PASADENA, Calif.-- Avery Dennison Corporation today reported first quarter diluted earnings per share of $0.69, compared with $0.57 per share for the first quarter of 2005. The increase in earnings reflected improvements in the Company's gross profit margin and operating expense ratio, as well as the benefit from an anticipated reduction in its tax rate relative to the same quarter last year. In both years, first quarter results included restructuring and asset impairment charges and a net loss from discontinued operations; 2005 results also included a gain on sale of assets and transition costs related to a plant closure. The net effect of these items totaled approximately $0.06 per share in 2006 and $0.05 per share in the prior year. Excluding these items, first quarter earnings per share from continuing operations increased by 21 percent over the same quarter last year. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".) "We delivered outstanding profit improvement this quarter, and are on track to achieve the savings we targeted from our cost reduction actions," said Dean A. Scarborough, president and chief executive officer of Avery Dennison. "Our employees are doing a tremendous job improving the profitability of our businesses, while maintaining their focus on innovation and top-line growth. "Underlying unit volume growth improved sequentially," added Scarborough. "We anticipate further improvement in unit volume growth through the balance of the year. In particular, with pricing actions largely behind us, we expect our service and product advantages to once again drive share gain domestically for our roll materials business. "We remain focused on our key strategic growth platforms," said Scarborough. "We expect that emerging markets will continue to provide solid growth, and our expansion efforts in radio frequency identification (RFID), roll label materials for the beverage market, the Retail Information Services business, and numerous other Horizon growth initiatives will deliver on their potential." First Quarter Financial Highlights From Continuing Operations (For a more detailed presentation of the Company's results for the quarter, see First Quarter 2006 Financial Review and Analysis, posted at the Company's Web site at www.investors.averydennison.com.) * Net sales were approximately even with the prior year at $1.34 billion. Organic sales growth, which excludes the impact of acquisitions, divestitures, and foreign currency translation, was approximately 3 percent. * Core unit volume grew approximately 2 percent compared with the prior year, representing the second consecutive quarter of improvement in underlying growth. Changes in pricing and product mix contributed approximately one point to top line growth. * Excluding restructuring and asset impairment charges, a gain on sale of assets and transition costs in 2005 related to a plant closure, operating margin improved by 100 basis points. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".) * The recognition of stock option expense added approximately $7 million of pre-tax cost compared with the prior year, which reduced operating margin by 50 basis points and reduced after-tax earnings by $0.04 per share. As previously announced, the Company expects pre-tax stock option expense for the full year of approximately $19 million, or $0.12 per share after-tax. * The effective tax rate declined by 390 basis points to 22.0 percent, in line with the Company's expectations. Segment Highlights * Pressure-sensitive Materials reported sales of $787 million, approximately even with the prior year. Organic sales growth for the segment was 3 percent. Operating margin before restructuring and asset impairment costs, as well as a gain on sale of assets in the prior year, declined 10 basis points to 8.9 percent. * Office and Consumer Products sales declined 7 percent to $240 million. Organic sales decline for the segment was 3 percent, including a 2 percent reduction in sales from exiting certain private label business. Operating margin before restructuring charges and 2005 transition costs associated with a plant closure increased 270 basis points to 15.3 percent. * Retail Information Services sales grew 5 percent to $165 million. Organic sales growth for the segment was 6 percent. Operating margin before restructuring and asset impairment charges increased 310 basis points to 6.8 percent. Outlook for the Year Reflecting first quarter results, Avery Dennison adjusted its full year earnings guidance to a range of $3.55 to $3.80 per share before charges associated with ongoing restructuring efforts. The Company previously expected earnings to be in the range of $3.45 to $3.80 per share before restructuring charges.