Avery Dennison Reports First Quarter 2004 Results; Reported Sales Grow Nearly 10 Percent; Earnings Per Share Exceed Expectations.Business Editors PASADENA, Calif.--(BUSINESS WIRE)--April 20, 2004 Avery Dennison Avery Dennison Corporation (NYSE: AVY) produces pressure-sensitive materials (such as self-adhesive labels), office products, and various paper products. R. Stanton Avery founded Avery in 1935. Avery Dennison Corporation was created in 1990 by merger of Avery and Dennison. Corporation (NYSE NYSE See: New York Stock Exchange :AVY AVY may refer to:
An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.52, compared with $0.71 per share for the first quarter of 2003. Excluding a previously announced acquisition-related restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. in the quarter, first quarter 2004 earnings were $0.68 per share, exceeding the high end of the Company's earnings expectations for the quarter. "Our better-than-expected sales and earnings in the first quarter of 2004 are a clear sign that our business is returning to our planned levels of growth," said Philip Philip, tetrarch of Ituraea Philip, d. A.D. 34, tetrarch of Ituraea, son of Herod the Great. He was perhaps the ablest of the Herod dynasty. He is mentioned in the Gospel of St. Luke. M. Neal, chairman and chief executive officer of Avery Dennison. "The Company's Horizons growth program is producing new innovations and generating sales in markets around the world, and at the same time, demand for existing products throughout many of our operations is continuing to improve. While our office products business did not reach targeted sales levels, we are aggressively taking actions to confront the challenges faced by this business." Key results for the first quarter of 2004 include: -- Earnings per share, on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, were $0.52, compared with $0.71 per share in the same quarter a year ago. First quarter earnings include the negative impact of $0.16 per share resulting from a restructuring charge related to the Jackstadt integration. A positive impact from currency translation contributed approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.04 per share to first quarter 2004 earnings, which was approximately $0.01 per share above the previously announced expectation for currency translation in the quarter. The benefit from currency translation was partially offset by a negative impact to operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. from the devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the U.K. pound against the Euro. -- Net income was $52.6 million, which includes the negative effect of a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern restructuring charge of approximately $21 million associated with the Jackstadt integration, compared with $70.8 million in the first quarter of 2003. -- Reported sales from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the grew 9.8 percent from prior-year levels, reaching $1.2 billion for the first quarter of 2004, compared with $1.1 billion in the first quarter of 2003, exceeding the Company's previously announced revenue growth expectation for the quarter. Approximately 75 percent of the revenue growth during the quarter is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the positive impact of currency translation, primarily the Euro. -- Core unit volume grew approximately 4.5 percent over the prior-year first quarter. -- Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , excluding the restructuring charge posted in the quarter, declined 110 basis points from the first quarter of 2003, as expected due to costs associated with manufacturing capacity expansion at two facilities in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). ,
a challenging pricing environment in the pressure-sensitive roll materials business and the impact of the U.K. pound devaluation. (See below, "Reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). to Non-GAAP Measures"). Operating margin, excluding the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). charge, increased 30 basis points from the fourth quarter of 2003, reflecting the positive impact of improved worldwide business conditions and ongoing productivity improvement efforts. -- The tax rate for the first quarter was 27.5 percent, unchanged from the fourth quarter of 2003 and consistent with the Company's projections. The Company's Pressure-sensitive Adhesives and Materials sector reported sales of $846 million, reflecting growth of approximately 17 percent over the first quarter of 2003. Approximately 60 percent of the sector's revenue growth is attributable to the impact of currency translation, primarily the Euro. The North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. pressure-sensitive roll materials business posted strong results in the quarter with mid single-digit sales growth, excluding the impact of currency translation, reflecting solid improvement over the rate of growth experienced in the fourth quarter of 2003. Before the effect of currency translation, sales in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. pressure-sensitive roll materials business increased at a mid single-digit rate, primarily driven by growth of more than 20 percent in Eastern European markets. The roll materials business in Asia continued to report extremely robust results, with sales growth in China of more than 50 percent over the year-ago first quarter. The Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of pressure-sensitive roll materials business grew at a double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. rate, before the impact of currency translation. The worldwide specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. tapes business continued to report double-digit sales growth, while the worldwide graphics and reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. materials business reported improved mid single-digit sales growth, excluding the impact of currency translation. Operating margin, excluding the restructuring charge, for the Pressure-sensitive Adhesives and Materials sector declined 20 basis points compared with the prior-year first quarter, and improved 180 basis points over the fourth quarter of 2003. (See below, "Reconciliation of GAAP to Non-GAAP Supplementary Information"). The sequential One after the other in some consecutive order such as by name or number. expansion in operating margin is attributable to higher sales and productivity improvements in the sector. The Company expects significant improvement in operating margin for the sector during the second half of the year due to cost savings associated with the closure of two European roll materials manufacturing plants. The Consumer and Converted Products sector reported sales of $442 million, reflecting a decline of approximately 4 percent over the prior-year first quarter. The revenue decline for the sector was partially offset by a positive contribution from currency translation of 4 points during the quarter. Sales in the global office products business declined approximately 12 percent compared with the year-ago first quarter, excluding the impact of currency translation. The decline is attributable to a previously announced share loss and increased fourth quarter buy-forwards by office products customers, as well as other inventory reductions, the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of a small line of paper products and weak market conditions. The Company anticipates stronger sales for its office products business in the second half of 2004, driven by share gains at several key accounts and new product introductions. The retail information services See Information Systems. business reported solid results for the first quarter, with an increase in demand in the final month of the period. Operating margin, excluding the restructuring charge, for the Consumer and Converted Products sector declined 270 basis points compared with the year-ago first quarter and 120 basis points compared with the fourth quarter of 2003. The decline is due to reduced volume and the negative impact of price and mix, partially offset by productivity improvements. The Company expects significant improvement in operating margin for the sector by the end of 2004 as a result of increased sales and cost reductions. Avery Dennison announced that for the second quarter of 2004, it expects earnings to be in the range of $0.70 to $0.75 per share, excluding a restructuring charge to earnings in the quarter related to the completion of integration activities for the Jackstadt acquisition. Based on first quarter 2004 results, Avery Dennison is updating its earnings-per-share guidance for the full year to $2.80 to $3.10 per share, excluding restructuring charges, from its previously announced expectation of $2.75 to $3.10 per share, excluding restructuring charges. "Based on our positive first quarter results, we are confident that our skilled execution of our growth and productivity strategies will deliver a successful year for Avery Dennison," said Neal. "We are well positioned to take advantage of the expected continued improvement in global economic conditions. "Our commitment to top-line growth is as strong as ever, as our research and development activities are focused on creating breakthrough technologies related to radio frequency identification See RFID. and other applications," said Neal. "We are steadily filling an active pipeline with new products and industry-leading services in markets that are positioned for excellent, long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth." Avery Dennison is a global leader in pressure-sensitive technology and innovative self-adhesive self-ad·he·sive adj. Having a surface coated with an adhesive and not needing any substance, such as glue or paste, applied to form a bond: self-adhesive wallpaper; self-adhesive labels. solutions for consumer products and label materials. Based in Pasadena, Calif., the Company had 2003 sales of $4.8 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 This is a list of postage stamps that are especially notable in some way. The best-known stamps:
v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. retail tag, labeling and branding systems, and specialty tapes and polymers. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain information presented in this news release may constitute "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements. These statements are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or expected results depending on a variety of factors, including but not limited to price and availability of raw materials; foreign exchange rates; worldwide and local economic conditions; selling prices; impact of legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , including the U.S. Department of Justice criminal investigation into competitive practices in the label stock industry and any related proceedings or lawsuits pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to the subject matter; impact of epidemiological epidemiological emanating from or pertaining to epidemiology. epidemiological associations the associative relationships between the frequency of occurrence of a disease and its determinants, its predisposing and precipitating events such as Severe Acute Respiratory Syndrome Severe Acute Respiratory Syndrome (SARS) Definition Severe acute respiratory syndrome (SARS) is the first emergent and highly transmissible viral disease to appear during the twenty-first century. (SARS) on the economy and the Company's customers and suppliers; successful integration of acquired companies; financial condition and inventory strategies of customers; introduction and acceptance of new products; fluctuations in demand affecting sales to customers; and other matters referred to in the Company's SEC filings. For more information and to listen to a live broadcast or an audio replay of the 1st Quarter conference call with analysts, visit the Avery Dennison Web site at www.investors.averydennison.com.
AVERY DENNISON
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
--------------------------------
Mar. 27, 2004 Mar. 29, 2003
----------------------------------------------------------------------
Net sales $ 1,246.7 $ 1,135.2
Cost of products sold 880.2 776.8
------------------------------------ ---------------------------------
Gross profit 366.5 358.4
Marketing, general & administrative
expense 257.9 247.1
Interest expense 14.7 14.9
Other expense(1) 21.4 ---
------------------------------------ ---------------------------------
Income from continuing operations
before taxes 72.5 96.4
Taxes on income 19.9 28.0
------------------------------------ ---------------------------------
Income from continuing operations 52.6 68.4
Income from discontinued operations,
net of taxes --- 2.4
------------------------------------ ---------------------------------
Net Income $ 52.6 $ 70.8
------------------------------------ ---------------------------------
Per share amounts:
Income per common share, assuming
dilution:
Continuing operations $ 0.52 $ 0.68
Discontinued operations --- 0.03
------------------------------------ ---------------------------------
Net Income $ 0.52 $ 0.71
------------------------------------ ---------------------------------
Average common shares outstanding,
assuming dilution 100.3 100.0
------------------------------------ ---------------------------------
Common shares outstanding at period
end 99.8 99.4
----------------------------------------------------------------------
(1) Other expense for the first quarter of 2004 includes $21.4 million
of restructuring costs and asset impairment charges.
(2) Certain prior-year amounts have been reclassified to conform with
the 2004 financial statement presentation.
Reconciliation of Non-GAAP Financial Measures in Accordance with SEC
Regulation G
Avery Dennison reports financial results in accordance with U.S. GAAP,
and herein provides some non-GAAP measures. These non-GAAP measures
are not in accordance with, nor are they a substitute for, GAAP
measures. These non-GAAP measures are intended to supplement the
Company's presentation of its financial results that are prepared in
accordance with GAAP.
Avery Dennison uses the non-GAAP measures presented to evaluate and
manage the Company's operations internally. Avery Dennison is also
providing this information to assist investors in performing
additional financial analysis that is consistent with financial
models developed by research analysts who follow the Company.
The reconciliation set forth below is provided in accordance with
Regulations G and S-K and reconciles the non-GAAP financial measures
with the most directly comparable GAAP financial measures.
AVERY DENNISON
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
-------------------------------
Mar. 27, 2004 Mar. 29, 2003
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP
Operating Margin:
Net sales $ 1,246.7 $ 1,135.2
-------------------------------
Income from continuing operations
before taxes $ 72.5 $ 96.4
-------------------------------------- -------------------------------
GAAP Operating Margin 5.8% 8.5%
----------------------------------------------------------------------
Income from continuing operations
before taxes $ 72.5 $ 96.4
Non-GAAP adjustments:
Restructuring costs and asset
impairment charges 21.4 ---
Interest expense 14.7 14.9
-------------------------------
Adjusted non-GAAP operating income
from continuing operations
before taxes and interest expense $ 108.6 $ 111.3
-------------------------------------- -------------------------------
Adjusted Non-GAAP Operating Margin 8.7% 9.8%
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP Net
Income:
As reported net income $ 52.6 $ 70.8
Non-GAAP adjustments, net of taxes:
Restructuring costs and asset
impairment charges 15.5 ---
Income from discontinued operations --- (2.4)
-------------------------------------- -------------------------------
Adjusted Non-GAAP Net Income $ 68.1 $ 68.4
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP
Earnings Per Share:
As reported income per common share,
assuming dilution: $ 0.52 $ 0.71
Non-GAAP adjustments per share, net
of taxes:
Restructuring costs and asset
impairment charges 0.16 ---
Income from discontinued operations --- (0.03)
-------------------------------------- -------------------------------
Adjusted Non-GAAP income per common
share, assuming dilution $ 0.68 $ 0.68
----------------------------------------------------------------------
Average common shares outstanding,
assuming dilution 100.3 100.0
-------------------------------------- -------------------------------
Common shares outstanding at period
end 99.8 99.4
----------------------------------------------------------------------
AVERY DENNISON
SUPPLEMENTARY INFORMATION
(In millions)
(Unaudited)
First Quarter Ended
------------------------------------------------
NET SALES OPERATING OPERATING
INCOME(1) MARGINS
------------------- -------------- -------------
2004 2003(2) 2004 2003(2) 2004 2003(2)
--------- --------- ------ ------- ----- -------
Pressure-sensitive
Adhesives and
Materials $846.3 $724.3 $47.8 $60.6 5.6% 8.4%
Consumer and
Converted Products 442.0 458.0 51.2 65.4 11.6% 14.3%
Intersegment Sales (41.6) (47.1) N/A N/A N/A N/A
Corporate Expense N/A N/A (11.8) (14.7) N/A N/A
Interest Expense N/A N/A (14.7) (14.9) N/A N/A
--------- --------- ------ ------- ----- -------
TOTAL FROM CONTINUING
OPERATIONS $1,246.7 $1,135.2 $72.5 $96.4 5.8% 8.5%
========= ========= ====== ======= ===== =======
(1) Operating income for the first quarter of 2004 includes
restructuring costs and asset impairment charges of $21.4 million
for the Pressure-sensitive Adhesives and Materials segment.
(2) Certain prior-year amounts have been reclassified to conform
with the 2004 financial statement presentation.
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION
OPERATING INCOME OPERATING MARGINS
-------------------- -------------------
2004 2003 2004 2003
---------- --------- --------- ---------
Pressure-sensitive Adhesives
and Materials
-----------------------------
Operating income, as reported $47.8 $60.6 5.6% 8.4%
Non-GAAP adjustments:
Restructuring costs and asset
impairment charges 21.4 --- 2.6% ---
---------- --------- --------- ---------
Adjusted non-GAAP operating
income $69.2 $60.6 8.2% 8.4%
========== ========= ========= =========
AVERY DENNISON
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
ASSETS Mar. 27, 2004 Mar. 29, 2003
----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 31.3 $ 33.2
Trade accounts receivable, net 816.0 748.4
Inventories, net 424.1 364.1
Other current assets 145.1 133.8
----------------------------------------------------------------------
Total current assets 1,416.5 1,279.5
Property, plant and equipment, net 1,291.2 1,201.2
Goodwill, net 716.3 626.4
Intangibles resulting from business
acquisitions, net 147.7 148.8
Other assets 505.5 498.3
----------------------------------------------------------------------
$ 4,077.2 $ 3,754.2
----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------
Current liabilities:
Short-term and current portion of
long-term debt $ 410.5 $ 313.1
Accounts payable 548.1 449.4
Other current liabilities 474.4 554.0
----------------------------------------------------------------------
Total current liabilities 1,433.0 1,316.5
Long-term debt 887.1 936.4
Other long-term liabilities 405.9 378.9
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 776.2 747.8
Retained earnings 1,784.3 1,695.8
Minimum pension liability (96.0) (68.2)
Accumulated other comprehensive loss 25.4 (108.3)
Cost of unallocated ESOP shares (11.6) (12.2)
Employee stock benefit trusts (654.0) (659.6)
Treasury stock at cost (597.2) (597.0)
----------------------------------------------------------------------
Total shareholders' equity 1,351.2 1,122.4
----------------------------------------------------------------------
$ 4,077.2 $ 3,754.2
----------------------------------------------------------------------
Certain prior-year amounts have been reclassified to conform with the
2004 financial statement presentation.
AVERY DENNISON
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
-----------------------------
Mar. 27, 2004 Mar. 29, 2003
------------------------------------------------------- --------------
Operating Activities:
Net income $ 52.6 $ 70.8
Less: income from discontinued operations --- 2.4
------------ ------------
Income from continuing operations 52.6 68.4
Adjustments to reconcile net income from
continuing operations to net cash
provided by operating activities:
Depreciation 36.9 34.8
Amortization 9.3 8.8
Deferred taxes 0.8 (8.3)
Asset impairment and net loss on sale of
assets 6.1 ---
------------ ------------
105.7 103.7
Changes in assets and liabilities (40.2) (68.5)
------------ ------------
Net cash provided by operating activities
from continuing operations 65.5 35.2
------------ ------------
Investing Activities:
Purchase of property, plant and equipment (37.9) (40.5)
Proceeds from sale of assets 0.9 4.4
Payments for acquisitions (2.3) (6.6)
Purchase of software and other assets (6.3) (7.4)
Other (2.5) (0.2)
------------ ------------
Net cash used in investing activities of
continuing operations (48.1) (50.3)
------------ ------------
Financing Activities:
Additional borrowings 123.2 428.4
Payments of debt (110.1) (369.7)
Dividends paid (40.9) (39.8)
Purchase of treasury stock (0.3) (0.1)
Proceeds from exercise of stock options,
net 8.1 1.7
Other 3.9 4.2
------------ ------------
Net cash (used in) provided by financing
activities of continuing operations (16.1) 24.7
------------ ------------
Effect of foreign currency translation on
cash balances 0.5 0.8
------------ ------------
Increase in cash and cash equivalents 1.8 10.4
------------ ------------
Cash and cash equivalents, beginning of
period 29.5 22.8
------------ ------------
Cash and cash equivalents, end of period $ 31.3 $ 33.2
============ ============
Certain prior-year amounts have been reclassified to conform with the
2004 financial statement presentation.
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