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Avery Dennison Q4 profit rises

Monday, February 01, 2010

Press release from the issuing company

Pasadena, Calif. - Avery Dennison Corporation today announced preliminary fourth quarter and full-year 2009 results.

"We completed 2009 with record free cash flow and significantly accelerated debt reduction while operating in the most difficult economic environment in decades," said Dean A. Scarborough, president and chief executive officer of Avery Dennison.

"While end markets remain soft, fourth-quarter sales reflect stabilizing inventory levels, resulting in solid improvement compared to the first half of the year," Scarborough said. "Our restructuring and productivity initiatives helped us expand gross margin and continue to invest for the future.

"Our leading market share in our core businesses and increased operating leverage position us well for strong profitable growth as markets recover," Scarborough said. "Our employees demonstrated great discipline in 2009, and I'm confident they will continue to do so in 2010 as we increase our focus on growth."

For more details on the Company's results, see the Company's supplemental presentation materials, "Fourth Quarter 2009 Financial Review and Analysis," posted at the Company's Web site at http://www.investors.averydennison.com, and furnished under Form 8-K with the SEC.

Fourth Quarter 2009 Results by Segment

All references to sales reflect comparisons on an organic basis, which exclude the impact of acquisitions, foreign currency translation, and the impact of an extra week in the 2009 fiscal year. All references to operating margin exclude the impact of restructuring, asset impairment charges, lease cancellation costs, and other items.

Pressure-sensitive Materials (PSM)
- Roll Materials sales grew, led by strength in emerging markets, partially offset by weakness in Europe. Growth in North America was flat. Sales continued to decline in the more economically sensitive Graphics and Reflective Products division.
- Operating margin increased as productivity offset higher employee costs*, while the effects of pricing and raw material trends continued to cover the cumulative impact of 2008 inflation.

Retail Information Services (RIS)
- The decline in sales primarily reflected reduced demand for apparel in the U.S. and Europe, and continued caution on the part of retailers.
- Operating margin before restructuring charges and other items declined as the benefits of restructuring and other productivity actions were offset by higher employee costs, reduced fixed-cost leverage, and other factors.
- RIS continues to reduce fixed costs, streamline its operations, and introduce new products and value-added services to increase its share of this large market.

Office and Consumer Products (OCP)
- The decline in sales reflected weak end-market demand, led by slower corporate purchasing activity.
- Operating margin declined as the benefit of productivity actions was more than offset by reduced fixed-cost leverage, higher employee costs, and increased marketing and product development spending.

Other specialty converting businesses
- Sales were flat compared to prior year, reflecting continuing weakness in the housing and construction industries.
- The improvement in operating margin reflected restructuring and productivity initiatives.
- Higher employee costs were related to reduced bonus accruals in Q4-08 (reflecting underperformance against financial targets late in that year) and increased bonus accruals in Q4-09 (reflecting Q4 outperformance against free cash flow targets), as well as adjustments to corporate-owned life insurance.

"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. Such 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 investment in development activities and new production facilities; fluctuations in cost and availability of raw materials; ability of the Company to achieve and sustain targeted cost reductions; ability of the Company to generate sustained productivity improvement; successful integration of acquisitions; successful implementation of new manufacturing technologies and installation of manufacturing equipment; the financial condition and inventory strategies of customers; customer and supplier concentrations; changes in customer order patterns; loss of significant contract(s) or customer(s); timely development and market acceptance of new products; fluctuations in demand affecting sales to customers; impact of competitive products and pricing; selling prices; business mix shift; volatility of capital and credit markets; impairment of capitalized assets, including goodwill and other intangibles; credit risks; ability of the Company to obtain adequate financing arrangements and to maintain access to capital; fluctuations in interest and tax rates; fluctuations in pension, insurance and employee benefit costs; impact of legal proceedings, including a previous government investigation into industry competitive practices, and any related proceedings or lawsuits pertaining thereto or to the subject matter thereof related to the concluded investigation by the U.S. Department of Justice ("DOJ") (including purported class actions seeking treble damages for alleged unlawful competitive practices, which were filed after the announcement of the DOJ investigation), as well as the impact of potential violations of the U.S. Foreign Corrupt Practices Act; changes in tax laws and regulations; changes in governmental regulations; changes in political conditions; fluctuations in foreign currency exchange rates and other risks associated with foreign operations; worldwide and local economic 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 and on the carrying value of its assets; (2) the impact of competitors' actions, including pricing, expansion in key markets, and product offerings; and (3) 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.

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 most recent Form 10-K, filed on February 25, 2009, with the Securities and Exchange Commission. 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 the forward-looking statements to reflect subsequent events or circumstances.

 

 

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