Avery Dennison Corporation · NYSE:AVY
Avery Dennison — FY2006 Earnings Presentation
20 slides from Avery Dennison's earnings presentation, Jan 23, 2007
Slide 1: Fourth Quarter and Full Year 2006 Financial Review and Analysis
Fourth Quarter and Full Year 2006 Financial Review and Analysis (Unaudited) January 23, 2007
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: Full Year 2006 Highlights
Full Year 2006 Highlights Modest growth in sales on adjusted organic basis (3%), reflecting price-related share loss in Roll Materials business in 2H-05 / early 2006, and generally slow market conditions affecting North America in 2H-06 Continued strength in emerging markets Good progress against sh
Slide 5: Full Year 2006 Highlights (continued)
Gross profit and EBIT margin (before restructuring charges) up 40 basis points and 30 basis points, respectively Slightly behind inflation curve in first half... selling price increases neutralize impact of inflation for the full year Benefit from restructuring savings and productivity initiatives p
Slide 6: Fourth Quarter Overview
Fourth Quarter Overview Net sales increased 3.5% over prior year (approx. 2% before effects of currency translation, acquisitions/divestitures and other comparability adjustments), reflecting both higher unit volume as well as positive changes in pricing and product mix Unit volume growth before pro
Slide 7: Fourth Quarter Overview (continued)
Fourth Quarter Overview (continued) Operating margin before restructuring and asset impairment charges and other items declined by 40 basis points Benefits from restructuring and other productivity improvements were more than offset by changes in the year-end adjustment of LIFO inventory reserves, s
Slide 8: Fourth Quarter Overview (continued)
Fourth Quarter Overview (continued) Restructuring and asset impairment charges in the fourth quarter include $5.1 million related to 2007 actions currently underway Annualized savings associated with these actions are expected to total approximately $11 to $13 million of new savings for 2008 2007 sa
Slide 9: Management Analysis of Underlying Sales Trends
Core volume growth (est.) (4.6)% 1.6% 0.8% 3.0% 1.1% Comparability adjustments(1) 4.6% 0.4% 1.7% (0.4)% (0.6)% "Underlying" volume growth 0.0% 2.0% 2.5% 2.6% 0.5% Reported Sales Growth (4.5)% (0.4)% (0.1)% 4.6% 3.5% Management Analysis of Underlying Sales Trends (continuing operations) (1) Adjustmen
Slide 10: Margin Analysis (continuing operations)
Gross Profit Margin (Total Company) 27.6% 27.8% 27.6% Operating Margin (non-GAAP*): Pressure-Sensitive Materials 9.4% 8.5% 10.2% Office and Consumer Products 18.0% 22.4% 16.0% Retail Information Services 7.6% 7.8% 6.4% Other Specialty Converting 1.5% 2.2% 5.0% Total Company 9.0% 9.4% 9.7% Impact of
Slide 11: Key Factors Impacting Margin
Key Factors Impacting Margin Gross profit margin declined 20 basis points compared with prior year to 27.6% Benefit from restructuring was more than offset by changes in the year- end adjustment of LIFO inventory reserves and unfavorable segment mix Marketing, general and administrative (MG&A) expen
Slide 12: Stock Option Expense
Stock Option Expense Pre-Tax Expense Margin Impact E.P.S. Pre-Tax Expense E.P.S. ($ mil.) ($ mil.) Corporate 3.6 n/a 9.7 Pressure-Sensitive Materials 1.0 ~ 10 b.p. 3.9 Office & Consumer Products 0.7 ~ 25 b.p. 2.8 Retail Information Services 0.0 ~ 0 b.p. 1.6 Other Specialty Converting 1.1 ~ 75 b.p. 2
Slide 13: Restructuring Summary (continuing operations)
Restructuring Summary (continuing operations)
Slide 14: Q4-2006 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $814 mil., up 6.7% compared with prior year Organic sales growth of approx. 3% Change in sales for roll materials business by region, adjusted for the effect of currency translation: North America even with prior year Low single-digit growth in Europe D
Slide 15: Segment Overview: Office and Consumer Products
Q4-2006 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $285 mil., down approx. 2.7% compared with prior year Divestiture of filing product lines in Europe and decision to exit certain private label business in the U.S. represented roughly 6 points of sales decline Impact
Slide 16: Segment Overview: Retail Information Services, Other Specialty Converting
Q4-2006 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $168 mil., up 5.5% compared with prior year Organic sales growth of approx. 4% Excluding restructuring and other items, operating margin declined 20 basis points to 7.6% Benefits of restructuring were offset by higher
Slide 17: Fourth Quarter Balance Sheet and FY Cash Flow
Fourth Quarter Balance Sheet and FY Cash Flow Millions, except as noted 2006 2005 Cash flow from operations(1) $516.2 $441.6 Payment for capital expenditures $161.9 $162.5 Payment for software and other deferred charges $ 33.4 $ 25.8 Free Cash Flow(2) $320.9 $253.3 Dividends $171.8 $168.7 Share Repu
Slide 18: 2007 Earnings Guidance: Key Considerations
2007 Earnings Guidance: Key Considerations Factors contributing to projected earnings growth: Midpoint of range assumes improvement in underlying growth rate... projecting reported revenue growth of 2% to 5% Volume up 2% to 4%, net of 1 point loss from strategic product pruning and price-related for
Slide 19: 2007 Earnings Guidance: Key Considerations (continued)
Key Assumptions: Reported revenue up 2% to 5%, including 1% to 1.5% benefit from currency Modest inflation in raw material costs offset with benefit from global sourcing strategies, material cost-outs, and selective price increases Operating margin of 9.5% to 10.5% Interest expense of $50 to $60 mil
Slide 20: 2007 Earnings and Free Cash Flow Guidance
2007 Earnings and Free Cash Flow Guidance 2007 Guidance Reported (GAAP) Earnings Per Share $3.90 - $4.30 Add Back: Estimated Restructuring and Asset Impairment Charges* $0.05 - $0.10 Adjusted (non-GAAP) Earnings Per Share $4.00 to $4.35 * Subject to upward revision as plans are finalized Capital Exp