Avery Dennison Corporation today announced preliminary, unaudited fourth quarter and full-year 2010 results. All non-GAAP financial measures are reconciled to GAAP in the attached tables.
Fourth Quarter Financial Summary - Preliminary
Free Cash Flow (a non-GAAP financial measure) as used herein is defined as net cash from operating activities (as reported), less net purchases of property, plant, equipment, software, and other deferred charges, plus proceeds from sale (purchases) of investments, net (see accompanying schedule A-3 for reconciliation to GAAP financial measures).
Full Year Financial Summary - Preliminary
(in millions, except per share amounts)
Free Cash Flow (a non-GAAP financial measure) as used herein is defined as net cash from operating activities (as reported), less net purchases of property, plant, equipment, software, and other deferred charges, plus proceeds from sale (purchases) of investments, net (see accompanying schedule A-3 for reconciliation to GAAP financial measures).
"We delivered solid results in 2010, led by sales growth and expanded margins in Pressure-sensitive Materials and Retail Information Services," said Dean A. Scarborough, Avery Dennison chairman, president and CEO. "Our employees did a great job serving our customers, and I want to thank them for their outstanding performance.
"In addition, we generated strong free cash flow and exceeded our debt reduction goal for the year," Scarborough said. "Having strengthened our balance sheet, we have begun to return more cash to shareholders, through our fourth-quarter share repurchases and the dividend increase and repurchase authorization we announced today.
"For 2011, we expect to continue our solid sales growth and margin expansion," Scarborough said. "We also will continue to invest in marketing and R&D to further advance our market leadership and generate long-term growth."
For more details on the Company's results, see the Company's supplemental presentation materials, "Fourth Quarter and Full-Year 2010 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.
Fourth Quarter 2010 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the impact of foreign currency translation and, where applicable, an extra week in the fiscal year 2009. All references to operating margin exclude the impact of restructuring, asset impairment charges, and other items.
Pressure-sensitive Materials (PSM)
- Roll Materials sales grew at a low-double digit rate, reflecting strength in all regions. Sales grew at a mid-single digit rate in the Graphics and Reflective Products division.
- Operating margin increased as the benefits of increased volume, pricing actions, and productivity initiatives more than offset raw material inflation. Operating margin declined sequentially as raw material inflation continued to outpace price increases.
Retail Information Services (RIS)
- Sales growth reflected increased demand from retailers and brands in the U.S. and Europe.
- Operating margin increased due to increased volume and restructuring and productivity initiatives, partially offset by higher employee costs. Operating margin increased sequentially due to higher volume, reflecting the normal seasonal trend.
Office and Consumer Products (OCP)
- The decline in sales reflected weak end-market demand and increased competition in the label category.
- Operating margin declined due to increased investment in demand creation, consumer promotions, and innovation, raw material inflation, and lower volume.
Other specialty converting businesses
- Sales growth primarily reflected increased demand for specialty tapes.
- Operating margin improved as the benefits of increased volume and productivity actions more than offset raw material inflation.
Other
The Board of Directors today announced a 25 percent increase in the first quarter 2011 dividend to $0.25 per share, and an authorisation to repurchase an additional five million shares.
During the fourth quarter of 2010, the Company repurchased approximately three million shares for a total cost of $109 million (offsetting dilution), and contributed $78 million to pension obligations (more than $50 million above requirements).
The fourth quarter effective GAAP tax rate of negative 60 percent included $0.42 per share from a discrete tax planning event. The adjusted tax rate for the fourth quarter was negative 35 percent.
Outlook
In the Company's supplemental presentation materials, "Fourth Quarter and Full-Year 2010 Financial Review and Analysis," the Company provides a list of factors that it believes will contribute to its 2011 financial results. Based on the factors listed and other assumptions, the Company expects adjusted (non-GAAP) earnings per share of $3.00 to $3.30. The Company expects free cash flow in 2011 of $325 to $350 million.
First quarter 2011 earnings as a percentage of full-year 2011 earnings are expected to be at the low end of the historical range of 15 to 20 percent, reflecting normal seasonality as well as the timing of inflation and pricing actions.
