Slide 1: Second Quarter 2007 Financial Review and Analysis (Unaudited)
Second Quarter 2007 Financial Review and Analysis (Unaudited) July 24, 2007
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information presented in this document 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
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: Overview
Overview Net sales increased 8.1% over prior year Adjusted unit volume growth was approx. 3% (adjusted for early customer orders for office products related to the back-to-school season, offset by completion of customer inventory reduction related to prior year forward buy, as well as exited low-mar
Slide 5: Overview (continued)
Overview (continued) Effective tax rate for the quarter was 23% (full year rate expected to be within original guidance of 20% to 22%) Reported E.P.S. of $0.87 includes: Net benefit of $0.01 from the reversal of an accrual related to a patent lawsuit and restructuring costs $0.16 dilution from the P
Slide 6: Management Analysis of Underlying Sales Trends
Core volume growth (est.) 1.0% 3.0% 1.0% 1.5% 2.5% Comparability adjustments(1) 1.5% (0.5)% (0.5)% 1.5% 0.5% "Underlying" volume growth 2.5% 2.5% 0.5% 3.0% 3.0% Reported Sales Growth (0.1)% 4.6% 3.5% 3.9% 8.1% Management Analysis of Underlying Sales Trends (1) Adjustments for comparability: 2006 - D
Slide 7: Margin Analysis (excluding Paxar)
Gross Profit Margin (Total Company) 26.8% 27.9% 26.2% Operating Margin (non-GAAP*): Pressure-Sensitive Materials 9.8% 9.8% 9.7% Office and Consumer Products 16.2% 16.5% 12.6% Retail Information Services 10.7% 12.7% 4.6% Other Specialty Converting 4.2% 3.5% 6.8% Total Company 10.0% 10.1% 8.4% Impact
Slide 8: Key Factors Impacting Margin
Key Factors Impacting Margin Excluding Paxar, gross profit margin declined 110 basis points compared with prior year to 26.8% Decline reflects impact of price competition and higher raw material costs, transition expenses associated with new cost reduction initiatives, and general inflation, partial
Slide 9: Q2-2007 Segment Overview: Pressure-Sensitive Materials
PRESSURE-SENSITIVE MATERIALS Reported sales of $879 mil., up 8.6% compared with prior year Organic sales growth of approx. 4% Change in sales for roll materials business by region, adjusted for the effect of currency: Mid single-digit growth in Europe (largest region for this business) North America
Slide 10: Q2-2007 Segment Overview: Retail Information Services
Q2-2007 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $219 mil., up 20.8% compared with prior year due to the Paxar acquisition Organic sales decline of approx. 1%, reflecting soft retail sales among key U.S. customers and share loss in woven labels, as well as share los
Slide 11: Q2-2007 Segment Overview: Office and Consumer Products
Q2-2007 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $263 mil., down 1.0% compared with prior year Completion of inventory draw-down related to Q4 price-related forward buy reduced sales by an estimated 2 points in the quarter; exited low-margin business contributed an
Slide 12: Second Quarter YTD Cash Flow and Debt-To-Total Capital
Second Quarter YTD Cash Flow and Debt-To-Total Capital Millions, except as noted 2007 2006 Cash flow from operations $130.9 $133.0 Payment for capital expenditures $ 94.7 $ 80.5 Payment for software and other deferred charges $ 29.0 $ 15.7 Free Cash Flow(1) $ 7.2 $ 36.8 Dividends $ 85.4 $ 85.7 Share
Slide 13: Paxar Financial Outlook
Paxar Financial Outlook Annual Estimated E.P.S. Accretion (Dilution) (excluding integration costs / one-time charges) 2007 $(0.07) 2008 $0.40 - $0.50 2009 $0.70 - $0.80 2010 $0.90 - $1.00 Estimated After-Tax Amortization of Intangibles (per share, included in E.P.S. above) 2007 $ 0.10 to $ 0.15 2008
Slide 14: Paxar Financial Outlook (continued)
Paxar Financial Outlook (continued) Estimated cost synergies (net of potential offsets): $115 to $125 mil. (90%+ cash) Timing to achieve savings (% of target savings achieved) 2007 Year-End Run Rate: 30% - 40% 2008 Mid-Year Run Rate: 60% - 70% 2008 Year-End Run Rate: 90%+ Financing Weighted average
Slide 15: Updated 2007 Earnings Guidance: Key Assumptions
Reported revenues expected to increase 14-16% for the full year, including 9% benefit from Paxar acquisition, net of divestitures, and 3.5% to 4.0% benefit from currency translation Core unit volume growth expected to accelerate in second half (additional 2 points of growth compared to Q2 pace), ref
Slide 16: 2007 Earnings Guidance
2007 Earnings Guidance 2007 Guidance Reported (GAAP) Earnings Per Share, Before Paxar $3.90 - $4.10 Add Back: Estimated Restructuring and Asset Impairment Charges(1) $0.05 - $0.10 Adjusted (non-GAAP) Earnings Per Share, Before Paxar $4.00 to $4.15 (1) Subject to upward revision as plans are finalize
Slide 17: Backup: Second Quarter Gross Profit & MG&A GAAP Reconciliation for Effects of Paxar
Backup: Second Quarter Gross Profit & MG&A GAAP Reconciliation for Effects of Paxar GAAP Reconciliation for Effects of Paxar GAAP Reconciliation for Effects of Paxar