Avery Dennison Tops Estimates Despite Profit Decline in Q3
Monday, October 28, 2013
Press release from the issuing company
PASADENA, Calif. - Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its third quarter ended September 28, 2013. 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) businesses as discontinued operations.
“I’m happy to once again report strong double-digit adjusted earnings growth for the quarter,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “Both of our core businesses are delivering solid sales growth, as well as outstanding operating margin expansion.”
“With another strong quarter behind us, we increased our earnings guidance for the year, and we remain committed to our disciplined capital allocation strategy,” Scarborough added. “We will return the vast majority of the net proceeds from our recent divestitures to shareholders, along with the solid free cash flow generated by our ongoing business. During the first nine months, we distributed over $300 million through dividends and the repurchase of 5.2 million shares.”
For more details on the company’s results, see the summary table accompanying this news release, as well as the supplemental presentation materials, “Third Quarter 2013 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.
Third 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)
Retail Branding and Information Solutions (RBIS)
The company repurchased 5.2 million shares through the end of the third quarter at an aggregate cost of $224 million.
On July 1, 2013, the company completed the sale of its OCP and DES businesses to CCL Industries Inc. Net proceeds from the sale are expected to be approximately $400 million, which the company intends to use primarily to repurchase shares. Net loss per share from discontinued operations was $(0.25), which includes loss on sale.
The third quarter effective tax rate was 17 percent, reflecting timing of certain discrete events and planning. The year-to-date adjusted tax rate was 33 percent.
Cost Reduction Actions
In the third quarter, the company continued to execute its plans to reduce fixed costs through restructuring actions. The company realized approximately $110 million in annualized savings from the program initiated in the first half of 2012. To implement these actions, the company incurred restructuring costs, net of gain on sale of assets, of approximately $20 million in the first nine months of 2013; in the fourth quarter, costs are expected to be offset by gains.
In its supplemental presentation materials, “Third 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 and other assumptions, the company now expects 2013 earnings per share from continuing operations of$2.40 to $2.50. Excluding an estimated $0.20 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$2.60 to $2.70. The company continues to expect free cash flow from continuing operations in the range of$275 million to $315 million.
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