Avery Dennison Corporation today announced preliminary, unaudited third quarter 2010 results. All non-GAAP financial measures are reconciled to GAAP in the attached tables.
Free Cash Flow (a non-GAAP financial measure) as used herein is defined as net cash from operating activities (as reported), less net purchases of property, plant, equipment, software, and other deferred charges, plus proceeds from sale of investments, net (see accompanying schedule A-3 for reconciliation to GAAP financial measures).
"Avery Dennison delivered another quarter of strong top-line growth, driven by Pressure-sensitive Materials and Retail Information Services," said Dean A. Scarborough, Avery Dennison chairman, president and CEO. "As expected, margins came under pressure as rising raw material costs outpaced price increases."
"Despite the increased inflation, we remain on track to meet our full-year targets for earnings and free cash flow, and we are well positioned for long-term profitable growth and increased returns," Scarborough said.
For more details on the Company's results, see the Company's supplemental presentation materials, "Third Quarter 2010 Financial Review and Analysis," posted at the Company's Web site at www.investors.averydennison.com, and furnished under Form 8-K with the SEC.
Third Quarter 2010 Results by Segment:
All references to sales reflect comparisons on an organic basis, which excludes the impact of foreign currency translation. All references to operating margin exclude the impact of restructuring, asset impairment charges, and other items.
Pressure-sensitive Materials (PSM)
- Roll Materials sales grew at a high-single digit rate, reflecting strength in all regions. Sales grew at a mid-single digit rate in the Graphics and Reflective Products division.
- Operating margin declined as continued raw material inflation, which outpaced pricing actions, and investments in growth more than offset the benefits from higher volume and productivity and restructuring initiatives.
Retail Information Services (RIS)
- Sales growth reflected increased demand, due in part to significant inventory destocking that occurred among apparel retailers in the prior year.
- Operating margin increased due to increased volume and restructuring and productivity initiatives, partially offset by higher employee costs.
- Operating margin declined sequentially due to lower volume, reflecting the normal seasonal trend.
Office and Consumer Products (OCP)
- The decline in sales reflected weak end-market demand and increased competition in the label category.
- Operating margin declined due to increased investment in demand creation, consumer promotions, and innovation, as well as lower volume.
Other specialty converting businesses
- Sales growth primarily reflected increased demand for products for automotive applications, which was down sharply in the third quarter of 2009.
- Operating margin declined due to raw material inflation, partially offset by the benefits of increased volume and restructuring and productivity actions.
The Company has adjusted its previous guidance. In the Company's supplemental presentation materials, "Third Quarter 2010 Financial Review and Analysis," the Company provides a list of factors that it believes will contribute to its 2010 financial results. Based on the factors listed and other assumptions, the Company now expects reported revenue growth of approximately 9 percent, and adjusted (non-GAAP) Earnings Per Share of $3.10 to $3.20. The increase in guidance for Earnings Per Share is primarily due to the inclusion of approximately $0.40 per share from a discrete tax planning event expected in the fourth quarter of 2010. The Company now expects Free Cash Flow in 2010 of approximately $350 to $375 million.