Avery Dennison Reports Second Quarter Results

PASADENA, Calif.--(Business Wire)--
Avery Dennison Corporation (NYSE:AVY) today reported second
quarter 2008 results. All non-GAAP terms are reconciled to GAAP in the
following tables.

-0-
*T
Second Quarter Financial Summary
($ millions, except per share amounts)

Q2 Q2 % Change vs. P/Y
----------------
2008 2007 As Rept Org(a)
-------- -------- --------- ------
Net sales, by segment:
Pressure-sensitive Materials $ 979.9 $ 879.3 11% 3%
Retail Information Services 438.2 219.4 100% -3%
Office and Consumer Products 255.4 262.7 -3% -6%
Other specialty converting
businesses 155.4 162.1 -4% -9%
-------- --------
Total net sales $1,828.9 $1,523.5 20% -1%
*T

-0-
*T
As Reported (GAAP)
------------------------------------
% of Sales
-----------
2008 2007 % Change 2008 2007
------- ------- -------- ----- -----
Operating income before interest
and taxes, by segment:
Pressure-sensitive Materials $ 80.0 $ 89.5 -11% 8.2% 10.2%
Retail Information Services 19.3 1.2 1508% 4.4% 0.5%
Office and Consumer Products 40.1 42.2 -5% 15.7% 16.1%
Other specialty converting
businesses 5.5 7.2 -24% 3.5% 4.4%
Corporate expense (1.4) (8.0) 83%
---------------
Total operating income before
interest and taxes $143.5 $132.1 9% 7.8% 8.7%

Interest expense 29.3 20.1 46%

Income from operations before
taxes $114.2 $112.0 2% 6.2% 7.4%

Taxes on income $ 21.8 $ 25.8 -16%

Net income $ 92.4 $ 86.2 7% 5.1% 5.7%

Net income per common share,
assuming dilution $ 0.93 $ 0.87 7%

Free cash flow(c)

Adjusted Non-GAAP(b)
-------------------------------------
% of Sales
------------
2008 2007 % Change 2008 2007
------- ------- -------- ------ -----
Operating income before interest
and taxes, by segment:
Pressure-sensitive Materials $ 80.4 $ 86.8 -7% 8.2% 9.9%
Retail Information Services 30.5 21.3 43% 7.0% 9.7%
Office and Consumer Products 44.3 42.5 4% 17.3% 16.2%
Other specialty converting
businesses 5.5 7.2 -24% 3.5% 4.4%
Corporate expense (5.7) (8.0) 29%
---------------
Total operating income before
interest and taxes $155.0 $149.8 3% 8.5% 9.8%

Interest expense 29.3 20.1 46%

Income from operations before
taxes $125.7 $129.7 -3% 6.9% 8.5%

Taxes on income $ 23.6 $ 29.9 -21%

Net income $102.1 $ 99.8 2% 5.6% 6.6%

Net income per common share,
assuming dilution $ 1.03 $ 1.01 2%

2008 2007
------- -------
Free cash flow(c) $ 99.6 $ 7.2

*T

-0-
*T
Note: This table has been added to the Company's quarterly earnings
disclosure to provide greater ease of reference and facilitate trend
analysis.

a) Percent change in sales before the impact of acquisitions,
divestitures, and foreign currency translation.

b) Excludes restructuring and asset impairment charges, transition
costs associated with the integration of Paxar, and other items
(see accompanying schedules A-3 and A-4 for reconciliation to GAAP
measures).

c) Free Cash Flow (a non-GAAP measure) as used herein is defined as
net cash provided by operating activities (as reported), less
purchase of property, plant, equipment, software, and other
deferred charges, plus proceeds from sale of investments, net (see
accompanying schedule A-3 for reconciliation to GAAP measure).
*T

"A strong product line, distinct competitive advantages, and the
strength of our global footprint continue to help offset the current
environment of spiking raw material costs and economic slowdown in the
U.S. and Europe," said Dean A. Scarborough, president and chief
executive officer of Avery Dennison. "Inflation and economic
conditions were worse than expected in the quarter, and are now
expected to be worse than previously anticipated during the second
half of the year, diminishing our 2008 outlook. In the face of major
headwinds, we are delivering strong cash flow and dividends, as we
have in the past.

"Despite weak economic environments in the U.S. and Europe, demand
in the Company's Pressure-sensitive Materials Segment continues to
grow, particularly in emerging markets. With rapid cost inflation
compressing margins, we're continuing to drive productivity
improvement and implementing additional price increases.

"The integration of Paxar into our Retail Information Services
Group remains on track, and is targeted to drive annual cost synergies
of approximately $120 million by the end of 2009, with 85 percent of
the savings realized by the end of 2008. We fully expect this business
to be an outstanding performer when the slumping apparel market
recovers. Our Office Products business continues to generate
significant cash flow, despite market conditions.

"We're positioning the Company for growth, and have great
confidence in improved results when external conditions normalize and
the benefit of internal actions flow through. We continue to invest in
key growth initiatives including RFID, emerging markets, and other
opportunities.

"We're improving productivity while optimizing working capital.
During the quarter, we increased productivity through accelerated
deployment of enterprise lean sigma tools, and furthered the
integration of Paxar. We also focused on working capital, resulting in
strong cash flow even in a difficult environment."

For more details on the Company's results for the quarter, see
Second Quarter 2008 Financial Review and Analysis, posted at the
Company's Web site at www.investors.averydennison.com.

Pressure-sensitive Materials Segment (PSM)

Segment revenue growth in the quarter was primarily driven by
strong sales in emerging markets, with revenue in the U.S. and Europe
reflecting the tough economic conditions. Revenue growth net of
currency translation was 3 percent.

Margin compression primarily reflected raw material inflation
ahead of price increases. The decline was partially offset by
continued improvements in operational efficiency. Price increases,
which started late in the first quarter, are accelerating through the
balance of the year.

Retail Information Services Segment (RIS)

Segment revenue growth in the quarter is attributable to
acquisitions, which were completed in June 2007 and April 2008.
Adjusted for acquisitions, revenue declined 3 percent, net of currency
translation.

RIS continues to build its competitive advantages of quality,
customization, global footprint, and data management. The organic
decline in revenue primarily reflects the sharp decline in apparel
shipped to U.S. retailers and brand owners, partially offset by modest
growth in the European market.

As the U.S. apparel market stabilizes, RIS will be better
positioned than ever to capitalize on its large market, made even more
accessible with the acquisition of Paxar.

The decline in profitability in the second quarter primarily
reflects low volumes in the current weak retail environment, as well
as inflation, including increased labor costs in China. The impact of
these factors was partially offset by integration synergies and other
sources of productivity. The Company remains on track to realize
annualized acquisition synergies of approximately $120 million.
Looking ahead, the Company expects that margins will normalize with
improved volume as the apparel market rebounds, incremental synergies
are realized, and price actions take effect.

Office and Consumer Products Segment (OCP)

The decline in Segment revenue, which comprises approximately 15
percent of Company revenue, is primarily attributable to end-market
softness reflecting the U.S. economic environment. Second quarter
year-over-year comparisons were also impacted by the timing of
back-to-school shipments, a portion of which shifted to the third
quarter this year. Net of currency translation, organic revenue
declined 6 percent.

The expansion in operating margin in the second quarter primarily
reflected product mix related to the timing of back-to-school
shipments and productivity improvements, partially offset by
accelerated inflation and reduced fixed cost leverage associated with
lower volume. The Company is moving forward with additional price
increases to help offset inflation.

While OCP continues to face difficult market conditions, its
powerful consumer brand, proprietary products, and low requirement for
capital expenditures result in significant contributions to free cash
flow, reflected in second quarter results.

Other Specialty Converting Businesses and RFID

The decline in revenue from these businesses, which comprises less
than 10 percent of Company revenue, is primarily attributable to lower
volumes in automotive and housing construction, partially offset by
growth in RFID inlays. Revenue declined 9 percent, net of currency
translation. RFID revenue quadrupled in the quarter, in line with
expectations. 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 annual effective tax rate for 2008 is expected to be
in the 14 percent to 16 percent range, with the ongoing annual tax
rate expected to be in the 17 percent to 19 percent range for the
foreseeable future, subject to significant volatility from quarter to
quarter. The effective tax rate for the quarter was 19 percent.

The Company's debt-to-total-capital ratio improved to 52 percent
at quarter-end. The Company targets 40 to 45 percent debt to total
capital.

Outlook

The Company is reducing its 2008 guidance primarily due to a
significant increase in inflation expectations coupled with greater
economic weakness. To help offset the impact of inflation, the Company
accelerated productivity efforts and is raising prices. However,
expectations for raw material inflation in 2008 have risen to
approximately $110 million, representing a 60 percent increase since
April. Because the majority of the benefit from pricing actions is
expected to materialize later in the year, raw material inflation will
significantly outpace price increases realized in the full year.

The Company's earnings expectations reflect revenue flat to
slightly down on an organic basis for 2008. Slowing in European and
Asian markets is expected, in addition to the slower U.S. market.

The Company now expects reported (GAAP) earnings for 2008 in a
range of $3.35 to $3.55 per share, including an estimated $0.40 per
share in restructuring and asset impairment charges and acquisition
integration costs. These charges and costs are subject to revision, as
plans have not been finalized. Excluding these items, the Company now
expects full year earnings per share for 2008 to be in the range of
$3.75 to $3.95 per share. The Company continues to expect 2008 free
cash flow of at least $400 million. (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 Second 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; credit risks; ability
of the Company to obtain adequate financing arrangements; fluctuations
in interest rates; fluctuations in pension, insurance and employee
benefit costs; impact of legal proceedings, including the Australian
Competition and Consumer Commission investigation into industry
competitive practices, and any related proceedings or lawsuits
pertaining to this investigation or to the subject matter thereof or
of 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 based
on issues in China; 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 Second Quarter conference call with analysts, visit the
Avery Dennison Web site at www.investors.averydennison.com.

-0-
*T
AVERY DENNISON
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)

(UNAUDITED)
Three Months Six Months
Ended Ended
------------------ ------------------
Jun. 28, Jun. 30, Jun. 28, Jun. 30,
2008 2007 2008 2007
-------------------------------------------------- ------------------

Net sales $ 1,828.9 $ 1,523.5 $ 3,474.1 $ 2,913.4

Cost of products sold 1,338.6 1,113.1 2,559.8 2,138.7
------------------------------ ------------------- -------------------

Gross profit 490.3 410.4 914.3 774.7

Marketing, general &
administrative expense 341.0 270.8 669.0 519.1

Interest expense 29.3 20.1 58.8 35.2

Other expense, net(1) 5.8 7.5 11.4 9.6
------------------------------ ------------------- -------------------

Income from operations before
taxes 114.2 112.0 175.1 210.8

Taxes on income 21.8 25.8 14.3 45.5
------------------------------ ------------------- -------------------

Net income $ 92.4 $ 86.2 $ 160.8 165.3
------------------------------ ------------------- -------------------

Per share amounts:

Net income per common share,
assuming dilution $ 0.93 $ 0.87 $ 1.62 $ 1.67
------------------------------ ------------------- -------------------

Average common shares
outstanding, assuming
dilution 98.9 98.7 98.9 98.8
------------------------------ ------------------- -------------------
Common shares outstanding at
period end 98.5 98.2 98.5 98.2
------------------------------ ------------------- -------------------
*T

-0-
*T
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.

(1) Other expense, net, for the second quarter of 2008 includes $10.3
of restructuring costs and asset impairment and lease
cancellation charges, partially offset by ($4.5) related to a
gain on sale of investments.

Other expense, net, for the second quarter of 2007 includes $10.4
of asset impairment charges and restructuring costs and $.3 of
expenses related to a divestiture, partially offset by a reversal
of an accrual ($3.2) related to a lawsuit.

Other expense, net, for 2008 YTD includes $15.9 of restructuring
costs and asset impairment and lease cancellation charges,
partially offset by ($4.5) related to a gain on sale of
investments.

Other expense, net, for 2007 YTD includes $12.5 of asset
impairment charges and restructuring costs and $.3 of expenses
related to a divestiture, partially offset by a reversal of an
accrual ($3.2) related to a lawsuit.

*T

-0-
*T
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.

*T

-0-
*T
AVERY DENNISON
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

(UNAUDITED)
Three Months Ended Six Months Ended
------------------ ------------------

Jun. 28, Jun. 30, Jun. 28, Jun. 30,
2008 2007 2008 2007
-------------------------------------------------- ------------------

Reconciliation of GAAP to Non-
GAAP Operating Margin:

Net sales $1,828.9 $1,523.5 $3,474.1 $2,913.4
------------------- -------------------

Income from operations before
taxes $ 114.2 $ 112.0 $ 175.1 $ 210.8
------------------------------ ------------------- -------------------
GAAP Operating Margin 6.2% 7.4% 5.0% 7.2%
-------------------------------------------------- -------------------

Income from operations before
taxes $ 114.2 $ 112.0 $ 175.1 $ 210.8

Non-GAAP adjustments:
Restructuring costs 7.2 0.9 10.5 3.0
Asset impairment and lease
cancellation charges 3.1 --- 5.4 ---
Asset impairment charges -
acquisition related(1) --- 9.5 --- 9.5
Transition costs associated
with acquisition
integrations(2) 5.7 10.2 12.7 10.2
Other(3) (4.5) (2.9) (4.5) (2.9)
Interest expense 29.3 20.1 58.8 35.2
------------------- -------------------

Adjusted non-GAAP operating
income before taxes and
interest expense $ 155.0 $ 149.8 $ 258.0 $ 265.8
------------------------------ ------------------- -------------------
Adjusted Non-GAAP Operating
Margin 8.5% 9.8% 7.4% 9.1%
-------------------------------------------------- -------------------

Reconciliation of GAAP to Non-
GAAP Net Income:

As reported net income $ 92.4 $ 86.2 $ 160.8 $ 165.3
Non-GAAP adjustments, net of
taxes:
Restructuring costs 6.0 0.7 8.8 2.4
Asset impairment and lease
cancellation charges 2.6 --- 4.5 ---
Asset impairment charges -
acquisition related --- 7.3 --- 7.3
Transition costs associated
with acquisition
integrations 4.9 7.8 10.7 7.8
Other (3.8) (2.2) (3.8) (2.2)
------------------------------ ------------------- -------------------
Adjusted Non-GAAP Net Income $ 102.1 $ 99.8 $ 181.0 $ 180.6
-------------------------------------------------- -------------------

*T

-0-
*T
(UNAUDITED)
Three Months Six Months
Ended Ended
--------------- ---------------
Jun. 28, Jun. 30, Jun. 28, Jun. 30,
2008 2007 2008 2007
---------------------------------------------------- -----------------

Reconciliation of GAAP to Non-GAAP
Earnings Per Share:

As reported income per common
share, assuming dilution $ 0.93 $ 0.87 $ 1.62 $ 1.67

Non-GAAP adjustments per share,
net of taxes:
Restructuring costs 0.06 0.01 0.09 0.03
Asset impairment and lease
cancellation charges 0.03 - 0.05 -
Asset impairment charges -
acquisition related - 0.07 - 0.07
Transition costs associated
with acquisition integrations 0.05 0.08 0.11 0.08
Other (0.04) (0.02) (0.04) (0.02)
---------------------------------- ----------------- -----------------
Adjusted Non-GAAP income per
common share excluding Paxar,
assuming dilution $ 1.03 $ 1.01 $ 1.83 $ 1.83
----------------------------------------------------------------------

Average common shares outstanding,
assuming dilution 98.9 98.7 98.9 98.8
----------------------------------------------------------------------
*T

-0-
*T
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.

(1) 2007 QTD and YTD includes asset impairment charges related to
software assets.

(2) 2008 and 2007 QTD and YTD includes transition costs associated
with acquisition integrations and change-in-control costs
reported in marketing, general & administrative expense. 2007 QTD
and YTD includes inventory step-up impact reported in cost of
products sold.

(3) 2008 QTD and YTD includes a gain on sale of investments.
2007 QTD and YTD includes reversal of an accrual ($3.2) related to
a lawsuit, partially offset by expenses of $.3 related to a
divestiture.

*T

-0-
*T
(UNAUDITED)

Six Months Ended
----------------------------

Jun. 28, 2008 Jun. 30, 2007
----------------------------------------------------------------------

Reconciliation of GAAP to Non-GAAP Cash
Flow:

Net cash provided by operating
activities $ 188.7 $ 130.9

Purchase of property, plant and
equipment (69.1) (94.7)

Purchase of software and other deferred
charges (33.0) (29.0)

Proceeds from sale of investments, net 13.0 -
----------------------------------------------------------------------
Free Cash Flow $ 99.6 $ 7.2
----------------------------------------------------------------------

*T

-0-
*T
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

(UNAUDITED)
Second Quarter Ended
---------------------------------------------

NET SALES OPERATING OPERATING
INCOME MARGINS
----------------- --------------- -----------

2008 2007 2008(1) 2007(2) 2008 2007
----------------- --------------- -----------

Pressure-sensitive
Materials $ 979.9 $ 879.3 $ 80.0 $ 89.5 8.2% 10.2%
Retail Information
Services 438.2 219.4 19.3 1.2 4.4% 0.5%
Office and Consumer
Products 255.4 262.7 40.1 42.2 15.7% 16.1%
Other specialty
converting businesses 155.4 162.1 5.5 7.2 3.5% 4.4%
Corporate Expense N/A N/A (1.4) (8.0) N/A N/A
Interest Expense N/A N/A (29.3) (20.1) N/A N/A
----------------- --------------- -----------

TOTAL FROM OPERATIONS $1,828.9 $1,523.5 $114.2 $112.0 6.2% 7.4%
================= =============== ===========

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.

(1) Operating income for the second quarter of 2008 includes $10.3 of
restructuring costs and asset impairment and lease cancellation
charges and $5.7 of transition costs associated with acquisition
integrations, partially offset by ($4.5) related to a gain on sale of
investments; of the total $11.5, the Pressure-sensitive Materials
segment recorded $.4, the Retail Information Services segment
recorded $11.2, the Office and Consumer Products segment recorded
$4.2 and Corporate recorded ($4.3).

(2) Operating income for the second quarter of 2007 includes $10.4 of
asset impairment charges and restructuring costs, $10.2 of transition
costs associated with the Paxar acquisition and $.3 of expenses
related to a divestiture, partially offset by a reversal of an
accrual ($3.2) related to a lawsuit; of the total $17.7, the
Pressure-sensitive Materials segment recorded ($2.7), the Retail
Information Services segment recorded $20.1 and the Office and
Consumer Products segment recorded $.3.

*T

-0-
*T
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Second Quarter Ended
---------------------------
OPERATING OPERATING
INCOME MARGINS
------------- -------------
2008 2007 2008 2007
------------- -------------
Pressure-sensitive Materials
------------------------------------------
Operating income, as reported $ 80.0 $89.5 8.2% 10.2%
Non-GAAP adjustments:
Restructuring costs 0.1 0.5 --- 0.1%
Asset impairment charges 0.3 --- --- ---
Reversal of an accrual for a lawsuit --- (3.2) --- (0.4%)
------------- -------------
Adjusted non-GAAP operating income $ 80.4 $86.8 8.2% 9.9%
============= =============

Retail Information Services
------------------------------------------
Operating income, as reported $ 19.3 $ 1.2 4.4% 0.5%
Non-GAAP adjustments:
Restructuring costs 2.7 0.4 0.6% 0.2%
Asset impairment and lease cancellation
charges 2.8 --- 0.7% ---
Asset impairment charges - acquisition
related --- 9.5 --- 4.4%
Transition costs associated with
acquisition integrations 5.7 10.2 1.3% 4.6%
------------- -------------
Adjusted non-GAAP operating income $ 30.5 $21.3 7.0% 9.7%
============= =============

Office and Consumer Products
------------------------------------------
Operating income, as reported $ 40.1 $42.2 15.7% 16.1%
Non-GAAP adjustments:
Restructuring costs 4.2 --- 1.6% ---
Expenses related to a divestiture --- 0.3 --- 0.1%
------------- -------------
Adjusted non-GAAP operating income $ 44.3 $42.5 17.3% 16.2%
============= =============

*T

-0-
*T
AVERY DENNISON
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

(UNAUDITED)
Six Months Year-to-Date
---------------------------------------------
NET SALES OPERATING OPERATING
INCOME MARGINS
----------------- --------------- -----------

2008 2007 2008(1) 2007(2) 2008 2007
----------------- ---------------------------

Pressure-sensitive
Materials $1,899.5 $1,739.3 $149.9 $171.4 7.9% 9.9%
Retail Information
Services 810.2 375.9 14.9 8.0 1.8% 2.1%
Office and Consumer
Products 449.8 477.1 61.6 68.7 13.7% 14.4%
Other specialty
converting businesses 314.6 321.1 14.7 18.5 4.7% 5.8%
Corporate Expense N/A N/A (7.2) (20.6) N/A N/A
Interest Expense N/A N/A (58.8) (35.2) N/A N/A
----------------- --------------- -----------

TOTAL FROM OPERATIONS $3,474.1 $2,913.4 $175.1 $210.8 5.0% 7.2%
================= =============== ===========

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.

(1) Operating income for 2008 includes $15.9 of restructuring costs
and asset impairment and lease cancellation charges and $12.7 of
transition costs associated with acquisition integrations, partially
offset by ($4.5) related to a gain on sale of investments; of the
total $24.1, the Pressure-sensitive Materials segment recorded $3.8,
the Retail Information Services segment recorded $19.5, the Office
and Consumer Products segment recorded $4.3, other specialty
converting businesses recorded $.1 and Corporate recorded ($3.6).

(2) Operating income for 2007 includes $12.5 of asset impairment
charges and restructuring costs, $10.2 of transitions costs
associated with the Paxar acquisition and $.3 of expenses related to
a divestiture, partially offset by a reversal of an accrual ($3.2)
related to a lawsuit; of the total $19.8, the Pressure-sensitive
Materials segment recorded ($1.2), the Retail Information Services
segment recorded $20.1 and the Office and Consumer Products segment
recorded $.9.

*T

-0-
*T
RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Six Months Year-to-Date
-----------------------------
OPERATING OPERATING
INCOME MARGINS
--------------- -------------
2008 2007 2008 2007
--------------- -------------
Pressure-sensitive Materials
----------------------------------------
Operating income, as reported $149.9 $171.4 7.9% 9.9%
Non-GAAP adjustments:
Restructuring costs 1.2 2.0 0.1% 0.1%
Asset impairment charges 2.6 --- 0.1% ---
Reversal of an accrual for a lawsuit --- (3.2) --- (0.2%)
--------------- -------------
Adjusted non-GAAP operating income $153.7 $170.2 8.1% 9.8%
=============== =============

Retail Information Services
----------------------------------------
Operating income, as reported $ 14.9 $ 8.0 1.8% 2.1%
Non-GAAP adjustments:
Restructuring costs 4.0 0.4 0.5% 0.1%
Asset impairment and lease cancellation
charges 2.8 --- 0.3% ---
Asset impairment charges - acquisition
related --- 9.5 --- 2.6%
Transition costs associated with
acquisition integrations 12.7 10.2 1.6% 2.7%
--------------- -------------
Adjusted non-GAAP operating income $ 34.4 $ 28.1 4.2% 7.5%
=============== =============

Office and Consumer Products
----------------------------------------
Operating income, as reported $ 61.6 $ 68.7 13.7% 14.4%
Non-GAAP adjustments:
Restructuring costs 4.3 0.6 1.0% 0.1%
Expenses related to a divestiture --- 0.3 --- 0.1%
--------------- -------------
Adjusted non-GAAP operating income $ 65.9 $ 69.6 14.7% 14.6%
=============== =============

Other specialty converting businesses
----------------------------------------
Operating income, as reported $ 14.7 $ 18.5 4.7% 5.8%
Non-GAAP adjustments:
Restructuring costs 0.1 --- --- ---
--------------- -------------
Adjusted non-GAAP operating income $ 14.8 $ 18.5 4.7% 5.8%
=============== =============

*T

-0-
*T
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 $3.35 - $3.55

Add Back:
----------------------------------------------------
Estimated Integration Transition Costs, Approximately
Restructuring and Asset Impairment Charges $0.40

Adjusted (non-GAAP) Earnings Per Share $3.75 - $3.95

*T

-0-
*T
AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)

(UNAUDITED)

ASSETS Jun. 28, 2008 Jun. 30, 2007
----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 87.1 $ 76.6
Trade accounts receivable, net 1,232.8 1,151.1
Inventories, net 679.1 666.2
Other current assets 302.0 260.4
----------------------------------------------------------------------
Total current assets 2,301.0 2,154.3

Property, plant and equipment, net 1,618.2 1,578.3
Other assets 2,778.6 2,447.2
----------------------------------------------------------------------
$ 6,697.8 $ 6,179.8
----------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------
Current liabilities:
Short-term and current portion of
long-term debt $ 825.8 $ 1,894.3
Accounts payable 797.8 708.2
Other current
liabilities 685.7 616.1
----------------------------------------------------------------------
Total current liabilities 2,309.3 3,218.6

Long-term debt 1,545.4 506.7
Other long-term liabilities 644.0 615.2
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 723.7 900.9
Retained earnings 2,363.4 2,238.5
Accumulated other comprehensive income
(loss) 195.3 (12.8)
Cost of unallocated ESOP shares (3.8) (5.7)
Employee stock benefit trusts (345.4) (547.5)
Treasury stock at cost (858.2) (858.2)

----------------------------------------------------------------------
Total shareholders' equity 2,199.1 1,839.3
----------------------------------------------------------------------
$ 6,697.8 $ 6,179.8
----------------------------------------------------------------------

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.

*T

-0-
*T
AVERY DENNISON
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

(UNAUDITED)
Six Months Ended
----------------------------

Jun. 28, 2008 Jun. 30, 2007
----------------------------------------------------------------------

Operating Activities:

Net income $ 160.8 $ 165.3

Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 101.6 79.7
Amortization 33.6 21.1
Deferred taxes (32.8) 13.3
Asset impairment and net loss on sale
and disposal of assets 14.4 13.1
Stock-based compensation 16.9 10.3
Other non-cash items, net (16.2) (9.9)
------- ---------
278.3 292.9

Changes in assets and liabilities (89.6) (162.0)
------- ---------
Net cash provided by operating activities 188.7 130.9
------- ---------

Investing Activities:

Purchase of property, plant and equipment (69.1) (94.7)
Purchase of software and other deferred
charges (33.0) (29.0)
Payments for acquisitions (125.0) (1,284.1)
Proceeds from sale of assets 3.2 1.7
Proceeds from sale of investments, net 13.0 ---
Other 1.9 0.7
------- ---------
Net cash used in investing activities (209.0) (1,405.4)
------- ---------

Financing Activities:

Net (decrease) increase in borrowings
(maturities of 90 days or less) (285.1) 1,423.9
Additional borrowings (maturities longer
than 90 days) 400.1 ---
Payments of debt (maturities longer than
90 days) (0.3) (11.7)
Dividends paid (87.6) (85.4)
Purchase of treasury stock --- (63.2)
Proceeds from exercise of stock options,
net 1.9 30.5
Other 5.4 (2.1)
------- ---------

Net cash provided by financing
activities 34.4 1,292.0
------- ---------
Effect of foreign currency translation on
cash balances 1.5 0.6
------- ---------
Increase in cash and cash equivalents 15.6 18.1
------- ---------
Cash and cash equivalents, beginning of
period 71.5 58.5
------- ---------
Cash and cash equivalents, end of period $ 87.1 $ 76.6
======= =========

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.
*T

Avery Dennison Corporation
Media Relations:
Laurence J. Dwyer, 626-304-2014
communications@averydennison.com
or
Investor Relations:
Eric M. Leeds, 626-304-2029
investorcom@averydennison.com

Copyright Business Wire 2008