Avery Dennison Corporation
T: +1 (626) 304-2361
T: +1 (440) 534-6290
GLENDALE, Calif., July 28, 2021 – Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its second quarter ended July 3, 2021. 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.
“We delivered another strong quarter, ahead of expectations, raised our outlook for the second half, and announced an agreement to acquire Vestcom that will build upon and expand RBIS’ strengths,” said Mitch Butier, Avery Dennison president and CEO. “Revenue was up 28 percent organically compared to prior year and up 11 percent compared to 2019, as RBIS and IHM rebounded significantly from prior year lows and strength in LGM continued.
“Our strong performance comes at a time when supply chains remain tight, inflation persists and the global health crisis continues. The current environment reinforces our determination to remain vigilant in ensuring the health and well-being of our employees, delivering for our customers, supporting our communities, and creating value for our shareholders.
“Vestcom, a high growth, high margin business, provides retail shelf-edge pricing and branding labeling solutions. The acquisition will further expand our position in high value categories while adding channel access and data management capabilities to RBIS that have the potential to further advance our Intelligent Labels strategy,” added Butier.
“Once again, I want to thank our entire team for their ongoing efforts to keep one another safe while continuing to deliver for all our stakeholders during this challenging period.”
Uncertainty surrounding the global health crisis remains elevated as many parts of the world are experiencing a surge in COVID-19 cases, with the greatest impact to the company being in South Asia, particularly RBIS. The safety and well-being of employees has been and will continue to be the company’s top priority. The company has taken steps to ensure employee safety, quickly implementing world-class safety protocols and continuing to adapt them as the pandemic evolves.
The company continues to actively manage through a dynamic supply and demand environment. Demand across the majority of businesses and regions remains very strong, while raw materials, freight and labor availability continue to be constrained. The company is leveraging its global scale and working closely with customers and suppliers to minimize disruptions. Inflation remains persistent and pricing and material re-engineering actions are being implemented to offset higher costs.
Second Quarter 2021 Results by Segment
Label and Graphic Materials
Retail Branding and Information Solutions
Industrial and Healthcare Materials
Balance Sheet, Liquidity, and Capital Deployment
The company’s balance sheet remains strong, with ample capacity. Net debt to adjusted EBITDA (non-GAAP) was 1.3 at the end of the second quarter, below its long-term target.
In the first half, the company returned $203 million in cash to shareholders through a combination of share repurchases and dividends, up from $142 million for the same period last year.
The company repurchased 0.2 million shares in the second quarter at an aggregate cost of $39 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down by 0.1 million compared to the same time last year.
In May 2021, the Brazilian Federal Supreme Court ruled on the recovery of certain indirect taxes that the company had paid in previous years. As a result of the ruling, the company recorded a gain of $29.1 million that it now expects to use to offset its future taxes in Brazil.
The company recorded a contingent liability during the quarter in the amount of $26.6 million based on a jury verdict issued in May 2021 in the matter of ADASA Inc. vs. Avery Dennison Corporation. The company will appeal the decision and believes it has meritorious defenses to present during the appeal process with an anticipated favorable final outcome.
The company announced today that it has signed an agreement to acquire Vestcom for $1.45 billion, subject to certain closing and post-closing adjustments. Vestcom is a privately held company that provides shelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged goods companies. The acquisition is expected to close in Q3 2021, subject to regulatory approvals and other customary closing conditions. The company plans to fund the acquisition with cash and debt. For more information on Vestcom and the transaction, see full press release here and the slides accompanying today’s release.
The company’s second quarter effective tax rate was 27.6%. The adjusted (non-GAAP) tax rate for the quarter was 25.6%, while the company’s current expectation for its full year adjusted tax rate is 25.3%.
Cost Reduction Actions
In the second quarter, the company realized approximately $17 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $2 million, the vast majority of which represents cash charges.
In its supplemental presentation materials, “Second Quarter 2021 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2021 financial results. Based on the factors listed and other assumptions, the company has raised its guidance range for 2021 reported earnings per share from $8.25 to $8.65 to $8.50 to $8.80. Excluding an estimated $0.15 per share related to restructuring charges and other items, the company’s guidance range for adjusted earnings per share has been raised from $8.40 to $8.80 to $8.65 to $8.95.
Note: 2021 estimates do not include the impact of Vestcom; transaction is expected to close in Q3 subject to regulatory approvals and other customary closing conditions
For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “Second Quarter 2021 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.
Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.
Avery Dennison Corporation (NYSE: AVY) is a global materials science company specializing in the design and manufacture of a wide variety of labeling and functional materials. The company’s products, which are used in nearly every major industry, include pressure-sensitive materials for labels and graphic applications; tapes and other bonding solutions for industrial, medical, and retail applications; tags, labels and embellishments for apparel; and radio frequency identification (RFID) solutions serving retail apparel and other markets. Headquartered in Glendale, California, the company employs more than 32,000 employees in more than 50 countries. Reported sales in 2020 were $7.0 billion. Learn more at www.averydennison.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
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 risks and uncertainties. Forward-looking statements also include those related to the acquisition of Vestcom, including its anticipated closing, benefits, financing and effect on our long-term targets and future financial results.
We believe that the most significant risk factors that could affect our financial performance in the near-term include: (i) the impacts to underlying demand for our products and/or foreign currency fluctuations from global economic conditions, political uncertainty, changes in environmental standards and governmental regulations, including as a result of the coronavirus/COVID-19 pandemic; (ii) competitors’ actions, including pricing, expansion in key markets, and product offerings; (iii) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through price increases, without a significant loss of volume; and (iv) the execution and integration of acquisitions, including the pending acquisition of Vestcom.
Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but are not limited to, risks and uncertainties relating to the following:
For a more detailed discussion of these factors, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K, filed with the Securities and Exchange Commission on February 25, 2021, and subsequent quarterly reports on Form 10-Q.
The forward-looking statements included in this document are made only as of the date of this document, and we undertake no obligation to update these statements to reflect subsequent events or circumstances, other than as may be required by law.
For more information and to listen to a live broadcast or an audio replay of the quarterly conference call with analysts, visit the Avery Dennison website at www.investors.averydennison.com
Avery Dennison Corporation
T: +1 (626) 304-2361
T: +1 (440) 534-6290
Various trademarks and trade names are used herein and are the property of their respective owners.