Avery Dennison Reports Q2 Results: Big Rise in Core Materials Businesses
Press release from the issuing company
Company Posts Record Second-Quarter Sales With Double-Digit Increases in Core Materials Businesses
PASADENA, Calif.--July 23, 2002--Avery Dennison Corporation today announced second-quarter diluted earnings per share of $.74 compared with $.61 for the second quarter a year ago, reflecting an increase of 21 percent over the prior-year quarter and exceeding the high end of the Company's original projection for the quarter by $.03 per share. Excluding the impact of the Jackstadt acquisition that was completed on May 17, 2002, earnings grew nearly 25 percent to $.76 per share.
"During the second quarter, many of our businesses achieved substantial sales growth improvement worldwide, enabling us to report significantly increased earnings," said Philip M. Neal, chairman and chief executive officer of Avery Dennison. "Our strong second-quarter performance reflects impressive top-line growth, aggressive productivity improvement efforts, a more stabilized pricing environment and a workforce of highly committed Avery Dennison employees focused on implementing top-line growth strategies across the Company."
Key results for the second quarter of 2002 include:
* Net income was $73.8 million, an increase of 23.4 percent from $59.8 million in the second quarter of 2001.
* Reported sales grew 9.9 percent to $1.056 billion for the second quarter of 2002 compared with $960.8 million in the second quarter of 2001. Excluding the impact of currency exchange rates, divestitures and the Jackstadt acquisition, sales increased 7.6 percent in the second quarter compared with the same quarter a year ago.
* Unit volume growth, excluding the impact of acquisitions and divestitures, was 9.8 percent over the prior-year second quarter.
* Operating margin expanded 10 basis points from the second quarter of 2001. On a sequential basis, operating margin declined 20 basis points from the first quarter of 2002. Excluding the impact from the Jackstadt acquisition, operating margin grew 80 basis points over the year-ago second quarter and increased 50 basis points from the first quarter of 2002.
* Returns on investment remained high, with annualized return on shareholders' equity at 28.5 percent and annualized return on total capital at 17.7 percent.
Key results for the first six months of 2002 include:
* Earnings per share, on a diluted basis, increased 12 percent to $1.40, compared with $1.25 for the first half of 2001.
* Net income grew 12.3 percent to $138.6 million, compared with $123.4 million in the first six months of 2001.
* Reported sales expanded 3.3 percent to $1.987 billion, compared with $1.924 billion in the first half of the prior year. Excluding the impact of currency exchange rates, acquisitions and divestitures, sales increased 3.6 percent over the first six months of 2001.
* Unit volume rose 6.1 percent, excluding the impact from acquisitions and divestitures, compared with the same period a year ago.
The Pressure-sensitive Adhesives and Materials sector reported strong improvement over the second quarter of 2001 with reported sales for the sector of $640.2 million. Sales for the sector grew 17.8 percent over the second quarter of 2001, excluding the impact of currency exchange rates and divestitures. Excluding the impact of the Jackstadt acquisition, currency exchange rates and divestitures, sales for the sector grew 9.4 percent. Double-digit sales growth was achieved in the U.S. roll materials business and pressure-sensitive materials operations in Asian and Latin American markets, excluding the impact of currency exchange rates. The specialty tape business reported high single-digit sales growth. Operating margin for the sector grew to 9.5 percent, an improvement of 120 basis points over the prior-year second quarter. Excluding the impact of the Jackstadt acquisition and divestitures, operating margin for the sector grew to 10.7 percent, an improvement of 230 basis points over the second quarter of 2001.
The Consumer and Converted Products sector also reported solid improvement compared to the same quarter a year ago. Reported sales for the sector were $460 million. Sales for the sector increased 3.8 percent from the second quarter of 2001, excluding the impact of currency exchange rates and divestitures. Stronger orders for the start of the "back-to-school" retail season in the U.S. market contributed to mid-single-digit sales growth for the Company's office products business. The worldwide ticketing business, which supplies tags and ticketing products to the apparel and retail industries, achieved double-digit sales growth. Operating margin for the sector was 14.3 percent, an increase of 20 basis points from the second quarter of 2001. Excluding the impact from divestitures, operating margin for the sector was 14.4 percent, unchanged from the prior-year second quarter and the first quarter of 2002.
As previously announced, during the second quarter Avery Dennison completed its acquisition of Jackstadt GmbH, based in Wuppertal, Germany. The Company stated that after the integration plans for Jackstadt operations are finalized in the third quarter of 2002, a previously announced pre-tax restructuring charge in the range of $30 million to $40 million will be expensed.
Avery Dennison announced that it expects earnings, excluding any impact from a restructuring charge related to the integration of Jackstadt operations, to be in the range of $.68 to $.73 per share for the third quarter of 2002, and annual earnings to be in the range of $2.74 to $2.85 per share. The Company said that these expectations are based on current economic conditions and include an anticipated dilutive impact on earnings resulting from the Jackstadt acquisition of approximately $.05 per share in the third quarter and $.03 per share in the fourth quarter.
"While order patterns across many of our businesses continue to be generally strong, we are somewhat cautious about our outlook for the second half of 2002 given the economic uncertainties created by the recent significant decline in the stock market," said Neal. "We know that some portion of our extremely strong second-quarter sales growth was attributable to inventory replenishment on the part of final end-user customers. A continuation of strong results in the second half of the year will ultimately depend upon consumers continuing to spend. Therefore, we are taking a cautious approach to forecasting our second-half results.
"For the long term, our focus on top-line growth strategies remains a key priority, with continued investment in new business ventures that are designed to open high-growth potential markets for us to introduce a variety of new products and applications. Our longstanding commitment to cost-reduction efforts and productivity improvement programs continues to be rock-solid, and we are looking forward to the benefits we will obtain when Jackstadt operations are fully integrated into our pressure-sensitive materials and graphics businesses," said Neal.
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