<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 28, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 1-7685
AVERY DENNISON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-1492269
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
150 NORTH ORANGE GROVE BOULEVARD, PASADENA, CALIFORNIA 91103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (818) 304-2000
Indicate by a check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes X No
----- -----
Number of shares of $1 par value common stock outstanding as of July 25,
1997: 120,402,745
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
INDEX TO FORM 10-Q
------------------
<TABLE>
<CAPTION>
Page No.
--------
Part I. Financial Information (Unaudited):
Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheet
June 28, 1997 and December 28, 1996 3
Consolidated Statement of Income
Three and Six Months Ended June 28, 1997 and June 29, 1996 4
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 28, 1997 and June 29, 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information:
Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
June 28, 1997 December 28, 1996
---------------- -----------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9.5 $ 3.8
Trade accounts receivable, net 496.8 448.5
Inventories, net 254.6 244.4
Prepaid expenses 22.1 17.8
Other current assets 89.0 90.0
--------------- ----------------
Total current assets 872.0 804.5
Property, plant and equipment, at cost 1,751.8 1,767.9
Accumulated depreciation (808.2) (805.2)
--------------- ----------------
943.6 962.7
Intangibles resulting from business acquisitions, net 130.8 135.9
Other assets 145.7 133.6
--------------- ----------------
$ 2,092.1 $ 2,036.7
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 86.4 $ 96.2
Accounts payable 232.6 230.7
Other current liabilities 325.8 367.0
--------------- ----------------
Total current liabilities 644.8 693.9
Long-term debt 444.1 370.7
Deferred taxes and other long-term liabilities 177.6 140.1
Shareholders' equity:
Common stock - $1 par value:
Authorized - 400,000,000 shares; Issued - 124,126,624
shares at June 28, 1997 and December 28, 1996 124.1 124.1
Capital in excess of par value 514.2 475.4
Retained earnings 1,002.3 945.6
Cumulative foreign currency translation adjustment (1.0) 28.3
Cost of unallocated ESOP shares (29.9) (29.4)
Minimum pension liability (0.2) (0.2)
Employee stock benefit trust, 17,380,545 shares at
June 28, 1997 and 17,959,358 shares at December 28, 1996 (675.7) (644.3)
Treasury stock at cost, 3,638,848 shares at June 28,
1997 and 2,551,808 shares at December 28, 1996 (108.2) (67.5)
--------------- ----------------
Total shareholders' equity 825.6 832.0
--------------- ----------------
$ 2,092.1 $ 2,036.7
=============== ================
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 844.8 $ 797.7 $ 1,673.7 $ 1,594.3
Cost of products sold 571.0 549.3 1,137.0 1,099.2
------------- ------------- ------------- -------------
Gross profit 273.8 248.4 536.7 495.1
Marketing, general and
administrative expense 188.7 174.9 369.0 350.2
Interest expense 8.8 9.4 17.3 18.3
------------- ------------- ------------- -------------
Income before taxes 76.3 64.1 150.4 126.6
Taxes on income 26.7 22.5 52.6 45.0
------------- ------------- ------------- -------------
Net income $ 49.6 $ 41.6 $ 97.8 $ 81.6
============= ============= ============= =============
PER SHARE AMOUNTS:
Net income per common share $ 0.48 $ 0.39 $ 0.95 $ 0.77
Net income per fully diluted
common share 0.47 0.38 0.92 0.75
Dividends 0.17 0.15 0.34 0.30
AVERAGE SHARES OUTSTANDING:
Common shares 103.3 105.4 103.4 105.6
Fully diluted common shares 106.3 108.1 106.5 108.3
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
June 28, 1997 June 29, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 97.8 $ 81.6
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 52.1 49.8
Amortization 5.6 5.6
Deferred taxes 5.8 10.5
Net change in assets and liabilities, net of the effect of
foreign currency translation and business divestitures (73.0) (88.1)
------------- -------------
Net cash provided by operating activities 88.3 59.4
------------- -------------
INVESTING ACTIVITIES:
- --------------------
Purchase of property, plant and equipment (67.6) (73.9)
Net (payments) proceeds from sale of assets, business
divestitures and acquisitions (4.2) 3.8
Other (3.8) (1.0)
------------- -------------
Net cash used in investing activities (75.6) (71.1)
------------- -------------
FINANCING ACTIVITIES:
- --------------------
Net increase in short-term debt 121.5 68.7
Net decrease in long-term debt (53.0) (1.4)
Dividends paid (41.2) (31.7)
Purchase of treasury stock (40.7) (50.1)
Other 6.9 4.3
------------- -------------
Net cash used in financing activities (6.5) (10.2)
------------- -------------
Effect of foreign currency translation on cash balances (0.5) --
------------- -------------
Increase (decrease) in cash and cash equivalents 5.7 (21.9)
------------- -------------
Cash and cash equivalents, beginning of period 3.8 27.0
------------- -------------
Cash and cash equivalents, end of period $ 9.5 $ 5.1
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements include normal
recurring adjustments necessary for a fair presentation of the Company's
interim results. Certain prior year amounts have been reclassified to conform
with current year presentation. The condensed financial statements and notes
in this Form 10-Q are presented as permitted by Regulation S-X, and as such,
they do not contain certain information included in the Company's 1996 annual
financial statements and notes.
The second quarters of 1997 and 1996 consisted of thirteen-week periods
ending June 28, 1997 and June 29, 1996, respectively. The interim results of
operations are not necessarily indicative of future financial results.
2. FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies and translation of the financial
statements of subsidiaries which operate in hyperinflationary economies
during 1997 resulted in no losses and losses of $.6 million, respectively,
during the three and six months ended June 28, 1997. During 1996, the Company
recorded losses of $.6 million and $1.2 million, respectively, during the
three and six months ended June 29, 1996. Operations in hyperinflationary
economies consist of the Company's Brazilian operations for 1997 and 1996 and
Mexican operations for 1997.
3. FINANCIAL INSTRUMENTS
The Company enters into forward exchange and interest rate contracts to
manage exposure to fluctuations in foreign currency exchange and interest
rates. The Company does not hold or issue financial instruments for trading
purposes.
Forward exchange contracts that hedge existing assets, liabilities or firm
commitments are measured at fair value and the related gains and losses on
these contracts are recognized in net income currently. Forward exchange
contracts that hedge forecasted transactions are measured at fair value and
the related gains and losses on these contracts are deferred and subsequently
recognized in net income in the period in which the underlying transaction is
consummated. In the event that an anticipated transaction is no longer likely
to occur, the Company recognizes the change in fair value of the instrument
in net income currently.
Gains and losses resulting from forward exchange contracts are recorded in
the same category as that arising from the related item being hedged. Cash
flows from the use of financial instruments are reported in the same category
as the hedged item in the statement of cash flows. Gains and losses on
contracts used to hedge the value of investments in certain foreign
subsidiaries are included in the cumulative foreign currency translation
adjustment component of shareholders' equity.
The net amounts paid or received on interest rate agreements are recognized
as adjustments to interest expense over the terms of the agreements. Contract
premiums paid, if any, are amortized to interest expense over the terms of
the underlying instruments.
6
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INVENTORIES
Inventories consisted of (in millions):
<TABLE>
<CAPTION>
June 28, 1997 December 28, 1996
------------- -----------------
<S> <C> <C>
Raw materials $ 82.8 $ 82.7
Work-in-progress 72.9 72.4
Finished goods 133.7 123.4
LIFO adjustment (34.8) (34.1)
------------- -----------------
$ 254.6 $ 244.4
============= =================
</TABLE>
5. INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Accumulated amortization of intangible assets at June 28, 1997 and December
28, 1996 was $47 million and $46.6 million, respectively.
6. RESEARCH AND DEVELOPMENT
Research and development expense for the three and six months ended June 28,
1997 was $16.1 million and $30.6 million, respectively. For the three and six
months ended June 29, 1996, research and development expense was $13.2
million and $26.5 million, respectively.
7. CONTINGENCIES
The Company has been designated by the U.S. Environmental Protection Agency
(EPA) and/or other responsible state agencies as a potentially responsible
party (PRP) at 18 waste disposal or waste recycling sites which are the
subject of separate investigations or proceedings concerning alleged soil
and/or groundwater contamination and for which no settlement of the Company's
liability has been agreed upon. Litigation has been initiated by a
governmental authority with respect to two of these sites, but the Company
does not believe that any such proceedings will result in the imposition of
monetary sanctions. The Company is participating with other PRPs at all such
sites, and anticipates that its share of cleanup costs will be determined
pursuant to remedial agreements entered into in the normal course of
negotiations with the EPA or other governmental authorities.
7
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. CONTINGENCIES (CONTINUED)
The Company has accrued liabilities for all sites, including sites in which
governmental agencies have designated the Company as a PRP, where it is
probable that a loss will be incurred and the minimum cost or amount of loss
can be reasonably estimated. However, because of the uncertainties associated
with environmental assessment and remediation activities, future expense to
remediate the currently identified sites, and sites which could be identified
in the future for cleanup, could be higher than the liability currently
accrued. Based on current site assessments, management believes that the
potential liability over the amounts currently accrued would not materially
affect the Company.
The Company and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the
business. In the opinion of management, the resolution of these matters will
not materially affect the Company.
8. NET INCOME PER SHARE
Net income per common share is computed by dividing net income by the
weighted-average number of common shares outstanding. Net income per fully
diluted common share is computed by dividing net income by the weighted-
average number of common shares and common share equivalents outstanding.
Common share equivalents include shares issuable upon the assumed exercise of
outstanding stock options.
9. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share" (EPS). The standard will require the Company to present both "basic"
and "diluted" EPS. The new requirements will be effective the fourth quarter
of 1997; earlier adoption is not allowed. At the present time, the impact of
the new standard is not expected to be material.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
The standard establishes guidelines for the reporting and display of
comprehensive income and its components in financial statements.
Comprehensive income includes items such as foreign currency translation
adjustments and adjustments to the minimum pension liability that are
currently presented as a component of shareholders' equity. Companies will be
required to report total comprehensive income for interim periods beginning
first quarter of 1998. Disclosure of comprehensive income and its components
will be required beginning fiscal year end 1998.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information". The standard requires that
companies disclose "operating segments" based on the way management
disaggregates the company for making internal operating decisions. The new
rules will be effective for the 1998 fiscal year. Abbreviated quarterly
disclosure will be required beginning first quarter of 1999, with both 1999
and 1998 information. The Company does not believe that the new standard will
have a material impact on the reporting of its segments.
8
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: FOR THE QUARTER
- --------------------------------------
Quarterly sales increased to $844.8 million, a 5.9 percent increase over second
quarter 1996 sales of $797.7 million. Excluding changes in foreign currency
rates, sales increased 8.3 percent.
The gross profit margin increased to 32.4 percent for the quarter compared to
31.1 percent for the second quarter of 1996. The increase was due to improved
productivity and product mix.
Marketing, general and administrative expense, as a percent of sales, was 22.3
percent compared to 21.9 percent for the second quarter of 1996, reflecting the
Company's increased spending on new products and geographic expansion.
Interest expense declined to $8.8 million for the second quarter of 1997,
compared to $9.4 million a year ago, due to lower weighted-average interest
rates. Income before taxes, as a percent of sales, increased to 9 percent from 8
percent a year ago, primarily as a result of improved gross profit margins. The
effective tax rate was 35 percent for the second quarter of 1997 compared to
35.1 percent for the second quarter of 1996.
Net income increased 19 percent to $49.6 million compared to $41.6 million in
the second quarter of 1996. Net income per common share for the quarter was $.48
compared to $.39 in the same period last year, a 23 percent increase. Net income
per fully diluted common share was $.47 for the second quarter of 1997 and $.38
for the second quarter of 1996, a 24 percent increase year over year.
Results of Operations by Business Sector
The Pressure-sensitive adhesives and materials sector reported increased sales
for the second quarter of 1997 compared to the same period last year.
Profitability for the sector was impacted by an increase in research and
development costs for new products. The U.S. operations' sales growth was
primarily led by increased sales volume for new products. Profitability for the
U.S. operations was impacted by an increase in research and development costs
for new products. The international businesses reported sales and profitability
growth. The improvements were primarily due to higher unit volume and geographic
expansion, which was partially offset by changes in foreign currency rates.
The Consumer and converted products sector reported increased sales and
profitability for the quarter. Increased sales in the U.S. operations continue
to be led by growth of its Avery-brand products and other consumer products.
Profitability improved primarily as a result of new products and an improved
product mix. Sales for the international businesses were impacted by the changes
in foreign currency rates and sales declines at certain European operations due
to the softness of certain economies. Profitability for the international
businesses was primarily impacted by decreased sales at selected European
operations and investments for the market expansion of new products.
9
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: SIX MONTHS YEAR-TO-DATE
- ----------------------------------------------
Sales for the first six months of 1997 were up 5 percent to $1.67 billion
compared to the corresponding period of 1996. Excluding changes in foreign
currency rates, sales increased 7 percent.
The gross profit margin for the first six months was 32.1 percent compared to
31.1 percent for the first six months of 1996. The increase was due to improved
productivity and product mix and increased capacity utilization. Marketing,
general and administrative expense, as a percent of sales, for the first six
months was 22 percent for both periods.
Interest expense declined to $17.3 million for the first six months compared to
$18.3 million for the first six months of 1996. The decrease was primarily due
to lower weighted-average interest rates. Income before taxes, as a percent of
sales, increased to 9 percent for the first six months of 1997 compared to 7.9
percent for 1996, as a result of improved gross profit margins. The year-to-date
effective tax rate was 35 percent for 1997 and 35.5 percent for 1996.
Net income was $97.8 million for the first six months of 1997 compared to $81.6
million for the first six months of 1996. Net income per common share increased
23 percent to $.95 for the first six months of 1997 compared to $.77 for the
same period last year. Net income per fully diluted common share was $.92 for
the first six months of 1997 compared to $.75 for the same period last year, a
23 percent increase year over year.
Results of Operations by Business Sector
The Pressure-sensitive adhesives and materials sector reported increased sales
and profitability for the first six months of 1997 compared to the same period
last year. The U.S. operations' sales growth was primarily led by increased
sales volume for new products. Profitability for the U.S. operations was
impacted by an increase in research and development costs for new products. The
international businesses reported increased sales and profitability primarily
due to higher unit volume and geographic expansion, which was partially offset
by changes in foreign currency rates.
The Consumer and converted products sector reported increased sales and
profitability for the first six months of 1997 compared to 1996. Increased sales
in the U.S. operations continue to be led by growth of its Avery-brand products
and other consumer products. Profitability improved primarily as a result of new
products and an improved product mix. Sales for the international businesses
were impacted by changes in foreign currency and sales declines at certain
European operations. Profitability for the international businesses was
primarily impacted by operations in France and decreased sales at selected
European operations due to the softness of certain economies.
10
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Average working capital, excluding short-term debt, as a percentage of sales,
improved to 9.3 percent for the quarter from 10.9 percent a year ago. Average
inventory turnover for the second quarter was 9 inventory turns compared to 9.5
inventory turns a year ago; the average number of days sales outstanding in
accounts receivable was 54 days compared to 56 days a year ago.
Net cash flows provided by operating activities totaled $88.3 million for the
first six months of 1997 and $59.4 million for the first half of 1996. The
increase in net cash flows provided by operating activities is primarily due to
a change in working capital requirements and the Company's improved
profitability.
Capital spending for the quarter was $35.9 million compared to $35.6 million a
year ago. For the first six months, capital spending totaled $67.6 million
compared to $73.9 million a year ago. Total capital spending for 1997 is
expected to be approximately $180 to $190 million, which is comparable to 1996.
In addition to cash flow from operations, the Company had more than adequate
financing arrangements to conduct its operations.
During the first six months of 1997, total debt increased $63.6 million to
$530.5 million from year end 1996. During the fourth quarter of 1996, the
Company registered with the Securities and Exchange Commission, $150 million in
principal amount of medium-term notes. In July 1997, $20 million had been
issued. Proceeds from the medium-term notes were used to reduce debt and for
other general corporate purposes.
Shareholders' equity decreased to $825.6 million from $832 million at year end
1996. During the second quarter of 1997, the Company purchased 559,000 shares of
common stock at a cost of $21.1 million. For the first six months of 1997, the
Company purchased 1.1 million shares of common stock at a cost of $40.7 million.
The market value of shares held in the employee stock benefit trust, after the
issuance of shares under the Company's stock and incentive plans, increased
during the quarter by $31.4 million to $675.7 million from year end 1996. Total
debt to total capital was 39.1 percent as of the end of second quarter of 1997
and 35.9 percent at year end 1996.
During the first quarter of 1997, the Company adopted SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". The standard revised the guidelines for recognition, measurement
and disclosure of transfers and servicing of financial assets and
extinguishments of debt. The Company's implementation of the new standard had no
effect on the first quarter of 1997 financial statements.
11
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FUTURE ACCOUNTING REQUIREMENTS
- ------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" (EPS). The
standard will require the Company to present both "basic" and "diluted" EPS. The
new requirements will be effective beginning the fourth quarter of 1997; earlier
adoption is not allowed. At the present time, the impact of the new standard is
not expected to be material.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
The standard establishes guidelines for the reporting and display of
comprehensive income and its components in financial statements. Comprehensive
income includes items such as foreign currency translation adjustments and
adjustments to the minimum pension liability that are currently presented as a
component of shareholders' equity. Companies will be required to report total
comprehensive income for interim periods beginning first quarter of 1998.
Disclosure of comprehensive income and its components will be required beginning
fiscal year end 1998.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information". The standard requires that companies
disclose "operating segments" based on the way management disaggregates the
company for making internal operating decisions. The new rules will be effective
for the 1998 fiscal year. Abbreviated quarterly disclosure will be required
beginning first quarter of 1999, with both 1999 and 1998 information. The
Company does not believe that the new standard will have a material impact on
the reporting of its segments.
SAFE HARBOR STATEMENT
- ---------------------
The matters described or referred to in the Form 10-Q include forward-looking
statements regarding future events. Factors which could cause actual results to
differ materially from those projected include risks and uncertainties relating
to investment in new production facilities, timely development and successful
marketing of new products, impact of competitive products and pricing,
fluctuations in foreign exchange rates, changes in economic conditions, and
other factors, including those described or referred to in the Company's SEC
filings, including its Form 10-K for the year ended December 28, 1996.
12
<PAGE>
PART II. OTHER INFORMATION
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
<TABLE>
<S> <C>
a. Exhibits: 11 Computation of Net Income Per Share Amounts
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended June 28, 1997.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AVERY DENNISON CORPORATION
--------------------------
(Registrant)
/s/ Thomas E. Miller
-----------------------------------
Thomas E. Miller
Vice President and Controller and
Interim Chief Financial Officer
(Chief Accounting Officer)
August 11, 1997
14
<PAGE>
AVERY DENNISON CORPORATION
COMPUTATION OF NET INCOME PER SHARE AMOUNTS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(A) Weighted average number of
common shares outstanding 103.3 105.4 103.4 105.6
Additional common shares issuable under
employee stock options using the treasury
stock method 3.0 2.7 3.1 2.7
------------- ------------- ------------- -------------
(B) Weighted average number of common shares
outstanding assuming the exercise of stock
options 106.3 108.1 106.5 108.3
============= ============= ============= =============
(C) Net income applicable to common stock $ 49.6 $ 41.6 $ 97.8 $ 81.6
============= ============= ============= =============
Net income per share as reported (C / A) $ 0.48 $ 0.39 $ 0.95 $ 0.77
============= ============= ============= =============
Net income per share giving effect to the exercise of
outstanding stock options (C / B) $ 0.47 $ 0.38 $ 0.92 $ 0.75
============= ============= ============= =============
</TABLE>
Exhibit 11
<PAGE>
AVERY DENNISON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings:
Income before taxes $ 76.3 $ 64.1 $ 150.4 $ 126.6
Add: Fixed charges* 13.2 13.9 26.3 27.4
Amortization of capitalized interest 1.3 1.2 1.4 1.3
Less: Capitalized interest (0.5) (0.8) (1.3) (1.6)
------------- ------------- ------------- -------------
$ 90.3 $ 78.4 $ 176.8 $ 153.7
============= ============= ============= =============
*Fixed charges:
Interest expense $ 8.8 $ 9.4 $ 17.3 $ 18.3
Capitalized interest 0.5 0.8 1.3 1.6
Amortization of debt issuance costs 0.1 0.1 0.2 0.3
Interest portion of leases 3.8 3.6 7.5 7.2
------------- ------------- ------------- -------------
$ 13.2 $ 13.9 $ 26.3 $ 27.4
============= ============= ============= =============
Ratio of Earnings to Fixed Charges 6.8 5.6 6.7 5.6
============= ============= ============= =============
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, "earnings" consist of income before taxes
plus fixed charges (excluding capitalized interest), and "fixed charges"
consist of interest expense, capitalized interest, amortization of debt
issuance costs and the portion of rent expense (estimated to be 35%) on
operating leases deemed representative of interest.
Exhibit 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 9,500
<SECURITIES> 0
<RECEIVABLES> 496,800<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 254,600
<CURRENT-ASSETS> 872,000
<PP&E> 1,751,800
<DEPRECIATION> 808,200
<TOTAL-ASSETS> 2,092,100
<CURRENT-LIABILITIES> 644,800
<BONDS> 444,100
0
0
<COMMON> 124,100
<OTHER-SE> 701,500
<TOTAL-LIABILITY-AND-EQUITY> 2,092,100
<SALES> 1,673,700
<TOTAL-REVENUES> 1,673,700
<CGS> 1,137,000
<TOTAL-COSTS> 1,137,000
<OTHER-EXPENSES> 369,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,300
<INCOME-PRETAX> 150,400
<INCOME-TAX> 52,600
<INCOME-CONTINUING> 97,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,800
<EPS-PRIMARY> .95
<EPS-DILUTED> .92
<FN>
<F1>ACCOUNTS RECEIVABLE ARE SHOWN NET OF ANY ALLOWANCES.
</FN>
</TABLE>
