Avery Dennison Announces First Quarter 2020 Results

Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its first quarter ended March 28, 2020. Non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, comparisons are to the same period in the prior year.

“The coronavirus is having a substantial impact on our teams, our markets and customers, our communities, and, of course, our shareholders,” said Mitch Butier, Chairman, President and CEO. “The situation has been evolving in unpredictable ways, and the team is doing a tremendous job adapting to the new reality, anticipating and planning for various scenarios.

“Our first priority in this crisis has been and will continue to be protecting the health and welfare of our teams, followed immediately by continuing to deliver industry-leading product quality and service for our customers,” added Butier. “I am proud of the actions we are taking to protect our team of 30,000 plus employees while meeting our customers’ needs in this challenging environment. I want to thank the entire team, especially those in our plants, for their tireless efforts to deliver for our customers through this crisis while keeping each other safe, bringing a whole new level of agility and dedication to address the unique challenges at hand.

“While earnings exceeded our expectations in the first quarter, the early stages of this downturn are playing out differently than past recessions. Label and Packaging Materials, our largest business, serves essential categories that are experiencing higher demand during the pandemic. In contrast, RBIS, which primarily serves apparel markets, is seeing a significant decline in demand, reflecting widespread retail store and apparel manufacturing closures.

“As a result, we anticipate a decline in organic growth and earnings for the year, as strong volume in essential label categories is more than offset by declines in categories serving apparel and industrial end markets. We are actively managing this dynamic environment, updating our scenario plans to reflect the unique nature of this global health crisis.

“We entered this crisis from a position of financial, operational, and commercial strength. Though the nature of the macro challenges is different than in past recessions, our business is resilient across economic cycles, as we serve diverse end markets. Past scenario planning has ensured that we have ample liquidity and a strong balance sheet, and we’re targeting free cash flow to be comparable to what we delivered last year.

“Our strategic priorities remain unchanged. We are protecting our investments to expand in high value categories, including RFID, while driving long-term profitable growth of our base businesses, and remain confident in our ability to create significant long-term value for all our stakeholders.”

First Quarter 2020 Results
Net sales were $1.72 billion, down 1.0 percent. Sales were up 1.0 percent ex. currency. On an organic basis, sales grew 0.3 percent.

Reported operating margin increased 120 basis points to 11.6 percent. Adjusted operating margin increased 90 basis points to 11.8 percent.

Reported net income was $1.60 per share, compared to a loss of $1.74 per share in the prior year first quarter. Prior year reported results included a $3.13 per share negative impact from pension settlement charges, net of tax. Adjusted net income was $1.66 per share, up 12 percent, above the company’s expectations, reflecting lower-than-planned raw material and employee-related costs.

The company’s first quarter effective tax rate was 25.6 percent. Its adjusted tax rate (non-GAAP) for the quarter was 24.7 percent, in line with the company’s current expectation for a full year adjusted tax rate in the mid-twenty percent range.

Free cash flow was negative $35.3 million reflecting seasonality (free cash flow in the first quarter of the year is typically negative, driven primarily by the timing of employee incentive and customer rebate payments), as well as lower cash collections related to customer shutdowns late in the quarter.

The company repurchased 0.4 million shares in the first quarter at an aggregate cost of $45.2 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down by 1.4 million compared to the same time last year.
more detail at: https://www.investors.averydennison.com/news-releases/news-release-details/avery-dennison-announces-first-quarter-2020-results

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