Avery Dennison Reports Second Quarter Earnings

Avery Dennison Corporation (NYSE:AVY) today reported net income of$112 million or $1.12 per share, compared with $89.4 million or $0.89per share in the prior year. Second quarter 2006 results included anafter-tax benefit of $15.6 million or $0.16 per share related to thetax effect of a divestiture that partially offset previouslyrecognized losses from discontinued operations.

Second quarter 2006 earnings from continuing operations were $96.4million or $0.96 per share, up 8 percent from $89.6 million or $0.89per share in the prior year. In both years, results includedrestructuring and asset impairment charges and other items. Excludingthese items, second quarter earnings per share from continuingoperations increased by 9 percent over the same quarter last year to$0.99. (See Attachment A-3: "Preliminary Reconciliation of GAAP toNon-GAAP Measures".)

The increase in earnings reflected improvements in the Company'sproductivity that led to a higher gross profit margin and loweroperating expense ratio. The Company also raised its estimate ofannualized savings from restructuring efforts to $85 to $100 millionby year-end, including the benefit of new productivity actionsidentified during the quarter.

Net sales for the second quarter were $1.41 billion, approximatelyeven with the same quarter last year. Organic sales growth, whichexcludes the impact of acquisitions, divestitures and foreign currencytranslation, was 2 percent. This increase was attributable to bothunit volume growth and positive changes in pricing and product mix.

"We continued to make steady progress in reaching our goals thisquarter, and in developing new sources of future top line growth andproductivity improvement," said Dean A. Scarborough, president andchief executive officer of Avery Dennison. "We remain committed to thepursuit of a balanced long-term strategy to drive both solid salesgrowth and continued margin expansion.

"Underlying unit growth improved sequentially for the rollmaterials business in North America, as customers continue to valueour service and product advantages," Scarborough added. "We expectvolume growth to accelerate in the second half of the year.

"I am particularly encouraged by the continued strength of thematerials operations in the emerging markets of Asia, Latin America,and Eastern Europe," Scarborough said. "Retail Information Servicesalso delivered solid sales growth and outstanding margin improvement.We expect these businesses, as well as radio frequency identificationand other important Horizon initiatives, to play key roles in drivingtop line growth and improved profitability."

Additional Second Quarter Financial Highlights From ContinuingOperations

(For a more detailed presentation of the Company's results for thequarter, see Second Quarter 2006 Financial Review and Analysis, postedat the Company's Web site at www.investors.averydennison.com.)

-- Core unit volume grew approximately 1 percent compared with the prior year. However, core unit volume growth was an estimated 2.5 percent when adjusted for a shift in the timing of back-to-school orders, the decision to exit certain private label businesses and other comparability considerations. Changes in pricing and product mix contributed approximately 1 point to top line growth.

-- Excluding restructuring and asset impairment charges and other items, operating margin improved by 60 basis points. (See Attachment A-3: "Preliminary Reconciliation of GAAP to Non-GAAP Measures".)

-- The recognition of stock option expense added approximately $4 million of pre-tax cost compared with the prior year, which reduced operating margin by 30 basis points and reduced after-tax earnings by $0.03 per share.

-- The effective tax rate for continuing operations was 22.3 percent, compared to the prior year at 22.6 percent, in line with the Company's expectations.

Segment Highlights

(See Attachment A-4: "Preliminary Supplementary Information,Reconciliation of GAAP to Non-GAAP Supplementary Information" foradjusted operating margins included below.)

-- Pressure-sensitive Materials reported sales of $810 million, up 1 percent from the prior year. Organic sales growth for the segment was 2 percent. Operating margin, before restructuring and asset impairment charges, increased 30 basis points to 9.8 percent.

-- Office and Consumer Products sales declined 12 percent to $265 million. Half of the decline in sales was due to the previously announced divestiture of low-margin filing product lines in Europe. The balance of the decline was due in equal measure to the decision to exit certain low-margin private label business and to a shift in the timing of back-to-school orders compared to last year, which is expected to benefit third quarter comparisons. Operating margin, before restructuring charges and other items, declined 50 basis points to 16.5 percent, due to transition costs associated with the divestiture, which more than offset productivity savings.

-- Retail Information Services sales grew 6 percent to $181 million on both a reported and organic basis. Operating margin, before restructuring charges, increased 240 basis points to 12.7 percent.

Outlook for the Year

Reflecting second quarter results, Avery Dennison adjusted itsfull year guidance for earnings from continuing operations to a rangeof $3.60 to $3.80 per share before charges associated with ongoingrestructuring efforts. The Company previously expected earnings fromcontinuing operations to be in the range of $3.55 to $3.80 per sharebefore restructuring and asset impairment charges. The Company nowexpects these charges will reduce full year earnings by $0.14 to $0.17per share, up from the previous estimate of $0.09 to $0.13 per share.

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

Avery Dennison is a global leader in pressure-sensitive labelingmaterials, office products and retail tag, ticketing and brandingsystems. Based in Pasadena, Calif., Avery Dennison is a FORTUNE 500company with 2005 sales of $5.5 billion. Avery Dennison employs morethan 22,000 individuals in 48 countries worldwide who apply theCompany's technologies to develop, manufacture and market a wide rangeof products for both consumer and industrial markets. Products offeredby Avery Dennison include Avery-brand office products and graphicsimaging media, Fasson-brand self-adhesive materials, peel-and-stickpostage stamps, reflective highway safety products, labels for a widevariety of automotive, industrial and durable goods applications,brand identification and supply chain management products for theretail and apparel industries, and specialty tapes and polymers.

Forward-Looking Statements

Certain information presented in this news release may constitute"forward-looking" statements. These statements and financial or otherbusiness targets are subject to certain risks and uncertainties.Actual results and trends may differ materially from historical orexpected results depending on a variety of factors, including but notlimited to fluctuations in cost and availability of raw materials;ability of the Company to achieve and sustain targeted costreductions; foreign currency exchange rates; worldwide and localeconomic conditions; impact of competitive products and pricing;selling prices; impact of legal proceedings, including the U.S.Department of Justice ("DOJ") criminal investigation, as well as theEuropean Commission ("EC"), Canadian Department of Justice, andAustralian Competition and Consumer Commission investigations, intoindustry competitive practices and any related proceedings or lawsuitspertaining to these investigations or to the subject matter thereof(including purported class actions seeking treble damages for allegedunlawful competitive practices, and purported class actions related toalleged disclosure and fiduciary duty violations pertaining to allegedunlawful competitive practices, which were filed after theannouncement of the DOJ investigation, as well as a likely fine by theEC in respect of certain employee misconduct in Europe); impact ofpotential violations of the U.S. Foreign Corrupt Practices Act basedon issues in China; impact of epidemiological events on the economyand the Company's customers and suppliers; successful integration ofacquisitions; financial condition and inventory strategies ofcustomers; timely development and market acceptance of new products;fluctuations in demand affecting sales to customers; and other mattersreferred to in the Company's SEC filings.

The Company believes that the most significant risk factors thatcould affect its ability to achieve its stated financial expectationsin the near-term include (1) potential adverse developments in legalproceedings and/or investigations regarding competitive activities,including possible fines, penalties, judgments or settlements; (2) theimpact of economic conditions on underlying demand for the Company'sproducts; (3) the impact of competitors' actions, including expansionin key markets, product offerings and pricing; (4) the degree to whichhigher raw material and energy-related costs can be passed on tocustomers through selling price increases (and previously implementedselling price increases can be sustained), without a significant lossof volume; and (5) the ability of the Company to achieve and sustaintargeted cost reductions.

The financial information presented in this news releaserepresents preliminary, unaudited financial results.

For more information and to listen to a live broadcast or an audioreplay of the 2nd Quarter conference call with analysts, visit theAvery Dennison Web site at www.investors.averydennison.com
AVERY DENNISON A-1
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)

(UNAUDITED)

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

July 01, July 02, July 01, July 02,
2006 2005 2006 2005

------------------------------------------------- -------------------

Net sales $ 1,409.7 $1,411.7 $2,746.9 $2,754.5

Cost of products sold 1,016.7 1,023.6 1,998.7 2,014.5

-------------------------- ---------------------- -------------------

Gross profit 393.0 388.1 748.2 740.0

Marketing, general &
administrative expense 251.3 254.5 496.1 508.9

Interest expense 13.6 15.7 28.1 30.2

Other expense, net (1) 4.0 2.1 11.6 5.4

-------------------------- ---------------------- -------------------

Income from continuing
operations before taxes 124.1 115.8 212.4 195.5

Taxes on income 27.7 26.2 47.1 46.8

-------------------------- ---------------------- -------------------

Income from continuing
operations 96.4 89.6 165.3 148.7

Income (Loss) from
discontinued operations,
net of tax (including
gain on disposal of $1.3
and tax benefit of $15.4
in 2006) 15.6 (0.2) 15.4 (1.6)

-------------------------- --------------------- ------------------

Net Income $ 112.0 $ 89.4 $ 180.7 $ 147.1

-------------------------- ---------------------- -------------------

Per share amounts:
Income (Loss) per common
share, assuming dilution

Continuing operations $ 0.96 $ 0.89 $ 1.65 $ 1.48

Discontinued operations 0.16 --- 0.15 (0.02)

-------------------------- --------------------- ------------------

Net Income $ 1.12 $ 0.89 $ 1.80 $ 1.46

-------------------------- ---------------------- -------------------

Average common shares
outstanding, assuming
dilution 100.4 100.6 100.3 100.6
-------------------------- ---------------------- -------------------
Common shares outstanding
at period end 100.1 100.2 100.1 100.2
-------------------------- ---------------------- -------------------

Certain prior year amounts have been reclassified to conform with the
2006 financial statement presentation.

(1) Other expense, net, for the second quarter of 2006 includes $6.1
of restructuring costs and asset impairment charges, charitable
contribution of $10 to Avery Dennison Foundation, partially offset
by gain on sale of investment of ($10.5) and gain from curtailment
and settlement of a pension obligation of ($1.6).

Other expense for the second quarter of 2005 includes $2.1 of
asset impairment charges and restructuring costs.

Other expense, net, for 2006 YTD includes $13.3 of restructuring
costs and asset impairment charges, legal accrual related to a
patent lawsuit of $.4 and charitable contribution of $10 to Avery
Dennison Foundation, partially offset by gain on sale of
investment of ($10.5) and gain from curtailment and settlement of
a pension obligation of ($1.6).

Other expense, net, for 2005 YTD includes $8.8 of restructuring
costs and asset impairment charges, partially offset by gain on
sale of assets of ($3.4).



A-2

Reconciliation of Non-GAAP Financial Measures in Accordance with SEC
Regulation G

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

Avery Dennison uses the non-GAAP measures presented to evaluate
and manage the Company's operations internally. Avery Dennison is also
providing this information to assist investors in performing
additional financial analysis that is consistent with financial models
developed by research analysts who follow the Company.

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.


AVERY DENNISON A-3
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

(UNAUDITED)

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

July 01, July 02, July 01, July 02,
2006 2005 2006 2005

---------------------------------------- --------- -------- ---------

Reconciliation of GAAP to Non-
GAAP Operating Margin:

Net sales $1,409.7 $1,411.7 $2,746.9 $2,754.5

-------- --------- -------- ---------

Income from continuing
operations before taxes $ 124.1 $ 115.8 $ 212.4 $ 195.5

------------------------------- -------- --------- -------- ---------

GAAP Operating Margin 8.8% 8.2% 7.7% 7.1%

---------------------------------------- --------- -------- ---------

Income from continuing
operations before taxes $ 124.1 $ 115.8 $ 212.4 $ 195.5

Non-GAAP adjustments:

Restructuring and transition
costs (1) 4.7 1.7 10.1 6.5

Asset impairment charges 1.4 1.5 3.2 4.2

Other (2) (2.1) --- (1.7) (3.4)

Interest expense 13.6 15.7 28.1 30.2

-------- --------- -------- ---------

Adjusted non-GAAP operating
income before taxes and
interest expense $ 141.7 $ 134.7 $ 252.1 $ 233.0

------------------------------- -------- --------- -------- ---------

Adjusted Non-GAAP Operating
Margin 10.1% 9.5% 9.2% 8.5%

---------------------------------------- --------- -------- ---------

Reconciliation of GAAP to Non-
GAAP Net Income:


As reported net income $ 112.0 $ 89.4 $ 180.7 $ 147.1

Non-GAAP adjustments, net of
taxes:

Restructuring and transition
costs 3.6 1.3 7.8 4.9

Asset impairment charges 1.1 1.1 2.5 3.2

Other (1.6) --- (1.3) (2.6)

(Income) Loss from
discontinued operations (15.6) 0.2 (15.4) 1.6

------------------------------- -------- --------- -------- ---------

Adjusted Non-GAAP Net Income $ 99.5 $ 92.0 $ 174.3 $ 154.2

---------------------------------------- --------- -------- ---------

Reconciliation of GAAP to Non-
GAAP Earnings Per Share:

As reported income per common
share, assuming dilution $ 1.12 $ 0.89 $ 1.80 $ 1.46

Non-GAAP adjustments per
share, net of taxes:

Restructuring and transition
costs 0.04 0.01 0.08 0.05

Asset impairment charges 0.01 0.01 0.02 0.03

Other (0.02) --- (0.01) (0.03)

(Income) Loss from
discontinued operations (0.16) --- (0.15) 0.02

------------------------------- -------- --------- -------- ---------

Adjusted Non-GAAP income per
common share, assuming
dilution $ 0.99 $ 0.91 $ 1.74 $ 1.53

---------------------------------------- --------- -------- ---------

Average common shares
outstanding, assuming dilution 100.4 100.6 100.3 100.6
---------------------------------------- --------- -------- ---------

Certain prior year amounts have been reclassified to conform with the
2006 financial statement presentation.

(1) 2006 QTD includes restructuring costs of $4.7.
2006 YTD includes restructuring costs of $10.1.

2005 QTD includes transition and restructuring costs of $1.1 and
$.6, respectively, primarily related to plant closures.
2005 YTD includes restructuring and transition costs of $4.6 and
$1.9, respectively, primarily related to plant closures.

(2) 2006 QTD includes gain from curtailment and settlement of a
pension obligation of ($1.6) and gain on sale of investment of
($10.5), partially offset by charitable contribution of $10
to Avery Dennison Foundation.
2006 YTD includes gain from curtailment and settlement of a
pension obligation of ($1.6) and gain on sale of investment of
($10.5), partially offset by charitable contribution of $10
to Avery Dennison Foundation and legal accrual related to a patent
lawsuit of $.4.

2005 YTD includes gain on sale of assets of ($3.4).


AVERY DENNISON A-4
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

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

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

2006 2005 2006(1) 2005(2) 2006 2005
-------- -------- -------- -------------- -----

Pressure-sensitive
Materials $ 809.5 $ 798.8 $ 77.4 $ 75.1 9.6% 9.4%
Office and
Consumer Products 265.4 300.2 45.3 49.5 17.1% 16.5%
Retail Information
Services 181.4 170.6 21.0 17.5 11.6% 10.3%
Other specialty
converting
businesses 153.4 142.1 4.6 3.0 3.0% 2.1%
Corporate Expense N/A N/A (10.6) (13.6) N/A N/A
Interest Expense N/A N/A (13.6) (15.7) N/A N/A
-------- -------- -------- -------- ----- -----

TOTAL FROM
CONTINUING
OPERATIONS $1,409.7 $1,411.7 $ 124.1 $ 115.8 8.8% 8.2%
======== ======== ======== ======== ===== =====



(1) Operating income for the second quarter of 2006 includes $6.1 of
restructuring costs and asset impairment charges, charitable
contribution of $10 to Avery Dennison Foundation, partially offset
by gain on sale of investment of ($10.5) and gain from curtailment
and settlement of a pension obligation of ($1.6); of the total $4,
the Pressure-sensitive Materials segment recorded $2.1, the Office
and Consumer Products segment recorded ($1.6), the Retail
Information Services segment recorded $2, the other specialty
converting businesses recorded $.7 and Corporate recorded $.8.

(2) Operating income for the second quarter of 2005 includes $3.2 of
asset impairment charges, transition and restructuring costs, of
which the Pressure-sensitive Materials segment recorded $1.1, the
Office and Consumer Products segment recorded $1.4 and other
specialty converting businesses recorded $.7.

Certain prior year amounts have been reclassified to conform with
the 2006 financial statement presentation.


RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Second Quarter Ended
--------------------------
OPERATING OPERATING
INCOME MARGINS
------------- ------------

2006 2005 2006 2005
------ ------ ------ -----
Pressure-sensitive Materials
-------------------------------------------
Operating income, as reported $77.4 $75.1 9.6% 9.4%
Non-GAAP adjustments:
Restructuring costs 2.0 0.4 0.2% ---
Asset impairment charges 0.1 0.7 --- 0.1%
----- ----- ------ -----

Adjusted non-GAAP operating income $79.5 $76.2 9.8% 9.5%
===== ===== ====== =====

Office and Consumer Products
-------------------------------------------
Operating income, as reported $45.3 $49.5 17.1% 16.5%
Non-GAAP adjustments:
Gain from curtailment and settlement of a
pension obligation (1.6) --- (0.6%) ---
Restructuring and transition costs (1) --- 1.4 --- 0.5%
----- ----- ------ -----

Adjusted non-GAAP operating income $43.7 $50.9 16.5% 17.0%
===== ===== ====== =====

Retail Information Services
-------------------------------------------
Operating income, as reported $21.0 $17.5 11.6% 10.3%
Non-GAAP adjustments:
Restructuring costs 2.0 --- 1.1% ---
----- ----- ------ -----

Adjusted non-GAAP operating income $23.0 $17.5 12.7% 10.3%
===== ===== ====== =====

Other specialty converting businesses
-------------------------------------------
Operating income, as reported $ 4.6 $ 3.0 3.0% 2.1%
Non-GAAP adjustments:
Restructuring costs 0.7 --- 0.5% ---
Asset impairment charges --- 0.7 --- 0.5%
----- ----- ------ -----

Adjusted non-GAAP operating income $ 5.3 $ 3.7 3.5% 2.6%
===== ===== ====== =====

(1) For 2005, amount includes transition and restructuring costs of
$1.1 and $.3, respectively, related to plant closures.



AVERY DENNISON A-5
PRELIMINARY SUPPLEMENTARY INFORMATION
(In millions)

(UNAUDITED)
Six Months Year-to-Date
------------------------------------------------

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

2006 2005 2006(1) 2005(2) 2006 2005
-------- -------- ------- ------- ----- -----

Pressure-sensitive
Materials $1,596.7 $1,584.2 $ 143.3 $ 146.4 9.0% 9.2%
Office and Consumer
Products 505.3 558.9 81.1 77.2 16.0% 13.8%
Retail Information
Services 335.2 316.4 28.6 21.9 8.5% 6.9%
Other specialty
converting
businesses 309.7 295.0 10.8 8.1 3.5% 2.7%
Corporate Expense N/A N/A (23.3) (27.9) N/A N/A
Interest Expense N/A N/A (28.1) (30.2) N/A N/A
-------- -------- ------- ------- ----- -----
TOTAL FROM
CONTINUING
OPERATIONS $2,746.9 $2,754.5 $ 212.4 $ 195.5 7.7% 7.1%
======== ======== ======= ======= ===== =====

(1) Operating income for 2006 includes $13.3 of restructuring costs
and asset impairment charges, legal accrual related to a patent
lawsuit of $.4 and charitable contribution of $10 to Avery
Dennison Foundation, partially offset by gain on sale of
investment of ($10.5) and gain from curtailment and settlement of
a pension obligation of ($1.6); of the total $11.6, the
Pressure-sensitive Materials segment recorded $6.1, the Office and
Consumer Products segment recorded ($.8), the Retail Information
Services segment recorded $4.3, the other specialty converting
businesses recorded $.7 and Corporate recorded $1.3.

(2) Operating income for 2005 includes $10.7 of restructuring costs,
asset impairment charges and transition costs, partially offset by
gain on sale of assets of ($3.4); of the total $7.3, the Pressure-
sensitive Materials segment recorded $.4, the Office and Consumer
Products segment recorded $6.2 and other specialty converting
businesses recorded $.7.

Certain prior year amounts have been reclassified to conform with
the 2006 financial statement presentation.


RECONCILIATION OF GAAP TO NON-GAAP SUPPLEMENTARY INFORMATION

Six Months Year-to-Date
-----------------------------
OPERATING OPERATING
INCOME MARGINS
--------------- -------------

2006 2005 2006 2005
------- ------- ------ ------
Pressure-sensitive Materials
----------------------------------------
Operating income, as reported $143.3 $146.4 9.0% 9.2%
Non-GAAP adjustments:
Restructuring costs 4.6 0.4 0.3% 0.1%
Asset impairment and lease cancellation
charges 1.1 3.4 0.1% 0.2%
Legal accrual related to a patent
lawsuit 0.4 --- --- ---
Gain on sale of assets --- (3.4) --- (0.2%)
------ ------ ------ ------

Adjusted non-GAAP operating income $149.4 $146.8 9.4% 9.3%
====== ====== ====== ======

Office and Consumer Products
----------------------------------------
Operating income, as reported $ 81.1 $ 77.2 16.0% 13.8%
Non-GAAP adjustments:
Gain from curtailment and settlement of
a pension obligation (1.6) --- (0.3%) ---
Restructuring and transition costs (1) 0.8 6.2 0.2% 1.1%
------ ------ ------ ------

Adjusted non-GAAP operating income $ 80.3 $ 83.4 15.9% 14.9%
====== ====== ====== ======

Retail Information Services
----------------------------------------
Operating income, as reported $ 28.6 $ 21.9 8.5% 6.9%
Non-GAAP adjustments:
Restructuring costs 4.0 --- 1.2% ---
Asset impairment charges 0.3 --- 0.1% ---
------ ------ ------ ------

Adjusted non-GAAP operating income $ 32.9 $ 21.9 9.8% 6.9%
====== ====== ====== ======

Other specialty converting businesses
----------------------------------------
Operating income, as reported $ 10.8 $ 8.1 3.5% 2.7%
Non-GAAP adjustments:
Restructuring costs 0.7 --- 0.2% ---
Asset impairment charges --- 0.7 --- 0.3%
------ ------ ------ ------

Adjusted non-GAAP operating income $ 11.5 $ 8.8 3.7% 3.0%
====== ====== ====== ======

(1) For 2006, amount includes restructuring costs of $.8.
For 2005, amount includes restructuring and transition costs of
$4.3 and $1.9, respectively, related to plant closures.


AVERY DENNISON A-6
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)

(UNAUDITED)

ASSETS July 01, 2006 July 02, 2005

----------------------------------------------------------------------

Current assets:
Cash and cash equivalents $ 49.1 $ 31.0
Trade accounts receivable, net 898.2 896.4
Inventories, net 479.7 471.9
Other current assets 161.9 136.8

----------------------------------------------------------------------

Total current assets 1,588.9 1,536.1

Property, plant and equipment, net 1,279.6 1,303.5
Goodwill 684.6 679.3
Intangibles resulting from business
acquisitions, net 96.1 105.9
Other assets 588.1 646.2

----------------------------------------------------------------------

$ 4,237.3 $ 4,271.0

----------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

----------------------------------------------------------------------

Current liabilities:
Short-term and current portion of
long-term debt $ 326.5 $ 182.4
Accounts payable 605.4 613.4
Other current liabilities 507.7 508.9

----------------------------------------------------------------------

Total current liabilities 1,439.6 1,304.7

Long-term debt 721.1 976.3
Other long-term liabilities 411.8 438.8
Shareholders' equity:
Common stock 124.1 124.1
Capital in excess of par value 775.9 697.4
Retained earnings 2,040.3 1,950.8
Accumulated other comprehensive loss (71.1) (74.9)
Cost of unallocated ESOP shares (7.7) (9.7)
Employee stock benefit trusts (558.7) (539.2)
Treasury stock at cost (638.0) (597.3)

----------------------------------------------------------------------

Total shareholders' equity 1,664.8 1,551.2

----------------------------------------------------------------------

$ 4,237.3 $ 4,271.0


AVERY DENNISON A-7
PRELIMINARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)

(UNAUDITED)

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

July 01, 2006 July 02, 2005

------------------------------------- ---------------- ---------------

Operating Activities:

Net income $ 180.7 $ 147.1

Adjustments to reconcile net income
to net cash provided by operating
activities:

Depreciation 77.9 77.1

Amortization 21.3 23.1

Deferred taxes 3.7 (1.2)

Asset impairment and net (gain) loss
on sale of assets (6.1) 2.5

Other non-cash items, net 6.7 (4.6)
--------------- --------------

284.2 244.0

Changes in assets and liabilities (151.2) (155.9)
--------------- --------------

Net cash provided by operating
activities 133.0 88.1
--------------- --------------

Investing Activities:

Purchase of property, plant and
equipment (80.5) (76.8)

Purchase of software and other
deferred charges (15.7) (10.0)

Payments for acquisitions --- (0.6)

Proceeds from sale of assets 0.9 16.5

Proceeds from sale of businesses and
investments 29.3 ---

Other (0.8) 4.1
--------------- --------------

Net cash used in investing activities (66.8) (66.8)
--------------- --------------

Financing Activities:

Net (decrease) increase in borrowings
(maturities of 90 days or less) (55.7) 55.2

Additional borrowings (maturities
longer than 90 days) --- 76.2

Payments of debt (maturities longer
than 90 days) (1.4) (134.2)

Dividends paid (85.7) (83.9)

Purchase of treasury stock --- ---


Proceeds from exercise of stock
options, net 18.6 3.1

Other 8.0 8.4
--------------- --------------


Net cash used in financing activities (116.2) (75.2)
--------------- --------------


Effect of foreign currency
translation on cash balances 0.6 0.1
--------------- --------------

Decrease in cash and cash equivalents (49.4) (53.8)
--------------- --------------

Cash and cash equivalents, beginning
of period 98.5 84.8
--------------- --------------

Cash and cash equivalents, end of
period $ 49.1 $ 31.0
=============== ==============