PASADENA, Calif. - January 27, 2009 - Avery Dennison Corporation (NYSE:AVY) today reported fourth quarter and year-end 2008 results. All non-GAAP terms are reconciled to GAAP in the attached tables.

"Avery Dennison generated record free cash flow in 2008, despite increasingly challenging business conditions in the retail sector and the effects of the broader economic slowdown," said Dean A. Scarborough, president and chief executive officer of Avery Dennison.

"We are responding to the challenges by continuing our efforts to reduce fixed costs, improve our financial flexibility, and accelerate our productivity improvements," added Scarborough. "We expect to generate solid cash flow in 2009. We are focused on increasing our operating leverage and developing new business opportunities to position the Company for strong earnings recovery when market conditions improve."

For more details on the Company's results for the quarter, see the Company’s Supplemental Presentation Materials, "Fourth Quarter and Full Year 2008 Financial Review and Analysis," posted at the Company’s Web site at www.investors.averydennison.com, and furnished under Form 8-K with the SEC.

Fourth Quarter, 2008 Results by Segment

Pressure-sensitive Materials (PSM)

• Revenue for roll materials declined in every region except Asia, reflecting weaknesses in end-markets and decisions by customers of the Graphics and Reflective Products division to defer purchases.
• The decline in operating margin reflected reduced fixed-cost leverage and the effects of raw material inflation. These factors outweighed the benefits of price increases, restructuring, and other productivity initiatives.

Retail Information Services (RIS)

• The decline in revenue primarily reflected continued weakness of the retail apparel market in the U.S. and in Europe.
• The decline in operating margin was driven by reduced fixed-cost leverage, cost inflation, and incremental intangible amortization. These were offset in part by incremental integration savings and the benefits of other productivity actions.
• The RIS business remains committed to its long-term profitability objectives. It achieved its goal by year-end 2008 of $120 million of annualized synergies from the Paxar acquisition, and plans to implement significant additional restructuring measures in 2009. The Company intends to continue to transform the business through Enterprise Lean Sigma and investments in technology to further strengthen competitive advantages, driving both growth and profitability.

Office and Consumer Products (OCP)

• The decline in revenue reflected a combination of weak end-market demand and tight inventory control by customers.
• The decline in operating margin was due to reduced fixed-cost leverage and raw material inflation. These effects were partially offset by price increases, restructuring, and other productivity initiatives.

Other specialty converting businesses

• The decline in revenue is primarily attributable to lower volume in products sold to the automotive and housing construction industries.
• Operating margin declined due to reduced fixed-cost leverage and inflation. These factors outpaced the benefit of productivity initiatives and a reduction in the loss from RFID.

Consolidated Items and Actions

Factors that affected consolidated results include:

• Raw material costs in 2008 increased approximately $125 million or 4%, and varied greatly by business and geography. This increase was partially offset by the benefits of global sourcing strategies, raw material cost reduction initiatives, and price increases. At the end of 2008, however, the Company's price/inflation gap was still significant, and additional price increases were implemented in January, 2009.
• In the fourth quarter of 2008, the Company began a restructuring program expected to reduce costs across all segments of the business. The Company currently anticipates $150 million in annualized savings over the next two years (estimating $70 million benefit, net of transition costs, in 2009). The restructuring includes reductions of approximately 10% of the Company's global workforce. The Company estimates that it will incur approximately $120 million of restructuring charges associated with these actions, with the majority to be incurred in 2009. In addition to the savings from these new actions, the Company expects approximately $40 million of carryover savings from previously implemented actions, including benefits from the Paxar integration.
• The Company’s effective tax rate was 2% for 2008, and negative 51% in the fourth quarter of 2008. The tax rate in the fourth quarter includes a net benefit of approximately $25 million from various tax planning actions, changes in tax reserves, and changes in statutory tax rates. The ongoing annual tax rate is expected to be in the low 20% range, although it can vary significantly from quarter to quarter.

Financial Condition

Avery Dennison has taken and continues to take actions to further strengthen its financial condition and increase its operating flexibility in the current economic environment.

• Since the acquisition of DM Label Group in the second quarter of 2008, the Company has reduced indebtedness by approximately $160 million.
• In January 2009, the Company and a subsidiary secured agreements to amend certain covenants governing the Company's revolving credit facility and the subsidiary's term loan, as reflected in the Company’s Supplemental Presentation Materials.

2009

Avery Dennison expects to generate significant free cash flow in 2009 and beyond. In light of decreased visibility in the global economic environment, the Company is not providing a 2009 earnings forecast at this time.

However, in the Company's Supplemental Presentation Materials, the Company provides a list of factors that it believes will contribute to its financial results in 2009. Applying these factors to the recent revenue trends from 2008, the Company estimates that it could achieve the following results for the full year, 2009:

*Adjusted EPS excludes restructuring and asset impairment charges, transition costs associated with acquisition integrations, and other items, totaling an estimated $120 million on a pre-tax basis.

This information is provided for illustrative purposes only

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

Avery Dennison is a recognized industry leader that develops innovative identification and decorative solutions for businesses and consumers worldwide. The Company’s products include pressure-sensitive labeling materials; graphics imaging media; retail apparel ticketing and branding systems; RFID inlays and tags; office products; specialty tapes; and a variety of specialized labels for automotive, industrial and durable goods applications. A FORTUNE 500 Company with sales of $6.7 billion in 2008, Avery Dennison is based in Pasadena, California and employs more than 36,000 employees in over 60 countries. For more information, visit www.averydennison.com.

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"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; 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 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 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 financial performance in the near-term include (1) the impact of economic conditions on underlying demand for the Company's products; (2) the impact of competitors' actions, including pricing, expansion in key markets, and product offerings; (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; (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.

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, and the Company's Form 10-Q filed on November 6, 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 Fourth Quarter conference call with analysts, visit the Avery Dennison Web site at www.investors.averydennison.com

Supporting Materials

• Fourth Quarter and Full Year 2008 Financial Review and Analysis (PDF 176KB)
• Fourth Quarter 2008 Financials (PDF 108KB)

Media Relations:
Dan Hilley (213) 630-6550
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Investor Relations:
Eric M. Leeds (626) 304-2029
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