Avery Dennison Management Discusses Q2 2012 Results - Earnings Call Transcript

Dean A. Scarborough

Thanks, Eric. The quarter came in just about as expected. Sales were up nearly 4% on an organic basis, and adjusted operating profit was down modestly. We're pleased with where we are on our free cash flow year-to-date, and we're on track to deliver earnings growth and free cash flow within the ranges of our guidance for the year. We are committed to returning more cash to investors, and we bought back an additional 2.4 million shares during the quarter to meet that commitment. As noted in our press release, we are accelerating our productivity and cost out plans to improve our competitive position and meet commitments to shareholders in an uncertain economic environment. The $100 million plus restructuring program announced today will enable us to deliver earnings growth in this unpredictable economy and provide nice upside when conditions improve. I'm also glad to say that we can fund this restructuring, while meeting our free cash flow targets as well. I'll provide additional color in a few minutes.

Turning to the segments. Pressure-Sensitive Materials had a solid quarter, both on the top line and the bottom line. Despite uncertain economic conditions in North America and Europe, Label and Packaging Materials had good sales growth in both regions, and we've gained back the share we lost in Europe a year ago. And, as we expected, emerging markets returned to double-digit sales growth.

Graphics and Reflective Solutions top line results were significantly weaker than LPM's. GRS is more economically sensitive, and the larger proportion of this business is in Europe, where it was especially hard-hit.

As you know, we've been investing in marketing and innovation in Label and Packaging Materials. We are gaining traction with a number of the new products we launched late last year, and we have a pipeline of new products that we'll introduce at Labelexpo in September. At the same time, LPM has been improving its already good service delivery time. And the combination of innovation and improved service are enabling us to gain share, and we're seeing this in our top line.

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