Avery Dennison Reports 3Q Results, 550 Positions Will Be Eliminated
Press release from the issuing company
PASADENA, Calif.--Oct. 23, 2001--Avery Dennison Corp. today announced third-quarter diluted earnings per share of $.63 compared with $.73 per share for the third quarter a year ago. Earnings were in line with the expectations that the company had set previously for the quarter and met analyst consensus estimates.
Key results for the third quarter of 2001 include:
Earnings per share, on a diluted basis, were $.63, compared with $.73 per share for the same quarter a year ago. The impact of changes in currency exchange rates reduced earnings per share by slightly more than $.01 for the quarter.
Net income was $61.7 million, compared with $73 million in the third quarter of 2000.
Reported sales declined 3.5 percent to $966.7 million, from $1,001.7 million in the third quarter a year ago. Excluding the impact of currency exchange rates, sales were 1.6 percent less than the third quarter a year ago. Acquisitions, net of divestitures, contributed 1 percent to sales growth in the third quarter.
Core unit volumes were essentially unchanged, excluding the impact from acquisitions and divestitures, compared with the same period a year ago.
"We are pleased to deliver earnings at levels consistent with our guidance announced in July, despite the sustained weakness in global economic conditions and the immediate adverse impact on the economy of the tragic events of September 11,'' said Philip M. Neal, chairman and chief executive officer of Avery Dennison.
"We continue to take the disciplined steps necessary to adapt successfully to the current uncertain business climate through aggressive cost-management efforts and initiatives to improve productivity, while keeping our attention focused on key long-term growth strategies,'' Neal said.
"Our recently announced agreement to acquire Jackstadt GmbH, a highly respected manufacturer of pressure-sensitive adhesive materials based in Germany, reflects our continued commitment and capability to expand our core businesses,'' said Neal.
Highlights for the first nine months of 2001 include:
Earnings per share, on a diluted basis, were $1.88, compared with $2.16 per share for the same period last year.
Net income was $185.1 million, down from $216 million during the same period a year ago.
Reported sales were $2,890.7 million, compared with $2,960.4 million during the same period in 2000. Excluding the impact of currency, sales were essentially flat compared with the prior year.
Unit volumes in the first nine months of 2001 were essentially unchanged, excluding the impact from acquisitions and divestitures, compared with the same period a year ago.
In the third quarter of 2001, sales for the Pressure-sensitive Adhesives and Materials sector grew to $549.2 million, an increase of 5 percent over the third quarter a year ago, excluding the impact of currency exchange rates and including the contribution from the Dunsirn Industries acquisition completed earlier this year. Operating margin for the sector was 8.6 percent in the third quarter of 2001, up 10 basis points compared with the second quarter of 2001, but down from 9.8 percent achieved in the third quarter a year ago.
A number of operations in the Pressure-sensitive Adhesives and Materials sector achieved continued sales and unit volume improvement. Sales grew in the company's core Fasson materials business in North America and Europe, excluding the impact of currency exchange rates, with particularly strong sales growth in Asia. However, sales declined in Latin America compared with the same period a year ago.
General economic weakness affecting North American office products markets and converting businesses negatively affected the Consumer and Converted Products sector, which reported a decline in sales in the third quarter of 2001 compared with the same period a year ago. Sales for the sector, excluding the impact of currency exchange rates, decreased 4.2 percent to $460.5 million. Operating margin for the sector decreased to 13.6 percent in the third quarter of 2001, compared with 16.4 percent for the same period a year ago.
The company said that the sales decline in the sector was primarily driven by a downturn at its North American office products business. In contrast to previous quarters, point-of-purchase data from superstores in North America during the third quarter of 2001 indicate that sales of Avery-brand office products decreased by low single-digit rates over prior-year levels.
This decline in consumer purchasing is consistent with public announcements by the company's superstore customers of significant drops in their in-store traffic following the September 11 terrorist attacks.
Consistent with softening sales levels at superstores, results from the back-to-school retail season were mixed, with strong sales reported for newly introduced Avery-brand products but relatively weak performance overall.
"The uncertain economic climate has made it unusually difficult to provide guidance over the past few quarters, and this quarter is perhaps the most challenging,'' said Neal. "Just a few weeks into the fourth quarter, orders for our Fasson-brand pressure-sensitive materials in North America are keeping pace with our improved third-quarter trends in that business.
"However, growth rates in Europe have slowed, and orders in our North American office products business are tracking below prior-year levels. Therefore, we remain cautious about the outlook for the fourth quarter.''
Avery Dennison said that it expects earnings in the fourth quarter of 2001 to be in the range of $.57 to $.63 per fully diluted share, consistent with current First Call consensus projections.
"We continue to benefit from ongoing cost-reduction efforts, which will provide approximately $30 million in annualized savings in our operations,'' said Neal. "In addition, we have identified a number of new programs to cut expenses that, once implemented, will result in approximately $15 million of additional annualized savings.''
The company said that it had originally planned to eliminate approximately 350 positions worldwide in 2001, but as a result of the continued slowing in economic conditions, it has become more aggressive in its employee reductions by cutting permanent headcount by more than 550 positions as of the end of the third quarter.
"In the midst of this extremely challenging time for all global companies, our core fundamentals remain solid, our products continue to enjoy market-leading positions in the pressure-sensitive materials and office products industries, and we continue to invest in the long-term growth of our businesses,'' said Neal.
"We look forward to the substantially expanded scale of our international pressure-sensitive materials operation once the Jackstadt acquisition is finalized. Completion of this deal is subject to regulatory approvals, which we hope to obtain late in the fourth quarter or early next year.
"We are confident that we have all the pieces in place to return to our historic levels of earnings and sales growth when global economic conditions improve,'' said Neal.
Avery Dennison is a global leader in pressure-sensitive technology and innovative self-adhesive solutions for consumer products and label materials. Based in Pasadena, the company had 2000 sales of $3.9 billion.
Avery Dennison develops, manufactures and markets a wide range of products for consumer and industrial markets, including Avery-brand office products, Fasson-brand self-adhesive materials, peel-and-stick postage stamps, battery labels, reflective highway safety products, automated retail tag and labeling systems, and specialty tapes and chemicals.
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