Avery Dennison Reports 4th Quarter and Year-End 2007 Earnings

Business Wire, Jan 29, 2008

PASADENA, Calif. -- Avery Dennison Corporation (NYSE:AVY):

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Avery Dennison Corporation (NYSE:AVY) today reported net income of $79.4 million or $0.81 per share, compared with $104.7 million or $1.04 per share in the prior year. Results included restructuring and asset impairment charges, transition costs associated with the integration of Paxar, and other items, totaling $0.27 and $0.05 in the fourth quarters of 2007 and 2006, respectively. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".)

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

The Company reported net income of $303.5 million or $3.07 per share for the full year 2007, compared with $373.2 million or $3.72 per share in the prior year. Results included restructuring and asset impairment charges, transition costs associated with the integration of Paxar, and other items, totaling $0.84 per share in 2007 and $0.12 per share in the prior year. Net sales were $6.31 billion in 2007, compared to $5.58 billion in the previous year. (See Attachment A-3: "Preliminary Reconciliation 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 businesses operating in the U.S. All the Company's businesses now utilize the FIFO method of accounting for inventory. All results have been presented on a FIFO basis as if the accounting change occurred as of January 1, 2006.

"2007 was a challenging year as U.S. retail markets slowed and market conditions for our pressure-sensitive materials business weakened, causing us to miss our revenue growth and profit objectives for the year," said Dean A. Scarborough, president and chief executive officer of Avery Dennison. "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 global retail information services market," he added. "The integration of Paxar with our Retail Information Services Group has been virtually seamless to our customers and is on track to realize annual cost synergies of nearly $125 million by the end of 2009."

"We continue to achieve solid results in the emerging markets, particularly in China and India where 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 in 2007 nearly tripling from the previous year. Buoyed by Paxar's RFID business, we expect sales of RFID products to reach $50 million in 2008."

Additional Fourth Quarter Financial Highlights

(For a more detailed presentation of the Company's results for the quarter, see Fourth Quarter 2007 Financial Review and Analysis, posted at the Company's Web site at www.investors.averydennison.com.)

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

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

Segment Highlights

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

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Outlook for the Year

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

The Company's earnings expectations reflect an assumption of reported revenue growth in the range of 9.5 to 12.5 percent, including a 6.5 percent contribution from the Paxar acquisition and an estimated 2 to 3 percent benefit from currency translation.

(For a more detailed presentation of the Company's assumptions underlying its 2008 earnings expectations, see Fourth Quarter and Full Year 2007 Financial Review and Analysis, posted at the Company's Web site at www.investors.averydennison.com.)