Slide 1: Supplemental Presentation Materials: Fourth Quarter and Full Year 2008 Financial Review and Analysis
Supplemental Presentation Materials Fourth Quarter and Full Year 2008 Financial Review and Analysis (Unaudited) January 27, 2009
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 2008 Overview
Full Year 2008 Overview Sales declined approximately 3% on an organic basis, reflecting soft market conditions as well as inventory reductions, particularly among Office Products customers Reported sales up approximately 6%, driven by acquisitions and the impact of currency translation, partially of
Slide 5: Full Year 2008 Overview (continued)
Full Year 2008 Overview (continued) In response to worsening market conditions, identified aggressive actions for sustainable reduction in cost structure Anticipate $150 million of annual savings from new actions by 2010, impacting approx. 10% of the Company's global workforce; roughly $70 million o
Slide 6: Fourth Quarter Overview
Fourth Quarter Overview Net sales declined 11.8% from prior year; 8.1% decline in sales on an organic basis Net effect of DM Label acquisition was 0.6% Currency translation reduced sales growth by 4.4% (approx. $0.05 negative impact to earnings per share) Operating margin before restructuring and as
Slide 7: Fourth Quarter Overview (continued)
Fourth Quarter Overview (continued) Annual effective tax rate was approx. 2%, reflecting geographic income mix and the result of effective tax planning and other factors Effective tax rate for the quarter was approx. negative 51%, including net benefit of approx. $25 million from tax planning action
Slide 8: Underlying Sales Trends
Reported Sales Growth 21.4% 18.4% 20.0% 2.6% (11.8)% 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). 4Q07 1Q08 2Q08 Organic Sales Growth(1) (0.6)% (1.9)% (0.6)% (2.4)%
Slide 9: Margin Analysis
Gross Profit Margin (total Company) 25.0% 28.1% 25.2% Operating Margin (non-GAAP(1)): Pressure-sensitive Materials 5.5% 9.0% 6.9% Retail Information Services 1.3% 6.7% 1.6% Office and Consumer Products 20.7% 21.9% 17.0% Other specialty converting businesses (6.8)% 2.4% 1.4% Total Company 4.9% 9.6% 6
Slide 10: Key Factors Impacting Margin
Key Factors Impacting Margin(1) Gross profit margin declined to 25.0% Decline reflects raw material inflation and reduced fixed cost leverage, partially offset by benefits from productivity and pricing actions Marketing, general and administrative (MG&A) expense ratio increased by 1.7 points compare
Slide 11: 4Q08 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $808 mil., down 9% compared with prior year Organic sales decline of approx. 4% Change in sales for roll materials business by region, adjusted for the effect of currency and intercompany sales: Europe and North America both down at low single digit rat
Slide 12: 4Q08 Segment Overview: Retail Information Services
4Q08 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $359 mil., down 13% compared with prior year Organic sales decline of approx. 12% Continued weakness of domestic retail apparel market and further weakening in Europe Operating margin before transition costs, restructuri
Slide 13: 4Q08 Segment Overview: Office and Consumer Products, Other Specialty Converting
4Q08 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $226 mil., down 17% compared with prior year Organic sales decline of approx. 14%, reflecting combination of weak end market demand and tight inventory control among customers Excluding restructuring charges and other i
Slide 14: FY08 Cash Flow and Year-End Debt-to-Total Capital
FY08 Cash Flow and Y/E Debt-To-Total Capital (Millions, except as noted) 2008 2007 Net cash provided by operating activities $ 539.7 $ 499.4 Purchase of property, plant and equipment $(128.5) $(190.5) Purchase of software and other deferred charges $ (63.1) $ (64.3) Proceeds from sale of investments
Slide 15: Actions to Increase Operational Flexibility
Actions to Increase Operational Flexibility Secured agreements to amend credit facility covenants to increase operating flexibility (effective 1/23/09): Amendments include carve-out for up to $155 mil. of cumulative restructuring charges for 4Q08 through 4Q09 Pricing = LIBOR + 225 basis points at cu
Slide 16: Contributing Factors to 2009 Financial Results
Contributing Factors to 2009 Financial Results P&L Considerations Two key variables are too volatile to provide meaningful 2009 earnings forecast: Volume (see Slide 17 for sensitivity to volume assumption) Raw material costs and pricing trend (assumed net neutral impact for modeling purposes) Other
Slide 17: Contributing Factors to 2009 Financial Results (continued)
Contributing Factors to 2009 Financial Results (continued) Cash Flow Considerations Capital expenditures (including IT) of $120 to $150 mil. Depreciation and amortization ^ $275 mil. Expected incremental contribution to pension fund = $25 mil. Sensitivity of Results to Recent Revenue Trends Combinin
Slide 18: Backup: Fourth Quarter Margin Comparison Reconciliation
Backup: Fourth Quarter Margin Comparison Reconciliation for Effects of Acquisition Integration Costs
Slide 19: Avery Dennison
A AVERY DENNISON