1. Lehman Brothers Industrial Select Conference
February 12, 2008
Lehman Brothers Industrial Select
Conference
Dean Scarborough
President and Chief Executive Officer Tuesday, February 12, 2008
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.
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2. Lehman Brothers Industrial Select Conference
February 12, 2008
Pressure-sensitive (“self-stick”) technology
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Overview of Today’s Portfolio… by segment
2007 Proforma Revenue By Segment,
with Annualized Paxar Sales
(after intercompany eliminations)
Other Specialty
Converting
9%
Office and
Consumer
Products
15%
Pressure-
sensitive
Materials
52%
Retail Information
Services
24%
2007 Net Sales (as reported) = $6.3 billion
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3. Lehman Brothers Industrial Select Conference
February 12, 2008
Overview of Today’s Portfolio… by region
2007 Proforma Revenue By Region,
with Annualized Paxar Sales
(before intergeographic eliminations)
Other*
Latin
America
U.S.
Asia
Eastern
Europe
Western
Europe
* “Other” includes Canada, Australia, and South Africa
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Full Year 2007 Overview
• Reported sales up 13%, driven primarily by the Paxar
acquisition and currency translation
• Total sales up approximately 1% on an organic basis
– Soft market conditions in several key segments
(particularly in second half of the year)
– Inventory reductions by Office Products customers
– Competitive price environment for the roll materials
business in North America and Europe
• Continued strength in emerging markets, particularly
for materials businesses in China, India, and the
ASEAN region
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4. Lehman Brothers Industrial Select Conference
February 12, 2008
Full Year 2007 Overview (continued)
• Completion of Paxar acquisition
– Expansion of core business with above-average
top-line growth potential
– Identification of $115 to $125 mil. in annual cost
synergies when integration is complete
• Solid progress against productivity initiatives
– Restructuring actions taken in 2007 to drive
annualized cost savings of $45 to $50 million (in
addition to acquisition integration savings)
– Further restructuring actions underway
– Ramp-up of Enterprise Lean Sigma program to drive
ongoing productivity improvement
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Strategic priorities for 2008
1. Capture Paxar integration synergies… begin to deliver
on RIS growth promise
2. Change 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
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5. Lehman Brothers Industrial Select Conference
February 12, 2008
Pressure-sensitive Materials
Market Position / Advantages
Global market share leader for
PS label materials
Proprietary product
technology and know-how…
innovation leader
Superior product breadth and
quality
Global scale advantages…
R&D, raw material sourcing,
2007 Financial Snapshot
global customers
Sales $3.5 bil.
Regional scale advantages…
Organic Sales Growth 2.8%
superior service (Exact, Next
Margin(1)
Operating 9.5%
Day Delivery, Fasson Optimum
Performance), low cost
(1) Excluding restructuring charges and other items – see
Appendix, “Reconciliation of Non-GAAP Financial
manufacturing
Measures to GAAP”
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PSM Strategy
• Expand in faster-growing international markets by
leveraging global and regional scale advantages
Other*
Latin
Roll Materials Group America
2007 revenues by U.S.
geography, before Asia
intergeographic
eliminations
Eastern
Europe
Western
Europe
* “Other” includes Canada, Australia, and South Africa
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6. Lehman Brothers Industrial Select Conference
February 12, 2008
PSM Strategy (continued)
• Drive increased PS penetration of food and
beverage segments (shift from glue-applied labels)
through product innovation and marketing
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Competitive advantage drives superior
performance
Operating Margin*
AVY PSM Segment vs. Peers
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2003 2004 2005 2006 2007
AVY PSM BMS PS Sector UPM Label Mat'ls
* Excluding restructuring charges
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7. Lehman Brothers Industrial Select Conference
February 12, 2008
Retail Information Services
Market Position / Advantages
Largest global supplier in
highly fragmented market
(tickets, labels, and related
products for retail supply chain)
Strong relationships with
major retailers and brand
owners
Geographic reach… proximity
to apparel manufacturers
Superior product quality
• Data mgmt and global
2007 Financial Snapshot
image/color control systems
Sales $1.2 bil.
Superior service
Organic Sales Growth 0.5%
• Design expertise
Margin(1)
Operating 6.0% • Fast, reliable sampling and
order fulfillment
(1) Excluding restructuring charges, integration transition
costs, and other items – see Appendix, “Reconciliation
of Non-GAAP Financial Measures to GAAP”
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RIS Strategy
• Apparel sourcing continues to shift to lowest labor
cost countries – proximity to manufacturers is key to
success
• Expect to continue gaining share through global
quality (data integrity, color consistency) and speed
• Key growth initiatives:
– Digital printing
– Packaging
– RFID
– Heat transfer
• Paxar acquisition – a perfect fit
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8. Lehman Brothers Industrial Select Conference
February 12, 2008
Paxar acquisition drives value in two ways
• Enhanced top-line growth potential
– Increased our presence (more than doubled RIS
sales) in the expanding, highly fragmented, retail
information and brand identification market
– Combined complementary strengths
– Improved ability to meet customer demands for
product innovation, quality, and speed of service
• $115 to $125 mil. of cost synergies
– Similar infrastructure – areas of overlap include
SG&A (e.g., corporate overhead, back office support)
and production
– Proven track record with acquisition integration on
global scale… high degree of confidence in ability to
quickly achieve the savings
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Office and Consumer Products
Market Position / Advantages
Global leader in key
Printable Media categories
(labels, index dividers)
Proprietary products
Ubiquitous software
templates and other
consumer use “enablers”
Powerful consumer brand
2007 Financial Snapshot
Preferred supplier
Sales $1.0 bil.
Organic Sales Change (6.6)%
Margin(1)
Operating 17.6%
(1) Excluding restructuring charges and other items – see
Appendix, “Reconciliation of Non-GAAP Financial
Measures to GAAP”
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9. Lehman Brothers Industrial Select Conference
February 12, 2008
OCP Strategy
• Focus on core products, growth projects with rapid
payback
– “Product renovation” to maintain / grow share vs.
private label offerings
• Expand operating margin
– Mix improvement
– Ongoing restructuring and productivity improvement
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RFID remains a top growth opportunity
Carton and pallet
tagging
Item-level
tagging…
apparel, airline
baggage,
pharma, etc.
AD-220/AD-221 AD-420/AD-421 AD-612 AD-622 AD-812/AD-811 AD-820/AD-821
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10. Lehman Brothers Industrial Select Conference
February 12, 2008
RFID remains a top growth opportunity (cont.)
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2008 Earnings Outlook: Key Considerations
• Positive factors contributing to our outlook:
– Modest organic sales growth (1% to 3%), reflecting economic
uncertainty
– 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 offset raw material inflation
– Reduced loss from building RFID business ($10 mil.)
– Currency translation benefit of 2% to 3% to top-line (E.P.S. benefit
of ~ $0.08)
• Offsetting factors vs. 2007:
– Higher interest ($20 to $30 mil.) and stock option expense (~ $10
mil.)
– Raw material inflation (1.5% to 2.0% before cost-outs, or approx.
$50 to $55 mil.)
– General inflation and reinvestment of savings for growth
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11. Lehman Brothers Industrial Select Conference
February 12, 2008
Good progress in Earnings Per Share
Earnings Per Share, Fully Diluted
Projecting 5 year CAGR in $4.15 to $4.55
adjusted EPS of 9.5% to 11.5% $3.80 to
$4.20
$3.91
$3.84
$3.72
$3.45
$3.06 $3.07
$2.78
$2.67 $2.64
$2.26
2003 2004 2005 2006 2007 2008 Guidance
EPS - GAAP EPS - Adjusted*
Target: double-digit EPS growth
* Excludes restructuring charges, gains on sale of assets, and other items – see Appendix for detail.
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Improvement in returns temporarily halted by
acquisition effect… expect to resume progress in ‘09
Adjusted Return on Total Capital*
16.0%
~ 15%
14.3%
13.0% 12.8% ~ 12.5%
12.4%
2003 2004 2005 2006 2007 2008 2010
Guidance Target
* Excludes restructuring charges, gains on sale of assets, and other items – see Appendix for detail.
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12. Lehman Brothers Industrial Select Conference
February 12, 2008
Expect significant increase in Free Cash Flow
in 2008 and beyond
2008
Guidance 2007
(Millions, except as noted)
Cash flow from operations $620 to $670 $499.4
Payment for capital expenditures(1) $155 to $160 $190.5
Payment for software and other
deferred charges(2) $60 to $65 $ 64.3
Free Cash Flow(3) $400 to $450 $244.6
up ~ 75% in 2008
Dividends ~ $180 $171.8
Share Repurchase --- $ 63.2
Total debt to total capital at year-end 45% to 50% 53.1%
2008 Guidance includes $5 - $10 mil. in capital investments related to Paxar integration
(1)
2008 Guidance includes $15 - $20 mil. in software investments related to Paxar integration
(2)
(3) Cash flow from operations less payment for capital expenditures, software and other deferred
charges
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Expect continued increase to dividend
$1.80
32 consecutive years of dividend increase
$1.60
$1.40
Dividends per share
$1.20
5 year average dividend
yield ~ 2.5%... vs. 1.6% for
$1.00
dividend-paying industrial
companies in S&P 500
$0.80
$0.60
$0.40
$0.20
$0.00
'75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
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13. Lehman Brothers Industrial Select Conference
February 12, 2008
Summary
• Short-Term: Challenging market environment –
Accelerate productivity improvement
• Long-Term: Paxar
RFID
Strong core business fundamentals
Focused on long-term value creation…
Free Cash Flow and ROTC
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APPENDIX
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14. Lehman Brothers Industrial Select Conference
February 12, 2008
2008 Guidance
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2008 Earnings and Free Cash Flow Guidance
2008
Guidance
Reported (GAAP) Earnings Per Share $3.80 - $4.20
Add Back:
Estimated Integration Transition Costs, Restructuring and
Asset Impairment Charges* ~ $0.35
Adjusted (non-GAAP) Earnings Per Share $4.15 to $4.55
Capital Expenditures & Investments in Software (ex-integration) ~ $195 mil.
Cash Costs of Paxar Integration (before tax) ~ $ 65 mil.
Free Cash Flow (before dividends) $400 to $450 mil.
* Subject to revision as plans are finalized
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15. Lehman Brothers Industrial Select Conference
February 12, 2008
Reconciliation of Non-GAAP
Financial Measures to GAAP
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Organic Sales Growth by Segment: 2007
Pressure Retail Office and Other Specialty
Sensitive Information Consumer Converting
($ 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 $620.8
GAAP Sales Growth 8.1% 75.9% -5.2% 3.3%
Organic Sales Growth 2.8% 0.5% -6.6% 0.9%
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16. Lehman Brothers Industrial Select Conference
February 12, 2008
OPERATING MARGIN BY SEGMENT
FY 2005 FY 2006 FY 2007
($ 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.
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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
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reclassification of units between segments.
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17. Lehman Brothers Industrial Select Conference
February 12, 2008
Earnings Per Share*, GAAP vs. Adjusted
2003 2004 2005 2006 2007 2008 Guidance
GAAP EPS 2.67 2.78 2.26 3.72 3.07 $3.80 to $4.20
Restructuring costs, asset impairment
0.22 0.27 0.40 0.27 0.49 ~ $0.20
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 $4.15 to $4.55
* Prior period reported numbers restated to conform with Q4-07 change in inventory accounting
methodology. Historical figures have NOT been adjusted to remove the contribution from businesses
subsequently divested or discontinued.
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ROTC*, GAAP vs. Adjusted
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
($ in millions, except as noted)
GAAP
Average Invested Capital (5 point average) 2,503.2 2,671.1 2,717.5 2,667.5 3,650.8
Net Income 267.9 279.0 226.8 373.2 303.5
Addback: After-tax interest expense 42.4 44.0 46.0 45.7 85.1
Return on Average Total Capital 12.4% 12.1% 10.0% 15.7% 10.6%
Adjusted
Adj. Average Invested Capital (5 point average) 2,503.6 2,690.2 2,752.9 2,695.4 3,684.8
Net Income 267.9 279.0 226.8 373.2 303.5
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 -0.8 27.6 119.8 12.5 83.0
Adjusted Return on Average Total Capital 12.4% 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.
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18. Lehman Brothers Industrial Select Conference
February 12, 2008
Paxar Financial Outlook
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Paxar Financial Outlook
(Millions,
Target Target Est. Pre-Tax Target
except as noted)
Pre-Tax Cost Annual E.P.S. Depreciation & EBITDA(1)
Savings Accretion(1) Amortization Accretion
2008 $80 – $90 $0.35 – $0.45 ~ $70 $175 – $190
2009 $110 – $120 $0.65 – $0.80 ~ $75 $215 – $235
2010 $115 – $125 $0.85 – $1.00 ~ $75 $240 – $260
Financing
• Weighted average interest expense of 5% based on current short-term rates
• Combination of senior notes, mandatory convertibles, and short-term debt (47% floating)
• Maintained BBB+ credit rating
Estimated One-Time Cash Integration Costs(2) Estimated Timing
Cash Restructuring / Transition Costs(3): $125 – $135 of Cash Outflows
2007 45%
Capital / IT Investments: $ 40 – $ 45
2008 35-40%
Total Cash Costs: $165 – $180 2009 15-20%
(1) Excluding one-time integration costs. Reflects near-term margin compression in base business, offset by lower
interest expense than previously assumed, with productivity improvement over time. Assumes 3% to 5%
compound annual growth on 2007 sales through 2010, with 2008 range reflecting 1% to 4% top line growth.
(2) Excludes non-cash charges (e.g., asset write-offs) taken to either the P&L or balance sheet
(3) Severance, change in control payments, consulting fees, etc.
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