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0000950134-08-001243.txt : 200801290000950134-08-001243.hdr.sgml : 2008012920080129084545ACCESSION NUMBER:0000950134-08-001243CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:23CONFORMED PERIOD OF REPORT:20080129ITEM INFORMATION:Results of Operations and Financial ConditionITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20080129DATE AS OF CHANGE:20080129

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:AVERY DENNISON CORPORATIONCENTRAL INDEX KEY:0000008818STANDARD INDUSTRIAL CLASSIFICATION:CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670]IRS NUMBER:951492269STATE OF INCORPORATION:DEFISCAL YEAR END:1229

FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-07685FILM NUMBER:08556028

BUSINESS ADDRESS:STREET 1:150 N ORANGE GROVE BLVDCITY:PASADENASTATE:CAZIP:91103BUSINESS PHONE:6263042000

MAIL ADDRESS:STREET 1:150 N ORANGE GROVE BLVDCITY:PASADENASTATE:CAZIP:91103

FORMER COMPANY:FORMER CONFORMED NAME:AVERY INTERNATIONAL CORPDATE OF NAME CHANGE:19901030

FORMER COMPANY:FORMER CONFORMED NAME:AVERY PRODUCTS CORPDATE OF NAME CHANGE:19760518

8-K1a37439e8vk.htmFORM 8-K

e8vk

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section13 OR 15(d) of
The Securities Exchange Act of 1934

January29, 2008
Date of Report

AVERY DENNISON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

1 -7685

95-1492269

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

150 North Orange Grove Boulevard

Pasadena, California

91103

(Address of principal executive offices)

(Zip Code)

Registrants telephone number, including area code (626)304-2000

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy thefiling obligation of the registrant under any of the following provisions (see General InstructionA.2. below):

o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item2.02 Results of Operations and Financial ConditionItem9.01 Financial Statements and ExhibitsSIGNATURESEXHIBIT LISTEXHIBIT 99.1EXHIBIT 99.2

Table of Contents

Section2 Financial Information

Item2.02 Results of Operations and Financial Condition.

AveryDennison Corporations news release dated January29, 2008, regarding its preliminary,unaudited financial results for the fourth quarter of 2007, along with earnings guidance for the2008 fiscal year, is attached hereto as Exhibit99.1. This information is being furnished (notfiled) under this Form 8-K. Additionally, the Company will discuss its preliminary financialresults during a webcast and teleconference call today at 2:00 p.m. (EDT). To access the webcastand teleconference call, please go to the Companys Web site athttp://www.investors.averydennison.com.

AveryDennison Corporations presentation dated January 29, 2008, regarding its preliminaryfinancial review and analysis for the fourth quarter of 2007, alongwith earnings guidance for 2008 fiscal year, is attached hereto as Exhibit99.2.This information is being furnished (not filed) under this Form 8-K. Additionally, this informationis available on the Companys Web site at http://www.investors.averydennison.com.

Section9 Financial Statements and Exhibits

Item9.01 Financial Statements and Exhibits.

(c)Exhibits

99.1

On January29, 2008, Avery Dennison Corporation issued a news release announcing itspreliminary, unaudited financial results for the fourth quarter ending December29, 2007,along with earnings guidance for the 2008 fiscal year.

99.2

On January29, 2008, Avery Dennison Corporation provided a presentation regarding itspreliminary financial review and analysis for the fourth quarter ending December29, 2007,along with earnings guidance for the 2008 fiscal year.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certainstatements contained in this report on Form 8-K and in Exhibit99.1 and Exhibit99.2 areforward-looking statements intended to qualify for the safe harbor from liability established bythe Private Securities Litigation Reform Act of 1995. Such forward-looking statements andfinancial or other business targets are subject to certain risks and uncertainties. Actual resultsand trends may differ materially from historical or expected results depending on a variety offactors, including but not limited to risks and uncertainties relating to investment in developmentactivities and new production facilities; fluctuations in cost and availability of raw materials;ability of the Company to achieve and sustain targeted cost reductions, including synergiesexpected from the integration of the Paxar business in the time and at the cost anticipated;ability of the Company to generate sustained productivity improvement; successful integration ofacquisitions; successful implementation of new manufacturing technologies and installation ofmanufacturing equipment; the financial condition and inventory strategies of customers; customerand supplier concentrations; changes in customer order patterns; loss of significant contract(s) orcustomer(s); timely development and market acceptance of new products; fluctuations in demandaffecting sales to customers; impact of competitive products and pricing; selling prices; businessmix shift; credit risks; ability of the Company to obtain adequate financing arrangements;fluctuations in interest rates; fluctuations in pension, insurance and employee benefit costs;impact of legal proceedings, including the Australian Competition and Consumer Commissioninvestigation into industry competitive practices, and any related proceedings or lawsuitspertaining to this investigation or to the subject matter thereof or of the concludedinvestigations by the U.S. Department of Justice (DOJ), the European Commission, and the CanadianDepartment of Justice (including purported class actions seeking treble damages for allegedunlawful competitive practices, which were filed after the announcement of the DOJ investigation),as well as the impact of potential violations of the U.S. Foreign Corrupt Practices Act based onissues in China; changes in governmental regulations; changes in political conditions; fluctuationsin foreign currency exchange rates and other risks associated withforeign operations; worldwide and local economic conditions; impact of epidemiological events onthe economy and the Companys customers and suppliers; acts of war, terrorism, natural disasters;and other factors.

Table of Contents

The Company believes that the most significant risk factors that could affect its ability toachieve its stated financial expectations in the near-term include (1)the impact of economicconditions on underlying demand for the Companys products; (2)the degree to which higher rawmaterial and energy-related costs can be passed on to customers through selling price increases,without a significant loss of volume; (3)the impact of competitors actions, including pricing,expansion in key markets, and product offerings; (4)potential adverse developments in legalproceedings and/or investigations regarding competitive activities, including possible fines,penalties, judgments or settlements; and (5)the ability of the Company to achieve and sustaintargeted cost reductions, including expected synergies associated with the Paxar acquisition.

For a more detailed discussion of these and other factors, see PartI, Item1A. Risk Factors andPartII, Item7. Managements Discussion and Analysis of Results of Operations and FinancialCondition in the Companys Form 10-K, filed on February28, 2007. The forward-looking statementsincluded in this Form 8-K are made only as of the date of this Form 8-K, and the Company undertakesno obligation to update the forward-looking statements to reflect subsequent events orcircumstances.

The financial information presented in the news release, included as an Exhibit to this CurrentReport, represents preliminary, unaudited financial results.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AVERY DENNISON CORPORATION

Date: January29, 2008

By: /s/ Daniel R. OBryant

Name:

Daniel R. OBryant

Title:

Executive Vice President, Finance

and Chief Financial Officer

Table of Contents

EXHIBIT LIST

Exhibit No. Description

99.1

News release dated January29, 2008.

99.2

Presentation dated January29, 2008.

EX-99.12a37439exv99w1.htmEXHIBIT 99.1

exv99w1

Exhibit99.1

AVERY DENNISON REPORTS
4th QUARTER AND YEAR-END 2007 EARNINGS

Reported net income per share of $0.81 for the fourth quarter, down from $1.04 pershare last year, due to integration costs and interest expense related to the $1.3billionacquisition of Paxar and other restructuring charges

Adjusted earnings per share of $1.08, excluding the impact of restructuring andasset impairment charges and transition costs related to the Paxar integration.

Net sales increased approximately 21percent to $1.71billion

Sales before the impact of the Paxar acquisition and foreign currency translationdeclined approximately 1percent

On track to achieve estimated $115 to $125million of annual cost synergies from Paxarintegration by end of 2009

PASADENA, Calif. January29, 2008 Avery Dennison Corporation (NYSE:AVY) today reportednet income of $79.4million or $0.81 per share, compared with $104.7million or $1.04 per share inthe prior year. Results included restructuring and asset impairment charges, transition costsassociated with the integration of Paxar, and other items, totaling $0.27 and $0.05 in the fourthquarters of 2007 and 2006, respectively. (See Attachment A-3: Preliminary Reconciliation of GAAPto Non-GAAP Measures.)

Net sales from continuing operations for the fourth quarter were $1.71billion, upapproximately 21percent from $1.41billion for the same quarter last year. Sales before the impactof the Paxar acquisition and foreign currency translation were down approximately 1percent fromthe prior year.

The Company reported net income of $303.5million or $3.07 per share for the full year 2007,compared with $373.2million or $3.72 per share in the prior year. Results included restructuringand asset impairment charges, transition costs associated with the integration of Paxar, and otheritems, totaling $0.84 per share in 2007 and $0.12 per share in the prior year. Net sales were $6.31billion in 2007, compared to $5.58billion in the previous year. (See Attachment A-3: PreliminaryReconciliation of GAAP to Non-GAAP Measures.)

In the fourth quarter of 2007, Avery Dennison changed from the last-in, first- out (LIFO)inventory accounting method to the first-in, first-out (FIFO)method for certain businessesoperating in the U.S. All the Companys businesses now utilize the FIFO method of accounting forinventory. All results have been presented on a FIFO basis as if the accounting change occurred asof January1, 2006.

2007 was a challenging year as U.S. retail markets slowed and market conditions for ourpressure-sensitive materials business weakened, causing us to miss our revenue growth and profitobjectives for the year, said Dean A. Scarborough, president and chief executive officer of AveryDennison. We took a number of actions to mitigate the effects of weaker market conditions,including accelerating productivity programs and reducing expenses.

I am pleased with the Paxar acquisition, which positions us as the clear leader in the globalretail information services market, he added. The integration of Paxar with our RetailInformation Services Group has been virtually seamless to our customers and is on track to realizeannual cost synergies of nearly $125million by the end of 2009.

We continue to achieve solid results in the emerging markets, particularly in China and Indiawhere we have expanded our capacity with several new manufacturing facilities, Scarborough said.Our radio frequency identification business is gaining traction with the number of inlays sold in2007 nearly tripling from the previous year. Buoyed by Paxars RFID business, we expect sales ofRFID products to reach $50million in 2008.

Additional Fourth Quarter Financial Highlights
(For a more detailed presentation of the Companys results for the quarter, seeFourth Quarter 2007 Financial Review and Analysis, posted at the Companys Web site atwww.investors.averydennison.com.)

Operating margin (GAAP basis) was 5.7percent, compared to 8.1percent for the sameperiod last year. Excluding interest expense, the effect of transition costs associatedwith the Paxar integration, restructuring and asset impairment charges, and other items,operating margin was 9.6percent, compared to 9.4percent for the previous year. (SeeAttachment A-3: Preliminary Reconciliation of GAAP to Non-GAAP Measures.)

The effective tax rate for the quarter and full year 2007 was approximately 19percent,in line with the Companys guidance.

Segment Highlights
(See Attachment A-4: Preliminary Supplementary Information, Reconciliation of GAAP to Non-GAAPSupplementary Information for adjusted operating margins included below.)

Pressure-sensitive Materials reported sales of $890million, up 9percent from theprior year. Organic sales growth for the segment was approximately 2percent, reflectingsoft market conditions in North America and Europe.

Segment operating margin (GAAP basis) was 8.9percent, compared to 9.1percent for the sameperiod last year. Before restructuring and asset impairment charges, and other items,operating margin declined 40 basis points to 9percent.

Retail Information Services sales grew 144percent to $411million, or about 1percentbefore the benefits from the Paxar acquisition and currency translation. Growth of thecore business continued to be slow due to the decline in orders for apparel shipped toNorth American retailers and brand owners, reflecting a weak domestic retail environment.

Segment operating margin (GAAP basis) was 0.5percent, compared to 5.7percent for the sameperiod last year. Before restructuring and asset impairment charges, transition costsassociated with the Paxar integration, and other items, operating margin was 6.8percent.

Office and Consumer Products sales declined 5percent to $272million. Organic salesdecline for the segment was approximately 8percent, due to customer inventory reductions.

Segment operating margin (GAAP basis) was 20.6percent, unchanged from the prior year.Before restructuring and asset impairment charges, and other items, operating margin was21.9percent, compared to 19.9percent for the same period last year.

Outlook for the Year

Avery Dennison announced that it expects reported (GAAP)earnings for 2008 to be in the rangeof $3.80 to $4.20 per share, including an estimated $0.35 per share in restructuring and assetimpairment charges and Paxar integration costs. These charges and costs are subject to revision, asplans have not been finalized. Excluding these items, the Company expects full year earnings pershare for 2008 to be in the range of $4.15 to $4.55 per share. (See Attachment A-6: PreliminaryReconciliation of GAAP to Non-GAAP Measures (Full Year 2008 Estimates).)

The Companys earnings expectations reflect an assumption of reported revenue growth in therange of 9.5 to 12.5percent, including a 6.5percent contribution from the Paxar acquisition andan estimated 2 to 3percent benefit from currency translation.

(For a more detailed presentation of the Companys assumptions underlying its 2008 earningsexpectations, see Fourth Quarter and Full Year 2007 Financial Review andAnalysis, posted at the Companys Web site at www.investors.averydennison.com.)

Note: Throughout this release, all calculations of amounts on a per share basis reflect fullydiluted shares outstanding.

Avery Dennison is a global leader in pressure-sensitive labeling materials, retail tag, ticketingand branding systems, and office products. Based in Pasadena, Calif., Avery Dennison is a FORTUNE500 Company with 2007 sales of $6.3billion. Avery Dennison employs more than 30,000 individuals in51 countries worldwide, who develop, manufacture and market a wide range of products for bothconsumer and industrial markets. Products offered by Avery Dennison include: Fasson brandself-adhesive materials; Avery Dennison brand products for the retail and apparel industries; Averybrand office products and graphics imaging media; specialty tapes, peel-and-stick postage stamps,and labels for a wide variety of automotive, industrial and durable goods applications.

###

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained in this document are forward-looking statements intended toqualify for the safe harbor from liability established by the Private Securities Litigation ReformAct of 1995. Such forward-looking statements and financial or other business targets are subject tocertain risks and uncertainties. Actual results and trends may differ materially from historical orexpected results depending on a variety of factors, including but not limited to risks anduncertainties relating to investment in development activities and new production facilities;fluctuations in cost and availability of raw materials; ability of the Company to achieve andsustain targeted cost reductions, including synergies expected from the integration of the Paxarbusiness in the time and at the cost anticipated; ability of the Company to generate sustainedproductivity improvement; successful integration of acquisitions; successful implementation of newmanufacturing technologies and installation of manufacturing equipment; the financial condition andinventory strategies of customers; customer and supplier concentrations; changes in customer orderpatterns; loss of significant contract(s) or customer(s); timely development and market acceptanceof new products; fluctuations in demand affecting sales to customers; impact of competitiveproducts and pricing; selling prices; business mix shift; credit risks; ability of the Company toobtain adequate financing arrangements; fluctuations in interest rates; fluctuations in pension,insurance and employee benefit costs; impact of legal proceedings, including the AustralianCompetition and Consumer Commission investigation into industry competitive practices, and anyrelated proceedings or lawsuits pertaining to this investigation or to the subject matter thereofor of the concluded investigations by the U.S. Department of Justice (DOJ), the EuropeanCommission, and the Canadian Department of Justice (including purported class actions seekingtreble damages for alleged unlawful competitive practices, which were filed after the announcementof the DOJ investigation), as well as the impact of potential violations of the U.S. ForeignCorrupt Practices Act based on issues in China; changes in governmental regulations; changes inpolitical conditions; fluctuations in foreign currency exchange rates and other risks associatedwith foreign operations; worldwide and local economic conditions; impact of epidemiological eventson the economy and the Companys customers and suppliers; acts of war, terrorism, naturaldisasters; and other factors.

The Company believes that the most significant risk factors that could affect its ability toachieve its stated financial expectations in the near-term include (1)the impact of economicconditions on underlying demand for the Companys products; (2)the degree to which higher rawmaterial and energy-related costs can be passed on to customers through selling price increases,without a significant loss of volume; (3)the impact of competitors actions, including pricing,expansion in key markets, and product offerings; (4)potential adverse developments in legalproceedings and/or investigations regarding competitive activities, including possible fines,penalties, judgments or settlements; and (5)the ability of the Company to achieve and sustaintargeted cost reductions, including expected synergies associated with the Paxar acquisition.

For a more detailed discussion of these and other factors, see Risk Factors andManagements Discussion and Analysis of Results of Operations and Financial Condition in theCompanys Form 10-K, filed on February28, 2007, with the Securities and Exchange Commission. Theforward-looking statements included in this news release are made only as of the date of this newsrelease, and the Company undertakes no obligation to update the forward-looking statements toreflect subsequent events or circumstances.

For more information and to listen to a live broadcast or an audio replay of the 4th
Quarter conference call with analysts, visit the Avery Dennison Web site at
www.investors.averydennison.com

A-1

AVERY DENNISON
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)

(UNAUDITED)

Three Months Ended Twelve Months Ended

Dec. 29, 2007 Dec. 30, 2006 Dec. 29, 2007 Dec. 30, 2006

Net sales

$ 1,714.0 $ 1,411.4 $ 6,307.8 $ 5,575.9

Cost of products sold

1,232.5 1,016.8 4,585.4 4,037.9

Gross profit

481.5 394.6 1,722.4 1,538.0

Marketing, general & administrative expense

333.0 262.4 1,182.5 1,011.1

Interest expense

34.3 13.3 105.2 55.5

Other expense, net (1)

16.2 5.1 59.4 36.2

Income from continuing operations before taxes

98.0 113.8 375.3 435.2

Taxes on income

18.6 8.7 71.8 76.7

Income from continuing operations

79.4 105.1 303.5 358.5

(Loss)income from discontinued operations, net of taxes

(0.4 ) 14.7

Net income

$ 79.4 $ 104.7 $ 303.5 $ 373.2

Per share amounts:

Net income per common share, assuming dilution

Continuing operations

$ 0.81 $ 1.04 $ 3.07 $ 3.57

Discontinued operations

0.15

Net income per commonshare, assumingdilution

$ 0.81 $ 1.04 $ 3.07 $ 3.72

Average common shares outstanding,assuming dilution

98.6 100.4 98.9 100.4

Common shares outstanding at period end

98.4 98.3 98.4 98.3

2006 amounts have been restated to reflect the change in method of accountingfor inventory from last-in, first-out (LIFO)to first-in, first-out (FIFO)forcertain businesses operating in the U.S.

(1) Other expense for the fourth quarter of 2007 includes $16.2 of restructuringcosts, asset impairment and lease cancellation charges.

Other expense, net, for the fourth quarter of 2006 includes restructuring costs,asset impairment and lease cancellation charges of $10.4, partially offset bygain on sale of assets of ($5.3).

Other expense, net, for 2007 includes $57.5 of asset impairment charges,restructuring costs and lease cancellation charges, $4.8 ofcertain non-recurring financing costs and $.3 of expenses related to adivestiture, partially offset by a reversal of ($3.2) related to a patentlawsuit.

Other expense, net, for 2006 includes restructuring costs, asset impairmentand lease cancellation charges of $29.8, environmental remediation costs of $13, legal accrual related to a patent lawsuit of $.4, miscellaneoustaxes of $.4 related to a divestiture and charitable contribution of $10 toAvery Dennison Foundation, partially offset by gain on sale of investment of($10.5), gain on sale of assets of ($5.3) and gain from curtailment andsettlement of a pension obligation of ($1.6).

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A-2

Reconciliation of Non-GAAP Financial Measures in Accordance with SEC Regulations G and S-K

Avery Dennison reports financial results in accordance with U.S. GAAP, and hereinprovides some non-GAAP financial measures. These non-GAAP financial measures are not inaccordance with, nor are they a substitute for, GAAP financial measures. These non-GAAPfinancial measures are intended to supplement the Companys presentation of its financialresults that are prepared in accordance with GAAP.

The Companys non-GAAP financial measures exclude the impact of certain events,activities or strategic decisions. The accounting effects of these events, activities ordecisions, which are included in the GAAP measures, may make it difficult to assess theunderlying performance of the Company in a single period. By excluding certainaccounting effects, both positive and negative (e.g. gains on sales of assets,restructuring charges, asset impairments, effects of acquisitions and related costs,etc.), from certain of the Companys GAAP measures, the Company believes that it isproviding meaningful supplemental information to facilitate an understanding of theCompanys core or underlying operating results. These non-GAAP measures are usedinternally to evaluate trends in the Companys underlying business, as well as tofacilitate comparison to the results of competitors for a single period. The Companyapplies a quarterly tax rate to the accounting adjustments in order for the year-to-datetax rate on non-GAAP income to be consistent with the year-to-dateGAAP tax rate.

Limitations associated with the use of the Companys non-GAAP measures include (1)theexclusion of items that recur from time to time (e.g. restructuring, asset impairmentcharges, discontinued operations, etc.) from calculations of the Companys earnings andoperating margin; (2)the exclusion of the effects of acquisitions, including integrationcosts and certain financing costs; (3)the exclusion of interest expensefrom the calculation of the Companys operating margin; and (4)the exclusion of anymandatory debt service requirements, as well as the exclusion of other uses of the cashgenerated by operating activities that do not directly or immediately support theunderlying business (such as discretionary debt reductions, dividends, share repurchase,acquisitions, etc.) for calculation of free cash flow. While some of the items theCompany excludes from GAAP measures recur, these items tend to be disparate in amount andtiming. Based upon feedback from investors and financial analysts,the Company believes that supplemental non-GAAP measures provideinformation that is useful to the assessment of the Companysperformance and operating trends.

The reconciliation set forth below is provided in accordance with Regulations G and S-Kand reconciles the non-GAAP financial measures with the most directly comparable GAAPfinancial measures.

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A-3

AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

(UNAUDITED)

Three Months Ended Twelve Months Ended

Dec. 29, 2007 Dec. 30, 2006 Dec. 29, 2007 Dec. 30, 2006

Reconciliation of GAAP to Non-GAAP Operating Margin:

Net sales

$ 1,714.0 $ 1,411.4 $ 6,307.8 $ 5,575.9

Income from continuing operations before taxes

$ 98.0 $ 113.8 $ 375.3 $ 435.2

GAAP Operating Margin

5.7 % 8.1 % 5.9 % 7.8 %

Income from continuing operations before taxes

$ 98.0 $ 113.8 $ 375.3 $ 435.2

Non-GAAP adjustments:

Restructuring costs

11.1 6.5 21.6 21.1

Asset impairment and lease cancellation charges

5.1 3.9 17.5 8.7

Asset impairment charges acquisition related (1)

18.4

Transition costs associated with Paxar integration(2)

16.8 43.0

Other (3)

(5.3 ) 1.9 6.4

Interest expense

34.3 13.3 105.2 55.5

Adjusted non-GAAP operating income before taxes and interest expense

$ 165.3 $ 132.2 $ 582.9 $ 526.9

Adjusted Non-GAAP Operating Margin

9.6 % 9.4 % 9.2 % 9.4 %

Reconciliation of GAAP to Non-GAAP Net Income:

As reported net income

$ 79.4 $ 104.7 $ 303.5 $ 373.2

Non-GAAP adjustments, net of taxes:

Restructuring costs

9.0 6.1 17.6 17.6

Asset impairment and lease cancellation charges

4.2 3.6 14.4 7.4

Asset impairment charges acquisition related

14.6

Transition costs associated with Paxar integration

13.6 34.6

Other

(5.0 ) 1.8 2.2

Loss (income)from discontinued operations

0.4 (14.7 )

Adjusted Non-GAAP Net Income

$ 106.2 $ 109.8 $ 386.5 $ 385.7

A-3

(continued)

AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

(UNAUDITED)

Three Months Ended Twelve Months Ended

Dec. 29, 2007 Dec. 30, 2006 Dec. 29, 2007 Dec. 30, 2006

Reconciliation of GAAP to Non-GAAP Earnings Per Share:

As reported income per common share, assuming dilution

$ 0.81 $ 1.04 $ 3.07 $ 3.72

Non-GAAP adjustments per share, net of taxes:

Restructuring costs

0.09 0.06 0.18 0.18

Asset impairment and lease cancellation charges

0.04 0.04 0.14 0.07

Asset impairment charges acquisition related

0.15

Transition costs associated with Paxar integration

0.14 0.35

Other

(0.05 ) 0.02 0.02

(Income) from discontinued operations

(0.15 )

Adjusted Non-GAAP income per common share,assuming dilution

$ 1.08 $ 1.09 $ 3.91 $ 3.84

Averagecommon shares outstanding, assuming dilution

98.6 100.4 98.9 100.4

2006 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO)to first-in, first-out(FIFO)for certain businesses operating in the U.S.

(1) 2007 YTD includes asset impairment charges primarily related to software assets.

(2) 2007 QTD includes $16.8 of Paxar integration costs and change-in-control costs reported in marketing, general & administrativeexpense.

2007 YTD includes $39.7 of Paxar integration costs and change-in-control costs reported in marketing, general & administrative expense and $3.3of inventory step-up impact reported in costs of products sold.

(3) 2007 YTD includes $4.8 of certain non-recurring financing costs and $.3 of expenses related to a divestiture, partially offset by reversal of anaccrual for a patent lawsuit of ($3.2).

2006 QTD includes gain on sale of assets of ($5.3).

2006 YTD includes $13 related to environmental remediation costs, legal accrual related to a patentlawsuit of $.4, miscellaneous taxes of $.4 related to a divestiture and charitable contribution of $10 to Avery Dennison Foundation, partially offsetby gain on sale of investment of ($10.5), gain on sale of assets of ($5.3) and gain from curtailment and settlement of a pension obligation of ($1.6).

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A-4

AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

(UNAUDITED)

Fourth Quarter Ended

NET SALES OPERATING INCOME OPERATING MARGINS

2007 2006 2007(1) 2006(2) 2007 2006

Pressure-sensitive Materials

$ 890.1 $ 814.3 $ 79.0 $ 74.3 8.9 % 9.1 %

Retail Information Services

410.7 168.1 1.9 9.6 0.5 % 5.7 %

Office and Consumer Products

272.2 285.0 56.1 58.6 20.6 % 20.6 %

Other specialty converting businesses

141.0 144.0 0.2 0.6 0.1 % 0.4 %

Corporate Expense

N/A N/A (4.9 ) (16.0 ) N/A N/A

Interest Expense

N/A N/A (34.3 ) (13.3 ) N/A N/A

TOTAL FROM CONTINUING OPERATIONS

$ 1,714.0 $ 1,411.4 $ 98.0 $ 113.8 5.7 % 8.1 %

2006 amounts have been restated to reflect the change in method of accountingfor inventory from last-in, first-out (LIFO)to first-in, first-out (FIFO)forcertain businesses operating in the U.S.

(1) Operating income for the fourth quarter of 2007 includes $16.8 oftransition costs associated with Paxar integration and $16.2 of restructuringcosts, asset impairment and lease cancellation charges; of the total $33, thePressure-sensitive Materials segment recorded $1, the Retail InformationServices segment recorded $26.1, the Office and Consumer Products segmentrecorded $3.4, the other specialty converting businesses recorded $2.7 andCorporate recorded ($.2).

(2) Operating income for the fourth quarter of 2006 includes restructuringcosts, asset impairment and lease cancellation charges of $10.4, partiallyoffset by gain on sale of assets of ($5.3); of the total $5.1, thePressure-sensitive Materials segment recorded $2.4, the Retail InformationServices segment recorded $3.3, the Office and Consumer Products segmentrecorded ($1.9) and other specialty converting businesses recorded $1.3.

RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Fourth Quarter Ended

OPERATING INCOME OPERATING MARGINS

2007 2006 2007 2006

Pressure-sensitive Materials

Operating income, as reported

$ 79.0 $ 74.3 8.9 % 9.1 %

Non-GAAP adjustments:

Restructuring costs

1.0 1.9 0.1 % 0.2 %

Assetimpairment and lease cancellation charges

1.6 0.2 %

Gain on sale of assets

(1.1 ) (0.1 %)

Adjusted non-GAAP operatingincome

$ 80.0 $ 76.7 9.0 % 9.4 %

Retail Information Services

Operating income, as reported

$ 1.9 $ 9.6 0.5 % 5.7 %

Non-GAAP adjustments:

Restructuring costs

6.2 1.8 1.5 % 1.1 %

Assetimpairment and lease cancellation charges

3.1 1.5 0.7 % 0.9 %

Transition costs associated with Paxar integration

16.8 4.1 %

Adjusted non-GAAP operatingincome

$ 28.0 $ 12.9 6.8 % 7.7 %

Office and Consumer Products

Operating income, as reported

$ 56.1 $ 58.6 20.6 % 20.6 %

Non-GAAP adjustments:

Restructuring costs

3.4 1.5 1.3 % 0.5 %

Asset impairment charges

0.8 0.3 %

Gain on sale of assets

(4.2 ) (1.5 %)

Adjusted non-GAAP operatingincome

$ 59.5 $ 56.7 21.9 % 19.9 %

Other specialty convertingbusinesses

Operating income, as reported

$ 0.2 $ 0.6 0.1 % 0.4 %

Non-GAAP adjustments:

Restructuring costs

1.1 1.3 0.8 % 0.9 %

Asset impairment charges

1.6 1.2 %

Adjusted non-GAAP operatingincome

$ 2.9 $ 1.9 2.1 % 1.3 %

-more-

A-5

AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

(UNAUDITED)

Twelve Months Year-to-Date

NET SALES OPERATING INCOME OPERATING MARGINS

2007 2006 2007(1) 2006(2) 2007 2006

Pressure-sensitive Materials

$ 3,497.7 $ 3,236.3 $ 318.7 $ 301.6 9.1 % 9.3 %

Retail Information Services

1,174.5 667.7 (4.0 ) 45.7 (0.3 %) 6.8 %

Office and Consumer Products

1,016.2 1,072.0 173.6 187.4 17.1 % 17.5 %

Other specialty converting businesses

619.4 599.9 25.4 17.3 4.1 % 2.9 %

Corporate Expense

N/A N/A (33.2 ) (61.3 ) N/A N/A

Interest Expense

N/A N/A (105.2 ) (55.5 ) N/A N/A

TOTAL FROM CONTINUING OPERATIONS

$ 6,307.8 $ 5,575.9 $ 375.3 $ 435.2 5.9 % 7.8 %

2006 amounts have been restated to reflect the change in method of accounting for inventory fromlast-in, first-out (LIFO)to first-in, first-out (FIFO)forcertain businesses operating in the U.S.

(1) Operating income for 2007 includes $57.5 of asset impairment charges, restructuring costs andlease cancellation charges, $43 of transition costs associated with Paxar integration, $4.8 ofcertain non-recurring financing costs and $.3 of expenses related to a divestiture, partiallyoffset by a reversal of ($3.2) related to a patent lawsuit; of the total $102.4, thePressure-sensitive Materials segment recorded $13.8, the Retail Information Services segmentrecorded $74.2, the Office and Consumer Products segment recorded $4.8, the other specialtyconverting businesses recorded $4.2 and Corporate recorded $5.4.

(2) Operating income for 2006 includes restructuring costs, asset impairment and lease cancellationcharges of $29.8, environmental remediation costs of $13, legal accrual related to a patent lawsuitof $.4, miscellaneous taxes of $.4 related to a divestiture and charitable contribution of $10 toAvery Dennison Foundation, partially offset by gain on sale of investment of ($10.5), gain on saleof assets of ($5.3) and gain from curtailment and settlement of a pension obligation of ($1.6); ofthe total $36.2, the Pressure-sensitive Materials segment recorded $9.3, the Retail InformationServices segment recorded $11.2, the Office and Consumer Products segment recorded ($2.3), theother specialty converting businesses recorded $3.7 and Corporate recorded $14.3.

RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Twelve Months Year-to-Date

OPERATING INCOME OPERATING MARGINS

2007 2006 2007 2006

Pressure-sensitive Materials

Operating income, as reported

$ 318.7 $ 301.6 9.1 % 9.3 %

Non-GAAP adjustments:

Restructuring costs

6.1 7.3 0.2 % 0.2 %

Asset impairment and lease cancellation charges

10.9 2.7 0.3 % 0.1 %

Legal accrual related to a patent lawsuit

(3.2 ) 0.4 (0.1 %)

Gain on sale of assets

(1.1 )

Adjusted non-GAAP operating income

$ 332.5 $ 310.9 9.5 % 9.6 %

Retail Information Services

Operating income, as reported

$ (4.0 ) $ 45.7 (0.3 %) 6.8 %

Non-GAAP adjustments:

Restructuring costs

9.7 9.4 0.8 % 1.4 %

Asset impairment and lease cancellation charges

3.1 1.8 0.2 % 0.3 %

Asset impairment charges acquisition related

18.4 1.6 %

Transition costs associated with Paxar integration

43.0 3.7 %

Adjusted non-GAAP operating income

$ 70.2 $ 56.9 6.0 % 8.5 %

Office and Consumer Products

Operating income, as reported

$ 173.6 $ 187.4 17.1 % 17.5 %

Non-GAAP adjustments:

Restructuring costs

4.1 2.3 0.4 % 0.2 %

Asset impairment and lease cancellation charges

0.4 0.8 0.1 % 0.1 %

Expenses related to a divestiture

0.3

Gain on sale of assets

(4.2 ) (0.4 %)

Gain from curtailment and settlement of a pensionobligation

(1.6 ) (0.1 %)

Other

0.4

Adjusted non-GAAP operating income

$ 178.4 $ 185.1 17.6 % 17.3 %

Other specialty converting businesses

Operating income, as reported

$ 25.4 $ 17.3 4.1 % 2.9 %

Non-GAAP adjustments:

Restructuring costs

2.3 2.1 0.4 % 0.4 %

Asset impairment charges

1.9 1.6 0.3 % 0.2 %

Adjusted non-GAAP operating income

$ 29.6 $ 21.0 4.8 % 3.5 %

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A-6

AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Full Year 2008 Estimates)

2008

Guidance

Reconciliation of GAAP to Non-GAAP Earnings Per Share Guidance:

Reported (GAAP)Earnings Per Share

$3.80 - $4.20

Add Back:

Estimated Integration Transition Costs, Restructuring and Asset Impairment Charges (1)

~ $0.35

Adjusted (non-GAAP) Earnings Per Share

$4.15 to $4.55

(1) Subject to revision as plans are finalized

-more-

A-7

AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)

(UNAUDITED)

ASSETS

Dec. 29,
2007 Dec. 30,
2006

Current assets:

Cash and cash equivalents

$ 71.5 $ 58.5

Trade accounts receivable, net

1,113.8 910.2

Inventories, net

631.0 496.9

Other current assets

242.0 221.1

Total current assets

2,058.3 1,686.7

Property, plant and equipment, net

1,591.4 1,309.4

Other assets

2,597.0 1,328.8

$ 6,246.7 $ 4,324.9

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities:

Short-term and current portion of long-term debt

$ 1,110.8 $ 466.4

Accounts payable

679.2 630.1

Other current liabilities

676.8 602.3

Total current liabilities

2,466.8 1,698.8

Long-term debt

1,145.0 501.6

Other long-term liabilities

640.6 428.3

Shareholders equity:

Common stock

124.1 124.1

Capital in excess of par value

781.1 881.5

Retained earnings

2,290.2 2,155.6

Accumulated other comprehensive income (loss)

89.7 (50.1 )

Cost of unallocated ESOP shares

(3.8 ) (5.7 )

Employee stock benefit trusts

(428.8 ) (602.5 )

Treasury stock at cost

(858.2 ) (806.7 )

Total shareholders equity

1,994.3 1,696.2

$ 6,246.7 $ 4,324.9

2006 amounts have been restated to reflect the change in method of accounting for inventory fromlast-in, first-out (LIFO)to first-in, first-out (FIFO)forcertain businesses operating in the U.S.

-more-

A-8

AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

(UNAUDITED)

Twelve Months Ended

Dec. 29, 2007 Dec. 30, 2006

Operating Activities:

Net income

$ 303.5 $ 373.2

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

184.1 154.3

Amortization

50.5 43.6

Deferred taxes

(28.1 ) (7.3 )

Asset impairment and net loss (gain)on sale and disposal of assets

44.0 (7.8 )

Stock-based compensation

21.6 24.1

Other non-cash items, net

(15.4 ) (6.5 )

560.2 573.6

Changes inassets and liabilities, net of the effect of business acquisitions and divestitures

(60.8 ) (62.8 )

Net cash provided by operating activities

499.4 510.8

Investing Activities:

Purchase of property, plant and equipment

(190.5 ) (161.9 )

Purchase of software and other deferred charges

(64.3 ) (33.4 )

Payments for acquisitions

(1,291.9 ) (13.4 )

Proceeds from sale of assets

4.9 15.4

Proceeds from sale of businesses and investments

35.4

Other

(1.4 ) 3.0

Net cash used in investing activities

(1,543.2 ) (154.9 )

Financing Activities:

Net increase (decrease)in borrowings (maturities of 90days or less)

792.2 (137.8 )

Additional borrowings (maturities longer than 90days)

688.8

Payments of debt (maturities longer than 90days)

(222.0 ) (2.3 )

Dividends paid

(171.8 ) (171.8 )

Purchase of treasury stock

(63.2 ) (157.7 )

Proceeds from exercise of stock options, net

36.2 54.1

Other

(4.8 ) 17.7

Net cash provided by (used in) financing activities

1,055.4 (397.8 )

Effect of foreign currency translation on cash balances

1.4 1.9

Increase (decrease)in cash and cash equivalents

13.0 (40.0 )

Cash andcash equivalents, beginning of year

58.5 98.5

Cash andcash equivalents, end of year

$ 71.5 $ 58.5

2006 amounts have been restated to reflect the change in method of accounting for inventory fromlast-in, first-out (LIFO)to first-in, first-out (FIFO)forcertain businesses operating in the U.S.

####

EX-99.23a37439exv99w2.htmEXHIBIT 99.2

exv99w2

EXHIBIT 99.2

Fourth Quarter and Full Year 2008

Financial Review and Analysis

(Unaudited)

January 29, 2007

DRAFT: Friday Evening Final

Certain statements contained in this document are "forward-looking statements" intended to qualify for the safe harborfrom liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements andfinancial or other business targets are subject to certain risks and uncertainties. Actual results and trends may differmaterially from historical or expected results depending on a variety of factors, including but not limited to risks anduncertainties relating to investment in development activities and new production facilities; fluctuations in cost andavailability of raw materials; ability of the Company to achieve and sustain targeted cost reductions, including synergiesexpected from the integration of the Paxar business in the time and at the cost anticipated; ability of the Company togenerate sustained productivity improvement; successful integration of acquisitions; successful implementation of newmanufacturing technologies and installation of manufacturing equipment; the financial condition and inventory strategiesof customers; customer and supplier concentrations; changes in customer order patterns; loss of significant contract(s)or customer(s); timely development and market acceptance of new products; fluctuations in demand affecting sales tocustomers; impact of competitive products and pricing; selling prices; business mix shift; credit risks; ability of theCompany to obtain adequate financing arrangements; fluctuations in interest rates; fluctuations in pension, insuranceand employee benefit costs; impact of legal proceedings, including the Australian Competition and ConsumerCommission investigation into industry competitive practices, and any related proceedings or lawsuits pertaining to thisinvestigation or to the subject matter thereof or of the concluded investigations by the U.S. Department of Justice("DOJ"), the European Commission, and the Canadian Department of Justice (including purported class actions seekingtreble damages for alleged unlawful competitive practices, which were filed after the announcement of the DOJinvestigation), as well as the impact of potential violations of the U.S. Foreign Corrupt Practices Act based on issues inChina; changes in governmental regulations; changes in political conditions; fluctuations in foreign currency exchangerates and other risks associated with foreign operations; worldwide and local economic conditions; impact ofepidemiological events on the economy and the Company's customers and suppliers; acts of war, terrorism, naturaldisasters; and other factors.

The Company believes that the most significant risk factors that could affect its ability to achieve its stated financialexpectations in the near-term include (1) the impact of economic conditions on underlying demand for the Company'sproducts; (2) the degree to which higher raw material and energy-related costs can be passed on to customers throughselling price increases, without a significant loss of volume; (3) the impact of competitors' actions, including pricing,expansion in key markets, and product offerings; (4) potential adverse developments in legal proceedings and/orinvestigations regarding competitive activities, including possible fines, penalties, judgments or settlements; and (5) theability of the Company to achieve and sustain targeted cost reductions, including expected synergies associated withthe Paxar acquisition.

The financial information presented in this document represents preliminary, unaudited financial results.

Slide 3

Use of Non-GAAP Financial Measures

This presentation contains certain non-GAAP measures as defined by SEC rules. Themost directly comparable GAAP measures have been included in the earnings newsrelease for the quarter. Reconciliations of non-GAAP measures to the most directlycomparable GAAP measures are included with the financial statements accompanying theearnings news release for the quarter, along with certain supplemental analysis provided inthis document. (See Attachments A-2 through A-5 to Exhibit 99.1, news release datedJanuary 29, 2007, and Slides 18 and 19 of this document.)

The Company's non-GAAP financial measures exclude the impact of certain events,activities or strategic decisions. The accounting effects of these events, activities ordecisions, which are included in the GAAP measures, may make it difficult to assess theunderlying performance of the Company in a single period. By excluding certainaccounting effects, both positive and negative (e.g., gains on sales of assets, restructuringcharges, asset impairments, effects of acquisitions and related costs, etc.), from certain ofthe Company's GAAP measures, the Company believes that it is providing meaningfulsupplemental information to facilitate an understanding of the Company's "core" or"underlying" operating results. These non-GAAP measures are used internally to evaluatetrends in the Company's underlying business, as well as to facilitate comparison to theresults of competitors for a single period. The Company applies a quarterly tax rate to theaccounting adjustments in order for the year-to-date tax rate on non-GAAP income to beconsistent with the year-to-date GAAP tax rate. (See Attachment A-2 to Exhibit 99.1 fordiscussion of limitations associated with the use of these non-GAAP measures.)

The information in this document has been furnished (not filed) under Form 8-K with theSEC and is posted at the Investors section of the Company's Web site.

Slide 3

Full Year 2007 Overview

Total sales up approximately 1% on an organic basis, reflectingsoft market conditions in several key segments (particularly insecond half of the year) and inventory reductions by OfficeProducts customers

Reported sales up 13%, driven primarily by the Paxar acquisitionand currency translation

Challenging year driven by economic and market conditions,including competitive price environment for the roll materialsbusiness in North America and Europe

Continued strength in emerging markets, particularly for materialsbusinesses in China, India, and the ASEAN region

Completion of Paxar acquisition; identification of $115 to $125 mil.in annual cost synergies when integration is complete

Actions taken to drive annualized cost savings of $45 to $50million (in addition to acquisition integration savings); furtheractions underway

Fourth Quarter Overview

Net sales increased 21.4% over prior year

Net effect of Paxar acquisition was approx. 15%

Currency added 7% ($0.05 benefit to earnings per share)

Sales declined modestly (0.6%) on an organic basis

Operating margin before restructuring and asset impairmentcharges and transition costs associated with the Paxar integrationincreased by 20 basis points vs. prior year

Restructuring and other productivity initiatives more than offset thecost of raw material inflation and competitive price environment

Headwinds also included 40 basis points of margin compression fromaddition of base Paxar business (margin of base business is lowerthan Company-average before integration savings)

Benefited from lower than anticipated corporate expense

Fourth Quarter Overview (continued)

Effective tax rate for the quarter and year was approximately 19%.Annual tax rate expected to be in the 18-20% range for theforeseeable future

Reported E.P.S. of $0.81 includes $0.27 of restructuring charges,asset impairment, and transition costs for Paxar integration

$0.13 of restructuring and asset impairment charges, including $0.08related to Paxar

$0.14 of transition costs associated with Paxar integration

Adjusted E.P.S. of $1.08

Adjusted earnings per share includes $0.03 of estimated accretionfrom the base Paxar business, including interest on acquisitiondebt and amortization of intangibles

Reported Sales Growth 3.5% 3.9% 8.1% 18.5% 21.4%

Management Analysis of Underlying Sales Trends

(1) Reported Sales Growth less the impacts of foreign currency translation andacquisitions, net of divestitures (calculation may not tie due to rounding).

Q4-06

Q1-07

Q2-07

Organic Sales Growth(1) 2.0% 1.3% 2.0% (0.1)% (0.6%)

Acquisitions, Net of

Divestitures (1.1)% (0.8)% 2.5% 14.5% 15.1%

Currency 2.6% 3.5% 3.5% 4.1% 7.0%

Q3-07

Q4-07

Gross Profit Margin (Total Company) 28.1% 29.0% 27.7%

Operating Margin (non-GAAP(2)):

Pressure-Sensitive Materials 9.0% 9.4% 9.5%

Retail Information Services (RIS) 6.8% 7.0% 3.0%

Office and Consumer Products 21.9% 19.9% 18.5%

Other Specialty Converting 2.1% 1.3% 5.7%

Total Company 9.6% 9.0% 9.0%

Impact of RFID on reported margin: (0.4)% (0.4)% (0.4)%

Total Company Excluding RFID 10.0% 9.4% 9.4%

(1) See Slides 18 and 19 for reconciliation to reported results for Total Company and RIS.

(2) Earnings before interest and taxes, restructuring and asset impairment charges, and other items

detailed in Attachments A-3 and A-4 of Exhibit 99.1.

Q4-07 Q4-06 Q3-07

Margin Analysis

(prior periods restated for change in LIFO accounting)

Adjusted(1)

Key Factors Impacting Margin

(see Slide 18 for prior year reconciliation for Paxar)

Gross profit margin before Paxar integration costs improved 10 basispoints compared to prior year margin, as reported

Adjusting the prior year number to include Paxar, gross profit margindeclined 90 basis points

This decline reflects impact of price competition and higher raw materialcosts, as well as negative segment and product mix shifts, partially offset byrestructuring savings and other sources of productivity

Marketing, general and administrative (MG&A) expense ratio beforePaxar integration costs improved by 20 basis points compared to prioryear MG&A ratio, as reported

Adjusting the prior year number to include Paxar, MG&A expense ratioimproved by 170 basis points

Absolute MG&A spending was down about $13 mil. vs. adjusted prior year,as cost reductions more than offset the effects of currency (approx. $11mil.), amortization of intangibles related to Paxar acquisition (approx. $6mil.), and general inflation

PRESSURE-SENSITIVE MATERIALS

Reported sales of $890 mil., up 9% compared with prior year

Organic sales growth of approx. 2%, a modest improvement over Q3 pace

Change in sales for roll materials business by region, adjusted for the effectof currency:

Europe up at low single digit rate, a modest improvement vs. Q3 trend

North America declined at low single digit rate, similar to Q3

Asia growth in mid-teens

South America up mid single digit

Graphics & Reflective business increased at mid single-digit rate beforecurrency

Excluding restructuring and asset impairment charges, operating margindeclined 40 basis points vs. prior year to 9.0%, as the negative effects ofpricing and raw material inflation more than offset benefits from restructuringand other productivity initiatives

Q4-2007 Segment Overview

Q4-2007 Segment Overview (continued)

RETAIL INFORMATION SERVICES

Reported sales of $411 mil., up 144% compared with prior year primarilydue to the Paxar acquisition

Organic sales growth of approx. 1%

Slowdown vs. historical trend and long-term target reflects decline in ordersfor apparel shipped to North American retailers and brand owners, reflectinga weak domestic retail market. Sales on products destined for Europeanmarket remain solid (> 10%)

Operating margin before transition costs, restructuring, and assetimpairment charges declined 90 basis points to 6.8%

Adjusting the prior year number to include Paxar (see Slide 19), operatingmargin before transition costs, restructuring, and asset impairmentcharges declined 20 basis points

Integration synergies of approx. $11 mil. more than offset the effects ofintangible amortization (approx. $6 mil.) and higher corporate cost allocation(approx. $4 mil.)

Realized volume growth insufficient to cover inflation in employee-relatedcosts (e.g., headcount additions and rapid salary inflation in China)

Target Target Est. Pre-Tax Target

Pre-Tax Cost Annual E.P.S. Depreciation & EBITDA(1)

Savings Accretion(1) Amortization Accretion

2008 $80 - $90 $0.35 - $0.45 ~ $70 $175 - $190

2009 $110 - $120 $0.65 - $0.80 ~ $75 $215 - $235

2010 $115 - $125 $0.85 - $1.00 ~ $75 $240 - $260

Financing

Weighted average interest expense of 5% based on current short-term rates

Combination of senior notes, mandatory convertibles, and short-term debt (47% floating)

Maintained BBB+ credit rating

Estimated One-Time Cash Integration Costs(2)

Cash Restructuring / Transition Costs(3): $125 - $135

Capital / IT Investments: $ 40 - $ 45

Total Cash Costs: $165 - $180

(1) Excluding one-time integration costs. Reflects near-term margin compression in base business, offset by lowerinterest expense than previously assumed, with productivity improvement over time. Assumes 3% to 5%compound annual growth on 2007 sales through 2010, with 2008 range reflecting 1% to 4% top line growth.

(2) Excludes non-cash charges (e.g., asset write-offs) taken to either the P&L or balance sheet

(3) Severance, change in control payments, consulting fees, etc.

Paxar Financial Outlook

(Millions,

except as noted)

Estimated Timingof Cash Outflows

2007 45%

2008 35-40%

2009 15-20%

Q4-2007 Segment Overview (continued)

OFFICE AND CONSUMER PRODUCTS

Reported sales of $272 mil., down 5% compared with prior year

Organic sales decline of approx. 8%, due to customer inventory reductions($18 mil. estimated impact to net sales)

Excluding restructuring and asset impairment charges, operating marginincreased 200 basis points to 21.9%, reflecting the benefits of:

Restructuring actions and other productivity initiatives

Tight management of expenses

Selective price increases (effective January 2007) and lower volume-basedrebates

OTHER SPECIALTY CONVERTING

Reported sales of $141 mil., down 2% compared with prior year

Organic sales decline of approx. 6%, or a decline of 2% adjusted for exit of lowmargin distribution business

Excluding restructuring and asset impairment charges, operating marginincreased by 80 basis points to 2.1%, reflecting improvement in RFID

FY 2007 Cash Flow and Y/E Debt-To-Total Capital (Millions, except as noted) 2007 2006

Cash flow from operations $499.4 $510.8 Payment for capital expenditures $190.5 $161.9 Payment for software and other deferred charges $ 64.3 $ 33.4 Free Cash Flow(1) $244.6 $315.5 Dividends $171.8 $171.8 Share Repurchase $ 63.2 $157.7 Total debt to total capital at year-end 53.1% 36.3%

(1) Cash flow from operations less payment for capital expenditures, software and other deferred charges(1) Cash flow from operations less payment for capital expenditures, software and other deferred charges(1) Cash flow from operations less payment for capital expenditures, software and other deferred charges(1) Cash flow from operations less payment for capital expenditures, software and other deferred charges(1) Cash flow from operations less payment for capital expenditures, software and other deferred charges

2008 Earnings Guidance:

Key Considerations

Guidance for adjusted (non-GAAP) earnings per share (see Slide 17 for reconciliationto GAAP): $4.15 to $4.55

Performance within range is highly dependent on organic growth

Low end of range assumes organic growth of 1%, net of about $50 mil. inassumed price reductions Company-wide

High end of range assumes organic growth of 3%, with a more neutral impact frompricing (carryover of 2007 price decline partially offset with increases)

Positive factors contributing to our outlook:

Incremental cost synergies from Paxar integration ($60 to $70 mil.)

Restructuring actions already announced ($25 to $30 mil. incremental to 2007)

Other restructuring and ongoing productivity initiatives

Price increases to offset raw material inflation

Reduced loss from building RFID business ($10 mil.)

Currency translation benefit of 2% to 3% to top-line (E.P.S. benefit of ~ $0.08)

Offsetting factors vs. 2007:

Higher interest ($20 to $30 mil.) and stock option expense (~ $10 mil.)

Raw material inflation (1.5% to 2.0% before cost-outs, or approx. $50 to $55 mil.)

General inflation and reinvestment of savings for growth

Summary of Assumptions:

Reported revenue up 9.5% to 12.5%, including 2% to 3% benefit fromcurrency, and 6.5% from Paxar acquisition effect (anniversary in mid-June)

1.5% to 2.0% inflation in overall raw material costs, offset with benefitfrom global sourcing strategies, material cost-outs, and priceincreases

Operating margin of 9.0% to 10.0%

Interest expense of $125 to $135 mil.

Tax rate in the range of 18% to 20%

Negligible change in shares outstanding

Seasonal considerations - Q1 approx. 20% of full year earnings:

RIS business is seasonally stronger in Q2 and Q4 (impact to totalCompany magnified with Paxar acquisition)

Savings from recently announced productivity actions ramp up in backhalf of the year

Stock option expense is higher in Q1

2008 Earnings Guidance:

Assumptions

2008 Earnings and Free Cash Flow Guidance

2008

Guidance

Reported (GAAP) Earnings Per Share

$3.80 - $4.20

Add Back:

Estimated Integration Transition Costs, Restructuring and

Asset Impairment Charges*

~ $0.35

Adjusted (non-GAAP) Earnings Per Share

$4.15 to $4.55

* Subject to revision as plans are finalized

Capital Expenditures & Investments in Software (ex-integration)

~ $195 mil.

Free Cash Flow (before dividends)

$400 to $450 mil.

Cash Costs of Paxar Integration (before tax)

~ $ 65 mil.

Backup: Fourth Quarter Margin Comparison

Reconciliation for Effects of Paxar - Total Company

Reconciliation for Effects of Paxar - Total CompanyReconciliation for Effects of Paxar - Total Company

Backup: Fourth Quarter Margin Comparison

Reconciliation for Effects of Paxar - RIS

Reconciliation for Effects of Paxar - RISReconciliation for Effects of Paxar - RIS

Back-up: Prior Period Restatements forChange in LIFO Accounting

Rationale for discontinuing LIFO accounting:

Time-consuming to track with no economic benefit

Inconsistent accounting methodology across business units within theCompany (e.g., LIFO accounting only used within the U.S.)

Magnitude of annual LIFO adjustment is typically immaterial to total results:

For summary of adjustments to restate prior period operating income bysegment, see "Q4-07 Restatement for LIFO", posted at the InvestorRelations section of our website

Relations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our websiteRelations section of our website

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