Avery Dennison (AVY) Q4 2010 earnings summary

Executive summary

• FY2010 sales rose 9% to $6.513B as global demand recovered; net income was $316.9M versus a $746.7M loss in 2009, which included major impairment charges.

• Higher volume and restructuring/productivity savings supported results, partly offset by raw-material inflation, employee costs, and Office and Consumer Products pressure.

Financial highlights

• Net sales were $6,512.7M, up 9% reported; organic sales growth was 10%, with a favorable $27M currency impact and a partial offset from 2009’s extra week.

• Gross profit was $1,826.0M and gross margin was 28.0%, versus $1,586.5M and 26.7% in 2009.

• Net income was $316.9M and diluted EPS was $2.97, versus a net loss of $746.7M and diluted loss per share of $7.21 in 2009; 2009 included $832M of impairment charges.

• Operating cash flow was $486.7M and free cash flow was $378.9M, versus $569.0M and $468.2M in 2009.

Outlook and guidance

• 2011 revenue and earnings are expected to increase; results depend partly on offsetting expected raw-material inflation through productivity and pricing, without significant volume loss, and on global economic conditions.

• Retirement-plan expenses and contributions are expected to decline by approximately $50M in 2011; anticipated restructuring cash charges are approximately $20M.

• 2011 interest expense is expected to be comparable to 2010; capital and software expenditures are anticipated at approximately $175M.

• Marketing, R&D, and infrastructure investment is expected to increase; the annual effective tax rate remains subject to tax law changes, geographic income mix, audits, and other discrete items.