Avery Dennison Sales Slide 13%
Wednesday, April 29, 2009
Press release from the issuing company
Avery Dennison Corporation today announced preliminary first quarter 2009 results.
"We continue to respond to the challenges by reducing fixed costs and accelerating productivity improvements," added Scarborough. "These actions plus continued investment in our growth initiatives will further position the Company for strong growth and increased returns when market conditions improve. We are weathering the storm, and expecting to generate solid free cash flow in 2009.
"I am pleased by the dedication, resolve, and resilience of Avery Dennison employees worldwide, and thank them for their hard work in a difficult economy."
For more details on the Company's results for the quarter, see the Company's Supplemental Presentation Materials, "First Quarter 2009 Financial Review and Analysis," posted at the Company's Web site at www.investors.averydennison.com, and furnished under Form 8-K with the SEC.
First Quarter, 2009 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the impact of acquisitions, foreign currency translation, and an extra week in the first quarter of 2009.
Pressure-sensitive Materials (PSM)
Roll Materials sales declined in every region, reflecting weakness in end-markets. Sales were particularly soft in the more economically sensitive Graphics and Reflective Products division.
The decline in operating margin reflected reduced fixed-cost leverage and the effects of raw material inflation. These factors outweighed the benefits of price increases, restructuring, and other productivity initiatives.
Retail Information Services (RIS)
The decline in sales primarily reflected continued weakness of the retail apparel market in the U.S. and in Europe.
The decline in operating margin was driven by reduced fixed-cost leverage and cost inflation. These were offset in part by incremental integration savings and the benefit of restructuring and other productivity actions.
The Company is implementing significant restructuring measures in this segment in 2009, and continues to transform the business to strengthen its competitive advantages to drive future growth and profitability improvement.
Office and Consumer Products (OCP)
The decline in sales reflected weak end-market demand, partially offset by the effect of customer inventory management.
The increase in operating margin reflected the benefit of price increases to offset raw material inflation carried throughout 2008, restructuring, and other productivity initiatives.
Other specialty converting businesses
The decline in sales is primarily attributable to lower volume in products sold to the automotive and housing construction industries.
Operating margin declined due to reduced fixed-cost leverage, which more than outweighed the benefit of restructuring and other productivity initiatives.
The Company is implementing significant restructuring measures in these businesses in 2009.
Consolidated Items and Actions
In the fourth quarter of 2008, the Company began a restructuring program expected to reduce costs across all segments of the business. The Company currently targets in excess of $150 million in annualized savings over the next two years (estimating $75 million benefit, net of transition costs, in 2009). The restructuring includes reductions of approximately 10 percent of the Company's global workforce. The Company estimates that it will incur approximately $130 million of cash restructuring charges associated with these actions, with the majority to be incurred in 2009. In addition to the savings from these new actions, the Company expects approximately $40 million of carryover savings from previously implemented actions, including benefits from the Paxar integration.
At the end of the first quarter of 2009, the Company achieved run-rate savings representing approximately 30 percent of its restructuring target, and anticipates reaching 50 percent by the end of the second quarter.
The Company's effective tax rate was approximately 2 percent in the first quarter of 2009. The ongoing annual tax rate is expected to be in the low 20 percent range, varying significantly from quarter to quarter.
The Company commenced an interim goodwill impairment test that management believes is likely to result in a non-cash impairment charge. This charge may impact the final first quarter 2009 financial results to be filed with the Company's Form 10-Q.
Avery Dennison is a recognized industry leader that develops innovative identification and decorative solutions for businesses and consumers worldwide. The Company's products include pressure-sensitive labeling materials; graphics imaging media; retail apparel ticketing and branding systems; RFID inlays and tags; office products; specialty tapes; and a variety of specialized labels for automotive, industrial and durable goods applications. A FORTUNE 500 Company with sales of $6.7 billion in 2008, Avery Dennison is based in Pasadena, California and employs more than 36,000 employees in over 60 countries. For more information, visit www.averydennison.com.
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