Press Release

• Reported EPS (including discontinued operations) of $0.62
• Reported EPS from continuing operations of $0.49
  • Adjusted EPS from continuing operations of $0.56 (non-GAAP)
• Net sales declined approximately 1 percent to $1.53 billion
  • Sales grew approximately 4 percent on organic basis
• Repurchased 2.4 million shares
• Narrowing range of 2012 EPS and free cash flow guidance
• Restructuring program targeting annualized savings of more than $100 million by mid-2013

PASADENA, Calif.--(BUSINESS WIRE)--Jul. 24, 2012-- Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited second quarter 2012 results. All non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, the discussion of the company’s results is focused on its continuing operations.

“Second-quarter results were in line with our expectations, and we are on track for full-year earnings growth and free cash flow within the ranges of our guidance,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “We continued to deliver on our commitment to return more cash to shareholders, repurchasing more than two million shares during the quarter.

“We are aggressively implementing the next phase of our restructuring initiative to help us deliver on our financial targets for double-digit earnings growth and higher returns,” Scarborough said. “Our near-term target is to achieve more than $100 million in annualized savings by mid-2013. The leaner cost structure that will result will enhance our overall competitive position and strengthen our ability to increase returns even in an uncertain economic environment.”

For more details on the company’s results, see the summary table accompanying this news release, as well as the supplemental presentation materials, “Second Quarter 2012 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished on Form 8-K with the SEC.

Second Quarter 2012 Results by Segment

All references to sales reflect comparisons on an organic basis, which exclude the estimated impact of currency translation, acquisitions and divestitures. Adjusted operating margin (non-GAAP) refers to earnings before interest expense and taxes, excluding restructuring costs and other items, as a percentage of sales.

Pressure-sensitive Materials (PSM)

• Label and Packaging Materials sales increased mid-single digits compared to prior year. Graphics and Reflective Solutions sales declined low single digits compared to prior year.
• Operating margin declined 20 basis points to 8.4% due to higher restructuring costs. Adjusted operating margin improved 10 basis points as the benefit from higher volume more than offset higher employee-related expenses, including incentive compensation.

Retail Branding and Information Solutions (RBIS)

• Consistent with recent trends, sales were flat, reflecting caution from retailers and brands in the U.S. and Europe.
• Operating margin declined 150 basis points to 4.8% due to wage inflation, partially offset by productivity initiatives. Adjusted operating margin declined 160 basis points.

Other specialty converting businesses

• Sales increased modestly due to increased volume.
• Operating margin improved 50 basis points to 2.9% as the impact of higher volume and productivity initiatives more than offset higher employee-related expenses and restructuring costs. Adjusted operating margin improved 80 basis points.

Other

Share Repurchase

The company repurchased 2.4 million shares during the second quarter at an aggregate cost of $70 million. Year-to-date through the end of the second quarter, the company repurchased 4.8 million shares at an aggregate cost of $142 million.

Results of Discontinued Operations

Due to the company’s pending divestiture of its Office and Consumer Products business (“OCP”), earnings from OCP and certain costs associated with the transaction are reported as income or loss from discontinued operations (net of tax) in the consolidated income statement.

Earnings per share from discontinued operations declined from $0.19 to $0.13. Adjusted earnings per share from discontinued operations declined from $0.18 to $0.16.

The company continues to expect the sale of OCP to be completed in the second half of 2012.

Income Taxes

The second quarter effective tax rate was 33.4 percent. The year-to-date adjusted tax rate for the second quarter increased from 29.3 to 34.1 percent, in line with expectations and the full year 2011 rate.

Cost Reduction Actions

In the first half of 2012, the company began a restructuring program expected to be completed by mid-2013 that will reduce costs across all segments of the business. The company currently anticipates more than $100 million in annualized savings from this program. To implement these actions, the company estimates that it will incur approximately $55 million in restructuring costs in 2012, and approximately $25 million in restructuring costs in 2013.

Outlook

In the company’s supplemental presentation materials, “Second Quarter 2012 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 is narrowing its previous guidance of 2012 earnings per share from continuing operations to $1.55 to $1.70 and free cash flow from continuing operations to $280 million to $310 million. Excluding an estimated $0.35 per share for restructuring costs and other items, the company expects adjusted (non-GAAP) earnings per share from continuing operations of $1.90 to $2.05.

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. The company is a global leader in pressure-sensitive labeling 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 50 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) the impact of 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 2011 Form 10-K, filed on February 27, 2012 with the Securities and Exchange Commission, 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 quarterly conference call with analysts, visit the Avery Dennison website at www.investors.averydennison.com