Avery Dennison Reports Q1 Results: Net Income Up; Sales Growth 24%
Press release from the issuing company
PASADENA, Calif.--April 22, 2003-- Avery Dennison Corporation today reported first quarter 2003 net income increased 9.3 percent to $70.8 million, compared with $64.8 million in the first quarter of 2002. Diluted earnings per share increased 7.6 percent to $0.71, compared with $0.66 per share for the first quarter a year ago.
"We are pleased to report a very solid first quarter of 2003, given the challenging economic and geopolitical climate, including achieving sales growth of nearly 24 percent and earnings-per-share growth of nearly 8 percent," said Philip M. Neal, chairman and chief executive officer of Avery Dennison. "In addition to achieving our sales and earnings growth goals, our newly launched top-line growth acceleration program is providing some exciting initial results, with more than 100 individual new product development projects underway throughout the Company that are expected to provide approximately $50 million in annualized sales by the end of the year."
Key results for the first quarter of 2003 include:
Earnings per share, on a diluted basis, were $0.71 per share, compared with $0.66 per share in the same quarter a year ago. The impact of currency exchange rates added $0.04 to earnings per share in the quarter, which was approximately $0.01 above the previously announced expectation for the quarter.
Net income increased 9.3 percent to $70.8 million, compared with $64.8 million in the first quarter of 2002.
Reported sales grew 23.6 percent from prior-year levels, reaching $1.151 billion for the first quarter of 2003, compared with $930.8 million in the first quarter of 2002. Approximately 60 percent of the incremental sales are attributed to acquisitions net of divestitures, and approximately 20 percent of the incremental sales are due to the impact of currency exchange rates. Consequently, core sales growth is estimated to be approximately 4 percent for the first quarter of 2003.
Core unit volume grew approximately 4 percent over the prior-year first quarter.
Operating margin declined 110 basis points from the first quarter of 2002, due to lower margins associated with the integration of acquired Jackstadt operations. Operating margin increased 170 basis points from the fourth quarter of 2002, with 150 basis points of the improvement attributable to the negative impact of restructuring and asset impairment charges in the fourth quarter.
Returns remained high, with return on shareholders' equity of 26 percent, compared with 27.6 percent in the year-ago first quarter, and return on total capital of 15.7 percent, compared with 17.1 percent in the first quarter of 2002.
The Company's Pressure-sensitive Adhesives and Materials sector reported sales of $724 million, reflecting growth of 32 percent over the first quarter of 2002. Approximately 55 percent to 60 percent of the incremental sales are attributed to acquisitions net of divestitures and approximately 15 percent of the incremental sales are due to the impact of currency exchange rates. Core sales growth for the sector is estimated to be 7 percent to 8 percent. Sales in the North American pressure-sensitive roll materials business remained solid, achieving mid-single digit growth driven by strong results in the premium packaging segment of the market. Excluding the Jackstadt acquisition, sales in the roll materials business in Asia grew at double-digit rates, while sales growth in European markets grew at low-single digit levels due to the continued weakened economic conditions in that region. The worldwide specialty tapes businesses reported strong results, especially in operations serving the medical market, while sales in the graphics and reflective materials businesses declined modestly, excluding the Jackstadt acquisition.
The Consumer and Converted Products sector reported sales of $473 million, reflecting growth of 13 percent over the prior-year first quarter. Approximately 60 percent of the incremental sales are attributed to acquisitions net of divestitures and approximately 35 percent of the incremental sales are due to the impact of currency exchange rates. Core sales growth for the sector is estimated to be approximately 1 percent. Global sales of office products declined by approximately 3 percent, due to continued weakened end-user demand and modest inventory reductions by office products superstores. The weakened retail sales at the office products superstores were partially offset by growth in both the commercial channel served by the superstores and the mass market channel. The industrial and automotive products business and the retail information services business continued to report strong results for the quarter.
The Company stated that the integration of operations resulting from the acquisition of Jackstadt is proceeding ahead of plan in terms of customer retention and working capital reductions, with cost savings expectations remaining on schedule. Avery Dennison also said that the integration of RVL and L&E operations is well underway as the Company's retail information services business broadens its capabilities to provide a full range of products and services to the retail and apparel industries.
Avery Dennison announced that for the second quarter of 2003, it expects earnings to be in the range of $0.77 to $0.82 per share, based on current assumptions. Avery Dennison stated that it was slightly reducing the high-end of its previously announced 2003 annual earnings-per-share expectation, by $0.05, based on generally weaker economic conditions around the world, which are expected to be partially offset by an anticipated positive impact from currency exchange rates. The adjustment results in an annual earnings expectation in the range of $3.00 to $3.20 per share in 2003.
"The fundamentals of our business remain outstanding, as demonstrated by the strong results achieved during the first quarter and our expectation of high-single digit annual earnings-per-share growth in 2003," said Neal. "We remain focused on our aggressive initiatives to accelerate growth, and we look forward to continued expansion as we introduce new products and services in markets that are enjoying solid, long-term growth."
Avery Dennison is a global leader in pressure-sensitive technology and innovative self-adhesive solutions for consumer products and label materials. Based in Pasadena, Calif., the Company had 2002 sales of $4.2 billion. Avery Dennison develops, manufactures and markets a wide range of products for consumer and industrial markets, including Avery-brand office products and graphics imaging media, Fasson-brand self-adhesive materials, peel-and-stick postage stamps, reflective highway safety products, automated retail tag, labeling and branding systems, and specialty tapes and polymers.
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