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Forward-Looking Statements
Certain information in this presentation may constitute “forward-looking” statements. These sta...
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Baird_presentation

  1. 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. 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 Dean Scarborough President and Chief Executive Officer May 13, 2008
  2. 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 “Supplemental Materials” handout accompanying this presentation.
  3. 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. Keys to unlocking shareholder value at AVY 1. Delivering ~ $100 mil. of incremental cost synergies from integration of Paxar acquisition 2. Demonstrating sustainable competitive advantage in roll label materials business (through market share gain, stable/improving operating margins and returns) 3. Driving 30%+ compound annual growth in free cash flow through 2010 2008 Growth Stock 3 Conference
  4. 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. 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. 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. > Largest global supplier of base material for pressure-sensitive label applications How we win. > Innovation > Product breadth and quality 2007 FINANCIAL SNAPSHOT > Global footprint Sales $3.5 bil. > Regional scale Organic Sales Growth 2.8% Operating Margin(1) 9.5% 2008 Growth Stock (1) Excluding restructuring charges and other items – see “Supplemental Materials” 6 Conference handout for detail.
  7. 7. 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 7 * Excluding restructuring charges Conference
  8. 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. 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 – 8 Conference see “Supplemental Materials” handout for detail.
  9. 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. 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 – see “Supplemental Materials” 9 Conference handout for detail.
  10. 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. 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 10 Conference
  11. 11. 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 ~ 9.5% 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 in adjusted EPS through 2010 2008 Growth Stock * Excludes restructuring charges, gains on sale of assets, and other items – 11 Conference see “Supplemental Materials” handout for detail.
  12. 12. 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 – 12 Conference see “Supplemental Materials” handout for detail.
  13. 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” ~ 75% boost to free cash flow in 2008 (current default color. is the FCF yield ~ 9%) 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% Target: > 30% compound annual growth through 2010 (1) 2008 Guidance includes $5 - $10 mil. in capital investments related to Paxar integration 2008 Growth Stock 13 (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
  14. 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 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 14 Conference
  15. 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: 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 15 Conference

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