Slide 1: Second Quarter 2011 Financial Review and Analysis
Supplemental Presentation Materials Second Quarter 2011 Financial Review and Analysis (preliminary, unaudited) July 26, 2011
Slide 2: Forward-looking statements
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. These forward-looking statements and financial or other business targets are subject to certain r
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation contains certain non-GAAP financial measures as defined by SEC rules. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included with the financial schedules accompanying the earnings news r
Slide 4: Overview: 2Q Results
Overview: 2Q Results • Rapid change in sales trend in the second quarter » Consolidated unit volume down approx. 5% (vs. ~ 3.5% increase in 1Q) due principally to lower than expected market demand in PSM and RBIS » OCP sales declined as expected • As expected, pricing and cost reduction actions offs
Slide 5: Overview: 2011 Outlook
Overview: 2011 Outlook • Full year guidance reflects recent trends and uncertain macro environment • Primary driver of reduced earnings guidance is lower volume expectation » High end of guidance range assumes modest improvement in 2H relative to 2Q trend » Low end of guidance range assumes 2Q trend
Slide 6: 2Q P&L Summary
2Q P&L Summary • Net sales grew approx. 3% on a reported basis (down approx. 2% before the benefit of currency translation) • Operating margin (non-GAAP) declined 80 basis points to 8.2% • Interest expense down $3.4 mil. vs. prior year • Effective GAAP tax rate of 34% » Year-to-date adjusted tax rat
Slide 7: Sales Trend Analysis
Sales Trend Analysis 2Q10 3Q10 4Q10 1Q11 2Q11 Organic Sales Change 14.1% 8.3% 9.0% 6.5% (1.9%) Currency 1.3% (2.4%) (1.4%) 0.2% 4.6% Reported Sales Change 15.4% 5.9% 7.6% 6.7% 2.7% 7 Second Quarter 2011 Financial Review and Analysis July 26, 2011
Slide 8: Margin Analysis
Margin Analysis 2Q11 2Q10 1Q11 Gross Profit Margin (total Company) 27.3% 29.2% 27.4% Operating Margin (non-GAAP): Pressure-sensitive Materials 9.4% 9.6% 9.1% Retail Branding and Information Solutions 7.4% 8.8% 3.3% Office and Consumer Products 10.9% 15.9% 1.0% Other specialty converting businesses 4
Slide 9: Key Factors Impacting 2Q Margin
Key Factors Impacting 2Q Margin • Gross profit margin declined 190 basis points vs. prior year as the impact of lower volume was partially offset by the benefit of productivity actions » Inflation largely offset by pricing • Marketing, general and administrative (MG&A) expense ratio declined 110 bas
Slide 10: 2Q Segment Overview
2Q Segment Overview PRESSURE-SENSITIVE MATERIALS • Reported sales of $985 mil., up 7% compared with prior year » Sales flat to prior year on organic basis • Label and Packaging Materials sales essentially unchanged on organic basis, as volume decline was offset by pricing actions • Graphics and Refl
Slide 11: 2Q Segment Overview (continued)
2Q Segment Overview (continued) RETAIL BRANDING AND INFORMATION SOLUTIONS • Reported sales of $396 mil., down 4% compared with prior year » Sales down 6% on organic basis • Operating margin (non-GAAP) decreased by 140 basis points to 7.4% driven by the impact of lower volume, partially offset by low
Slide 12: 2Q Segment Overview (continued)
2Q Segment Overview (continued) OTHER SPECIALTY CONVERTING BUSINESSES • Reported sales of $141 mil., up 4% compared with prior year » Sales flat to prior year on organic basis • Operating margin (non-GAAP) improved by 90 basis points as the impact of pricing and favorable product mix more than offse
Slide 13: Contributing Factors to 2011
Contributing Factors to 2011 Assumptions as of 4/27/11 Assumptions as of 7/26/11 • Organic sales growth of ~7% • Organic sales growth of 1.5% to 3.5% • Currency translation (at March rates, represents • Currency translation (at June rates, represents approx. 3% tailwind to reported sales growth; app
Slide 14: 2011 Earnings and Free Cash Flow Guidance
2011 Earnings and Free Cash Flow Guidance 2011 Guidance Reported (GAAP) Earnings Per Share $2.25 - $2.55 Add Back: Estimated Restructuring Costs and Other Items ~ $0.20 Adjusted (non-GAAP) Earnings Per Share $2.45 - $2.75 Free Cash Flow (before dividends) $250 - $275 mil. 14 Second Quarter 2011 Fina
Slide 15: Avery Dennison
IN AVERY DENNISON