UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934

October 21, 2008
Date of Report

AVERY DENNISON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		1 -7685		95-1492269
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

150 North Orange Grove Boulevard Pasadena, California		91103
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (626) 304-2000

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Section 2 — Financial Information

Item 2.02		Results of Operations and Financial Condition.

(a) Avery Dennison Corporation’s (the “Company”) news release dated October 21, 2008, regarding its preliminary, unaudited financial results for the third quarter of 2008, including its revised earnings guidance for the 2008 fiscal year, is attached hereto as Exhibit 99.1. This information is being furnished (not filed) under this Form 8-K. Additionally, the Company will discuss its preliminary financial results during a webcast and teleconference call today at 2:00 p.m. (EDT). To access the webcast and teleconference call, please go to the Company’s Web site at http://www.investors.averydennison.com.

Avery Dennison Corporation’s presentation dated October 21, 2008, regarding its preliminary financial review and analysis for the third quarter of 2008, is attached hereto as Exhibit 99.2. This information is being furnished (not filed) under this Form 8-K. Additionally, this information is available on the Company’s Web site at http://www.investors.averydennison.com.

Section 9 — Financial Statements and Exhibits

Item 9.01		Financial Statements and Exhibits.

(c)		Exhibits
99.1		On October 21, 2008, Avery Dennison Corporation issued a news release announcing its preliminary, unaudited financial results for the third quarter ending September 27, 2008, along with its revised earnings guidance for the 2008 fiscal year.
99.2		On October 21, 2008, Avery Dennison Corporation provided a presentation regarding its preliminary financial review and analysis for the third quarter ending September 27, 2008, along with its revised earnings guidance for the 2008 fiscal year.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained in this report on Form 8-K and in Exhibit 99.1 and Exhibit 99.2 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 expected 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, including synergies expected from the integration of the Paxar business in the time and at the cost anticipated; 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; credit risks; ability of the Company to obtain adequate financing arrangements and to maintain access to capital; fluctuations in interest rates; fluctuations in pension, insurance and employee benefit costs; impact of legal proceedings, including previous government investigations into industry competitive practices, and any related proceedings or lawsuits pertaining thereto or to the subject matter thereof related to the concluded investigations by the U.S. Department of Justice (“DOJ”), the European Commission, and the Canadian Department of Justice (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

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, natural disasters; and other factors.

The Company believes that the most significant risk factors that could affect its ability to achieve its stated financial expectations 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 raw material and energy-related costs can be passed on to customers through selling price increases, without a significant loss of volume; (3) the impact of competitors’ actions, including pricing, expansion in key markets, and product offerings; (4) potential adverse developments in legal proceedings and/or investigations regarding competitive activities, including possible fines, penalties, judgments or settlements; and (5) the ability of the Company to achieve and sustain targeted cost reductions, including expected synergies associated with the Paxar acquisition.

For a more detailed discussion of these and other factors, see Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Form 10-K, filed on February 27, 2008. The forward-looking statements included in this Form 8-K are made only as of the date of this Form 8-K, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

The financial information presented in the news release, included as an Exhibit to this Current Report, represents preliminary, unaudited financial results.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT LIST

Exhibit No.		Description
99.1		News release dated October 21, 2008.
99.2		Presentation dated October 21, 2008.

Exhibit 99.1

AVERY DENNISON REPORTS THIRD QUARTER RESULTS

     PASADENA, Calif. – October 21, 2008 – Avery Dennison Corporation (NYSE:AVY) today reported third quarter 2008 results. All non-GAAP terms are reconciled to GAAP in the attached tables.

Third Quarter Financial Summary — Preliminary

($ millions, except per share amounts)

		Q3				Q3				% Change vs. P/Y
		2008				2007				As Rept				Organic (a)
Net sales, by segment:
Pressure-sensitive Materials		$	936.2			$	868.3				8	%			1	%
Retail Information Services			379.1				388.7				-2	%			-7	%
Office and Consumer Products			260.4				266.9				-2	%			-4	%
Other specialty converting businesses			149.1				156.5				-5	%			-8	%
Total net sales		$	1,724.8			$	1,680.4				3	%			-2	%

		As Reported (GAAP)																				Adjusted Non-GAAP (b)
														% of Sales																				% of Sales
		2008				2007				% Change				2008				2007				2008				2007				% Change				2008				2007
Operating income before interest and taxes, by segment:
Pressure-sensitive Materials		$	60.6			$	68.3				-11	%			6.5	%			7.9	%		$	64.7			$	82.3				-21	%			6.9	%			9.5	%
Retail Information Services			(0.1	)			(15.0	)			-99	%			0.0	%			-3.9	%			5.9				13.0				-55	%			1.6	%			3.3	%
Office and Consumer Products			40.9				48.8				-16	%			15.7	%			18.3	%			44.2				49.3				-10	%			17.0	%			18.5	%
Other specialty converting businesses			0.8				7.9				-90	%			0.5	%			5.0	%			2.1				9.4				-78	%			1.4	%			6.0	%
Corporate expense			(5.9	)			(7.8	)															(2.9	)			(2.2	)
Total operating income before interest and taxes		$	96.3			$	102.2				-6	%			5.6	%			6.1	%		$	114.0			$	151.8				-25	%			6.6	%			9.0	%
Interest expense			29.0				35.7																29.0				35.7
Income from operations before taxes		$	67.3			$	66.5				1	%			3.9	%			4.0	%		$	85.0			$	116.1				-27	%			4.9	%			6.9	%
Taxes on income		$	4.6			$	7.7															$	4.6			$	16.4
Net income		$	62.7			$	58.8				7	%			3.6	%			3.5	%		$	80.4			$	99.7				-19	%			4.7	%			5.9	%
Net income per common share, assuming dilution		$	0.63			$	0.59				7	%										$	0.81			$	1.01				-20	%
																						2008				2007
YTD Free Cash Flow (c)																						$	251.5			$	129.4

     “Avery Dennison showed resilience in a very challenging environment and expects to generate record free cash flow in 2008, despite the economic slowdown and rising raw material prices,” said Dean A. Scarborough, president and chief executive officer of Avery Dennison. “Organic revenue growth slowed and margins contracted in the third quarter, reflecting current market conditions.

     “With the continued economic slowdown, we are lowering operating costs and accelerating productivity improvement, further trimming capital expenditures and working capital, and are planning additional cost-reduction actions. We continue to invest in our longer-term growth initiatives. While we are reducing our near-term outlook, the strength of our franchises in pressure-sensitive materials, retail information services, and office products makes us highly confident in our future.”

Pressure-sensitive Materials (PSM)

     Pressure-sensitive Materials revenue increased in the quarter, driven by changes in currency rates and growth in the emerging markets. Revenue growth net of currency translation was 1.4 percent. Sales in local currency declined in the U.S. and were flat in Europe, reflecting slower economic conditions. Segment margin compression reflects raw material inflation outpacing the initial benefits of price increases, and negative product mix, partially offset by continued improvements in operational efficiency.

     “Contributing to the slowdown in Pressure-sensitive revenue growth is a reduction in new product launches and redesigns by packaged-goods companies, consistent with the weak retail environment,” Scarborough said. “We expect normal end-user activity to resume when consumer confidence increases. In the near term, we will continue to address cost inflation through additional price increases and productivity improvements.”

Retail Information Services (RIS)

     The decline in RIS revenue reflects a continued decline in the domestic retail apparel market, and further weakening in Europe. Adjusting for acquisitions, segment revenue declined 7.3 percent, net of currency translation. The cost savings from integration synergies and other productivity initiatives were more than offset by the effects of reduced fixed cost leverage, continued inflation, and incremental intangible amortization associated with acquisitions.

     “Notwithstanding the extraordinary market conditions, RIS continues to build its competitive advantages of data management, global footprint, quality, and customization,” said Scarborough. “When the U.S. and European apparel markets stabilize, we expect RIS to deliver strong growth with rapidly expanding margins.”

Office and Consumer Products (OCP)

     Office and Consumer Products segment revenue declined primarily as a result of end-market softness in the U.S. Third Quarter year-over-year comparisons were affected by weak end-market demand, partially offset by a third-quarter benefit from the timing of back-to-school shipments. Overall, the back-to-school season was soft. Net of currency translation, organic revenue declined approximately 4 percent.

     The decline in operating margin reflects reduced fixed-cost leverage and inflation, partially offset by price increases and increased productivity. Additional price increases are scheduled to take effect January 1, 2009.

Other Specialty Converting and RFID

     The decline in revenue in these businesses, which comprise less than 10 percent of Company revenue, is primarily attributable to lower volume in automotive and housing construction, partially offset by growth in RFID inlays. RFID revenue nearly tripled in the quarter. The decline in operating margin reflects reduced fixed- cost leverage and inflation, partially offset by productivity improvements and reduced RFID losses.

Consolidated Items

     The Company’s effective tax rate for 2008 is expected to be in the range of 8 percent to 10 percent, subject to changes in geographic income mix, with the ongoing annual tax rate expected to be in the 17 percent to 19 percent range for the foreseeable future. The effective tax rate for the quarter was 6.8 percent.

     The Company’s access to capital has been uninterrupted through the market turmoil. To fund short term needs, the Company utilizes commercial paper and its credit lines.

     The Company’s debt-to-total-capital ratio was 51.9 percent at quarter-end. The Company targets 40 to 45 percent debt to total capital.

Outlook

     The Company announced on September 8, 2008, that results in July and August were below forecast due to deteriorating market conditions. The Company expects this trend, which worsened in September, to weaken further in the fourth quarter.

     The Company is reducing 2008 guidance due to increased market uncertainty and a slowing economy in the U.S., which is extending to Europe and Asia. Additionally, the Company anticipates that customer inventory reductions will negatively affect sales in the fourth quarter.

     The Company expects that margins will continue to be pressured by raw material inflation. The Company increased its estimate of raw material inflation in 2008 to approximately $125 million from its July estimate of approximately $110 million. While the Company intends to pass on these higher costs through price increases, the benefit of these increases will not be fully realized until the first quarter of 2009. This will result in an expected price/inflation gap of approximately $20 million in the fourth quarter of 2008.

     The Company now expects reported (GAAP) earnings for 2008 to be in the range of $2.65 to $2.85 per share, including an estimated $0.50 per share in restructuring and asset impairment charges and acquisition integration costs. Excluding these items, the Company now expects full year earnings per share for 2008 to be in the range of $3.15 to $3.35 per share. Consistent with this range of earnings guidance, the Company expects record 2008 free cash flow of approximately $375 million.

     “We expect to deliver record free cash flow in 2008, reflecting the strength of our company and our aggressive management through the near term market challenges. Our leading market positions and competitive advantages are expected to drive strong revenue growth with accelerated margin expansion when the economy recovers,” said Scarborough.

(See Attachment A-6: “Preliminary Reconciliation of GAAP to Non-GAAP Measures (Full Year 2008 Estimate)”.)

(For a more detailed presentation of the Company’s assumptions underlying its revised 2008 earnings expectations, see Third Quarter 2008 Financial Review and Analysis, posted at the Company’s Web site at www.investors.averydennison.com.)

Note: Throughout this release, all calculations of amounts on a per share basis reflect fully diluted shares outstanding.

Avery Dennison is a global leader in pressure-sensitive labeling materials, retail tag, ticketing and branding systems, and office products. Based in Pasadena, Calif., Avery Dennison is a FORTUNE 500 Company with 2007 sales of $6.3 billion. Avery Dennison employs more than 30,000 individuals in over 60 countries, who develop, manufacture and market a wide range of products for both consumer and industrial markets. Products offered by Avery Dennison include: Fasson-brand self-adhesive materials; Avery Dennison brand products for the retail and apparel industries; Avery-brand office products and graphics imaging media; specialty tapes, peel-and-stick postage stamps, and labels for a wide variety of automotive, industrial and durable goods applications.

# # #

“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 expected 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, including synergies expected from the integration of the Paxar business in the time and at the cost anticipated; 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; credit risks; ability of the Company to obtain adequate financing arrangements and to maintain access to capital; fluctuations in interest rates; fluctuations in pension, insurance and employee benefit costs; impact of legal proceedings, including previous government investigations into industry competitive practices, and any related proceedings or lawsuits pertaining thereto or to the subject matter thereof related to the concluded investigations by the U.S. Department of Justice (“DOJ”), the European Commission, and the Canadian Department of Justice (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 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, natural disasters; and other factors.

The Company believes that the most significant risk factors that could affect its ability to achieve its stated financial expectations 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 raw material and energy-related costs can be passed on to customers through selling price increases, without a significant loss of volume; (3) the impact of competitors’ actions, including pricing, expansion in key markets, and product offerings; (4) potential adverse developments in legal proceedings and/or investigations regarding competitive activities, including possible fines, penalties,

judgments or settlements; and (5) the ability of the Company to achieve and sustain targeted cost reductions, including expected synergies associated with the Paxar acquisition.

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 Form 10-K, filed on February 27, 2008, with the Securities and Exchange Commission. The forward-looking statements included in this news release are made only as of the date of this news release, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

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

A-1

AVERY DENNISON
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)

		(UNAUDITED)
		Three Months Ended								Nine Months Ended
		Sep. 27, 2008				Sep. 29, 2007				Sep. 27, 2008				Sep. 29, 2007
Net sales		$	1,724.8			$	1,680.4			$	5,198.9			$	4,593.8
Cost of products sold			1,290.5				1,214.2				3,850.3				3,352.9
Gross profit			434.3				466.2				1,348.6				1,240.9
Marketing, general & administrative expense			325.5				330.4				994.5				849.5
Interest expense			29.0				35.7				87.8				70.9
Other expense, net (1)			12.5				33.6				23.9				43.2
Income from operations before taxes			67.3				66.5				242.4				277.3
Taxes on income			4.6				7.7				18.9				53.2
Net income		$	62.7			$	58.8			$	223.5			$	224.1
Per share amounts:
Net income per common share, assuming dilution		$	0.63			$	0.59			$	2.26			$	2.27
Average common shares outstanding, assuming dilution			98.9				98.9				98.9				98.9
Common shares outstanding at period end			98.5				98.3				98.5				98.3

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to
first-in, first-out (FIFO) for certain businesses operating in the U.S.

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A-2

Reconciliation of Non-GAAP Financial Measures in Accordance with SEC Regulations G and S-K

Avery Dennison reports financial results in accordance with U.S. GAAP, and herein provides some non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for, GAAP financial measures. These non-GAAP financial measures are intended to supplement the Company’s presentation of its financial results that are prepared in accordance with GAAP.

The Company’s non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP measures, may make it difficult to assess the underlying performance of the Company in a single period. By excluding certain accounting effects, both positive and negative (e.g. gains on sales of assets, restructuring charges, asset impairments, effects of acquisitions and related costs, etc.), from certain of the Company’s GAAP measures, the Company believes that it is providing meaningful supplemental information to facilitate an understanding of the Company’s “core” or “underlying” operating results. These non-GAAP measures are used internally to evaluate trends in the Company’s underlying business, as well as to facilitate comparison to the results of competitors for a single period. The Company applies the anticipated full-year GAAP tax rate to the non-GAAP adjustments to determine adjusted non-GAAP net income.

Limitations associated with the use of the Company’s non-GAAP measures include (1) the exclusion of items that recur from time to time (e.g. restructuring, asset impairment charges, discontinued operations, etc.) from calculations of the Company’s earnings and operating margin; (2) the exclusion of the effects of acquisitions, including integration costs and certain financing costs; (3) the exclusion of interest expense from the calculation of the Company’s operating margin; and (4) the exclusion of any mandatory debt service requirements, as well as the exclusion of other uses of the cash generated by operating activities that do not directly or immediately support the underlying business (such as discretionary debt reductions, dividends, share repurchase, acquisitions, etc.) for calculation of free cash flow. While some of the items the Company excludes from GAAP measures recur, these items tend to be disparate in amount and timing. Based upon feedback from investors and financial analysts, the Company believes that supplemental non-GAAP measures provide information that is useful to the assessment of the Company’s performance and operating trends.

The reconciliation set forth below is provided in accordance with Regulations G and S-K and reconciles the non-GAAP financial measures with the most directly comparable GAAP financial measures.

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A-3

AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

		(UNAUDITED)
		Three Months Ended								Nine Months Ended
		Sep. 27, 2008				Sep. 29, 2007				Sep. 27, 2008				Sep. 29, 2007
Reconciliation of GAAP to Non-GAAP Operating Margin:
Net sales		$	1,724.8			$	1,680.4			$	5,198.9			$	4,593.8
Income from operations before taxes		$	67.3			$	66.5			$	242.4			$	277.3
GAAP Operating Margin			3.9	%			4.0	%			4.7	%			6.0	%
Income from operations before taxes		$	67.3			$	66.5			$	242.4			$	277.3
Non-GAAP adjustments:
Restructuring costs			8.7				7.5				19.2				10.5
Asset impairment and lease cancellation charges			3.8				12.4				9.2				12.4
Asset impairment charges — acquisition related (1)			—				8.9				—				18.4
Transition costs associated with acquisition integrations (2)			5.2				16.0				17.9				26.2
Other (3)			—				4.8				(4.5	)			1.9
Interest expense			29.0				35.7				87.8				70.9
Adjusted non-GAAP operating income before taxes and interest expense		$	114.0			$	151.8			$	372.0			$	417.6
Adjusted Non-GAAP Operating Margin			6.6	%			9.0	%			7.2	%			9.1	%
Reconciliation of GAAP to Non-GAAP Net Income:
As reported net income		$	62.7			$	58.8			$	223.5			$	224.1
Non-GAAP adjustments, net of taxes:
Restructuring costs			8.7				6.2				17.5				8.6
Asset impairment and lease cancellation charges			3.8				10.2				8.3				10.2
Asset impairment charges — acquisition related			—				7.3				—				14.6
Transition costs associated with acquisition integrations			5.2				13.2				15.9				21.0
Other			—				4.0				(3.8	)			1.8
Adjusted Non-GAAP Net Income		$	80.4			$	99.7			$	261.4			$	280.3

A-3
(continued)

		(UNAUDITED)
		Three Months Ended								Nine Months Ended
		Sep. 27, 2008				Sep. 29, 2007				Sep. 27, 2008				Sep. 29, 2007
Reconciliation of GAAP to Non-GAAP Earnings Per Share:
As reported income per common share, assuming dilution		$	0.63			$	0.59			$	2.26			$	2.27
Non-GAAP adjustments per share, net of taxes:
Restructuring costs			0.09				0.06				0.18				0.09
Asset impairment and lease cancellation charges			0.04				0.11				0.08				0.11
Asset impairment charges — acquisition related			—				0.07				—				0.14
Transition costs associated with acquisition integrations			0.05				0.14				0.16				0.21
Other			—				0.04				(0.04	)			0.02
Adjusted Non-GAAP income per common share, assuming dilution		$	0.81			$	1.01			$	2.64			$	2.84
Average common shares outstanding, assuming dilution			98.9				98.9				98.9				98.9

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to
first-in, first-out (FIFO) for certain businesses operating in the U.S.

		(UNAUDITED)
		Nine Months Ended
		Sep. 27, 2008				Sep. 29, 2007
Reconciliation of GAAP to Non-GAAP Cash Flow:
Net cash provided by operating activities		$	382.3			$	305.6
Purchase of property, plant and equipment			(97.8	)			(136.3	)
Purchase of software and other deferred charges			(49.2	)			(39.9	)
Proceeds from sale of investments, net			16.2				—
Free Cash Flow		$	251.5			$	129.4

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A-4

AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

		(UNAUDITED)
		Third Quarter Ended
		NET SALES								OPERATING INCOME								OPERATING MARGINS
		2008				2007				2008 (1)				2007 (2)				2008				2007
Pressure-sensitive Materials		$	936.2			$	868.3			$	60.6			$	68.3				6.5	%			7.9	%
Retail Information Services			379.1				388.7				(0.1	)			(15.0	)			0.0	%			(3.9	%)
Office and Consumer Products			260.4				266.9				40.9				48.8				15.7	%			18.3	%
Other specialty converting businesses			149.1				156.5				0.8				7.9				0.5	%			5.0	%
Corporate Expense			N/A				N/A				(5.9	)			(7.8	)			N/A				N/A
Interest Expense			N/A				N/A				(29.0	)			(35.7	)			N/A				N/A
TOTAL FROM OPERATIONS		$	1,724.8			$	1,680.4			$	67.3			$	66.5				3.9	%			4.0	%

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to
first-in, first-out (FIFO) for certain businesses operating in the U.S.

RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

		Third Quarter Ended
		OPERATING INCOME								OPERATING MARGINS
		2008				2007				2008				2007
Pressure-sensitive Materials
Operating income, as reported		$	60.6			$	68.3				6.5	%			7.9	%
Non-GAAP adjustments:
Restructuring costs			0.9				3.1				0.1	%			0.4	%
Asset impairment and lease cancellation charges			3.2				10.9				0.3	%			1.2	%
Adjusted non-GAAP operating income		$	64.7			$	82.3				6.9	%			9.5	%
Retail Information Services
Operating income, as reported		$	(0.1	)		$	(15.0	)			0.0	%			(3.9	%)
Non-GAAP adjustments:
Restructuring costs			0.8				3.1				0.2	%			0.8	%
Asset impairment charges — acquisition related			—				8.9				—				2.3	%
Transition costs associated with acquisition integrations			5.2				16.0				1.4	%			4.1	%
Adjusted non-GAAP operating income		$	5.9			$	13.0				1.6	%			3.3	%
Office and Consumer Products
Operating income, as reported		$	40.9			$	48.8				15.7	%			18.3	%
Non-GAAP adjustments:
Restructuring costs			2.7				0.1				1.1	%			0.1	%
Asset impairment and lease cancellation charges			0.6				0.4				0.2	%			0.1	%
Adjusted non-GAAP operating income		$	44.2			$	49.3				17.0	%			18.5	%
Other specialty converting businesses
Operating income, as reported		$	0.8			$	7.9				0.5	%			5.0	%
Non-GAAP adjustments:
Restructuring costs			1.3				1.2				0.9	%			0.8	%
Asset impairment charges			—				0.3				—				0.2	%
Adjusted non-GAAP operating income		$	2.1			$	9.4				1.4	%			6.0	%

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A-5

AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

		(UNAUDITED)
		Nine Months Year-to-Date
		NET SALES								OPERATING INCOME								OPERATING MARGINS
		2008				2007				2008 (1)				2007 (2)				2008				2007
Pressure-sensitive Materials		$	2,835.7			$	2,607.6			$	210.5			$	239.7				7.4	%			9.2	%
Retail Information Services			1,189.3				764.6				14.8				(7.0	)			1.2	%			(0.9	%)
Office and Consumer Products			710.2				744.0				102.5				117.5				14.4	%			15.8	%
Other specialty converting businesses			463.7				477.6				15.5				26.4				3.3	%			5.5	%
Corporate Expense			N/A				N/A				(13.1	)			(28.4	)			N/A				N/A
Interest Expense			N/A				N/A				(87.8	)			(70.9	)			N/A				N/A
TOTAL FROM OPERATIONS		$	5,198.9			$	4,593.8			$	242.4			$	277.3				4.7	%			6.0	%

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to
first-in, first-out (FIFO) for certain businesses operating in the U.S.

RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

		Nine Months Year-to-Date
		OPERATING INCOME								OPERATING MARGINS
		2008				2007				2008				2007
Pressure-sensitive Materials
Operating income, as reported		$	210.5			$	239.7				7.4	%			9.2	%
Non-GAAP adjustments:
Restructuring costs			2.1				5.1				0.1	%			0.2	%
Asset impairment and lease cancellation charges			5.8				10.9				0.2	%			0.4	%
Reversal of an accrual for a lawsuit			—				(3.2	)			—				(0.1	%)
Adjusted non-GAAP operating income		$	218.4			$	252.5				7.7	%			9.7	%
Retail Information Services
Operating income, as reported		$	14.8			$	(7.0	)			1.2	%			(0.9	%)
Non-GAAP adjustments:
Restructuring costs			4.8				3.5				0.4	%			0.5	%
Asset impairment and lease cancellation charges			2.8				—				0.3	%			—
Asset impairment charges — acquisition related			—				18.4				—				2.4	%
Transition costs associated with acquisition integrations			17.9				26.2				1.5	%			3.4	%
Adjusted non-GAAP operating income		$	40.3			$	41.1				3.4	%			5.4	%
Office and Consumer Products
Operating income, as reported		$	102.5			$	117.5				14.4	%			15.8	%
Non-GAAP adjustments:
Restructuring costs			7.0				0.7				1.0	%			0.1	%
Asset impairment and lease cancellation charges			0.6				0.4				0.1	%			0.1	%
Expenses related to a divestiture			—				0.3				—				—
Adjusted non-GAAP operating income		$	110.1			$	118.9				15.5	%			16.0	%
Other specialty converting businesses
Operating income, as reported		$	15.5			$	26.4				3.3	%			5.5	%
Non-GAAP adjustments:
Restructuring costs			1.4				1.2				0.3	%			0.3	%
Asset impairment charges			—				0.3				—				—
Adjusted non-GAAP operating income		$	16.9			$	27.9				3.6	%			5.8	%

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A-6

AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Full Year 2008 Estimates)

		2008
		Guidance
		(revised)
Reconciliation of GAAP to Non-GAAP Earnings Per Share Guidance:
Reported (GAAP) Earnings Per Share		$2.65 - $2.85
Add Back:
Estimated Integration Transition Costs, Restructuring and Asset Impairment Charges		~ $0.50
Adjusted (non-GAAP) Earnings Per Share		$3.15 - $3.35

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A-7

AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)

		(UNAUDITED)
		Sep. 27, 2008				Sep. 29, 2007
ASSETS
Current assets:
Cash and cash equivalents		$	81.3			$	77.3
Trade accounts receivable, net			1,120.7				1,112.4
Inventories, net			648.7				657.1
Other current assets			286.2				231.2
Total current assets			2,136.9				2,078.0
Property, plant and equipment, net			1,543.3				1,569.0
Other assets			2,704.8				2,490.3
		$	6,385.0			$	6,137.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term and current portion of long-term debt		$	721.6			$	1,572.3
Accounts payable			730.6				660.3
Other current liabilities			673.2				635.5
Total current liabilities			2,125.4				2,868.1
Long-term debt			1,545.2				755.5
Other long-term liabilities			615.8				599.7
Shareholders’ equity:
Common stock			124.1				124.1
Capital in excess of par value			747.4				832.3
Retained earnings			2,382.3				2,254.5
Accumulated other comprehensive income			75.0				30.5
Cost of unallocated ESOP shares			(3.8	)			(5.7	)
Employee stock benefit trusts			(358.7	)			(463.5	)
Treasury stock at cost			(867.7	)			(858.2	)
Total shareholders’ equity			2,098.6				1,914.0
		$	6,385.0			$	6,137.3

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to first-in, first-out (FIFO) for certain businesses operating in the U.S.

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A-8

AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

		(UNAUDITED)
		Nine Months Ended
		Sep. 27, 2008				Sep. 29, 2007
Operating Activities:
Net income		$	223.5			$	224.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			154.8				128.8
Amortization			51.3				35.6
Deferred taxes			(33.0	)			12.6
Asset impairment and net loss on sale and disposal of assets			16.4				36.4
Stock-based compensation			24.0				15.5
Other non-cash items, net			9.5				(7.6	)
			446.5				445.4
Changes in assets and liabilities			(64.2	)			(139.8	)
Net cash provided by operating activities			382.3				305.6
Investing Activities:
Purchase of property, plant and equipment			(97.8	)			(136.3	)
Purchase of software and other deferred charges			(49.2	)			(39.9	)
Payments for acquisitions			(130.6	)			(1,285.2	)
Proceeds from sale of assets			5.0				2.8
Proceeds from sale of investments, net			16.2				—
Other			2.0				(0.2	)
Net cash used in investing activities			(254.4	)			(1,458.8	)
Financing Activities:
Net (decrease) increase in borrowings (maturities of 90 days or less)			(386.3	)			1,263.1
Additional borrowings (maturities longer than 90 days)			400.1				248.8
Payments of debt (maturities longer than 90 days)			(0.7	)			(181.9	)
Dividends paid			(131.4	)			(128.0	)
Purchase of treasury stock			(9.8	)			(63.2	)
Proceeds from exercise of stock options, net			2.3				34.4
Other			8.2				(2.5	)
Net cash (used in) provided by financing activities			(117.6	)			1,170.7
Effect of foreign currency translation on cash balances			(0.5	)			1.3
Increase in cash and cash equivalents			9.8				18.8
Cash and cash equivalents, beginning of period			71.5				58.5
Cash and cash equivalents, end of period		$	81.3			$	77.3

2007 amounts have been restated to reflect the change in method of accounting for inventory from last-in, first-out (LIFO) to first-in, first-out (FIFO) for certain businesses operating in the U.S.

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