Wachovia09-09-08
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Wachovia09-09-08 Wachovia09-09-08 Document Transcript

  • Insert solid color bar in this area. Extend to dotted guidelines Everyand toEverywhere. of screen. Medium gray is the default. day. far right edge Investor Presentation and Supplemental Information 081308US Forward-Looking Statements Certain statements contained in this document are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking 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. This presentation includes references to the Company’s 2008 guidance, which was included in the Company’s second quarter earnings announcement as of July 22, 2008 and was current only as of that date. By including this previously provided guidance in this presentation, we are not affirming nor updating the previously released guidance, which was current only as of July 22, 2008. The Company undertakes no duty to update its forward-looking statements, including the earnings guidance. 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 “Supplemental Materials” handout accompanying this presentation. 1
  • Actions underway to address 1-3/4” line challenging near-termbar right edge ofExtend toMedium gray Insert solid color in this area. dotted Optional photo extends guidelines and to far screen. to the business conditions is the default color. > Sales trends somewhat mixed: – Organic sales growth improved sequentially for the PSM Segment; emerging markets remain strong for materials businesses – Weakness in the U.S. retail environment continued to drive sales declines (organic basis) for a number of businesses, including RIS and Office Products – European end market weakened for RIS > Operating margin negatively impacted by raw material and energy inflation, pricing (carryover from prior year), and unfavorable segment/product mix > Actions underway to weather the storm and position Company for economic rebound: – Implementing additional price increases in Roll Materials and Office Products; new pricing actions taken in RIS – Executing Paxar integration – Driving increased productivity across organization – Protecting investment in key growth programs (RFID, emerging markets, RIS, other) – Projecting significant increase in free cash flow over the next few years 3 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 4 2
  • 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 5 * ”Other” includes Canada, Australia and South Africa 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% (1) Excluding restructuring charges and other items – 6 see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP” 3
  • 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 7 * ”Other” includes Canada, Australia and South Africa 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 8 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. PSM: How do we grow? > Drive share gain in durable goods applications 9 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 10 5
  • 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 the default color. is still less than 25 percent in North America 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) 11 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 Joint partnership with customers drives growth color. is the default 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? 12 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 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 13 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 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 AVY PSM Segment BMS PS Segment UPM Label Materials Segment * Excluding restructuring charges 14 Data for BMS and UPM taken from public filings and earnings releases 7
  • 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 15 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% (1) Excluding restructuring charges, integration transition costs, and other items – 16 see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP” 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. Global Footprint 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. 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.) 18 9
  • 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 * Excluding restructuring charges, integration transition costs, and other items – 19 see Appendix, Reconciliation of Non-GAAP Financial Measures to GAAP” 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 20 10
  • 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% (1) Excluding restructuring charges and other items – 21 see Appendix, “Reconciliation of Non-GAAP Financial Measures to GAAP” 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 22 11
  • 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 23 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. 24 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. 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 25 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 $3.91 $3.75 to $3.95 $3.84 Projecting 5 year CAGR in adjusted $3.72 EPS of ~ 7.8% through 2008 $3.35 to $3.45 $3.55 $3.07 $3.06 $2.78 $2.67 $2.64 $2.26 2003 2004 2005 2006 2007 2008 Guidance (provided on 7/22/08)(2) EPS - Adjusted(1) EPS - GAAP Target: > 12% compound annual growth in adjusted EPS through 2010 (1) Excludes restructuring charges, gains on sale of assets, and other items – see “Supplemental 26 Materials” handout for detail. (2) Guidance not affirmed or updated. 13
  • 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(1) 16.0% 15% 14.3% 13.0% 12.8% 12.7% ~ 12.0% (2) 2003 2004 2005 2006 2007 2008 Guidance 2010 Target Improvement in returns temporarily halted by acquisition effect… expect to resume progress in ‘09 (1) Excludes restructuring charges, gains on sale of assets, and other items – see “Supplemental 27 Materials” handout for detail. (2) Guidance not affirmed or updated. 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” ~ 65% boost to free cash flow in 2008 (current default color. is the FCF yield ~ 9%) 2008 Guidance (provided on 2007 (Millions, except as noted) 7/22/08)(3) Cash flow from operations $580 to $610 $499.4 expenditures(1) Payment for capital ~ $135 $190.5 Payment for software and other deferred charges(1) $55 to $60 $ 64.3 ~ $15 $0.0 Proceeds from sale of investments, net Free Cash Flow(2) > $400 $244.6 Dividends ~ $180 $171.8 Share Repurchase --- $ 63.2 Total debt to total capital at year-end 45% to 50% 53.1% Target: > 30% compound annual growth through 2010 (1) Includes Paxar integration related expenditures (2) Net cash provided by operating activities (as reported), less purchase of property, plant, 28 equipment, software, and other deferred charges, plus proceeds from sale of investments, net (3) Guidance not affirmed or updated 14
  • 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 increases through 2007 $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 '7 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '0 '0 '0 '0 Current Dividend Yield ~ 3% 29 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 30 15
  • 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 31 (2) Cash flow from operations less payment for capital expenditures, software and other deferred charges 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. Appendix 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 2008 Earnings and Free Cash Flow Guidance default color. is the 2008 Guidance (provided on 7/22/08)(2) Reported (GAAP) Earnings Per Share $3.35 to $3.55 Add Back: Estimated Integration Transition Costs, Restructuring and Asset Impairment Charges(1) ~ $0.40 Adjusted (non-GAAP) Earnings Per Share $3.75 to $3.95 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 mil. (1) Subject to revision as plans are finalized 34 (2) Guidance not affirmed or updated. 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 7/22/08)(1) is the default color. 2008 Earnings Guidance (provided on : Key Considerations Guidance for adjusted (non-GAAP) earnings per share (see Slide 35 for reconciliation to GAAP): $3.75 to $3.95 (from $4.00 to $4.30 previously) > Reduction in expectations reflects $35 to $45 mil. increase in expected raw material inflation for the year compared to previous estimate, alongside weakening end market demand, and incrementally weaker segment mix 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 (~ 3.5% before cost-outs, or approx. $110 mil.) > General inflation and reinvestment of savings for growth 35 (1) Guidance not affirmed or updated. 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 2008 Earnings Guidance (provided on 7/22/08)(1):isKey Assumptions the default color. Current Assumptions Previous Assumptions > Reported revenue up nearly 12%, > Reported revenue up 10% to 12%, including approx. 5% benefit from including approx. 5% benefit from currency, and 7% from acquisitions currency, and 7% from acquisitions – Sales roughly flat on an organic – Sales flat to down slightly on an basis, with modest volume organic basis… incrementally higher growth offset by negative sales benefit from pricing vs. April price/mix estimate – Unfavorable segment mix vs. previous assumption (slower growth in higher variable margin businesses) > Approx. 2.5% (~ $70 mil.) > Raw material cost inflation of approximately 3.5% (~ $110 mil.), partially offset with benefit from global sourcing strategies, material cost-outs, and price increases > > Operating margin ~ 8% 8.5% to 9.0% > > Unchanged from previous Interest expense of $115 to $120 mil. > > Effective tax rate of 14% to 16% 15% - 18% > > Unchanged from previous Negligible change in shares 36 (1) Guidance not affirmed or updated. 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. Second Quarter 2008 Overview Net sales increased 20% over prior year; 1% decline in sales on an organic basis > Net effect of Paxar and DM Label acquisitions was approx. 14% > Currency added 7% ($0.05 benefit to earnings per share) Operating margin before restructuring and asset impairment charges and transition costs associated with the Paxar integration declined by 130 basis points vs. prior year > Decline reflects raw material and energy inflation, carryover of 2007 price reductions in the roll materials business, and negative segment and product mix > Headwinds also included 50 basis points of margin compression from addition of base Paxar business (margin of base business lower than Company-average before integration savings) > Margin improvement expected over balance of year, as benefits from pricing and productivity actions are realized 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 Second Quarter 2008 Overview (continued) is the default color. Effective tax rate for the quarter was 19% > Annual effective tax rate for 2008 expected to be in the 14%-16% range > Ongoing annual tax rate expected to be in the 17%-19% range for the foreseeable future, subject to significant volatility from quarter to quarter Reported E.P.S. of $0.93 includes $0.10 of restructuring charges, asset impairment, and transition costs for Paxar integration, net of gain on sale of investment > $0.05 of transition costs associated with Paxar integration > $0.09 of restructuring and asset impairment charges > $0.04 gain on sale of investment Adjusted E.P.S. of $1.03 38 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. Second Quarter 2008 Segment Overview PRESSURE-SENSITIVE MATERIALS Reported sales of $980 mil., up 11% compared with prior year > Organic sales growth of approx. 3%, representing modest pick-up from Q1 pace Change in sales for roll materials business by region, adjusted for the effect of currency and intercompany sales: > Europe up at mid single digit rate > North America declined at low single digit rate > Asia growth in mid teens > South America up at low single digit rate Graphics & Reflective business down low single digit rate before currency Excluding restructuring charges and other items, operating margin declined 170 basis points vs. prior year to 8.2%, as the negative effects of raw material inflation and prior year price reductions more than offset the initial benefits of price increases, restructuring and other productivity initiatives > Incremental benefit of pricing actions expected to be realized in second half of the year 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. Second Quarter 2008 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $438 mil., up 100% compared with prior year due to the Paxar and DM Label acquisitions > Organic sales decline of approx. 3% > Continued weakness of domestic retail apparel market; sales growth trend for products destined for European market remained positive, but weakened considerably compared to pace delivered in last few quarters Adjusting the prior year number to include pre-acquisition Paxar results (see Slide 44), operating margin before transition costs, restructuring, and other items declined 80 basis points to 7.0%, as integration savings (approx. $20 mil.) and other productivity actions were more than offset by the effects of: > Lower volume (reduced fixed cost leverage) > Employee-related, raw material and other cost inflation > Incremental intangible amortization (approx. $5 mil.) and higher corporate cost allocation (approx. $4 mil.) associated with Paxar 40 20
  • 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 approximately $120 mil. of annual synergies when complete; roughly 85% of targeted synergies expected to be captured in Company’s run rate by year-end* > Total synergies of approximately $21 mil. in Q2, up from $18 mil. in Q1 > No change to anticipated cash costs of integration ($165 - $180 mil) – $109 mil. of cash integration costs incurred since deal close – Approximately $35 mil. in cash costs to be paid in second half of 2008 – Balance (approx. $30 mil.) to be paid in 2009/2010, over half of which relates to IT investment * Approx. 15% of this synergy is captured outside of RIS, due to in-sourcing of materials (benefits 41 PSM segment), and reduction in corporate expense 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. Second Quarter 2008 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $255 mil., down 3% compared with prior year > Organic sales decline of approx. 6%, due to weak end market demand in North America and delay in orders related to back-to-school season Excluding restructuring charges, operating margin improved by 110 basis points to 17.3%, as the benefit of restructuring and other productivity initiatives, as well as favorable product mix, more than offset inflation and reduced fixed cost leverage associated with lower sales OTHER SPECIALTY CONVERTING Reported sales of $155 mil., down 4% compared with prior year > Organic sales decline of approx. 9%, or approx. 7% when adjusted for exit of low margin distribution business Operating margin declined by 90 basis points to 3.5%, as the benefit of productivity initiatives, as well as a reduction in the loss from RFID, was more than offset by reduced fixed cost leverage and cost inflation 42 21
  • Insert solid color bar in this area. Extend to dotted Optional photo extends Second Quarter Margin Comparison Reconciliationtofor edge of screen. Medium gray guidelines and far right to the 1-3/4” line is the default color. Effects of Paxar – RIS Q2-08 Q2-07 Variance ($ in millions, except as noted) Paxar1 Total RIS Total Fav (Unf) Net Sales, as reported 438.2 219.4 207.5 426.9 2 Adjusted Non-GAAP Operating Income 30.5 21.3 12.0 33.3 2 Adjusted Non-GAAP Operating Margin 7.0% 9.7% 5.8% 7.8% (80) b.p. 1) For the 11 weeks of 2nd quarter prior to acquisition close (values provided by Paxar upon close -- unaudited results) 2) See Attachment A-4 to Exhibit 99.1 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 44 22
  • 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 $620.8 GAAP Sales Growth 8.1% 75.9% -5.2% 3.3% Organic Sales Growth 2.8% 0.5% -6.6% 0.9% 45 OPERATING MARGIN BY SEGMENT FY 2005 FY 2006 FY 2007 ($ 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 23
  • 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 Earnings Per Share(1), GAAP vs. Adjusted 2008 Guidance (provided on 7/22/08)(2) 2003 2004 2005 2006 2007 GAAP EPS 2.67 2.78 2.26 3.72 3.07 $3.35 to $3.55 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 Tax Expense on Repatriated Earnings - - 0.14 - - - Transition costs associated with the Paxar - - - - 0.35 ~ $0.15 integration Adjusted EPS 2.64 3.06 3.45 3.84 3.91 $3.75 to $3.95 (1) Prior period reported numbers restated to conform with Q4-07 change in inventory accounting methodology. Historical figures have NOT been adjusted to remove the contribution from businesses subsequently divested or discontinued. (2) Guidance not affirmed or updated 48 24
  • ROTC*, GAAP vs. Adjusted FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 ($ 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 25