“I’m pleased to report a solid start to 2014, with earnings in line with our expectations,” says Dean Scarborough, Avery Dennison chairman, president and CEO. “Sales were up nearly 5 percent on an organic basis, driven by strong volume growth in Pressure-sensitive Materials. Retail Branding and Information Solutions delivered another quarter of strong earnings growth, reflecting the successful execution of productivity initiatives across the business.”
“We are maintaining our guidance for full-year adjusted earnings per share growth in the range of 8 to 19 percent, and remain committed to our disciplined strategy for capital allocation,” Scarborough adds. “I am confident that the consistent execution of our strategies for long-term value creation will continue to benefit our customers, employees, and shareholders.”
For more details on the company’s results, see the summary table accompanying this news release, as well as the supplemental presentation materials, “First Quarter 2014 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.
Details of the report are as follows:
First Quarter 2014 Results by Segment
All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, product line exits, acquisitions and divestitures and, where applicable, the extra week in the fiscal year. Adjusted operating margin refers to earnings before interest expense and taxes, excluding restructuring costs and other items, as a percentage of sales.
Pressure-sensitive Materials (PSM)
PSM segment sales increased approximately 6 percent. Within the segment, Label and Packaging Materials sales increased mid-single digits. Combined sales for Graphics, Reflective, and Performance Tapes also increased mid-single digits.
Operating margin increased 20 basis points to 9.8 percent as the benefit of productivity initiatives and higher volume was largely offset by higher employee-related expenses and other factors. Adjusted operating margin was unchanged.
Retail Branding and Information Solutions (RBIS)
RBIS segment sales increased approximately 2 percent driven by increased demand from Europe-based retailers and brands.
Operating margin increased 50 basis points to 4.3 percent as the benefit of productivity initiatives and higher volume more than offset higher employee-related expenses and restructuring charges, as well as the impact of a prior year gain on sale of assets. Adjusted operating margin improved 120 basis points.
The company repurchased 1.2 million shares in the first quarter of 2014 at an aggregate cost of $59 million.
On July 1, 2013, the company completed the sale of its OCP and DES businesses.
The first quarter effective tax rate was 18 percent. The adjusted tax rate for the first quarter was 33 percent.
Cost Reduction Actions
In the first quarter, the company realized approximately $10 million in savings from restructuring, and incurred restructuring costs of approximately $7 million. The company expects to incur cash restructuring costs of $45 million in 2014.
In its supplemental presentation materials, “First Quarter 2014 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2014 financial results. Based on the factors listed and other assumptions, the company expects 2014 earnings per share from continuing operations of $2.60 to $2.90. Excluding an estimated $0.30 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $2.90 to $3.20.