Slide 1: Third Quarter 2008 Financial Review and Analysis
Third Quarter 2008 Financial Review and Analysis (Unaudited) October 21, 2008
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: Actions underway to address challenging near-term business conditions
Actions underway to address challenging near-term business conditions Sales trend weakened, impacted by economic slowdown Consolidated organic revenue declined 2% PSM organic revenue grew slightly driven by emerging markets. Growth slowed sequentially, reflecting weakening trends in North America an
Slide 5: Third Quarter Overview
Third Quarter Overview Net sales increased 2.6% over prior year; 2.4% decline in sales on an organic basis Net effect of DM Label acquisition was 0.6% Currency added 4.5% ($0.03 benefit to earnings per share) Operating margin before restructuring and asset impairment charges and transition costs ass
Slide 6: Third Quarter Overview (continued)
Third Quarter Overview (continued) Effective tax rate for the quarter was 6.8%, reflecting geographic income mix and other factors Annual effective tax rate for 2008 expected to be in the range of 8% to 10%, subject to changes in geographic income mix Ongoing annual tax rate expected to be in the 17
Slide 7: Underlying Sales Trends
Reported Sales Growth 18.5% 21.4% 18.4% 20.0% 2.6% 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). Q3-07 Q4-07 Q1-08 Organic Sales Growth(1) (0.1)% (0.6)% (1.9)% (0.6)%
Slide 8: Margin Analysis
Gross Profit Margin (total Company) 25.2% 27.7% 26.8% Operating Margin (non-GAAP(1)): Pressure-sensitive Materials 6.9% 9.5% 8.2% Retail Information Services 1.6% 3.3% 7.0% Office and Consumer Products 17.0% 18.5% 17.3% Other Specialty Converting 1.4% 6.0% 3.5% Total Company 6.6% 9.0% 8.5% (1) Earni
Slide 9: Key Factors Impacting Margin
Key Factors Impacting Margin(1) Gross profit margin declined by 270 basis points compared to prior year 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 rat
Slide 10: Pressure-Sensitive Materials Q3-2008 Segment Overview
PRESSURE-SENSITIVE MATERIALS Reported sales of $936 mil., up 8% compared with prior year Organic sales growth of approx. 1% Change in sales for roll materials business by region, adjusted for the effect of currency and intercompany sales: Europe approximately flat with prior year North America decli
Slide 11: Retail Information Services Segment Overview
Q3-2008 Segment Overview (continued) RETAIL INFORMATION SERVICES Reported sales of $379 mil., down 2% compared with prior year Organic sales decline of approx. 7% Continued weakness of domestic retail apparel market and further weakening in Europe Operating margin before transition costs, restructur
Slide 12: Office and Consumer Products; Other Specialty Converting
Q3-2008 Segment Overview (continued) OFFICE AND CONSUMER PRODUCTS Reported sales of $260 mil., down 2% compared with prior year Organic sales decline of approx. 4%; benefit of delay in orders related to back- to-school season (from Q2 to Q3) was more than offset by weak end market demand Excluding r
Slide 13: Third Quarter YTD Cash Flow and Debt-To-Total Capital
Third Quarter YTD Cash Flow and Debt-To-Total Capital (Millions, except as noted) 2008 2007 Net cash provided by operating activities $ 382.3 $ 305.6 Purchase of property, plant and equipment $ (97.8) $(136.3) Purchase of software and other deferred charges $ (49.2) $ (39.9) Proceeds from sale of in
Slide 14: 2008 Earnings Guidance (revised): Key Assumptions
2008 Earnings Guidance (revised): Key Assumptions Reported revenue up nearly 12% Sales flat to down slightly on organic basis Current Assumptions Previous Assumptions Reported revenue up 8% - 9% Sales down ~ 2% on organic basis ~ 4% from currency ~ 6.5% from acquisitions Raw material cost inflation
Slide 15: 2008 Earnings and Free Cash Flow Guidance
2008 Earnings and Free Cash Flow Guidance 2008 Guidance Reported (GAAP) Earnings Per Share $2.65 - $2.85 Add Back: Estimated Integration Transition Costs, Restructuring and Asset Impairment Charges ~ $0.50 Adjusted (non-GAAP) Earnings Per Share $3.15 to $3.35 Capital Expenditures & Investments in So
Slide 16: Backup: Third Quarter Margin Comparison
Backup: Third Quarter Margin Comparison Reconciliation for Effects of Acquisition Integration Costs Reconciliation for Effects of Acquisition Integration Costs Reconciliation for Effects of Acquisition Integration Costs
Slide 17: Avery Dennison
A AVERY DENNISON