Avery Dennison Corporation announced preliminary, unaudited results for its fourth quarter and year ended December 31, 2016. 

“I am pleased to report another year of progress toward our long-term goals,” says Mitch Butier, president and CEO. “We drove strong organic sales growth and margin expansion through our strategy to accelerate growth in high value categories and disciplined execution in our base businesses.

“Label and Graphic Materials had another outstanding year and the transformation of Retail Branding and Information Solutions is on track. Results in our newly created Industrial and Healthcare Materials segment were as anticipated, and it is well positioned for profitable growth. I would like to thank our employees for their dedication and focus on our continued success. In 2017, we expect to again deliver solid sales and earnings growth. We remain confident that the consistent execution of our strategies will enable us to achieve our long-term goal of superior value creation through a balance of profitable growth and capital discipline,” Butier says.

Fourth Quarter 2016 Results by Segment
Prior period amounts have been reclassified to reflect the company’s new operating structure. The Label and Graphic Materials segment includes Label and Packaging Materials, Graphics Solutions, and Reflective Solutions (all previously reported in Pressure-sensitive Materials). The Industrial and Healthcare Materials segment includes Performance Tapes (previously reported in Pressure-sensitive Materials), Fasteners Solutions (previously reported in Retail Branding and Information Solutions), and Vancive Medical Technologies (previously reported as a standalone segment). Retail Branding and Information Solutions now includes tickets, tags, and labels for apparel, radio-frequency identification, and Printer Solutions.

Organic sales change refers to the increase or decrease in sales excluding the estimated impact of currency translation, product line exits, and acquisitions and divestitures. Adjusted operating margin refers to income before interest expense and taxes, excluding restructuring charges and other items, as a percentage of sales.

Label and Graphic Materials
Reported sales increased approximately 10 percent; on an organic basis, sales grew approximately 7 percent. Within the segment, sales in Label and Packaging Materials increased mid-single digits and the combined Graphics and Reflective businesses increased low-double digits on an organic basis.

Operating margin improved 70 basis points to 11.3 percent, driven primarily by the impact of higher volume. Adjusted operating margin also improved 70 basis points.

Retail Branding and Information Solutions
Reported sales increased approximately 3 percent; on an organic basis, sales grew approximately 5 percent.

Operating margin improved 610 basis points to 9.3 percent, primarily due to lower restructuring charges. Adjusted operating margin improved 220 basis points as the net savings associated with the business model transformation and the impact of higher volume were partially offset by higher employee-related costs.

Industrial and Healthcare Materials
Reported sales decreased approximately 8 percent; on an organic basis, sales declined approximately 10 percent, as expected. Strong growth in industrial was more than offset by an expected decline in healthcare categories.

Operating margin declined 360 basis points to 8.8 percent as the impact of lower volume was only partially offset by the benefit of productivity initiatives.
Other

Share Repurchases / Equity Dilution from Long-Term Incentives
In 2016, the company repurchased 3.8 million shares at an aggregate cost of $262 million. Net of dilution, the company reduced its share count by 2 million. The cost of repurchases, net of proceeds from stock option exercises, was $191 million.

Income Taxes
The 2016 full year tax rate was 32.8 percent, in-line with our previous expectation of 33 percent. The tax rate in 2017 is expected to be in the low-thirty percent range.

Cost Reduction Actions
In 2016, the company realized approximately $82 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $20 million, the majority of which represent cash charges.

Outlook
In its supplemental presentation materials, “Fourth Quarter and Full Year 2016 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2017 financial results. Based on the factors listed and other assumptions, the company expects 2017 earnings per share of $4.10 to $4.30.

Excluding an estimated $0.20 per share for restructuring charges and other items, the company expects adjusted earnings per share (non-GAAP) of $4.30 to $4.50.