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Avery Dennison Reports 1Q Results, Sales Trends Improve

Press release from the issuing company

Sales Trends Improve and Margins Expand On a Sequential Basis in Quarter PASADENA, Calif.--April 23, 2002--Avery Dennison today announced first quarter results, achieving sales and earnings consistent with the Company's previously announced expectations for the quarter. "We are encouraged that our core businesses experienced a solid improvement trend late in the quarter, with sales and volumes growing stronger during the final weeks," said Philip M. Neal, chairman and chief executive officer of Avery Dennison. "We are pleased that with our aggressive cost reduction actions and productivity improvement programs, in addition to a more stable pricing environment in our materials businesses, we have been successful at growing our margins this quarter relative to the preceding quarter." "While our long-term strategies remain focused on solid top-line growth, our commitment to achieving exceptional cost savings throughout our operations has enabled us to improve our profitability during this period of challenging worldwide economic conditions," said Neal. Key results for the first quarter of 2002 include: * Earnings per share, on a diluted basis, were $.66 per share, compared with $.65 per share in the same quarter a year ago. The results include the benefit of approximately $.03 per share related to an accounting change eliminating goodwill amortization. The impact of currency exchange rates, including the effect of further devaluation of the Argentine peso, reduced earnings by approximately $.02 per share. * Net income was $64.8 million, an increase of 1.9 percent from $63.6 million in the first quarter of 2001. * Reported sales declined 3.4 percent from prior-year levels, totaling $930.8 million for the first quarter of 2002 compared with $963.2 million in the first quarter of 2001. Excluding the impact of currency exchange rates, divestitures and acquisitions, sales declined 0.4 percent in the first quarter. * Unit volume grew 2.3 percent over the prior-year first quarter. * Operating margin declined 30 basis points from the first quarter of 2001. However, operating margin increased 90 basis points from the fourth quarter of 2001. * Return on shareholders' equity remained high at 27.6 percent, compared with 30.2 percent in the year-ago first quarter. Return on total capital was 17.1 percent, unchanged from the same quarter a year ago. The Company's largest core business, the Pressure-sensitive Adhesives and Materials sector, reported continued improvement over the first quarter of 2001, particularly in international operations, with strong sales growth in Asia. The graphics materials and specialty tapes businesses reported substantial profit improvement on relatively flat sales growth. Reported sales for the sector were $550 million. Excluding the impact of currency exchange rates, acquisitions and divestitures, sales for the sector grew 6.7 percent over the first quarter of 2001. The Consumer and Converted Products sector reported a decline in sales, reflecting continued economic weakness in retail markets that these businesses serve. Purchases of Avery-brand products by consumers at office products superstores grew slightly during the quarter, reflecting an improvement trend from the second half of 2001. Reported sales for the sector were $420 million. Excluding the impact of currency exchange rates, acquisitions and divestitures, sales for the sector decreased 5.4 percent from the first quarter of 2001. The Company stated that it is still awaiting a decision from the German Federal Cartel Office on regulatory approval of the previously announced acquisition of Jackstadt GmbH. While the outcome of the transaction remains uncertain, Avery Dennison and Jackstadt continue to provide additional information to regulators regarding market share concerns that were raised earlier by the German Federal Cartel Office. Avery Dennison announced that for the second quarter of 2002, it anticipates earnings to be in the range of $.66 to $.71 per share. Avery Dennison stated that it was raising modestly its 2002 annual earnings-per-share expectation to a range of $2.70 to $2.85, assuming a continuation of the improving trend that was apparent in the latter part of the first quarter. "Looking forward, we are encouraged by the strong sales growth achieved in the final weeks of the first quarter, though we remain cautious about ongoing improvement in business conditions," said Neal. "Preliminary data for orders entered during the first weeks of April confirm that sales continued to improve early in the second quarter. If this trend remains, we are confident in our ability to return to historical levels of double-digit earnings growth in the second quarter and for the balance of this year." "Our ability to expand margins in the first quarter demonstrates the success of the strategic actions we implemented in a climate of weakened economic conditions," said Neal. "Our long-term outlook remains excellent. Throughout our businesses we have maintained, and in some cases expanded, our strong market share positions. We will continue to enhance our presence in solid, long-term growth markets, build our powerful brands and invest in new product development and superior service programs."