Productivity initiatives help Avery expand gross margin

01 Feb '10

4 min read

The improvement in operating margin reflected restructuring and productivity initiatives.

Consolidated Items and Actions

In the fourth quarter of 2008, the Company began a restructuring program to reduce costs across all segments of the business. In the fourth quarter of 2009, the Company increased its target to $180 million in annualized savings by mid-2010, and delivered approximately $75 million in savings, net of transition costs, in 2009. The Company estimates that it will incur approximately $160 million of total restructuring charges associated with these actions (cash charges represent approximately 70 percent of the total), with approximately $130 million incurred in 2009. The cash flow impact of the program totaled approximately $70 million in 2009.

At the end of the fourth quarter of 2009, the Company achieved run-rate savings representing approximately 75 percent of its restructuring target.

The effective tax rate for the full year was approximately 6 percent, while the adjusted tax rates for the full year and fourth quarter were approximately 12 percent and 16 percent, respectively.

The Company reduced debt by approximately $300 million in the second half of 2009, resulting from dramatically improved working capital productivity, reduced capital spending, and the reduced dividend.

2010

In the Company's supplemental presentation materials, "Fourth Quarter 2009 Financial Review and Analysis," the Company provides a list of factors that it believes will contribute to its 2010 financial results.

Within the range of scenarios provided above, the Company estimates Free Cash Flow in 2010 of $300 to $350 million.

Avery Dennison Corporation

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