Avery Dennison Corporation · NYSE:AVY
Avery Dennison — Q3 2006 Earnings Presentation
18 slides from Avery Dennison's earnings presentation, Oct 24, 2006
Slide 1: Third Quarter 2006 Financial Review and Analysis
Third Quarter 2006 Financial Review and Analysis (Unaudited) October 24, 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. The most directly comparable GAAP measures have been included in the earnings news release for the quarter. Reconciliations of non-GAAP measures to the most directly comparable GAAP measu
Slide 4: Overview
Overview Net sales increased approx. 5% over prior year (approx. 4% before effects of currency translation and acquisitions/divestitures), reflecting both higher unit volume as well as positive changes in pricing and product mix Local currency sales improved sequentially in all major regions of the
Slide 5: Overview (continued)
Overview (continued) Compared to a year ago, selling price increases fully offset material cost and energy-related increases of approx. $7 mil. for the quarter Both the Pressure-Sensitive Materials and Office & Consumer Products segments delivered significant operating margin improvement For the tot
Slide 6: Overview (continued)
Overview (continued) We remain on track to achieve targeted savings from restructuring efforts Recognized $12 mil. of savings (net of transition costs) during the third quarter Expect full year 2006 results will reflect roughly half of total targeted savings (net of transition costs), with increment
Slide 7: Management Analysis of Underlying Sales Trends
Core volume growth (est.) (1.1)% (4.6)% 1.6% 0.8% 3.0% Comparability adjustments(1) 0.8% 4.6% 0.4% 1.7% (0.4)% "Underlying" volume growth (0.3)% 0.0% 2.0% 2.5% 2.6% Reported Sales Growth 2.0% (4.5)% (0.4)% (0.1)% 4.6% Management Analysis of Underlying Sales Trends (continuing operations) (1) Adjustm
Slide 8: Margin Analysis (continuing operations)
Gross Profit Margin (Total Company) 27.6% 26.4% 27.9% Operating Margin (non-GAAP*): Pressure-Sensitive Materials 10.2% 9.1% 9.8% Office and Consumer Products 16.0% 15.1% 16.5% Retail Information Services 6.4% 7.1% 12.7% Other Specialty Converting 5.0% 5.6% 3.5% Total Company 9.7% 9.5% 10.1% Impact o
Slide 9: Key Factors Impacting Margin
Key Factors Impacting Margin Gross profit margin increased 120 basis points compared with prior year to 27.6% Improvement from productivity gains was partially offset by transition costs associated with restructuring and divestitures (20 b.p.) Sequential decline in gross profit margin reflects norma
Slide 10: Stock Option Expense
Stock Option Expense Stock Option Expense
Slide 11: Raw Material Update
Raw Material Update Current outlook for 2006 raw material inflation revised downward from original expectations... now estimating approx. $40 to $45 mil. of volume-adjusted raw material inflation for FY 2006 Paper-based commodities represent largest category of raw materials, representing approx. 45
Slide 12: Restructuring Summary (Continuing Operations)
Restructuring Summary (Continuing Operations)
Slide 13: Q3-2006 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $825 mil., up 8% compared with prior year Organic sales growth of approx. 5% Change in sales for roll materials business by region, adjusted for the effect of currency translation: Low single-digit growth in North America Mid single-digit growth in Euro
Slide 14: Segment Overview: Office and Consumer Products
Q3-2006 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $282 mil., down approx. 1% compared with prior year As expected, benefit of shift in timing of back-to-school orders from Q2 to Q3 represented about 3 to 4 points of growth Divestiture of filing product lines in Euro
Slide 15: Segment Overview: Retail Information Services and Other Specialty Converting
Q3-2006 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $164 mil., up 6% compared with prior year Organic sales growth of approx. 4% Excluding restructuring charges, operating margin declined by 70 basis points to 6.4% Benefits of restructuring and other productivity initi
Slide 16: Third Quarter Balance Sheet and YTD Cash Flow
Third Quarter Balance Sheet and YTD Cash Flow Millions, except as noted 2006 2005 Cash flow from operations(1) $359.9 $288.5 Payment for capital expenditures $110.6 $117.1 Payment for software and other deferred charges $ 24.2 $ 15.6 Free Cash Flow(2) $225.1 $155.8 Dividends $128.5 $125.9 Total debt
Slide 17: 2006 Earnings Guidance
2006 Earnings Guidance Updated Assumptions for Full Year: Continued improvement in underlying growth rate, resulting in reported revenue up 2% to 3%, with modest benefit from currency Underlying volume up 3% to 4% 2% sales decline from product line divestitures and exited private label business Pric
Slide 18: 2006 Earnings Guidance (continued)
2006 Earnings Guidance (continued) Updated Previous Guidance Guidance Reported (GAAP) Earnings Per Share $3.56 - $3.68* $3.58 - $3.81 Add Back: Restructuring Charges $0.16 - $0.18 $0.14 - $0.17 Environmental Remediation Costs $0.08 - -- Deduct: Discontinued Operations $0.15 $0.15 Adjusted (non-GAAP)