Avery Dennison Corporation: Fiscal 2011 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2011, rather than a standalone fourth quarter. Avery Dennison manufactures pressure-sensitive materials, labels, tags, tapes, RFID products, graphics products, and office and consumer products. Its reportable segments were Pressure-sensitive Materials and Retail Branding and Information Solutions.
- Approximately 200 manufacturing and distribution facilities, more than 30,000 employees, and operations in over 60 countries.
- International operations represented approximately 73% of 2011 sales.
- Pressure-sensitive Materials contributed approximately 66% of total sales; Retail Branding and Information Solutions contributed approximately 25%.
Financial metrics and liquidity
The filing incorporates the consolidated financial statements, selected financial data, and management’s discussion from the 2011 Annual Report. The provided filing text does not state clear values for consolidated revenue, operating income, net income, cash flow, margins, total debt, cash balances, or liquidity ratios.
- Research and development expense was $92.4 million in 2011, compared with $85.6 million in 2010 and $78.9 million in 2009.
- Variable-rate borrowings were $225.6 million at December 31, 2011.
- Approximately 6 million shares remained available for repurchase under board authorizations at year-end; no registered equity securities were repurchased during the fourth quarter.
- Estimated accrued environmental remediation liabilities were $40.6 million at December 31, 2011.
Material changes versus the prior comparable period
- On December 30, 2011, Avery Dennison agreed to sell its Office and Consumer Products business to 3M for gross cash proceeds of $550 million, subject to customary adjustments, closing conditions, and regulatory approvals.
- The Office and Consumer Products business was classified as a discontinued operation and held for sale.
- Research and development spending increased by $6.8 million, or approximately 8%, from 2010.
- The company entered into a second amended and restated credit agreement dated December 22, 2011.
Guidance, outlook, risks, contingencies, and unusual items
The provided text does not include specific earnings, revenue, margin, or cash-flow guidance. Management emphasized productivity initiatives, including facility closures, headcount reductions, manufacturing relocations, process standardization, and lean operating programs, but cautioned that execution and expected savings are not assured.
- Key exposures include global economic conditions, raw-material and energy cost inflation, pricing pressure, foreign-currency volatility, customer concentration, supply-chain disruptions, competition, and demand cyclicality.
- The proposed 3M transaction carried risks related to regulatory approval, business separation, transition services, tax and accounting benefits, and potential disruption to customers and operations.
- Avery Dennison was identified as a potentially responsible party at 13 environmental sites. Management stated that additional remediation costs could exceed accrued liabilities but could not reasonably estimate a range.
- The company identified risks from debt levels, credit-rating downgrades, interest-rate changes, pension obligations, goodwill impairment, litigation, intellectual-property claims, information-technology disruption, data security, and environmental compliance.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2011. PricewaterhouseCoopers LLP audited the controls and financial statement schedule.
Most important facts for investors to verify
- Obtain the incorporated 2011 Annual Report to verify revenue, operating profit, net income, discontinued-operation results, cash flow, margins, debt, cash, and liquidity metrics.
- Review the accounting treatment, closing status, proceeds, tax effects, and transition obligations related to the planned $550 million sale to 3M.
- Assess leverage and refinancing exposure, including the $225.6 million of variable-rate borrowings and applicable credit-agreement terms.
- Review segment sales and profitability trends, particularly the pressure-sensitive materials and retail branding businesses.
- Evaluate environmental, litigation, tax, pension, goodwill, foreign-exchange, and raw-material cost exposures beyond the amounts accrued.