Consumables

Avery Dennison Announces First Quarter 2013 Results

Friday 26. April 2013 - 1Q13 Reported EPS (including discontinued operations) of $0.57

Adjusted EPS (non-GAAP, continuing operations) of $0.59
1Q13 Net sales grew approx. 4 percent to $1.50 billion
Net sales up approx. 4 percent on organic basis
Returned $89 million of cash to shareholders, with dividends of $27 million and repurchase of 1.5 million shares for $62 million
Restructuring program on track to achieve more than $100 million in annualized savings by mid-2013
Obtained all regulatory clearances for sale of OCP and DES; anticipate closing mid-2013
FY13 Adjusted EPS (non-GAAP, continuing operations) expected to be up 22% to 40% (compared to 15% to 35% previously)
Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited first quarter 2013 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, and comparisons are to the same period in the prior year. Results reflect classification of Office and Consumer Products (OCP) and Designed and Engineered Solutions (DES) as discontinued operations.
“First-quarter results were in line with our expectations,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “Double-digit sales growth in emerging markets at Pressure-sensitive Materials and continued sales growth at Retail Branding and Information Solutions, combined with the benefits of our restructuring program, put us on track for a 22 to 40 percent increase in full-year adjusted earnings per share.
“We are also on track to deliver on our free cash flow target for the year,” Scarborough said. “During the quarter, we returned nearly $90 million to shareholders through dividends and the repurchase of approximately 1.5 million shares.
“Finally, I’m pleased that we have received all regulatory clearances for the sale of Office and Consumer Products and Designed and Engineered Solutions, which we expect to complete mid-year,” Scarborough said.
First Quarter 2013 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, product line exits, acquisitions and divestitures. Adjusted operating margin refers to earnings before interest expense and taxes, excluding restructuring costs and other items, as a percentage of sales.
Pressure-sensitive Materials (PSM)
PSM segment sales increased approximately 3 percent. Within the segment, Label and Packaging Materials sales increased low-single digits. Combined sales for Graphics, Reflective, and Performance Tapes increased slightly.
Operating margin improved 20 basis points to 9.6 percent as the benefit of productivity initiatives and higher volume more than offset the impact of changes in product mix and higher employee-related expenses. Adjusted operating margin improved 30 basis points.
Retail Branding and Information Solutions (RBIS)
Sales increased approximately 6 percent driven by increased demand from U.S. and European retailers and brands, including another quarter of strong growth in RFID.
Operating margin improved 210 basis points to 3.8 percent as the benefit of productivity initiatives and higher volume more than offset higher employee-related expenses. Adjusted operating margin improved 150 basis points.
Other
Share Repurchases
The company repurchased 1.5 million shares in the first quarter at an aggregate cost of $62 million (approximately 1.5 percent of shares outstanding).
Results of Discontinued Operations
Earnings from OCP and DES, and certain costs associated with their anticipated divestiture, are reported as income or loss from discontinued operations (net of tax) in the preliminary, unaudited consolidated statements of income. Net loss per share from discontinued operations increased from $(0.01) to $(0.09).
Income Taxes
The first quarter effective tax rate was 18 percent, reflecting favorable tax law changes that are discrete to the quarter. The adjusted tax rate for the first quarter decreased from 34 to 33 percent, in line with expectations.
Cost Reduction Actions
In the first half of 2012, the company began a restructuring program to reduce costs across all segments of the business. The company continues to anticipate more than $100 million in annualized savings from this program by mid-2013. To implement these actions, the company incurred restructuring costs, net of gain on sale of assets, of approximately $7 million in the first quarter. The company expects to incur restructuring costs, net of gain on sale of assets, of $25 million in 2013.
Outlook
In its supplemental presentation materials, “First Quarter 2013 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2013 financial results. Based on the factors listed, other assumptions and the exclusion of DES, the company now expects 2013 earnings per share from continuing operations of $2.23 to $2.58. Excluding an estimated $0.17 per share for restructuring costs and other items, net of gain on sale of assets, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $2.40 to $2.75. The company expects free cash flow from continuing operations in the range of $275 million to $315 million.
Note: Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.