 %
Non-GAAP adjustments:
Restructuring costs 3.9 2.5 0.5 % 0.3 %
Asset impairment and lease cancellation charges 2.4 3.2 0.3 % 0.3 %
Legal settlement costs 2.0 --- 0.2 % ---
Adjusted non-GAAP operating income $ 84.0 $ 68.5 9.9 % 7.3 %
Retail Information Services
Operating (loss) income, as reported $ (29.1 ) $ 0.5 (8.9 %) 0.1 %
Non-GAAP adjustments:
Restructuring costs 21.0 1.4 6.4 % 0.4 %
Asset impairment and lease cancellation charges 1.3 --- 0.4 % ---
Transition costs associated with acquisition integrations --- 5.2 --- 1.4 %
Adjusted non-GAAP operating (loss) income $ (6.8 ) $ 7.1 (2.1 %) 1.9 %
Office and Consumer Products
Operating income, as reported $ 41.0 $ 41.5 16.9 % 15.9 %
Non-GAAP adjustments:
Restructuring costs (0.2 ) 3.3 (0.1 %) 1.3 %
Asset impairment charges --- 0.6 --- 0.2 %
Adjusted non-GAAP operating income $ 40.8 $ 45.4 16.8 % 17.4 %
Other specialty converting
businesses
Operating income, as reported $ 0.9 $ 1.2 0.7 % 0.8 %
Non-GAAP adjustments:
Restructuring costs 2.3 1.5 1.8 % 1.0 %
Asset impairment charges 2.8 --- 2.1 % ---
Adjusted non-GAAP operating income $ 6.0 $ 2.7 4.6 % 1.8 %
A-5
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)
(UNAUDITED)
Nine Months Year-to-Date
NET SALES OPERATING INCOME (LOSS) OPERATING MARGINS
2009 2008 2009 (1) 2008 (2) 2009 2008
(40 weeks) (39 weeks) (40 weeks) (39 weeks) (40 weeks) (39 weeks)
Pressure-sensitive Materials $ 2,453.4 $ 2,835.7 $ 126.1 $ 217.0 5.1 % 7.7 %
Retail Information Services 972.7 1,189.3 (888.4 ) 17.1 (91.3 %) 1.4 %
Office and Consumer Products 644.1 710.2 98.9 104.1 15.4 % 14.7 %
Other specialty converting businesses 360.7 463.7 (37.0 ) 16.5 (10.3 %) 3.6 %
Corporate Expense N/A N/A (50.0 ) (24.5 ) N/A N/A
Interest Expense N/A N/A (67.0 ) (87.8 ) N/A N/A
TOTAL FROM OPERATIONS $ 4,430.9 $ 5,198.9 $ (817.4 ) $ 242.4 (18.4 %) 4.7 %
(1) Operating loss for 2009 includes $832 of goodwill and
indefinite-lived intangible asset impairment charges, $102.2 of
restructuring costs, asset impairment and lease cancellation
charges, legal settlement costs of $39 and a loss of $21.2 from
debt extinguishment; of the total $994.4, the Pressure-sensitive
Materials segment recorded $70.2, the Retail Information Services
segment recorded $869, the Office and Consumer Products segment
recorded $5.5, the other specialty converting businesses recorded
$28.5 and Corporate recorded $21.2.
(2) Operating income for 2008 includes $28.4 of
restructuring costs, asset impairment and lease cancellation
charges and $17.9 of transition costs associated with acquisition
integrations, partially offset by ($4.5) related to a gain on sale
of investments; of the total $41.8, the Pressure-sensitive
Materials segment recorded $10, the Retail Information Services
segment recorded $26.4, the Office and Consumer Products segment
recorded $8.2, the other specialty converting businesses recorded
$1.7 and Corporate recorded ($4.5).
Beginning in 2009, the Company modified its approach to allocating
Corporate costs to its operating segments to better reflect the
costs required to support operations within segment
results.Prior year amounts have been restated to conform with
the new methodology.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
Nine Months Year-to-Date
OPERATING INCOME (LOSS) OPERATING MARGINS
2009 2008 2009 2008
Pressure-sensitive Materials
Operating income, as reported $ 126.1 $ 217.0 5.1 % 7.7 %
Non-GAAP adjustments:
Restructuring costs 24.9 4.2 1.0 % 0.1 %
Asset impairment and lease cancellation charges 6.3 5.8 0.3 % 0.2 %
Legal settlement costs 39.0 --- 1.6 % ---
Adjusted non-GAAP operating income $ 196.3 $ 227.0 8.0 % 8.0 %
Retail Information Services
Operating (loss) income, as reported $ (888.4 ) $ 17.1 (91.3 %) 1.4 %
Non-GAAP adjustments:
Restructuring costs 31.4 5.7 3.2 % 0.5 %
Asset impairment and lease cancellation charges 5.6 2.8 0.6 % 0.3 %
Transition costs associated with acquisition integrations --- 17.9 --- 1.5 %
Goodwill and indefinite-lived intangible asset impairment charges 832.0 --- 85.5 % ---
Adjusted non-GAAP operating (loss) income $ (19.4 ) $ 43.5 (2.0 %) 3.7 %
Office and Consumer Products
Operating income, as reported $ 98.9 $ 104.1 15.4 % 14.7 %
Non-GAAP adjustments:
Restructuring costs 1.0 7.6 0.1 % 1.1 %
Asset impairment charges 4.5 0.6 0.7 % ---
Adjusted non-GAAP operating income $ 104.4 $ 112.3 16.2 % 15.8 %
Other specialty converting
businesses
Operating (loss) income, as reported $ (37.0 ) $ 16.5 (10.3 %) 3.6 %
Non-GAAP adjustments:
Restructuring costs 12.6 1.7 3.5 % 0.3 %
Asset impairment charges 15.9 --- 4.4 % ---
Adjusted non-GAAP operating (loss) income $ (8.5 ) $ 18.2 (2.4 %) 3.9 %
A-6
AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(UNAUDITED)
ASSETS Oct. 3, 2009 Sep. 27, 2008
Current assets:
Cash and cash equivalents $ 91.9 $ 81.3
Trade accounts receivable, net 1,008.6 1,120.7
Inventories, net 511.8 648.7
Other current assets 212.0 286.2
Total current assets 1,824.3 2,136.9
Property, plant and equipment, net 1,393.3 1,543.3
Goodwill 962.2 1,775.0
Other intangibles resulting from business acquisitions, net 271.3 298.0
Non-current deferred and refundable income taxes 216.8 80.1
Other assets 426.7 551.7
$ 5,094.6 $ 6,385.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term and current portion of long-term debt $ 669.4 $ 721.6
Accounts payable 650.5 730.6
Other current liabilities 668.4 673.2
Total current liabilities 1,988.3 2,125.4
Long-term debt 1,115.7 1,545.2
Other long-term liabilities 690.6 615.8
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 698.4 747.4
Retained earnings 1,472.4 2,382.3
Accumulated other comprehensive (loss) income (170.8 ) 75.0
Cost of unallocated ESOP shares --- (3.8 )
Employee stock benefit trusts (253.3 ) (358.7 )
Treasury stock at cost (570.8 ) (867.7 )
Total shareholders' equity 1,300.0 2,098.6
$ 5,094.6 $ 6,385.0
A-7
AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(UNAUDITED)
Nine Months Ended
Oct. 3, 2009 Sep. 27, 2008
(40 Weeks) (39 Weeks)
Operating Activities:
Net (loss) income $ (796.6 ) $ 223.5
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 139.8 154.8
Amortization 55.8 55.7
Provision for doubtful accounts 16.3 13.1
Goodwill and indefinite-lived intangible asset impairment charges 832.0 ---
Asset impairments and net loss on sale and disposal of assets 39.3 16.4
Loss from debt extinguishment 21.2 ---
Stock-based compensation 19.8 24.0
Other non-cash expense and loss 16.2 3.2
Other non-cash income and gain (7.2 ) (14.9 )
336.6 475.8
Changes in assets and liabilities and other adjustments, net of the (19.7 ) (93.5 )
effect of business acquisitions
Net cash provided by operating activities 316.9 382.3
Investing Activities:
Purchase of property, plant and equipment (46.7 ) (97.8 )
Purchase of software and other deferred charges (20.4 ) (49.2 )
Payments for acquisitions --- (130.6 )
Proceeds from sale of investments, net 0.3 16.2
Other (4.0 ) 7.0
Net cash used in investing activities (70.8 ) (254.4 )
Financing Activities:
Net decrease in borrowings (maturities of 90 days or less) (58.1 ) (386.3 )
Additional borrowings (maturities longer than 90 days) --- 400.1
Payments of debt (maturities longer than 90 days) (93.2 ) (0.7 )
Dividends paid (112.3 ) (131.4 )
Purchase of treasury stock --- (9.8 )
Proceeds from exercise of stock options, net --- 2.3
Other 2.0 8.2
Net cash used in financing activities (261.6 ) (117.6 )
Effect of foreign currency translation on cash balances 1.9 (0.5 )
(Decrease) increase in cash and cash equivalents (13.6 ) 9.8
Cash and cash equivalents, beginning of year 105.5 71.5
Cash and cash equivalents, end of period $ 91.9 $ 81.3
SOURCE: Avery Dennison Corporation
Avery Dennison Corporation Media Relations: David Frail, 626-304-2014 communications@averydennison.com or Investor Relations: Eric M. Leeds, 626-304-2029 investorcom@averydennison.com
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