Avery Dennison's preliminary Q3 net income down 22.0% year-over-year to US$49.8M; sales up 4.0% to US$1.7B with increased sales in pressure-sensitive materials, specialty converting business segments offsetting other segment losses
October 26, 2011
– Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited third quarter 2011 results. All non-GAAP financial measures are reconciled to GAAP in the attached tables.
"The weak demand we experienced in the second quarter continued into the third and led to lower operating results," said Dean Scarborough, Avery Dennison chairman, president and CEO. "We now expect these trends to continue in the fourth quarter, and as a result we have reduced our 2011 outlook.
"We continue to invest in innovation and launched a number of new products during the quarter," Scarborough said. "At the same time, our employees are doing a great job of controlling expenses and improving productivity. We are well positioned to drive long-term profitable growth once economic trends improve."
For more details on the Company's results, see the Company's supplemental presentation materials, "Third Quarter 2011 Financial Review and Analysis," posted on the Company's website at www.investors.averydennison.com, and furnished on Form 8-K with the SEC.
Third Quarter 2011 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation. All references to operating margin exclude the impact of restructuring costs and other items.
Pressure-sensitive Materials (PSM)
Label and Packaging Materials sales grew compared to the prior year as volume declines were offset by pricing actions. Sales in Graphics and Reflective Solutions were relatively flat.
Operating margin increased compared to prior year as the impact of lower volume was more than offset by lower employee-related costs. Pricing and cost reduction actions offset inflation compared to the same period last year. Prices and raw material costs are stabilizing.
Retail Branding and Information Solutions (RBIS)
Sales declined due to lower unit demand from retailers and brands in the U.S. and Europe reflecting caution about consumer spending.
Operating margin was flat compared to the prior year as the impact of lower volume was offset by lower employee-related costs and the benefit of productivity initiatives.
Office and Consumer Products (OCP)
The decline in sales reflected weak end market demand.
Operating margin declined due primarily to the effects of lower volume and raw material inflation, partially offset by lower advertising spend and employee-related costs.
Other specialty converting businesses
Sales increased slightly compared to the prior year.
Operating margin declined as the impact of lower volume was partially offset by productivity initiatives.
In the third quarter, the Company identified further actions to reduce fixed costs, and is now targeting approximately $55 million in annualized savings, with about one-fourth of the benefit to be realized in 2011. The Company estimates that it will incur approximately $45 million in total restructuring charges associated with these actions in 2011. Cash charges are expected to approximate $42 million, with $36 million to be incurred in 2011. The Company continues to identify and assess further opportunities to increase productivity through restructuring.
The third quarter effective GAAP tax rate was 30 percent. The year-to-date adjusted tax rate increased from 23 percent to 34 percent, reflecting geographic income mix and reduced benefit from discrete tax events.
In the Company's supplemental presentation materials, "Third Quarter 2011 Financial Review and Analysis," the Company provides a list of factors that it believes will contribute to its 2011 financial results. Based on the factors listed and other assumptions, the Company now expects 2011 adjusted (non-GAAP) earnings per share of between $2.15 and $2.30 and free cash flow of between $215 million and $235 million.
Note: Throughout this release and the supplemental presentation materials, all calculations of 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. For more than 75 years the company has been a global leader in pressure-sensitive technology and materials, retail branding and information solutions, and organization and identification products for offices and consumers. A FORTUNE 500 company with sales of $6.5 billion in 2010, Avery Dennison is based in Pasadena, California and has employees in over 60 countries. For more information, visit www.averydennison.com.
Industry Intelligence Editor's Note: In an omitted table, Avery Dennison reported Q3 net income of US$49.8 million and net sales of US$1.7 billion. For the same period a year ago, the company recorded net income of US$64.2 million and net sales of US$1.64 billion.