Avery Dennison Corporation announced preliminary, unaudited third quarter 2012 results.
“In the third quarter, we delivered the strongest organic sales growth since first quarter 2011,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “Continued top-line momentum in Pressure-sensitive Materials and a rebound in Retail Branding and Information Solutions’ core business, as well as accelerating adoption of RFID, drove better than expected earnings for the quarter. As a result, we raised our guidance for full-year earnings per share.
“Our restructuring initiative is well under way, and we are on track to achieve more than $100 million in annualized savings by mid-2013,” Scarborough said. “The leaner cost structure that will result will enhance our competitive position and strengthen our ability to increase returns.
“We continued to repurchase shares, meeting our commitment to return more cash to shareholders while maintaining a strong balance sheet,” Scarborough said.
Pressure-sensitive Materials segment sales increased approximately 7 percent. Within the segment and compared to prior year, Label and Packaging Materials sales increased high single digits, and Graphics and Reflective Solutions sales increased mid-single digits.
Operating margin declined 30 basis points to 7.4 percent due to higher employee-related expenses, the impact of changes in product mix, and higher restructuring costs, partially offset by the benefit of higher volume and productivity initiatives. Adjusted operating margin improved 40 basis points.
Sales increased approximately 7 percent compared to prior year driven by increased demand from U.S. and European retailers and brands, including accelerating RFID adoption.
Operating margin improved 210 basis points to 2.8 percent as the benefit of productivity initiatives, higher volume, and lower restructuring costs more than offset higher employee-related expenses and the impact of changes in product mix. Adjusted operating margin improved 90 basis points.
As previously announced, the company and 3M Company have terminated the definitive agreement under which 3M would have purchased the company's Office and Consumer Products (OCP) business. The company is continuing to pursue a divestiture of OCP.
Earnings from OCP and certain costs associated with its anticipated divestiture are reported as income or loss from discontinued operations (net of tax) in the consolidated income statement.
In the first half of 2012, the company began a restructuring program expected to be completed by mid-2013 to reduce costs across all segments of the business. The company currently anticipates more than $100 million in annualized savings from this program. To implement these actions, the company estimates that it will incur restructuring costs and other items of approximately $55 million and $25 million in 2012 and 2013, respectively.
In the company’s supplemental presentation materials, “Third Quarter 2012 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2012 financial results. Based on the factors listed and other assumptions, the company raised its previous guidance of 2012 earnings per share from continuing operations to $1.65 to $1.70. The company maintained its free cash flow guidance. Excluding an estimated $0.35 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $2.00 to $2.05.