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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 26, 1999
Date of Report (Date of earliest event reported)
AVERY DENNISON CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 1-7685 95-1492269
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
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150 N. Orange Grove Boulevard 91103
Pasadena, California (Zip Code)
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (626) 304-2000
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Item 5. Other Events.
The Company issued a news release today in the form attached as Exhibit 99.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in the Company's news release constitute "forward
looking statements" under the Private Securities Litigation Reform Act.
Projections related to expense reductions and savings forecast, earnings and
profitability, and the Company's realignment of its cost structure involve
certain risks and uncertainties. Actual results may differ materially due to
factors such as the impact of competitive conditions; changes in the levels of
spending on Company initiatives and business opportunities; other streamlining
programs; changes in tax law or generally accepted accounting practices; and
other matters, including those referred to in the Company's SEC filings.
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 hereunto duly authorized.
Dated: January 26, 1999
AVERY DENNISON CORPORATION
By: /s/ Robert M. Calderoni
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Name: Robert M. Calderoni
Title: Senior Vice President, Finance and
Chief Financial Officer
EXHIBIT LIST
Exhibit No. Description
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99 News Release dated January 26, 1999.
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Exhibit 99
AVERY DENNISON REPORTS RECORD
4TH QUARTER AND YEAR-END RESULTS
1998 results provide double-digit earnings-per-share
growth over prior year and superior returns on investment
Major cost reduction program to be launched in 1st Quarter 1999
PASADENA, Calif. -- January 26, 1999 -- Avery Dennison Corporation
(NYSE/PSE:AVY) today reported fourth quarter and year-end records for earnings,
sales and returns on investment. The Company also announced the implementation
of a major cost reduction program, which will include a one-time restructuring
charge in the first quarter of 1999, designed to increase operating efficiencies
and improve profitability in 1999 and beyond.
For the fourth quarter:
. Earnings per share, on a diluted basis, increased to $.54 per share, a
record level for the fourth quarter and an increase of 3.8 percent over the
prior year fourth quarter earnings of $.52 per share.
. Reported sales grew 5.8 percent to a record $884.6 million from $836.4
million a year ago. Excluding the impact of currency, sales grew 5.2
percent from the prior year fourth quarter.
. Unit volume increased 8.1 percent over the prior year.
In the fourth quarter, sales were up in both the Company's Consumer and
Converted Products and Pressure-sensitive Adhesives and Materials sectors in the
United States and internationally. International sales growth was especially
strong in the quarter.
Financial highlights for the year:
. Earnings per share, on a diluted basis, increased 11.4 percent to $2.15
from $1.93 in 1997, the seventh consecutive year of double-digit
earnings-per-share growth.
. Reported sales increased 3.4 percent to a record $3.5 billion from $3.3
billion in 1997. Excluding the impact of currency, sales grew nearly 5
percent.
. Unit volume grew 7.4 percent.
. Return on shareholders' equity reached a new high of 26.7 percent from
24.8 percent last year.
. Return on total capital increased to 19 percent from 18.1 percent in
1997.
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. Economic value added increased 20 percent over the prior year to $100
million.
"1998 was another record-setting year for Avery Dennison," said Philip M.
Neal, president and chief executive officer. "Our successful strategies enabled
us to continue to deliver double-digit earnings per share growth despite
challenging global economic conditions that surfaced in the second half of the
year. In addition, sales, profits and returns on investment achieved new all-
time highs.
"The Company's continued outstanding results reflect the platform for
growth that we have built successfully over the last few years. We have
achieved growth in our core markets and expanded into new geographic markets,
while enhancing operational excellence and financial strength."
"During the past year, we made important investments around the world to
grow our core businesses, underscoring our long-term commitment to worldwide
expansion. We opened a major new facility in Germany to produce pressure-
sensitive film for rapidly growing European markets. We made acquisitions in
North America, Latin America and Europe, in addition to our recent joint venture
with Zweckform, a leading office products supplier in Germany," Neal said. "In
addition, we plan to build a new office products manufacturing facility in
Northern Mexico, which will provide more efficient, lower-cost service and
distribution to our customers in the Western United States and Latin America."
Avery Dennison also announced plans for a major realignment of the
Company's cost structure that will streamline operations and further improve
profitability. This program will be implemented aggressively, resulting in
savings of $15 million to $18 million in 1999. When fully implemented, the
realignment is expected to result in annualized cost savings of $58 million to
$62 million.
The restructuring will result in a one-time pretax charge to 1st Quarter
1999 earnings of $60 million to $65 million, or $.40 to $.42 per diluted share
on an after-tax basis. The restructuring charge will include severance costs,
related asset write-offs, and other one-time expenses.
The Company will close eight facilities around the world in the Company's
Consumer and Converted Products and Pressure-sensitive Adhesives and Materials
sectors. As a result, approximately 1,500 positions will be eliminated, or
approximately nine percent of the Company's total workforce.
"Avery Dennison has consistently delivered superior returns and earnings
growth," said Neal. "We expect this major realignment to position the Company
for double-digit earnings growth in 1999 and beyond, before the effects of the
one-time charge."
Avery Dennison develops, manufactures and markets innovative self-adhesive
solutions for consumer products and label systems. Based in Pasadena, Calif.,
the Company makes a wide range of products for consumer and industrial markets,
including Avery-brand office products, Fasson-brand self-adhesive materials,
peel-and-stick postage stamps, battery labels, automated retail tag and labeling
systems, and specialty tapes and chemicals. Approximately 16,100 employees in
200 manufacturing and sales facilities produce and sell Avery Dennison products
in 89 countries.
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AVERY DENNISON
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
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Three Months Ended Year Ended
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Jan. 2, 1999 Dec. 27, 1997 Jan. 2, 1999 Dec. 27, 1997
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Net sales $884.6 $836.4 $3,459.9 $3,345.7
Cost of products sold 592.8 560.5 2,315.4 2,263.0
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Gross profit 291.8 275.9 1,144.5 1,082.7
Marketing, general & administrative expense 198.2 186.9 773.2 739.8
Interest expense 9.3 6.4 34.6 31.7
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Income before taxes 84.3 82.6 336.7 311.2
Taxes on income 28.4 28.2 113.4 106.4
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Net income $ 55.9 $ 54.4 $ 223.3 $ 204.8
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Net income per common share, assuming
dilution $ 0.54 $ 0.52 $ 2.15 $ 1.93
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Average shares outstanding:
Assuming dilution 102.7 105.5 104.1 106.1
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Common shares outstanding at period end 100.0 102.4 100.0 102.4
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Supplementary Sector Information
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Operating Margins
1998 Sales % Change 1998 1997 1996
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Pressure-sensitive adhesives & materials (PS) $1,874.1 2.8% 9.1% 9.4% 9.0%
Consumer & converted products (CCP) $1,742.1 4.2% 13.0% 11.3% 10.0%
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AVERY DENNISON
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
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ASSETS Jan. 2, 1999 Dec. 27, 1997
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Current assets:
Cash and cash equivalents $ 18.5 $ 3.3
Trade accounts receivable, net 454.8 457.7
Inventories, net 230.6 230.1
Other current assets 98.1 102.4
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Total current assets 802.0 793.5
Property, plant and equipment, net 1,035.6 985.3
Intangibles resulting from business acquisitions, net 145.1 133.7
Other assets 159.9 134.0
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$2,142.6 $2,046.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Short-term and current portion of long-term debt $ 71.3 $ 43.6
Accounts payable 269.8 245.3
Other current liabilities 323.2 341.0
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Total current liabilities 664.3 629.9
Long-term debt 465.9 404.1
Other long-term liabilities 179.1 175.3
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 587.5 592.5
Retained earnings 1,185.1 1,063.6
Cumulative translation adjustment (8.1) (21.4)
Cost of unallocated ESOP shares (18.3) (23.4)
Minimum pension liability - (1.1)
Employee stock benefit trusts (677.6) (730.3)
Treasury stock at cost (359.4) (166.8)
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Total shareholders' equity 833.3 837.2
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$2,142.6 $2,046.5
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AVERY DENNISON
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(In millions)
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Year Ended
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Jan. 2, 1999 Dec. 27, 1997
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Operating Activities:
Net income $ 223.3 $ 204.8
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 114.6 105.5
Amortization 12.6 11.3
Deferred taxes 13.8 18.4
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Cash provided by operations 364.3 340.0
Changes in assets and liabilities, net of the effect of foreign
currency translation, business divestitures and
acquisitions 58.5 28.4
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Net cash provided by operating activities 422.8 368.4
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Investing Activities:
Purchase of property, plant and equipment (159.7) (177.3)
Net (payments) proceeds from acquisitions, sale of assets
and business divestitures (30.9) 4.6
Other (26.9) (16.3)
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Net cash used in investing activities (217.5) (189.0)
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Financing Activities:
Net increase in long-term debt 46.1 58.3
Net increase (decrease) in short-term debt 39.3 (73.0)
Dividends paid (101.8) (86.8)
Purchase of treasury stock (192.6) (99.3)
Proceeds from exercise of stock options 20.7 13.3
Other (2.3) 7.9
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Net cash used in financing activities (190.6) (179.6)
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Effect of foreign currency translation on cash balances 0.5 (0.3)
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Increase (decrease) in cash and cash equivalents 15.2 (0.5)
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Cash and cash equivalents, beginning of year 3.3 3.8
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Cash and cash equivalents, end of year $ 18.5 $ 3.3
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Contact:
Avery Dennison, Pasadena
Charles E. Coleman, 626/304-2014 (media)
[email protected]
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Wayne H. Smith, 626/304-2001 (investors)
[email protected]
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www.averydennison.com
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