Avery Dennison Corporation
) reported adjusted earnings of 69 cents per share in the third
quarter of 2013, up 35% from 51 cents per share reported in the
year-ago quarter and ahead of the Zacks Consensus Estimate of 65
cents. Results benefited from the growth in revenues in the core
segments as well as Avery's restructuring and other productivity
actions that were initiated last year.
Including restructuring costs and other items, earnings from
continuing operations were 62 cents per share in the quarter
compared with 35 cents in the year-ago quarter.
Total revenue increased 4% (organic as well as reported basis) to
$1.505 billion from $1.447 billion in the prior-year quarter.
However, revenues missed the Zacks Consensus Estimate of $1.509
billion by a whisker.
Cost of sales in the reported quarter rose 3% to $1.1 billion.
Gross profit increased 6% to $402 million from $381 million in
the prior-year quarter. Gross margin expanded 40 basis points to
Marketing, general & administrative expenses were $286
million versus $287 million in the year-ago quarter. Adjusted
operating profit increased 23% to $116 million. Adjusted
operating margin improved 120 basis points to 7.7%.
Total revenue in the Pressure-sensitive Materials segment
increased 4% to $1.09 billion. Label and Packaging Materials
sales increased in low-single digits, while sales for Graphics,
Reflective, and Performance Tapes increased in mid-single digits.
Adjusted operating profit increased 18% to $115 million in the
quarter 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 4% to $391 million from $376 million in the
year-earlier quarter. The improvement was driven by increased
demand from European retailers and brands. The segment's adjusted
operating income rose 25% to $23 million on productivity
initiatives and higher volumes, partially offset by employee
Other specialty converting businesses segment reported net sales
of $19.5 million, up 3% from $18.9 million in the year-ago
quarter. The segment reported an operating loss of $0.6 million,
narrower than the year ago quarter's loss of $2.9 million.
As of Sep 28, 2013, Avery Dennison had cash and cash equivalents
of $310 million, up from $191 million as of Sep 29, 2012.
Long-term debt was $951 million as of Sep 28, 2013, compared with
$703 million as of Sep 29, 2012. Debt to capitalization ration
improved to 40.6% as of Sep 28, 2013 from 46.5% as of Sep 29,
Cash flow from operating activities was $95.7 million during the
first nine months of 2013 compared with $214 million in the
prior-year comparable period. Free cash flow during the first
nine months of 2013 was $105 million, up from $102 million in the
prior-year comparable period. Avery repurchased 5.2 million
shares for $224 million so far in 2013.
Cost Reduction Actions
The company had initiated a restructuring program in the first
half of 2012 to trim costs across all its segments; owing to
which the company incurred restructuring costs of approximately
$56 million in 2012 and net cost of $20 million in the first
three quarters of 2013. Avery has achieved annualized savings of
$110 million from this program. The company expects gains from
the program to exceed costs in the fourth quarter.
Fiscal 2013 Outlook
The company raised its adjusted earnings forecast to the range of
$2.60 to $2.70 per share from the previous range of $2.40 to
$2.60 per share. The revised guidance represents annual growth of
33% to 38%. Free cash flow from continuing operations is expected
between $275 million and $315 million in 2013.
Sale of Businesses
On Jul 1, 2013, Avery completed the sale of its Office and
Consumer Products and Designed and Engineered Solutions
businesses to CCL Industries Inc., a global leader in specialty
packaging solutions. The net proceeds of approximately $400
million will be utilized to repurchase shares.
With the divestiture of the underperforming Office and Consumer
Products unit, Avery Dennison will be able to focus on its core
segments and increase its growth profile. Further share
repurchases will also provide a boost to Avery's earnings.
However, the uncertain macroeconomic environment remains a
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 in more than 60 countries.
Avery currently holds a Zacks Rank #3 (Hold).
An Avery Dennison peer,
United Stationers Inc.
) reported an 11% year-on-year improvement in its third quarter
earnings of $1.01 a share, which however fell a penny short of
the Zacks Consensus Estimate. Among other peers,
ACCO Brands Corp.
) is expected to announce its results on Oct 30 followed by
CompX International Inc.
) on Nov 4.
ACCO BRANDS CP (ACCO): Free Stock Analysis
AVERY DENNISON (AVY): Free Stock Analysis
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UTD STATIONERS (USTR): Free Stock Analysis
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