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Baird2006RFIDConferencefinal

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  • 1. Baird 2006 RFID Conference Stan Drobac, VP RFID Strategy September 27, 2006 Page 1
  • 2. Forward-Looking Statements Certain information presented in this document or discussed during this presentation may constitute “forward-looking” statements. These statements and financial or other business targets are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or expected results depending on a variety of factors, including but not limited to fluctuations in cost and availability of raw materials; ability of the Company to achieve and sustain targeted cost reductions; foreign currency exchange rates; worldwide and local economic conditions; impact of competitive products and pricing; selling prices; impact of legal proceedings, including the U.S. Department of Justice (“DOJ”) criminal investigation, as well as the European Commission (“EC”), Canadian Department of Justice, and Australian Competition and Consumer Commission investigations, into industry competitive practices and any related proceedings or lawsuits pertaining to these investigations or to the subject matter thereof (including purported class actions seeking treble damages for alleged unlawful competitive practices, and purported class actions related to alleged disclosure and fiduciary duty violations pertaining to alleged unlawful competitive practices, which were filed after the announcement of the DOJ investigation, as well as a likely fine by the EC in respect of certain employee misconduct in Europe); impact of potential violations of the U.S. Foreign Corrupt Practices Act based on issues in China; impact of epidemiological events on the economy and the Company’s customers and suppliers; successful integration of acquisitions; financial condition and inventory strategies of customers; timely development and market acceptance of new products; fluctuations in demand affecting sales to customers; and other matters referred to in the Company’s SEC filings. The Company believes that the most significant risk factors that could affect its ability to achieve its stated financial expectations in the near-term include (1) potential adverse developments in legal proceedings and/or investigations regarding competitive activities, including possible fines, penalties, judgments or settlements; (2) the impact of economic conditions on underlying demand for the Company's products; (3) the impact of competitors’ actions, including expansion in key markets, product offerings and pricing; (4) the degree to which higher raw material and energy- related costs can be passed on to customers through selling price increases (and previously implemented selling price increases can be sustained), without a significant loss of volume; and (5) the ability of the Company to achieve and sustain targeted cost reductions.
  • 3. 2005 Revenue by Segment Other Specialty Converting 10% Retail Information Services 12% Pressure- Sensitive Materials Office and 57% Consumer Products 21% Division Name Page 3
  • 4. Avery Dennison is committed to RFID leadership •RFID is a label technology •A core AVY market •Fits our manufacturing strengths, channel access •Our #1 growth opportunity •Will impact/create multiple AVY businesses Investment (US$ mil) 2004 2005 2006 est. Capital $12 $17* $15 – $20** Pre-Tax P&L Loss $16 $32 $25 - $30 * Including purchase of land for new facility ** Including acquisition of RF IDentics, Inc. (<$15 million) Page 4
  • 5. Where We Play In RFID Value Chain Converting/ Printing Partners Avery Dennison - Retail Information Services Avery Dennison RFID, RF IDentics Chip Chip Antenna Antenna Inlay Label Distribution End user Design Manufacture Design Manufacture Assembly Conversion & Service Sales through value-adding converters Partnerships with all major chip suppliers aggregates volume, facilitates better customer service Page 5
  • 6. RFID Label Construction Face stock + adhesive Inlay + adhesive Liner Page 6
  • 7. Components of an Inlay Substrate Chip Antenna (typically PET) (etched copper, could be aluminum or silver ink) Page 7
  • 8. Straps are easier to handle than chips Page 8
  • 9. Inlay assembly options: Flip-chip (L), Strap Attach (R) Page 9
  • 10. News: Technology transfer AVY will license strap attach, and provide supporting materials and know-how, to converters and equipment makers • Enables customization, service levels as seen in printed label market – Shortens supply chain – Lets converters produce special designs – Eliminates dependency on standard inlays from a few suppliers • Enables more applications, market growth • Positions AVY more clearly as converters’ preferred partner Page 10
  • 11. News: Acquisition of RF IDentics Acquisition adds complementary technology and capabilities • Rapid prototyping • High-mix, short run production • Encapsulation techniques for durable tags • Converter-oriented approach (added tools for technology transfer program) • Manufacturing and test processes, IP Page 11
  • 12. Competitive Advantages • Outstanding product performance and testing capabilities • Good linkages to all points in value chain; unique ability to enable converters • Superior roll-to-roll manufacturing capability • Superior commercial approach • Corporate credibility / financial strength Page 12
  • 13. RFID business overview Status • Manufacturing speeds, yields beating internal targets • Market expansion remains sluggish, delaying revenue growth • Customers, other partners recognize our technical capabilities • Continue to target 30%+ share of US carton label segment Plans • Broaden scope of activity: – Pharmaceuticals, apparel, other item level – Reusable assets – Add HF tag offerings – Expand activities in Europe / Asia • Extend our reach via the converter network, leveraging strap attach licenses and the technology transfer program Page 13
  • 14. Page 14

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