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Baird_supp Presentation Transcript

  • 1. Insert solid color bar in this area. Extend to dotted guidelines Everyand toEverywhere. of screen. Medium gray is the default. day. far right edge Robert W. Baird & Co. 2008 Growth Stock Conference Insert photo, graphic image or solid color block in this area. Avery Dennison Extend frame to dotted lines above and below and to left and right edges. Go to View > Grids and Guides if you do not see the dotted guidelines in the background Supplemental Materials May 13, 2008
  • 2. Forward-Looking Statements Certain information in 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 risks and uncertainties relating to investment in development activities and new production facilities; fluctuations in cost and availability of raw materials; ability of the Company to achieve and sustain targeted cost reductions, including synergies expected 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 of acquisitions; successful implementation of new manufacturing technologies and installation of manufacturing equipment; the financial condition and inventory strategies of 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 to customers; impact of competitive products and pricing; selling prices; business mix 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 Commission investigation into industry competitive practices, and any related proceedings or lawsuits pertaining to this investigation 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 seeking treble damages for alleged unlawful 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 on issues in China; changes in governmental regulations; changes in political conditions; fluctuations in foreign currency exchange rates and other risks associated with foreign operations; worldwide and local economic conditions; impact of epidemiological events on the economy and the Company’s customers and suppliers; acts of war, terrorism, natural disasters; and other factors. 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) the impact of economic conditions on underlying demand for the Company’s products; (2) the degree to which higher raw material 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 legal proceedings and/or investigations regarding competitive activities, including possible fines, penalties, judgments or settlements; and (5) the ability of the Company to achieve and sustain targeted cost reductions, including expected synergies associated with the Paxar acquisition. Use of Non-GAAP Financial Measures This presentation contains certain non-GAAP measures as defined by SEC rules. As required by these rules, we have provided a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, included in the Appendix section of this presentation.
  • 3. Challenging business conditionsline continued throughfar right edge ofExtend toMedium gray Q1… screen. dotted Insert solid color bar in this area. Optional photo extends guidelines and to to the 1-3/4” actions underway to improve results is the default color. > Slowdown in U.S. retail environment drove sales declines (organic basis) for both RIS and Office Products – Office Products customers reduced inventories… current levels approximately 15-20% lower than same time last year > Volume growth trend in roll materials improved vs. Q4, both in NA and Europe, but Graphics and Reflective declined > PSM margins negatively impacted by pricing, weaker product mix, and raw material inflation > Actions underway to weather the storm and position Company for economic rebound: – Implementing price increases in Roll Materials (worldwide) and Office Products – Executing Paxar integration – Driving increased productivity across organization – Protecting investment in key growth programs (RFID, emerging markets, RIS, other) – Increasing focus on free cash flow… trimming capital/IT budgets and reducing working capital Remain committed to achieving original 2008 cash flow target 2008 Growth Stock 3 Conference
  • 4. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Who we are… AVY by segment 2007 Proforma Revenue By Segment, with Annualized Paxar Sales Other (after intercompany eliminations) Specialty Converting 9% Office and Consumer Products 15% Retail Pressure-sensitive Information Materials Services 52% 24% 2007 Net Sales (as reported) = $6.3 billion 2008 Growth Stock 4 Conference
  • 5. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Who we are… AVY by region 2007 Proforma Revenue By Region, with Annualized Paxar Sales (before intergeographic eliminations) Other* Latin America U.S. Asia Eastern Europe Western Europe 2008 Growth Stock 5 * ”Other” includes Canada, Australia and South Africa Conference
  • 6. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Pressure-sensitive Materials (PSM) Who we are. > Global market share leader How we win. > Innovation > Product breadth and quality > Global footprint 2007 FINANCIAL SNAPSHOT > Regional scale Sales $3.5 bil. Organic Sales Growth 2.8% Operating Margin(1) 9.5% 2008 Growth Stock (1) Excluding restructuring charges and other items – 6 Conference see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP”
  • 7. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. PSM: How do we grow? > Expand in faster-growing international markets by leveraging global and regional scale advantages Other* Latin America Roll Materials 2007 revenues by U.S. geography, before Asia intergeographic eliminations Eastern Europe Western Europe 2008 Growth Stock 7 * ”Other” includes Canada, Australia and South Africa Conference
  • 8. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. PSM: How do we grow? > Drive increased PS penetration of food and beverage segments (shift from glue-applied labels) through product innovation and marketing 2008 Growth Stock 8 Conference
  • 9. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. PSM: How do we grow? > Drive share gain in durable goods applications 2008 Growth Stock 9 Conference
  • 10. Insert solid color bar in this area. Extend to dotted Optional photo extends Transition to pressure-sensitive materials drives and betteredge of screen. Medium gray guidelines a to far right than to the 1-3/4” line 6% total applied cost advantage in labeling is the default color. for breweries Total Applied Cost Comparison Pressure- Glue- Sensitive Applied Cost down more than 6%... … while achieving: > Premium brand image > Design flexibility > Functionality > Ease of product changeover Material Process Costs Tooling Other Costs 2008 Growth Stock 10 Conference
  • 11. Pressure-sensitive penetration photoprime label (brandbar rightsegments Insert solid color ID) edge ofExtend toMedium gray in this area. dotted Optional of extends guidelines and to far screen. to the 1-3/4” line is still less than 25 percent in North Americathe default color. is North American Prime Label (Brand ID) Segments 80% Pharma Wine 60% Personal Care PS Penetration Food 40% Spirits Household 20% Beer Other Beverage 0% 0% 1% 2% 3% 4% 5% 6% 7% 8% Projected Market Growth ('07 - '10 CAGR) 2008 Growth Stock 11 Conference
  • 12. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Joint partnership with customers drives growth Growth • Drive growth in underpenetrated segments (food, beverage, household) How can we help you grow? Productivity • Lean and Six Sigma process improvement How can we help you become • Expanded service programs more cost effective? Innovation • Continual product re-engineering How can we help you look • Specialty application development to the future? 2008 Growth Stock 12 Conference
  • 13. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line Graphics and Reflective… > $600 mil. business with solid growth drivers is the default color. > Emerging markets > Wide-format digital printers > Differentiation through innovation, quality, and service 2008 Growth Stock 13 Conference
  • 14. Sustainable competitive advantages drive superior tobar right edge ofExtend toMedium gray Insert solid color in this area. dotted Optional photo extends guidelines and far screen. to the 1-3/4” line is the default color. profitability and returns vs. peers | Operating Margin* AVY PSM Segment vs. Peers 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2005 2006 2007 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 AVY PSM Segment BMS PS Segment UPM Label Materials Segment 2008 Growth Stock 14 * Excluding restructuring charges Conference
  • 15. Insert solid color bar in this area. Extend to dotted Major initiatives underway Optional photo extends to drive future guidelines and to far right edge of screen. Medium gray to the 1-3/4” line productivity gains for PSM is the default color. > Announced price increases > Product (materials) re-engineering > Raw materials… strategic sourcing initiatives > Quakertown scale-up for films > Coater optimization and shut-downs > Enterprise Lean Sigma 2008 Growth Stock 15 Conference
  • 16. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Retail Information Services (RIS) Who we are. > Largest global supplier in retail tag, ticketing, brand and product identification How we win. > Global scale, local presence > Comprehensive product range that offers global consistency 2007 FINANCIAL SNAPSHOT > Strong relationships with major retailers and brand owners Sales $1.2 bil. > Unparalleled ability to support, Organic Sales Growth 0.5% create and inspire Operating Margin(1) 6.0% 2008 Growth Stock (1) Excluding restructuring charges, integration transition costs, and other items – 16 Conference see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP”
  • 17. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Global Footprint 2008 Growth Stock 17 Conference
  • 18. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Benefits of Paxar acquisition Enhanced the Company’s top-line growth potential > More than doubled sales in segment with above-average growth potential > Combined complementary strengths > Improved ability to meet customer demands for product innovation, quality, and speed of service $115 to $125 mil. of cost synergies > Elimination of headquarters, costs of running public company (~ $25 mil.) > “Front-end” (e.g., sales, product development) redundancies (~ $15 mil.) > In-sourcing of supplies, procurement savings (~ $25 mil.) > Rationalization of production facilities and related overhead ($50 to $60 mil.) 2008 Growth Stock 18 Conference
  • 19. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Integration update: actions taken or underway Restructuring actions approved to-date (~ $85 mil. of savings) Close former Paxar corporate headquarters Completed Consolidate sales force Completed Integrate Korea, Singapore and Thailand Completed Restructure Mexico, El Salvador and Dominican Republic By Q2’08 Close Paxar manufacturing unit in Germany End of ‘08 Transfer production lines to more cost-effective locations Q4’07 - Q4’08 Other End of ‘08 Procurement / in-sourcing related projects (~ $25 mil. of savings): Absorb third party or Paxar in-house laminates into Q3’07 - Q2’08 Roll Materials Division Execute procurement actions to leverage scale Q3’07 - Q3’08 2008 Growth Stock 19 Conference
  • 20. Integration cost synergies Optional photo extendsto substantialbar right edge ofExtend toMedium gray Insert solid color in this area. dotted create path guidelines and to far screen. to the 1-3/4” line is the default color. margin improvement over medium-term Adjusted RIS Operating Margin* 6% -1% 12% + 6% 2007 Combined Incremental 2009/2010 Incremental Other Productivity, Goodwill Net of Incremental Synergies (Incl. Paxar prior Amortization Investments & Cost to acquisition) and Corp. Fee Inflation 2008 Growth Stock * Excluding restructuring charges, integration transition costs, and other items – 20 Conference see Appendix, Reconciliation of Non-GAAP Financial Measures to GAAP”
  • 21. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line RIS growth through innovation is the default color. > Digital Printing Services > Heat Transfer > Packaging > RFID Applications 2008 Growth Stock 21 Conference
  • 22. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Office and Consumer Products (OCP) Who we are. > Global leader in key Printable Media categories (labels, index dividers) How we win. > Proprietary products > Ubiquitous software templates and other consumer-use “enablers” 2007 FINANCIAL SNAPSHOT > Powerful consumer brand Sales $1.0 bil. > Preferred supplier Organic Sales Change (6.6)% Operating Margin(1) 17.6% 2008 Growth Stock (1) Excluding restructuring charges and other items – 22 Conference see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP”
  • 23. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. OCP: Key Strategic Priorities Focus on core products, growth projects with rapid payback > “Product renovation” to maintain / grow share vs. private label offerings Maintain / expand margin and ROTC > Product mix improvement > Price increases to offset raw material inflation > Enterprise Lean Sigma > Capital investment substantially below D&A 2008 Growth Stock 23 Conference
  • 24. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Renovation example: Labels Objective: Deliver consumer preferred, IP-protected, value-added product that drives sales growth Strategy: Optimize products by application (addressing, return addressing, shipping and filing/identification) TrueBlock Next Gen Repositionable Clear Internet White Larger Return Shipping and Filing Easy Peel Easy Peel Shipping Easy Peel Address Q4 2005 Q2 2006 Q4 2006 Q4 2007 Q4 2008 Q4 2008 Q4 2009 2008 Growth Stock 24 Conference
  • 25. Insert solid color bar in this area. Extend to dotted ELS continues to drive operationalextends Optional photo to the 1-3/4” line transformation to far right edge of screen. Medium gray guidelines and is the default color. for Office Products North America Reduction in supply chain costs 2008 est. vs. ’01/’02 Supply chain headcount 39% Direct labor costs 51% Improved service, quality, and safety record Service – line fill rate 2.2 pts to 97.8% Defects per million 85% Improved capital efficiency and ROTC Plant/DC square footage 35% Fixed assets 36% ROTC 12.6 pts. 2008 Growth Stock 25 Conference
  • 26. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. RFID Carton and pallet tagging Item-level tagging… apparel, airline baggage, pharmaceutical, etc. AD-220/AD-221 AD-420/AD-421 AD-612 AD-622 AD-812/AD-811 AD-820/AD-821 2008 Growth Stock 26 Conference
  • 27. Insert solid color bar in this area. Extend to dotted Optional photo extends What does it mean for investors? line guidelines and to far right edge of screen. Medium gray to the 1-3/4” is the default color. Long-term earnings growth… Earnings Per Share, Fully Diluted $4.00 to $4.30 $3.91 $3.60 to $3.84 Projecting 5 year CAGR in adjusted $3.90 $3.72 EPS of 8.7% to 10.2% through 2008 $3.45 $3.07 $3.06 $2.78 $2.67 $2.64 $2.26 2003 2004 2005 2006 2007 2008 Guidance (revised) EPS - GAAP EPS - Adjusted* Target: > 12% compound annual growth through 2010 2008 Growth Stock * Excludes restructuring charges, gains on sale of assets, and other items – 27 Conference see Appendix for detail.
  • 28. Insert solid color bar in this area. Extend to dotted Optional photo extends What does it mean for investors? line guidelines and to far right edge of screen. Medium gray to the 1-3/4” is the default color. Improving returns… Adjusted Return on Total Capital* 16.0% 15% 14.3% 13.0% 12.8% 12.7% ~ 12.0% 2003 2004 2005 2006 2007 2008 Guidance 2010 Target Improvement in returns temporarily halted by acquisition effect… expect to resume progress in ‘09 2008 Growth Stock * Excludes restructuring charges, gains on sale of assets, and other items – 28 Conference see Appendix for detail.
  • 29. Insert solid color bar in this area. Extend to dotted Optional photo extends What does it mean for investors?line guidelines and to far right edge of screen. Medium gray to the 1-3/4” is the default color. Increase in free cash flow… 2008 Guidance (revised) 2007 (Millions, except as noted) Cash flow from operations $600 to $640 $499.4 Payment for capital expenditures(1) $135 to $140 $190.5 Payment for software and other deferred charges(2) $55 to $60 $ 64.3 Free Cash Flow(3) $400 to $450 $244.6 Dividends ~ $180 $171.8 Share Repurchase --- $ 63.2 Total debt to total capital at year-end 45% to 50% 53.1% Free cash flow up ~ 75% in 2008; current FCF Yield ~ 9% (1) 2008 Guidance includes $5 - $10 mil. in capital investments related to Paxar integration 2008 Growth Stock 29 (2) 2008 Guidance includes $15 - $20 mil. in software investments related to Paxar integration Conference (3) Cash flow from operations less payment for capital expenditures, software and other deferred charges
  • 30. Insert solid color bar in this area. Extend to dotted Optional photo extends What does it mean for investors?line guidelines and to far right edge of screen. Medium gray to the 1-3/4” is the default color. Dividend increase… 32 consecutive years of dividend increase $1.80 $1.60 $1.40 $1.20 Dividends per share $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 '7 '7 '8 '8 '9 '9 '0 '0 '7 '8 '8 '8 '9 '9 '9 '0 '0 Current Dividend Yield ~ 3% 2008 Growth Stock 30 Conference
  • 31. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Wrap-up: 2008 Priorities 1. Capture Paxar integration synergies… deliver on RIS growth commitment 2. Improve trajectory of PSM business: > Continued growth in emerging markets > Investment in new application growth > Accelerated productivity improvement > Price increases to offset raw material inflation 3. Continue to renovate core Office Products; manage for margin/cash flow 4. Accelerate Enterprise Lean Sigma efforts Company- wide to improve productivity and enhance product quality and customer service 5. Deliver significant increase in free cash flow 2008 Growth Stock 31 Conference
  • 32. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Wrap-up: Medium-term Financial Targets Adjusted EPS (1) > 12% CAGR through 2010 ROTC (1) 15% by 2010 Free Cash Flow (2) > 30% CAGR through 2010 (1) Excluding restructuring charges, gains on sale of assets, and other items 2008 Growth Stock 32 (2) Cash flow from operations less payment for capital expenditures, software and other deferred Conference charges
  • 33. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Appendix 2008 Growth Stock 34 Conference
  • 34. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. 2008 Earnings and Free Cash Flow Guidance 2008 Guidance (revised) Reported (GAAP) Earnings Per Share $3.60 to $3.90 Add Back: Estimated Integration Transition Costs, Restructuring and Asset Impairment Charges* ~ $0.40 Adjusted (non-GAAP) Earnings Per Share $4.00 to $4.30 Capital Expenditures and Investments in Software (ex-integration) ~ $170 mil. Cash Costs of Paxar Integration (before tax) ~ $ 65 mil. Free Cash Flow (before dividends) $400 to $450 mil. 2008 Growth Stock 35 * Subject to revision as plans are finalized Conference
  • 35. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. 2008 Earnings Guidance (revised): Key Considerations Guidance for adjusted (non-GAAP) earnings per share: $4.00 to $4.30 (from $4.15 to $4.55 previously) > Performance within range is highly dependent on organic growth and product mix > Midpoint of range assumes no meaningful change in macro-economic environment over the balance of the year 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 partially offset raw material inflation > Reduced loss from building RFID business ($10 mil.) > Currency translation benefit of approx. 5% to top-line (E.P.S. benefit of ~ $0.16) > Lower tax rate Offsetting factors vs. 2007: > Higher interest ($10 to $15 mil.) and equity-based comp expense (~ $10 mil.) > Raw material inflation (~2.5% before cost-outs, or approx. $70 mil.) > General inflation and reinvestment of savings for growth 2008 Growth Stock 36 Conference
  • 36. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. 2008 Earnings Guidance (revised): Key Assumptions Current Assumptions Previous Assumptions > Reported revenue up 10% to 12%, > Reported revenue up 9.5% to 12.5%, including approximately 5% benefit from including 2% to 3% from currency and currency, and 7% from acquisitions 6.5% from acquisitions – Sales up 1% to 3% on an – Sales roughly flat on an organic basis, organic basis with modest volume growth offset by negative price/mix > Approx. 2% ($50-$55 mil.) > Raw material cost inflation of approximately 2.5% (~ $70 mil.), offset with benefit from global sourcing strategies, material cost-outs, and price increases > 9% to 10% > Operating margin of 8.5% to 9.0% > $125 to $135 mil. > Interest expense of $115 to $120 mil. > Effective tax rate of 15% to 18% (approx. > 18% - 20% 20% effective quarterly tax rate in Q2-Q4) > Negligible change in shares outstanding > Negligible change 2008 Growth Stock 37 Conference
  • 37. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. First Quarter 2008 Overview Net sales increased 18.4% over prior year > Net effect of Paxar acquisition was approx. 14% > Currency added 6% ($0.05 benefit to earnings per share) > Sales declined approximately 2% on an organic basis Operating margin before restructuring and asset impairment charges and transition costs associated with the Paxar integration declined by 200 basis points vs. prior year > Decline reflects carryover of 2007 price reductions in the roll materials business, raw material inflation, negative segment and product mix, as well as reduced fixed cost leverage > Headwinds also included 50 basis points of margin compression from addition of base Paxar business (margin of base business is lower than Company-average before integration savings) 2008 Growth Stock 38 Conference
  • 38. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. First Quarter 2008 Overview (continued) Annual effective tax rate for 2008 expected to be in the 15%-18% range (down from 18%-20% originally) > Ongoing annual tax rate now expected to be in the 17%-19% range for the foreseeable future (down from 18%-20% previously), subject to significant volatility from quarter to quarter > Effective tax rate for the quarter was negative (12.3%), primarily due to recognition of $21 million tax benefit from increased ability to realize deferred tax assets Reported E.P.S. of $0.69 includes $0.11 of restructuring charges, asset impairment, and transition costs for Paxar integration > $0.06 of transition costs associated with Paxar integration > $0.05 of restructuring and asset impairment charges Adjusted E.P.S. of $0.80 2008 Growth Stock 39 Conference
  • 39. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. First Quarter 2008 Segment Overview PRESSURE-SENSITIVE MATERIALS Reported sales of $920 mil., up 7% compared with prior year > Organic sales growth of approx. 1%, slower than Q4 pace Change in sales for roll materials business by region, adjusted for the effect of currency and intercompany sales: > Europe up at low single digit rate (improved vs. Q4 pace) > North America declined at low single digit rate (similar to 2H-07) > Asia growth in mid-teens > South America roughly comparable to prior year Graphics & Reflective business down mid-single-digit rate before currency Excluding restructuring and asset impairment charges, operating margin declined 170 basis points vs. prior year to 8.0%, as the negative effects of pricing and raw material inflation more than offset benefits from restructuring and other productivity initiatives 2008 Growth Stock 40 Conference
  • 40. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. First Quarter 2008 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $372 mil., up 138% compared with prior year due to the Paxar acquisition > Organic sales decline of approx. 1% > Continued weakness of domestic retail apparel market; sales on products destined for European market remained solid Operating margin before transition costs and restructuring charges declined 330 basis points to 1.0%, as integration synergies (approx. $17 mil.) and other productivity actions were more than offset by the effects of: > Employee-related / raw material cost inflation > Reduced fixed cost leverage > Negative price/mix > Intangible amortization (approx. $6 mil.) and higher corporate cost allocation (approx. $4 mil.) associated with Paxar 2008 Growth Stock 41 Conference
  • 41. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Paxar Integration Update > Targeting up to $125 mil. of annual synergy savings when complete > Realized approx. $17 mil. of savings in Q1, up from $11 mil. in Q4 > Over 75% of targeted savings expected to be captured in run rate by year-end > No change to anticipated cash costs of integration ($165 - $180 mil) > Last piece of permanent financing completed in February 2008 Growth Stock 42 Conference
  • 42. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. First Quarter 2008 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $194 mil., down 9% compared with prior year > Organic sales decline of approx. 12%, due in part to customer inventory reductions ($12 mil. estimated impact to net sales) Excluding restructuring charges, operating margin declined 150 basis points to 11.1%, as the benefit of restructuring and other productivity initiatives was more than offset by reduced fixed cost leverage OTHER SPECIALTY CONVERTING Reported sales of $159 mil., comparable to prior year > Organic sales decline of approx. 4%, or roughly comparable to prior year when adjusted for exit of low margin distribution business Excluding restructuring charges, operating margin declined 130 basis points to 5.8%, as the benefit of restructuring and other productivity initiatives as well as a reduction in the loss from RFID was more than offset by reduced fixed cost leverage and cost inflation 2008 Growth Stock 43 Conference
  • 43. Insert solid color bar in this area. Extend to dotted Optional photo extends guidelines and to far right edge of screen. Medium gray to the 1-3/4” line is the default color. Reconciliation of Non-GAAP Financial Measures to GAAP 2008 Growth Stock 44 Conference
  • 44. Organic Sales Growth by Segment: 2007 Pressure Retail Office and Other Specialty Sensitive Information Consumer Converting ($ in millions) Materials Services Products Businesses 2006 GAAP Sales $3,236.3 $667.7 $1,072.0 $599.9 Impact of 2007 Currency Changes $174.3 $16.7 $25.3 $15.6 2006 Adjusted Non-GAAP Sales $3,410.6 $684.4 $1,097.3 $615.5 2007 GAAP Sales $3,497.7 $1,174.5 $1,016.2 $619.4 Est. Impact of Acq.& Divestitures ($7.8) $486.6 ($9.2) ($1.4) 2006 Adjusted Non-GAAP Sales $3,505.5 $687.9 $1,025.4 $620.8 GAAP Sales Growth 8.1% 75.9% -5.2% 3.3% Organic Sales Growth 2.8% 0.5% -6.6% 0.9% 45
  • 45. OPERATING MARGIN BY SEGMENT FY 2005 FY 2006 FY 2007 ($ in millions, except as noted) Pressure Sensitive Materials Net Sales 3,114.5 3,236.3 3,497.7 Operating income, as reported 264.1 301.6 318.7 Operating margin, as reported 8.5% 9.3% 9.1% Non-GAAP adjustments: Restructuring costs, asset impairment charges, and other items 23.0 9.3 13.8 Adjusted non-GAAP operating income 287.1 310.9 332.5 Adjusted non-GAAP operating margin 9.2% 9.6% 9.5% Retail Information Services Net Sales 630.4 667.7 1,174.5 Operating income, as reported 37.7 45.7 -4.0 Operating margin, as reported 6.0% 6.8% -0.3% Non-GAAP adjustments: Transition costs, restructuring costs, asset impairment charges, and other items 7.5 11.2 74.2 Adjusted non-GAAP operating income 45.2 56.9 70.2 Adjusted non-GAAP operating margin 7.2% 8.5% 6.0% Prior period reported numbers restated to conform with Q4-07 change in inventory accounting methodology and reclassification of units between segments. 46
  • 46. OPERATING MARGIN BY SEGMENT FY 2005 FY 2006 FY 2007 ($ in millions, except as noted) Office and Consumer Products Net Sales 1,136.1 1,072.0 1,016.2 Operating income, as reported 161.9 187.4 173.6 Operating margin, as reported 14.3% 17.5% 17.1% Non-GAAP adjustments: Restructuring costs, asset impairment charges, and other items 21.8 (2.3) 4.8 Adjusted non-GAAP operating income 183.7 185.1 178.4 Adjusted non-GAAP operating margin 16.2% 17.3% 17.6% Other Specialty Converting Businesses Net Sales 592.5 599.9 619.4 Operating income, as reported 14.9 17.3 25.4 Operating margin, as reported 2.5% 2.9% 4.1% Non-GAAP adjustments: Restructuring costs and asset impairment charges 6.2 3.7 4.2 Adjusted non-GAAP operating income 21.1 21.0 29.6 Adjusted non-GAAP operating margin 3.6% 3.5% 4.8% EBIT Impact of RFID (32.5) (31.8) (25.4) Adj non-GAAP operating income ex-RFID 53.6 52.8 55.0 Adj non-GAAP operating margin ex-RFID 9.1% 8.8% 9.0% Prior period reported numbers restated to conform with Q4-07 change in inventory accounting methodology and reclassification of units between segments. 47
  • 47. Earnings Per Share*, GAAP vs. Adjusted 2008 Guidance 2003 2004 2005 2006 2007 (revised) GAAP EPS 2.67 2.78 2.26 3.72 3.07 $3.60 to $3.90 Restructuring costs, asset impairment 0.22 0.27 0.40 0.27 0.49 ~ $0.25 charges, and other items Loss (income) from discontinued (0.25) 0.01 0.65 (0.15) - - operations - - 0.14 - - - Tax Expense on Repatriated Earnings Transition costs associated with the Paxar - - - - 0.35 ~ $0.15 integration Adjusted EPS 2.64 3.06 3.45 3.84 3.91 $4.00 to $4.30 * Prior period reported numbers restated to conform with Q4-07 change in inventory accounting methodology. Historical figures have NOT been adjusted to remove the contribution from businesses subsequently divested or discontinued. 48
  • 48. ROTC*, GAAP vs. Adjusted FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 ($ in millions, except as noted) GAAP Average Invested Capital (5 point average) 2,421.0 2,671.1 2,717.5 2,667.5 3,649.8 Net Income 267.4 279.0 226.8 373.2 303.5 Addback: After-tax interest expense 42.4 44.0 46.0 45.7 85.1 Return on Average Total Capital 12.8% 12.1% 10.0% 15.7% 10.6% Adjusted Adj. Average Invested Capital (5 point average) 2,419.9 2,690.2 2,752.9 2,695.4 3,683.8 Net Income 267.4 279.0 226.8 373.2 303.5 Addback: After-tax interest expense 42.4 44.0 46.0 45.7 85.1 Addback: After-tax transition costs, restructuring costs, asset impairment charges, impact of discontinued ops, and other items -3.0 27.6 119.8 12.5 83.0 Adjusted Return on Average Total Capital 12.7% 13.0% 14.3% 16.0% 12.8% * Prior period reported numbers restated to conform with Q4-07 change in inventory accounting methodology. Historical figures have NOT been adjusted to remove the contribution from businesses subsequently divested or discontinued. 49