Avery Dennison Corporation · NYSE:AVY
Avery Dennison — Q2 2006 Earnings Presentation
15 slides from Avery Dennison's earnings presentation, Jul 25, 2006
Slide 1: Second Quarter 2006 Financial Review and Analysis (Unaudited)
Second Quarter 2006 Financial Review and Analysis (Unaudited) July 25, 2006
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information presented in this document may constitute "forward-looking" statements. These statements and financial or other business targets are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or expected
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation contains certain non-GAAP measures as defined by SEC rules. As required by these rules, we have provided a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, which have been included with the financial statements ac
Slide 4: Overview
Overview Productivity improvements drove an 8% increase in GAAP E.P.S. (continuing operations), or a 9% increase before restructuring charges and other items Productivity improvements were reflected in both a higher gross profit margin and a lower operating expense ratio, creating 60 basis points of
Slide 5: Overview (continued)
Overview (continued) Unit volume before product line divestitures, exited private label business, and other comparability issues grew by more than 2%, representing the third consecutive quarter of improvement in this underlying trend In particular, unit volume for the roll materials business in Nort
Slide 6: Management Analysis of Underlying Sales Trends
Core volume growth (est.) 1.0% (1.1)% (4.6)% 1.6% 0.8% Comparability adjustments(1) (1.0)% 0.8% 4.6% 0.4% 1.7% "Underlying" volume growth 0.0% (0.3)% 0.0% 2.0% 2.5% Reported Sales Growth 7.1% 2.0% (4.5)% (0.4)% (0.1)% Management Analysis of Underlying Sales Trends (continuing operations) (1) Adjustm
Slide 7: Key Factors Impacting Margin
Key Factors Impacting Margin Gross profit margin increased 40 basis points compared with prior year to 27.9% Improvement from productivity gains (160 b.p.) was partially offset by: Transition costs associated with restructuring and divestitures (25 b.p.) Material cost and energy-related inflation in
Slide 8: Stock Option Expense
Stock Option Expense Stock Option Expense
Slide 9: Raw Material Update
Raw Material Update Paper-based commodities represent largest category of raw materials, representing approx. 45-50% of total spend Large share of raw material purchases tied to oil based commodities: Plastic films and resins - polypropylene, polyethylene, polyester, and vinyls, among others - repre
Slide 10: Restructuring Summary (Continuing Operations)
Restructuring Summary (Continuing Operations)
Slide 11: Q2-2006 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $810 mil., up 1% compared with prior year Organic sales growth of approx. 2% Change in sales for roll materials business by region, adjusted for the effect of currency translation: Low single-digit growth in North America (about 4 points of sequential i
Slide 12: Q2-2006 Segment Overview: Office and Consumer Products
Q2-2006 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $265 mil., down approx. 12% compared with prior year Half of the sales decline due to the divestiture of filing product lines in Europe Balance of decline due in equal measure to the decision to exit certain private
Slide 13: Q2-2006 Segment Overview: Retail Information Services and Other
Q2-2006 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $181 mil., up 6% compared with prior year Increase primarily due to core unit volume growth, reflecting rapid growth of Heat Transfer and other product lines Organic sales growth of approx. 6% Excluding restructuring
Slide 14: Second Quarter Balance Sheet and YTD Cash Flow
Second Quarter Balance Sheet and YTD Cash Flow Millions, except as noted 2006 2005 Cash flow from operations(1) $ 133.0 $ 88.1 Payment for capital expenditures $ 80.5 $ 76.8 Payment for software $ 15.7 $ 10.0 Free Cash Flow(2) $ 36.8 $ 1.3 Dividends $ 85.7 $ 83.9 Total debt to total capital 38.6% 42
Slide 15: 2006 Earnings Guidance
2006 Earnings Guidance Key Assumptions: Reported revenue up 2% to 4%, with negligible impact from currency Raw material inflation of approximately 2% in 2006 ($50 to $60 million) Operating margin (incl. RFID and stock option expense) of 9% to 10% Interest expense of $55 to $60 million Tax rate in th