Avery Dennison Corporation
) reported adjusted earnings of 71 cents per share in the second
quarter of 2013, up 34% from 53 cents per share reported in the
year-ago quarter and ahead of the Zacks Consensus Estimate of 69
cents. Results benefited from the company's restructuring and
other productivity actions that were initiated last year.
Including restructuring costs and other items, earnings from
continuing operations were 70 cents per share in the quarter
compared with 47 cents in the year-ago quarter.
Total revenue increased 4.2% to $1.552 billion from $1.490
billion in the prior-year quarter, ahead of the Zacks Consensus
Estimate of $1.54 billion. On an organic basis, revenues
increased approximately 5%.
Cost of sales in the reported quarter rose 3% to $1.13 billion.
Gross profit increased 8% to $417 million from $388 million in
the prior-year quarter. Gross margin expanded 90 basis points to
Marketing, general & administrative expenses were $293
million versus $285 million in the year-ago quarter. Adjusted
operating profit increased 20% to $124 million. Adjusted
operating margin improved 110 basis points to 8%.
Total revenue in the Pressure-sensitive Materials segment
increased 3% to $1.11 billion. Label and Packaging Materials
sales increased in mid-single digits, while sales for Graphics,
Reflective, and Performance Tapes increased in low-single digits.
Adjusted operating profit increased 17% to $119 million in the
quarter. Adjusted operating margin expanded 130 basis points to
10.7%, driven by benefit of productivity initiatives and higher
volume, which helped mitigate changes in product mix.
Total revenue from Retail Branding and Information Solutions
increased 7% to $419.6 million from $390.9 million in the
year-earlier quarter. The improvement was driven by increased
demand from U.S. and European retailers and brands.
The segment's adjusted operating income rose 25% to $29.6
million with adjusted operating margin expanding 110 basis points
to 7.1% on productivity initiatives and higher volumes, partially
offset by employee related expenses.
Other specialty converting businesses segment reported net sales
of $18.8 million, down 1% from $19 million in the year-ago
quarter. The segment reported an operating loss of $2.8 million,
flat year over year.
As of Jun 29, 2013, Avery Dennison had cash and cash equivalents
of $211.6 million versus $161.4 million as of Jun 30, 2012.
Long-term debt was $951.4 million as of Jun 29, 2013, compared
with $703.2 million as of Jun 30, 2012.
Cash flow from operating activities was $46.7 million during
the first half of 2013 compared with $41 million in the
prior-year period. Avery repurchased 3.5 million shares during
the first half of fiscal 2013 for $149 million.
Cost Reduction Actions
The company had initiated a restructuring program in the first
half of 2012 to trim down costs across all its segments; owing to
which the company incurred restructuring costs of approximately
$56 million in 2012 and net cost of $4 million in the first half
of 2013. Avery expects to incur restructuring costs, net of gain
on sale of assets, of $15 million in 2013. So far the company has
achieved annualized savings of $105 million from this program.
Fiscal 2013 Outlook
The company expects adjusted earnings in the range of $2.40 to
$2.60 per share. Free cash flow from continuing operations is
expected between $275 million and $315 million in 2013.
Sale of Businesses
In the fourth quarter of 2012, Avery had announced that it has
entered into an agreement with CCL Industries Inc., a global
leader in specialty packaging solutions to divest its Office and
Consumer Products and Designed and Engineered Solutions
businesses, for $500 million in cash.
On Jul 1, 2013, Avery completed the sale, subject to customary
closing adjustments expected to be finalized by Oct 1, 2013. The
net proceeds of approximately $400 million will be utilized to
repurchase shares, reduce debt and make an additional pension
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AVERY DENNISON (AVY): Free Stock Analysis
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Avery continues to deliver healthy organic growth in both the
core segments - Pressure-Sensitive Materials and Retail Branding
and Information Solutions. Now, with the divestiture of the
underperforming Office and Consumer Products unit, the company
will be able to focus on these core segments and increase its
Pasadena, Calif.-based Avery Dennison manufactures
pressure-sensitive materials and tickets, tags, labels and other
converted products. Avery has over 200 manufacturing and
distribution facilities across more than 60 countries.
Avery currently holds a Zacks Rank #3 (Hold).
An Avery Dennison peer,
United Stationers Inc.
) reported second quarter earnings of 86 cents a share, up 30%
from 66 cents earned in the year-ago quarter, ahead of the Zacks
Consensus Estimate of 79 cents. Among other peers,
The Standard Register Co.
ACCO Brands Corp.
) are yet to announce their second quarter results.