Avery Dennison Reports Third Quarter 2003 Results; Reported Sales Grow 9.3 Percent to Reach $1.2 Billion; Company Posts Earnings of $0.67 Per Share on a Diluted Basis.Business Editors PASADENA, Calif.--(BUSINESS WIRE)--Oct. 21, 2003 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 $0.67, compared with $0.64 per share for the prior-year quarter, which included a special charge to earnings in the third quarter of 2002. "Our third quarter results are consistent with the revised earnings expectation that we announced on September September: see month. 18," 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. "As we indicated last month, weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. business conditions,
particularly in markets in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Western Europe Western EuropeThe countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , persisted throughout the third quarter and affected virtually all of our core businesses. However, top-line growth at operations in the emerging markets of Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. , Asia and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. continued to be strong." Key results for the third quarter of 2003 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 $0.67, compared with $0.64 per share for the same quarter a year ago, which included a $0.10 per share, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to earnings related to the disposition of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → and lease cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. costs. A positive impact from currency exchange rates contributed $0.02 per share to third quarter 2003 earnings. -- Net income was $66.5 million, compared with $63.1 million in the third quarter of 2002, which included the non-cash charge. -- Reported sales grew 9.3 percent to $1.2 billion for the third quarter of 2003, compared with $1.1 billion in the third quarter of 2002, primarily reflecting the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. benefit of currency exchange rates and the impact of acquisitions net of divestitures. -- Core unit volume growth was approximately 4 percent over the same period a year ago. -- Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: declined by 20 basis points in the third quarter of 2003, compared with the third quarter of 2002, which included the negative impact of the special charge to earnings. On a sequential One after the other in some consecutive order such as by name or number. basis, operating margin declined 70 basis points, compared with the second quarter of 2003. The margin decline is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a more competitive pricing environment, reduced fixed cost leverage in domestic operations, and negative product and business mix, as well as higher manufacturing and supply chain costs associated with the integration of recent acquisitions. -- The year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. tax rate was 50 basis points lower than the previous quarter, declining to 27.5 percent in the third quarter from 28 percent in the second quarter, due to the geographic mix of the Company's income in the quarter and the benefit of structural and operational changes. Key results for the first nine months of 2003 include: -- Earnings per share, on a diluted basis, were $2.08, compared with $2.03 for the same period in 2002. A positive impact from currency exchange rates contributed $0.10 per share to year-to-date earnings. -- Net income grew 3.4 percent to $208.6 million, compared with $201.7 million in the first nine months of 2002. -- Reported sales grew 15.3 percent to $3.5 billion, compared with $3.1 billion in the first nine months of the prior year, primarily reflecting the positive impact of currency exchange rates and acquisitions net of divestitures. -- Year-to-date operating margin decreased approximately 90 basis points from the prior-year level. -- Returns on investment remained strong, with annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. at 23.7 percent and annualized return on total capital at 15 percent. The Pressure-sensitive Adhesives and Materials sector posted revenue growth of approximately 10 percent over the third quarter of 2002, with reported sales for the sector of $756.1 million. Approximately two-thirds of the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales are attributable to the impact of currency exchange rates, primarily the Euro. 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 before the impact of currency exchange rates. Top-line results for the roll materials business in Eastern Europe and China were especially strong, with both regions achieving sales growth of approximately 25 percent over prior-year levels. 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 roll materials business reported continued double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. sales growth. The North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. roll materials business reported a low single-digit rate of decline in sales compared with the prior year, driven by continued weak economic conditions. The global specialty tape business reported strong sales growth, with double-digit increases excluding the impact of currency exchange rates, as it continued to introduce a variety of new products for medical and industrial applications. The 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 businesses achieved mid single-digit sales growth before the impact of currency exchange rates, with strong double-digit growth in the emerging markets and solid results in North American operations North American operation Surgical oncology Radical surgery of a 'frozen pelvis', consisting of radical en bloc resection of the uterus and urinary bladder. See 'Frozen pelvis.'. Cf 'All-American' and 'South American' operations. , which were offset by relatively flat sales growth in European operations. Operating margin for the Pressure-sensitive Adhesives and Materials sector increased 120 basis points over the prior-year third quarter. The third quarter of 2002 included a non-cash charge to earnings which had a negative impact of 160 basis points on the sector's operating margin. The Consumer and Converted Products sector reported sales growth of approximately 7 percent over the same quarter a year ago, driven by the positive impact of acquisitions and currency exchange rates, which were partially offset by an overall sales decline of approximately 2 percent for core businesses in the sector. Reported sales for the sector were $506.1 million. Sales in the worldwide office products business were down approximately 1 percent, reflecting an improvement over the 3 percent to 4 percent declines reported in the first two quarters of 2003. Point-of-sale point of sale n. pl. points of sale A business or place where a product or service can be purchased. Also called point of purchase. point results at the office products superstores This is a list of superstores by country. Multi-national
Operating margin for the Consumer and Converted Products sector declined 190 basis points from the prior-year third quarter. The third quarter of 2002 included a non-cash charge to earnings which had a negative impact of 90 basis points on the sector's operating margin. Avery Dennison said that it has revised its expectation for the fourth quarter of 2003 and it anticipates earnings to be in the range of $0.56 to $0.60 per share, before the expected net effect of a gain on divested operations and the impact of 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). . The Company said that this projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. for the fourth quarter assumes a benefit of $0.02 to $0.03 per share from currency exchange rates, and reported revenue growth 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 in the range of 8 to 10 percent, driven primarily by currency exchange rates and last year's acquisitions of RVL RVL Revolution (Nintendo) RVL Regio Verkehrsverbund Lörrach GmbH (German) RVL Rolling Vertical Landing and L&E. The fourth quarter projection also assumes operating margin in the range of 7.5 to 8.5 percent, interest expense of approximately $14 million, and a tax rate of 27.5 percent. The Company said that the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of its package label converting operations 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). was recently completed. Before the
benefit of an estimated $27 million pre-tax pre-tax adj → anterior al impuestopre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain on the sale, the divestiture is expected to reduce earnings by $0.02 per share in the fourth quarter. Avery Dennison announced that it is planning a variety of new measures to increase productivity and reduce expenses that are expected to result in cost savings in the range of $20 million to $25 million for 2004, rising to $30 million to $35 million in 2005. These actions include new headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reductions at businesses throughout the Company, primarily in North American operations, in the range of 500 to 600 positions, which are unrelated to previously announced targets for headcount reductions. The Company said that it anticipates fourth quarter restructuring charges 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. associated with these actions, which will partially offset the benefit from the gain on the sale of its package label converting operations. "We are experiencing a relatively prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. period of difficult business conditions and we are not assuming improvement in the economic climate through the end of the year. However, we are encouraged by the strides we are making to develop new sources of top-line growth, to significantly improve productivity and to aggressively reduce costs," said Neal. "We are confident that our strategies are on track to provide increased sales growth and improved profitability over the 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. . "We are excited about the momentum and initial successes being achieved by our top-line growth initiative that has been introduced throughout the Company," said Neal. "Teams of Avery Dennison employees, currently totaling more than 1,500 individuals around the world, have developed and launched new products and applications that have already generated incremental sales of approximately $15 million to $20 million to date, and we expect the efforts of this program to contribute at least $50 million of annualized incremental sales by the end of 2003." 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 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 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 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, the Company's customers and business; 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 3rd 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 Nine Months Ended
------------------ -------------------
Sep. 27, Sep. 28, Sep. 27, Sep. 28,
2003 2002 2003 2002
----------------------------------------------------------------------
Net sales $1,204.1 $1,101.7 $3,531.5 $3,063.9
Cost of products sold 848.6 753.1 2,446.2 2,068.6
-------------------------------------------------- -------------------
Gross profit 355.5 348.6 1,085.3 995.3
Marketing, general &
administrative expense 253.3 237.5 765.9 670.8
Interest expense 13.9 11.9 43.3 30.9
Other (income) expense, net 0.2 15.2 (3.8) 15.2
-------------------------------------------------- -------------------
Income from continuing
operations before taxes 88.1 84.0 279.9 278.4
Taxes on income 23.3 22.9 77.0 82.2
-------------------------------------------------- -------------------
Income from continuing
operations 64.8 61.1 202.9 196.2
Income from discontinued
operations, net of taxes 1.7 2.0 5.7 5.5
-------------------------------------------------- -------------------
Net Income $ 66.5 $ 63.1 $ 208.6 $ 201.7
------------------------------- ------------------ ------------------
Per share amounts:
Income per common share,
assuming dilution:
Continuing operations $ 0.65 $ 0.62 $ 2.03 $ 1.98
Discontinued operations 0.02 0.02 0.05 0.05
------------------------------- ------------------ ------------------
Net Income $ 0.67 $ 0.64 $ 2.08 $ 2.03
------------------------------- ------------------ ------------------
Average common shares
outstanding, assuming
dilution 100.0 99.3 100.1 99.2
------------------------------- ------------------ ------------------
Common shares outstanding at
period end 99.4 98.5 99.4 98.5
----------------------------------------------------------------------
AVERY DENNISON
SUPPLEMENTARY INFORMATION
(In millions)
(Unaudited)
Third Quarter Ended
---------------------------------------------
NET SALES OPERATING OPERATING
INCOME (1) MARGINS
------------------- ------------- -----------
2003 2002 2003 2002 2003 2002
--------- --------- ------ ------ ----- -----
Pressure-sensitive
Adhesives and Materials $756.1 $687.0 $55.3 $41.6 7.3% 6.1%
Consumer and Converted
Products (2) 506.1 470.9 60.8 65.5 12.0% 13.9%
Discontinued Operations (14.0) (12.8) (2.4) (2.6) 17.1% 20.3%
Intersegment Sales (44.1) (43.4) N/A N/A N/A N/A
Corporate Expense N/A N/A (11.7) (8.6) N/A N/A
Interest Expense N/A N/A (13.9) (11.9) N/A N/A
--------- --------- ------ ------ ----- -----
TOTAL FROM CONTINUING
OPERATIONS $1,204.1 $1,101.7 $88.1 $84.0 7.3% 7.6%
========= ========= ====== ====== ===== =====
(1) Operating income for the third quarter of 2002 includes asset
impairment charges and lease cancellation costs of $15.2 million,
of which the Pressure-sensitive Adhesives and Materials segment
recorded $11 million and the Consumer and Converted Products
segment recorded $4.2 million.
(2) Includes results from discontinued operations.
AVERY DENNISON
SUPPLEMENTARY INFORMATION
(In millions)
(Unaudited)
Nine Months Year-to-Date
-----------------------------------------------
NET SALES OPERATING OPERATING
INCOME (1) MARGINS
------------------- --------------- -----------
2003 2002 2003 2002 2003 2002
--------- --------- ------- ------- ----- -----
Pressure-sensitive
Adhesives and
Materials $2,224.2 $1,877.6 $170.3 $153.5 7.7% 8.2%
Consumer and Converted
Products (2) 1,482.8 1,351.0 190.6 191.5 12.9% 14.2%
Discontinued
Operations (43.9) (37.7) (7.9) (7.5) 18.0% 19.9%
Intersegment Sales (131.6) (127.0) N/A N/A N/A N/A
Corporate Expense N/A N/A (29.8) (28.2) N/A N/A
Interest Expense N/A N/A (43.3) (30.9) N/A N/A
--------- --------- ------- ------- ----- -----
TOTAL FROM CONTINUING
OPERATIONS $3,531.5 $3,063.9 $279.9 $278.4 7.9% 9.1%
========= ========= ======= ======= ===== =====
(1) Operating income for 2002 includes asset impairment charges and
lease cancellation costs of $15.2 million, of which the Pressure-
sensitive Adhesives and Materials segment recorded $11 million and
the Consumer and Converted Products segment recorded $4.2 million.
(2) Includes results from discontinued operations.
AVERY DENNISON
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
ASSETS Sep. 27, 2003 Sep. 28, 2002
----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $31.6 $28.9
Trade accounts receivable, net 774.6 731.8
Inventories, net 391.4 339.7
Other current assets 153.4 141.7
----------------------------------------------------------------------
Total current assets 1,351.0 1,242.1
Property, plant and equipment, net 1,254.3 1,118.5
Goodwill, net 685.5 436.0
Intangibles resulting from business
acquisitions, net 149.1 129.2
Other assets 519.5 480.4
----------------------------------------------------------------------
$3,959.4 $3,406.2
----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
----------------------------------------------------------------------
Current liabilities:
Short-term and current portion of
long-term debt $325.6 $268.9
Accounts payable 485.3 386.5
Other current liabilities 599.6 562.1
----------------------------------------------------------------------
Total current liabilities 1,410.5 1,217.5
Long-term debt 891.3 768.7
Other long-term liabilities 395.8 399.8
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 643.9 740.2
Retained earnings 1,754.1 1,649.0
Minimum pension liability (68.2) (14.3)
Accumulated other comprehensive loss (37.0) (158.9)
Cost of unallocated ESOP shares (13.6) (13.7)
Employee stock benefit trusts (544.7) (667.8)
Treasury stock at cost (596.8) (638.4)
----------------------------------------------------------------------
Total shareholders' equity 1,261.8 1,020.2
----------------------------------------------------------------------
$3,959.4 $3,406.2
----------------------------------------------------------------------
Certain prior-year amounts have been reclassified to conform with the
2003 financial statement presentation.
AVERY DENNISON
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
----------------------------------
Sep. 27, 2003 Sep. 28, 2002
---------------------------------------------------- -----------------
Operating Activities:
Net income $208.6 $201.7
Less: income from discontinued
operations 5.7 5.4
--------------- ----------------
Income from continuing operations 202.9 196.3
Adjustments to reconcile net income
from continuing operations to
net cash provided by operating
activities:
Depreciation 104.8 93.1
Amortization 26.0 16.6
Deferred taxes 5.9 4.8
Asset impairment and net losses on
sale of assets 3.8 15.2
--------------- ----------------
343.4 326.0
Changes in assets and liabilities (76.9) (11.9)
--------------- ----------------
Net cash provided by operating
activities from continuing
operations 266.5 314.1
--------------- ----------------
Investing Activities:
Purchase of property, plant and
equipment (148.3) (70.6)
Proceeds from sale of assets 7.0 9.7
Payments for acquisitions (9.5) (220.9)
Purchase of software (15.2) (14.4)
Other (4.5) (10.3)
--------------- ----------------
Net cash used in investing activities
of continuing operations (170.5) (306.5)
--------------- ----------------
Financing Activities:
Additional borrowings 414.5 404.8
Payments of debt (398.3) (319.9)
Dividends paid (119.3) (108.7)
Purchase of treasury stock (0.1) (5.0)
Proceeds from exercise of stock
options, net 2.3 20.3
Other 12.0 11.4
--------------- ----------------
Net cash provided by (used in)
financing activities of continuing
operations (88.9) 2.9
--------------- ----------------
Effect of foreign currency
translation on cash balances 1.7 (0.7)
--------------- ----------------
Increase in cash and cash
equivalents 8.8 9.8
--------------- ----------------
Cash and cash equivalents, beginning
of period 22.8 19.1
--------------- ----------------
Cash and cash equivalents, end of
period $31.6 $28.9
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