Slide 1: Fourth Quarter and Full Year Financial Review and Analysis (Unaudited)
Fourth Quarter and Full Year 2008 Financial Review and Analysis (Unaudited) January 29, 2007 DRAFT: Friday Evening Final
Slide 2: 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 ri
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation contains certain non-GAAP measures as defined by SEC rules. The most directly comparable GAAP measures have been included in the earnings news release for the quarter. Reconciliations of non-GAAP measures to the most directly comparable GAAP measu
Slide 4: Full Year 2007 Overview
Full Year 2007 Overview Total sales up approximately 1% on an organic basis, reflecting soft market conditions in several key segments (particularly in second half of the year) and inventory reductions by Office Products customers Reported sales up 13%, driven primarily by the Paxar acquisition and
Slide 5: Fourth Quarter Overview
Fourth Quarter Overview Net sales increased 21.4% over prior year Net effect of Paxar acquisition was approx. 15% Currency added 7% ($0.05 benefit to earnings per share) Sales declined modestly (0.6%) on an organic basis Operating margin before restructuring and asset impairment charges and transiti
Slide 6: Fourth Quarter Overview (continued)
Fourth Quarter Overview (continued) Effective tax rate for the quarter and year was approximately 19%. Annual tax rate expected to be in the 18-20% range for the foreseeable future Reported E.P.S. of $0.81 includes $0.27 of restructuring charges, asset impairment, and transition costs for Paxar inte
Slide 7: Management Analysis of Underlying Sales Trends
Reported Sales Growth 3.5% 3.9% 8.1% 18.5% 21.4% Management Analysis of Underlying Sales Trends (1) Reported Sales Growth less the impacts of foreign currency translation and acquisitions, net of divestitures (calculation may not tie due to rounding). Q4-06 Q1-07 Q2-07 Organic Sales Growth(1) 2.0% 1
Slide 8: Margin Analysis
Gross Profit Margin (Total Company) 28.1% 29.0% 27.7% Operating Margin (non-GAAP(2)): Pressure-Sensitive Materials 9.0% 9.4% 9.5% Retail Information Services (RIS) 6.8% 7.0% 3.0% Office and Consumer Products 21.9% 19.9% 18.5% Other Specialty Converting 2.1% 1.3% 5.7% Total Company 9.6% 9.0% 9.0% Imp
Slide 9: Key Factors Impacting Margin
Key Factors Impacting Margin (see Slide 18 for prior year reconciliation for Paxar) Gross profit margin before Paxar integration costs improved 10 basis points compared to prior year margin, as reported Adjusting the prior year number to include Paxar, gross profit margin declined 90 basis points Th
Slide 10: Q4-2007 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $890 mil., up 9% compared with prior year Organic sales growth of approx. 2%, a modest improvement over Q3 pace Change in sales for roll materials business by region, adjusted for the effect of currency: Europe up at low single digit rate, a modest impr
Slide 11: Q4-2007 Segment Overview: Retail Information Services
Q4-2007 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $411 mil., up 144% compared with prior year primarily due to the Paxar acquisition Organic sales growth of approx. 1% Slowdown vs. historical trend and long-term target reflects decline in orders for apparel shipped t
Slide 12: Paxar Integration Targets and Costs
Target Target Est. Pre-Tax Target 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 averag
Slide 13: Q4-2007 Segment Overview: Office and Consumer Products; Other Specialty Converting
Q4-2007 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $272 mil., down 5% compared with prior year Organic sales decline of approx. 8%, due to customer inventory reductions ($18 mil. estimated impact to net sales) Excluding restructuring and asset impairment charges, ope
Slide 14: FY 2007 Cash Flow and Year-End Debt-To-Total Capital
FY 2007 Cash Flow and Y/E Debt-To-Total Capital (Millions, except as noted) 2007 2006 Cash flow from operations $499.4 $510.8 Payment for capital expenditures $190.5 $161.9 Payment for software and other deferred charges $ 64.3 $ 33.4 Free Cash Flow(1) $244.6 $315.5 Dividends $171.8 $171.8 Share Rep
Slide 15: 2008 Earnings Guidance: Key Considerations
2008 Earnings Guidance: Key Considerations Guidance for adjusted (non-GAAP) earnings per share (see Slide 17 for reconciliation to GAAP): $4.15 to $4.55 Performance within range is highly dependent on organic growth Low end of range assumes organic growth of 1%, net of about $50 mil. in assumed pric
Slide 16: Earnings Guidance: Assumptions
Summary of Assumptions: Reported revenue up 9.5% to 12.5%, including 2% to 3% benefit from currency, and 6.5% from Paxar acquisition effect (anniversary in mid- June) 1.5% to 2.0% inflation in overall raw material costs, offset with benefit from global sourcing strategies, material cost-outs, and pr
Slide 17: 2008 Earnings and Free Cash Flow Guidance
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 * Subject to revision as plans are fina
Slide 18: Backup: Fourth Quarter Margin Comparison - Total Company
Backup: Fourth Quarter Margin Comparison Reconciliation for Effects of Paxar - Total Company Reconciliation for Effects of Paxar - Total Company Reconciliation for Effects of Paxar - Total Company
Slide 19: Backup: Fourth Quarter Margin Comparison - RIS
Backup: Fourth Quarter Margin Comparison Reconciliation for Effects of Paxar - RIS Reconciliation for Effects of Paxar - RIS Reconciliation for Effects of Paxar - RIS
Slide 20: Back-up: Prior Period Restatements for Change in LIFO Accounting
Back-up: Prior Period Restatements for Change in LIFO Accounting Rationale for discontinuing LIFO accounting: Time-consuming to track with no economic benefit Inconsistent accounting methodology across business units within the Company (e.g., LIFO accounting only used within the U.S.) Magnitude of a