Press Release

PASADENA, Calif.--(BUSINESS WIRE)--Jan. 31, 2012-- Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited fourth quarter and full-year 2011 results. All non-GAAP financial measures are reconciled to GAAP in the attached tables. Unless otherwise indicated, the discussion of the Company’s results is focused on its continuing operations.

“Despite the challenges of softening volumes and inflation in 2011, we increased operating income before restructuring costs, and generated nearly $300 million of free cash flow,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “Our employees did an outstanding job of meeting this year’s challenges with a strong focus on pricing, productivity, and working capital, and I want to thank them for their discipline and dedication.

“We also announced earlier this month an agreement to sell our Office and Consumer Products business, consistent with our strategy to maximize its value for shareholders,” Scarborough said.

“For 2012, although the economic environment remains uncertain, we expect improved earnings, solid free cash flow, and increased return of cash to shareholders.”

For more details on the Company’s results, see the Company’s supplemental presentation materials, “Fourth Quarter and Full-Year 2011 Financial Review and Analysis,” posted on the Company’s website at www.investors.averydennison.com, and furnished on Form 8-K with the SEC.

Fourth Quarter 2011 Results by Segment

All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, acquisitions and divestitures.

Pressure-sensitive Materials (PSM)

• Label and Packaging Materials sales grew compared to the prior year due to the benefit of pricing actions taken to offset raw material inflation. Sales in Graphics and Reflective Solutions grew compared to prior year due to higher volume.
• Operating margin declined 40 basis points to 6.9 percent as increased raw material costs and costs associated with restructuring were largely offset by the benefit of pricing actions and productivity initiatives. Excluding costs associated with restructuring, operating margin was roughly flat.

Retail Branding and Information Solutions (RBIS)

• Sales declined due to lower unit demand from retailers and brands in the U.S. and Europe reflecting caution about consumer spending.
• Operating margin declined 180 basis points to 2.7 percent as lower volume and increased costs associated with restructuring were partially offset by the benefit of productivity initiatives. Excluding costs associated with restructuring, operating margin was roughly flat.

Other specialty converting businesses

• Sales declined compared to the prior year.
• Operating margin declined 150 basis points to negative 5.2 percent as lower volume and increased costs associated with restructuring were partially offset by a gain on the sale of a product line. Excluding costs associated with restructuring and the gain on the sale, operating margin declined.

Other

The Company today announced an eight percent increase in the first quarter 2012 dividend to $0.27 per share.

Sale of Office and Consumer Products Business

On January 3, 2012, the Company announced that it signed a definitive agreement to sell its Office and Consumer Products business (“OCP”) to 3M Company for $550 million in cash. The transaction is subject to customary closing conditions and regulatory approvals, and is expected to be completed in the second half of 2012. The Company's OCP earnings, combined with costs associated with the transaction, are reported as income or loss from discontinued operations (net of tax) in the consolidated income statement. OCP assets and liabilities are segregated on the balance sheet for 2011 as “held for sale”. Cash flow continues to be reported on a consolidated basis.

The Company expects a combination of net proceeds and free cash flow from OCP of approximately $400 million.

Taxes

The fourth quarter effective tax rate was 22 percent. The full-year tax rate on continuing operations increased from negative one percent in 2010 to 34 percent, reflecting a significant discrete tax event in the fourth quarter of 2010, geographic income mix, and other discrete items. Fourth quarter results from continuing and discontinued operations included a negative $0.12 per share tax settlement primarily related to OCP (discontinued operations).

Cost Reduction Actions

In the fourth quarter, the Company continued to reduce fixed costs through restructuring actions, which included a reduction of corporate overhead consistent with the sale of OCP. The Company estimates approximately $55 million in annualized savings from actions taken during the year, with approximately one-fourth of the benefit realized in 2011. The Company incurred approximately $45 million in charges associated with these actions in 2011. Cash costs from continuing and discontinued operations associated with restructuring activities were $38 million and less than $1 million, respectively, in 2011. The Company continues to identify and assess further opportunities to increase productivity through restructuring.

Outlook

In the Company’s supplemental presentation materials, “Fourth Quarter and Full-Year 2011 Financial Review and Analysis,” the Company provides a list of factors that it believes will contribute to its 2012 financial results. Based on the factors listed and other assumptions, the Company expects 2012 earnings per share from continuing operations between $1.65 and $2.00 and free cash flow from continuing operations between $275 million and $325 million. Excluding an estimated $0.15 per share for restructuring costs and other items, the Company expects adjusted (non-GAAP) earnings per share from continuing operations of between $1.80 and $2.15.

Note: Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.

About Avery Dennison

Avery Dennison (NYSE:AVY) helps make brands more inspiring and the world more intelligent. For more than 75 years the company has been a global leader in pressure-sensitive technology and materials and retail branding and information solutions. A FORTUNE 500 company with sales of $6 billion from continuing operations in 2011, Avery Dennison is based in Pasadena, California and has employees in over 60 countries. For more information, visit www.averydennison.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

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. These forward-looking statements and financial or other business targets are subject to certain risks and uncertainties. Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but not limited to risks and uncertainties relating to the following: fluctuations in demand affecting sales to customers; the financial condition and inventory strategies of customers; changes in customer order patterns; worldwide and local economic conditions; fluctuations in cost and availability of raw materials; ability of the company to generate sustained productivity improvement; ability of the company to achieve and sustain targeted cost reductions; impact of competitive products and pricing; loss of significant contract(s) or customer(s); collection of receivables from customers; selling prices; business mix shift; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; outcome of tax audits; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; fluctuations in foreign currency exchange rates and other risks associated with foreign operations; integration of acquisitions and completion of pending dispositions; amounts of future dividends and share repurchases; customer and supplier concentrations; successful implementation of new manufacturing technologies and installation of manufacturing equipment; disruptions in information technology systems; successful installation of new or upgraded information technology systems; volatility of financial markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; ability of the company to obtain adequate financing arrangements and maintain access to capital; fluctuations in interest and tax rates; fluctuations in pension, insurance and employee benefit costs; impact of legal and regulatory proceedings, including with respect to environmental, health and safety; changes in governmental laws and regulations; changes in political conditions; impact of epidemiological events on the economy and the company's customers and suppliers; acts of war, terrorism, and natural disasters; and other factors.

The Company believes that the most significant risk factors that could affect its financial performance in the near-term include (1) economic conditions on underlying demand for the Company's products; (2) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through selling price increases, without a significant loss of volume; and (3) competitors' actions, including pricing, expansion in key markets, and product offerings.

For a more detailed discussion of these and other factors, see “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s 2010 Form 10-K, filed on February 28, 2011 with the Securities and Exchange Commission (“SEC”), and subsequent quarterly reports on Form 10-Q. The forward-looking statements included in this document are made only as of the date of this document, and the Company undertakes no obligation to update these statements to reflect subsequent events or circumstances.

For more information and to listen to a live broadcast or an audio replay of the Fourth Quarter conference call with analysts, visit the Avery Dennison website at www.investors.averydennison.com