Avery Dennison Announces First Quarter 2012 Results
Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited first quarter 2012 results. All non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, the discussion of the company’s results is focused on its continuing operations.
“As expected, first-quarter sales declined modestly on an organic basis, reflecting the slowdown in volume we began to experience in the second quarter of last year,” said Dean Scarborough, Avery Dennison chairman, president and CEO.
“Despite the lower sales and impact of raw material inflation, we increased operating profit through productivity initiatives and pricing. We are delivering on our commitment to return more cash to our shareholders, through share repurchases and the increased dividend.
“For the full year, we expect to increase earnings per share and free cash flow in line with our previous guidance, and to continue returning more cash to shareholders while maintaining our strong balance sheet,” Scarborough said.
For more details on the company’s results, see the summary table accompanying this news release, as well as the company’s supplemental presentation materials, “First Quarter 2012 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished on Form 8-K with the SEC.
First Quarter 2012 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, acquisitions and divestitures.
Pressure-sensitive Materials (PSM)
Retail Branding and Information Solutions (RBIS)
Other specialty converting businesses
The company repurchased 2.4 million shares during the first quarter at an aggregate cost of $72 million.
Results of Discontinued Operations
Due to the company’s pending divestiture of its Office and Consumer Products business (“OCP”), earnings from OCP and certain costs associated with the transaction are reported as income or loss from discontinued operations (net of tax) in the consolidated income statement.
Earnings per share from discontinued operations declined from $0.07 to a loss of ($0.03). Excluding restructuring and transaction costs and other items, adjusted earnings per share from discontinued operations was unchanged.
The company continues to expect the sale of OCP to be completed in the second half of 2012.
The first quarter effective tax rate was 29 percent. The adjusted tax rate for the first quarter increased from 24 to 34 percent, in line with expectations.
Cost Reduction Actions
In the first quarter, the company continued to reduce fixed costs through restructuring actions. The company estimates approximately $6 million in annualized savings from actions taken during the quarter, with approximately three-quarters of the benefit expected to be realized in 2012. The company incurred approximately $7 million in charges associated with these actions during the first quarter. The company continues to identify and assess further opportunities to increase productivity through restructuring.
In the company’s supplemental presentation materials, “First Quarter 2012 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2012 financial results. Based on the factors listed and other assumptions, the company is maintaining its previous guidance of 2012 earnings per share from continuing operations of $1.65 to $2.00 and free cash flow from continuing operations of $275 million to $325 million. Excluding an estimated $0.15 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $1.80 to $2.15.
Note: Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.
About Avery Dennison
Avery Dennison (NYSE:AVY) helps make brands more inspiring and the world more intelligent. The company is a global leader in pressure-sensitive labeling technology and materials and retail branding and information solutions. A FORTUNE 500 company with sales of $6 billion from continuing operations in 2011, Avery Dennison is based in Pasadena, California and has employees in over 60 countries. For more information, visit 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. Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but not limited to risks and uncertainties relating to the following: fluctuations in demand affecting sales to customers; the financial condition and inventory strategies of customers; changes in customer order patterns; worldwide and local economic conditions; fluctuations in cost and availability of raw materials; ability of the company to generate sustained productivity improvement; ability of the company to achieve and sustain targeted cost reductions; impact of competitive products and pricing; loss of significant contract(s) or customer(s); collection of receivables from customers; selling prices; business mix shift; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; outcome of tax audits; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; fluctuations in foreign currency exchange rates and other risks associated with foreign operations; integration of acquisitions and completion of pending dispositions; amounts of future dividends and share repurchases; customer and supplier concentrations; successful implementation of new manufacturing technologies and installation of manufacturing equipment; disruptions in information technology systems; successful installation of new or upgraded information technology systems; volatility of financial markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; ability of the company to obtain adequate financing arrangements and maintain access to capital; fluctuations in interest and tax rates; fluctuations in pension, insurance and employee benefit costs; impact of legal and regulatory proceedings, including with respect to environmental, health and safety; changes in governmental laws and regulations; changes in political conditions; impact of epidemiological events on the economy and the company's customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.
The company believes that the most significant risk factors that could affect its financial performance in the near-term include (1) the impact of economic conditions on underlying demand for the company's products; (2) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through selling price increases, without a significant loss of volume; and (3) competitors' actions, including pricing, expansion in key markets, and product offerings.
For a more detailed discussion of these and other factors, see “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the company’s 2011 Form 10-K, filed on February 27, 2012 with the Securities and Exchange Commission. The forward-looking statements included in this document are made only as of the date of this document, and the company undertakes no obligation to update these statements to reflect subsequent events or circumstances.
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
David Frail, (626) 304-2014
Eric M. Leeds, (626) 304-2029
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