<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
COMMISSION FILE NUMBER 1-7685
AVERY DENNISON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1492269
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
150 NORTH ORANGE GROVE BOULEVARD, 91103
PASADENA, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (818) 304-2000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------- -----------------
Common stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Not applicable.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates as of
February 27, 1996, was approximately $2,871,381,513.
Number of shares of common stock, $1 par value, outstanding as of February
27, 1996: 52,798,966.
The following documents are incorporated by reference into the Parts of this
report below indicated:
DOCUMENT INCORPORATED BY REFERENCE INTO:
-------- -------------------------------
Annual Report to Shareholders for fiscal PARTS I, II
year ended December 30, 1995
(the "1995 Annual Report")
Definitive Proxy Statement for Annual PARTS III, IV
Meeting of Stockholders to be held
April 25, 1996 (the "1996 Proxy Statement")
<PAGE>
PART I
ITEM 1. BUSINESS
Avery Dennison Corporation ("Registrant") was incorporated in 1977 in the
state of Delaware as Avery International Corporation, the successor
corporation to a California corporation of the same name which was
incorporated in 1946. In 1990, Registrant merged one of its subsidiaries into
Dennison Manufacturing Company ("Dennison"), as a result of which Dennison
became a wholly owned subsidiary of Registrant, and in connection with which
Registrant's name was changed to Avery Dennison Corporation.
The principal business of Registrant and its subsidiaries (Registrant and
its subsidiaries are sometimes hereinafter referred to as the "Company") is
the production of self-adhesive materials. Some are "converted" into labels
and other products through embossing, printing, stamping and die-cutting, and
some are sold in unconverted form as base materials, tapes and reflective
sheeting. The Company also manufactures and sells a variety of office products
and other items not involving pressure-sensitive components, such as
notebooks, three-ring binders, organizing systems, felt-tip markers, glues,
fasteners, business forms, tickets, tags, and imprinting equipment.
A self-adhesive material is one that adheres to a surface by mere press-on
contact. It consists of four elements--a face material, which may be paper,
metal foil, plastic film or fabric; an adhesive which may be permanent or
removable; a release coating; and a backing material to protect the adhesive
against premature contact with other surfaces, and which can also serve as the
carrier for supporting and dispensing individual labels. When the products are
to be used, the release coating and protective backing are removed, exposing
the adhesive, and the label or other device is pressed or rolled into place.
Self-adhesive materials may initially cost more than materials using heat or
moisture activated adhesives, but their use often effects substantial cost
savings because of their easy and instant application, without the need for
adhesive activation. They also provide consistent and versatile adhesion,
minimum adhesive deterioration and are available in a large selection of
materials in nearly any size, shape or color.
International operations, principally in Western Europe, constitute a
significant portion of the Company's business. In addition, the Company is
currently expanding operations in Asia Pacific, Latin America and Eastern
Europe. Aside from certain risks normally attending international operations,
such as changes in economic conditions, currency fluctuation, exchange control
regulations and the effect of international relations and domestic affairs of
non-U.S. countries on the conduct of business, the nature of these operations
and the countries in which they are conducted are such as to present no
business risks which would have a material adverse effect on the Company.
The Company manufactures and sells its products from 200 manufacturing
facilities and sales offices located in 33 countries, and employs a total of
approximately 15,500 persons worldwide.
No material part of the Company's business is dependent upon a single
customer or a few customers and the loss of a particular customer or a few
customers would not have a material adverse effect on the Company's business.
However, sales of the Company's U.S. office products sector are increasingly
concentrated in a small number of major customers, principally discount office
products superstores and distributors (see Note 4 of Notes to Consolidated
Financial Statements on page 47 of the 1995 Annual Report, which is
incorporated by reference). United States export sales are an insignificant
part of the Company's business. Backlogs are not considered material in the
industries in which the Company competes.
The Company's business is separated into three principal industry sectors--
Pressure-Sensitive Adhesives and Materials, Office Products, and Converted
Products. The Company's operations within each of these three sectors are
further divided organizationally into various groups, each consisting of
divisions which manufacture products similar in nature or sell to similar
markets.
1
<PAGE>
PRESSURE-SENSITIVE ADHESIVES AND MATERIALS SECTOR
These units manufacture and sell Fasson- and Avery-brand pressure-sensitive
base materials generally in unconverted form, and include Materials North
America, European Operations--Materials, Automotive and Graphic Systems, and
Chemical Divisions. Base materials consist primarily of papers, fabrics,
plastic films and metal foils which are primed and coated with Company-
developed and purchased adhesives and laminated with specially coated backing
papers and films for protection. They can be sold in roll or sheet form with
either solid or patterned adhesive coatings, and are available in a wide range
of face materials, sizes, thicknesses and adhesive properties. The business of
these units is not seasonal.
Materials North America (including units in Canada, Mexico, South America,
Australia and Asia Pacific) and European Operations--Materials (including a
unit in South Africa) manufacture and sell a wide range of pressure-sensitive
coated papers, films and foils, in roll and sheet form, to label printers,
converters and merchant distributors for labeling, decorating, fastening,
electronic data processing and special applications, and also provide paper
and film stock for use in a variety of industrial, commercial and consumer
applications. Certain units also manufacture and sell proprietary film face
stocks and specialty insulation paper. Specialty tapes are sold to industrial
and medical converters and original equipment manufacturers, and to
disposable-diaper producers throughout the world. During 1995, the Company
established distribution centers in Mexico, Chile and Brazil.
Automotive and Graphic Systems units manufacture and sell a variety of films
and other products to the worldwide automotive, architectural, printing and
graphics markets. These units sell durable cast and reflective films to the
construction, automotive after-market, fleet transportation, sign and
industrial equipment markets, and retroreflective films for government and
traffic applications. In converted form, these products and the Company's Dry
Paint products, including Avloy and Avcoat products, are supplied to
automotive original equipment manufacturers. In addition, these units sell
specialty print-receptive films to the industrial label and office products
markets, metallic dispersion products to the packaging industry and
proprietary woodgrain film laminates for housing exteriors and automotive
applications.
The Chemical Divisions produce a range of solvent and emulsion-based acrylic
polymer adhesives, protective coatings and binders for internal uses as well
as for other companies.
The Company competes, both domestically and internationally, with a
relatively small number of medium to large firms. Entry of competitors into
the field of pressure-sensitive adhesives and materials is limited by high
capital requirements and a need for sophisticated technical know-how.
OFFICE PRODUCTS SECTOR
Office products units manufacture stock products which are sold primarily
through office products wholesalers and dealers, through mass market channels
of distribution, and through discount office products superstores. The
business of these units is not seasonal, except for certain stationery
products sold through various channels during the back-to-school selling
season.
Office products units in North America and Europe manufacture and sell a
wide range of products for home, school and office uses, including pressure-
sensitive labels, laser and ink-jet printer labels and software, binders,
dividers, presentation and organizing systems (including indexing and tabbing
guides), adhesive products, marking devices and numerous other office
products. These units produce the Avery-brand line of stock self-adhesive
products, including copier, laser and ink-jet labels and related software;
laser-printer card and index products; unprinted labels; correction tape; file
folder, color-coding and data-processing labels; notebooks; notebook and
presentation dividers; three-ring binders; sheet protectors; and various vinyl
and heat-sealed products. These operations also manufacture and sell a wide
range of other stationery products, including felt-tip markers, adhesives and
specialty products under brand names such as Avery, Marks-A-Lot and HI-LITER,
and accounting products, note pads and business forms under the Avery and
National brand names.
2
<PAGE>
Office products units in the United Kingdom also manufacture and distribute
office products and accessories including plastic desk and office accessories,
computer storage units, filing racks and cabinets, organizers, index systems
and related items, and a wide range of manila files, folders and wallets,
lever arch files, suspension files and project covers under the Myers and
Guidex brand names. Office products units in France produce a line of Doret-
and Cheval-brand binder and document protection products.
Office products units are generally leaders in most markets in which they
compete even though they must compete with other large manufacturers on a
global basis. Among the principal competitors in the office products business
are Esselte AB, American Brands, Inc. and Minnesota Mining and Manufacturing
Co. The Company believes that its ability to service its customers with an
extensive product line, its distribution strength, and its ability to develop
internally and to commercialize successfully new products are probably the
most important factors in developing and maintaining the various units'
competitive position.
CONVERTED PRODUCTS SECTOR
Converted products units manufacture and sell a wide range of converted
products including labels, tags, fasteners and automated labeling and
imprinting equipment to a wide variety of customers for industrial and retail
applications. They include European Operations, Converted and Fastener
Products and Label Ventures businesses. Converted products include pressure-
sensitive base materials, and paper or plastic film which are converted into
labels and other products by embossing, printing, stamping and die-cutting.
These products are sold by units in this sector directly to manufacturers and
packagers and retailers, as well as through international subsidiaries,
distributors and licensees. The business of these units is not seasonal. In
December 1995, the Company sold certain non-strategic North American label
converting businesses, and reorganized the North American units under
Converted and Fastener Products and Label Ventures businesses.
The European Operations group manufactures and sells a wide range of custom
pressure-sensitive labels for functional, decorative and information purposes,
and automated label application and imprinting machines to the automotive,
pharmaceutical, cosmetic, durable goods and consumer packaged goods markets.
Its products are sold by subsidiaries located in Europe. This group also
furnishes production, merchandising and technical information to independent
licensees operating in several foreign countries to assist them in converting
self-adhesive base materials, and in selling a product line similar to that of
the group's subsidiaries.
The Converted Products businesses produce custom pressure-sensitive and
heat-transfer labels for the automotive, durable goods, information automation
and consumer packaged goods industries. Custom pressure-sensitive products for
the automotive and durable goods markets are sold directly to a wide range of
industrial users in North America, and custom pressure-sensitive labels and
specialty forms/label combination products are sold to the electronic data
processing market, primarily in North America. Self-adhesive stamps are also
produced for the U.S. and international postal services by the Label Ventures
businesses. Soabar Products and Fastener Divisions design, fabricate and sell
a wide variety of tags and labels and an established line of machines for
imprinting, dispensing and attaching preprinted roll tags and labels. The
machine products are designed for use with tags as a complete system. These
units also design, assemble and sell integrated shipping and receiving
systems. Principal markets include apparel, retail and industrial companies
for identification, tracking and control applications principally in North
America, Europe and Asia Pacific. The Fastener Division produces plastic tying
and attaching products for retail and industrial users. Products are sold
directly to end users and internationally through subsidiaries, as well as
through distributors and licensees in other countries.
These business units usually occupy a solid position in most markets in
which they compete, although many face strong local competition. The Company
believes that its diverse technical foundation, including a significant range
of electronic imprinting and data control systems, high speed printers,
automatic labeling systems and fastening devices are probably the most
important factors in developing and maintaining the various units' competitive
position.
3
<PAGE>
ASIA PACIFIC GROUP
The Asia Pacific Group was created in 1994 to strengthen and expand the
Company's presence in the Asia Pacific region. Divisions in the Group are
included in the three industry sectors described above for financial reporting
purposes. Included in the Group are Fasson Australia, which manufactures and
sells pressure-sensitive base materials in Australia and New Zealand; Soabar
Hong Kong, which produces and sells promotional and price marking bar-coded
tags and labels for the Asian garment industry; Avery Dennison Australia,
which manufactures office product labels, variable-information printed labels
and Therimage-brand decorating systems for distribution in the Asia Pacific
region; and Avery China and Avery Korea, which manufacture and distribute
pressure-sensitive base materials principally in their respective countries.
Also included in the Asia Pacific Group are organizations for the distribution
of fasteners, base materials and office products in Southeast Asia and Japan,
including Hong Kong and Singapore. In 1995, the Company constructed a base
materials manufacturing plant, located near Shanghai, China, which began
production in the second half of the year. In 1996, the Company plans to
expand its distribution operations into other Asia Pacific countries.
RESEARCH AND DEVELOPMENT
Many of the Company's current products are the result of its own research
and development efforts. The Company expended $52.7 million, $49.1 million and
$45.5 million in 1995, 1994 and 1993, respectively, on research related
activities by operating units and the Avery Research Center (the "Research
Center"), located in Pasadena, California. A substantial amount of the
Company's research and development activities are conducted at the Research
Center. Much of the effort of the Research Center applies to two or more of
the Company's industry sectors, and cannot readily be allocated among such
sectors. In addition, many such expenditures are for products and projects at
a relatively early stage of development, and the sector in which they will be
utilized cannot be determined at the time the expenditures are made. However,
research and development expenditures which can be identified by Company
industry sectors are approximately proportional to the percentages of Company
sales represented by each such sector.
The operating units' research efforts are directed primarily toward
developing new products and processing techniques and improving product
performance, often in close association with customers. The Research Center
supports the units' product development work, and focuses closely on basic
research and development in new adhesives, materials and coating processes.
Research and development generally focuses on projects affecting more than one
industry sector in such areas as printing and coating technologies, and
adhesive, release, coating and ink chemistries.
The loss of any of the Company's individual patents, trademarks or licenses,
or any group of related patents, trademarks or licenses, would not be material
to the business of the Company taken as a whole, nor to any of the Company's
three industry sectors, except those referred to above.
THREE-YEAR SUMMARY OF SECTOR INFORMATION
The Business Sector Information attributable to the Company's operations for
the three years ended December 30, 1995, which appears in Note 10 of Notes to
Consolidated Financial Statements on pages 51 and 52 of the 1995 Annual
Report, is incorporated herein by reference.
OTHER MATTERS
At present, the Company produces a majority of its self-adhesive materials
using non-solvent technology. However, a significant portion of the Company's
manufacturing process for self-adhesive materials utilizes certain evaporative
organic solvents which, unless controlled, would be emitted into the
atmosphere. Emissions of these substances are regulated by instrumentalities
of federal, state, local and foreign governments. During the past several
years, the Company has made a substantial investment in solvent capture and
control units and solvent-free systems. Installation of these units and
systems has reduced atmospheric emissions and the Company's requirements for
solvents.
4
<PAGE>
Major research efforts have been directed toward development of new
adhesives and solvent-free adhesive processing systems. Emulsion and hot-melt
adhesives and solventless silicone systems have been installed at the
Company's Peachtree City, Georgia; Fort Wayne and Greenfield, Indiana; Rancho
Cucamonga, California; Quakertown, Pennsylvania; Rodange, Luxembourg;
Turnhout, Belgium; Hazerswoude, The Netherlands; and Cramlington, England
facilities, as well as other plants in the United States, Australia, Brazil,
France, Germany, Korea and China.
The Company does not believe that the costs of complying with applicable
laws enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, will
have a material effect upon the capital expenditures, earnings or competitive
position of the Company.
For information regarding the Company's potential responsibility for cleanup
costs at certain hazardous waste sites, see "Legal Proceedings" (Part I, Item
3) and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (Part II, Item 7).
ITEM 2. PROPERTIES
The Company operates 30 principal manufacturing facilities ranging in size
from approximately 100,000 square feet to approximately 370,000 square feet
and totaling over 5 million square feet. The following sets forth the
locations of such principal facilities and the business sectors for which they
are presently used:
PRESSURE-SENSITIVE ADHESIVES AND MATERIALS SECTOR
Domestic--Painesville and Fairport, Ohio; Peachtree City, Georgia;
Quakertown, Pennsylvania; Rancho Cucamonga, California;
Greenfield, Fort Wayne, Lowell and Schererville, Indiana.
Foreign--Hazerswoude, The Netherlands; Cramlington, England; Champ-sur-
Drac, France; Turnhout, Belgium; Ajax, Canada; Rodange,
Luxembourg; and Haan, Germany.
OFFICE PRODUCTS SECTOR
Domestic--Torrance, California; Gainesville, Georgia; Rochelle and Rolling
Meadows, Illinois; Chicopee and Springfield, Massachusetts;
Meridian, Mississippi; and Crossville, Tennessee.
Foreign--Bowmanville, Canada; and La Monnerie and Troyes, France.
CONVERTED PRODUCTS SECTOR
Domestic--Philadelphia, Pennsylvania; Framingham, Massachusetts; and
Clinton, South Carolina.
In addition to the Company's principal manufacturing facilities described
above, the Company's principal facilities include its corporate headquarters
facility in Pasadena, California, offices located in Wooburn Green, England;
Leiden, The Netherlands; Concord, Ohio and Framingham, Massachusetts and the
Research Center, located in Pasadena, California.
All of the Company's principal properties identified above are owned in fee
except the Torrance, California; Rolling Meadows, Illinois; Springfield,
Massachusetts; Ajax, Canada; and small portions of the Framingham,
Massachusetts; and La Monnerie, France facilities, all of which are leased.
All of the buildings comprising the facilities identified above were
constructed after 1954 except parts of the Framingham, Massachusetts plant and
office complex, construction of the first portion of which was completed in
1893 and which has been enlarged on several occasions thereafter. All
buildings owned or leased are well maintained and of sound construction, and
are considered suitable and generally adequate for the
5
<PAGE>
Company's present needs. The Company intends to expand capacity and provide
facilities to meet future increased demand. Owned buildings and plant
equipment are insured against major losses from fire and other usual business
risks. The Company knows of no material defects in title to, or encumbrances
on, any of its properties except for mortgage liens against the Meridian,
Mississippi; La Monnerie and Troyes, France and Turnhout, Belgium plants and
three other facilities not listed separately above.
ITEM 3. LEGAL PROCEEDINGS
The Company, like other U.S. corporations, has periodically received notices
from the U.S. Environmental Protection Agency ("EPA") and state environmental
agencies alleging that the Company is a potentially responsible party ("PRP")
for past and future cleanup costs at hazardous waste sites. The Company has
been designated by the EPA and/or other responsible state agencies as a PRP at
16 waste disposal or waste recycling sites which are the subject of separate
investigations or proceedings concerning alleged soil and/or groundwater
contamination and for which no settlement of the Company's liability has been
agreed upon. Litigation has been initiated by a governmental authority with
respect to three of these sites, but the Company does not believe that any
such proceedings will result in the imposition of monetary sanctions. The
Company is participating with other PRPs at all such sites, and anticipates
that its share of cleanup costs will be determined pursuant to remedial
agreements entered into in the normal course of negotiations with the EPA or
other governmental authorities. The Company has accrued liabilities for all
sites, including sites in which governmental agencies have designated the
Company as a PRP, where it is probable that a loss will be incurred and the
amount of the loss can be reasonably estimated. However, because of the
uncertainties associated with environmental assessment and remediation
activities, future expense to remediate the currently identified sites, and
sites which could be identified in the future for cleanup, could be higher
than the liability currently accrued.
The Registrant and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the business.
In the opinion of the Company's management, the resolution of these matters
will not materially affect the financial position, results of operations or
liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
6
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT*
<TABLE>
<CAPTION>
SERVED AS FORMER POSITIONS AND
NAME AGE OFFICER SINCE OFFICES WITH REGISTRANT
---- --- ------------- -----------------------
<C> <C> <C> <C> <S>
Charles D. Miller 68 May 1965 1964-1983 Various positions of
Chairman and Chief increasing
Executive Officer responsibility
(Also Director of
Registrant)
Philip M. Neal 55 January 1974 1974-1990 Various positions of
President and Chief increasing
Operating Officer responsibility
(Also Director of 1990 Executive Vice President
Registrant)
R. Gregory Jenkins 59 July 1981 1974-1988 Various positions of
Senior Vice President, increasing
Finance and Chief Financial responsibility
Officer
Robert J. Keegan 48 August 1995 **1972-1989 Various positions of
Executive Vice President and increasing
Global Strategy Officer responsibility with
Eastman Kodak Company
**1990-1991 President, Kodak Spain,
Eastman Kodak Company
**1991-1995 Vice President, Consumer
Imaging Business
Manager, Europe, Middle
East, Africa Eastman
Kodak Company
Alan J. Gotcher 46 November 1984 1984-1990 Vice President,
Senior Vice President, Corporate Research
Manufacturing and Technology
Robert G. van Schoonenberg 49 December 1981 None
Vice President, General
Counsel and Secretary
Wayne H. Smith 54 June 1979 None
Vice President and Treasurer
Thomas E. Miller 48 March 1994 1973-1990 Various positions of
Vice President and increasing
Controller responsibility
1990-1993 Assistant Controller
1993-1994 V.P. and Assistant
Controller
Diane B. Dixon 44 December 1985 1982-1985 Director of
Vice President, Corporate Communications
Communications
Susan B. Garelli 44 October 1994 **1987-1991 V.P., Human Resources,
Vice President, Columbia Pictures
Human Resources Entertainment, Inc.
**1991-1993 Senior V.P., Human
Resources and Corporate
Communications, JWP,
Inc.
**1993-1994 Consultant, JWP, Inc.
</TABLE>
- -------
* All officers are elected to serve a one year term and until their successors
are elected and qualify.
** Business experience prior to service with Registrant.
7
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT* (CONTINUED)
<TABLE>
<CAPTION>
SERVED AS FORMER POSITIONS AND
NAME AGE OFFICER SINCE OFFICES WITH REGISTRANT
---- --- ------------- -----------------------
<C> <C> <C> <C> <S>
Paul B. Germeraad 48 May 1991 **1989-1991 Director, Flexible
Vice President and Director, Packaging Technical
Corporate Research Group, James River
Corporation
Johan J. Goemans 52 October 1992 1975-1990 Various positions of
Vice President, Management increasing
Information Systems responsibility
1991-1992 Director of Distribution
and Logistics, Fasson
Roll Division U.S.
James L. Fletcher 1988-1991 Senior Manufacturing
Vice President, Customer Systems Consultant
Service and Logistics 1991-1993 V.P., Customer Logistics
Gary A. McCue 59 November 1987 1987-1994 Vice President and
Vice President, Strategic Controller
Value Development 1994 Vice President,
Corporate Value Planning
and Development
Kim A. Caldwell 48 June 1990 1974-1985 Various positions of
Senior Group Vice President, increasing
Worldwide Materials responsibility
1985-1990 Vice President and
General Mgr., Fasson
Roll Div. (U.S.)
Geoffrey T. Martin 41 January 1994 1986-1988 Managing Director, Label
Senior Vice President, Systems
European Operations 1988-1992 V.P. and General
Manager, Label Systems
UK and Ireland
1992-1993 V.P., Office Products
Group Europe
1993-1994 Group Vice President,
Converting and Office
Products Europe
Donald L. Thompson 54 October 1993 1973-1988 Various positions of
Group Vice President, Office increasing
Products responsibility
1988-1993 V.P. and General
Manager, Commercial
Products Division
1993 V.P., Sales and Customer
Operations, North
America
James E. Shaw 64 February 1994 1986-1991 V.P. and General
Group Vice President, Manager, Graphic Systems
Automotive and Graphic Division
Systems 1991-1994 V.P. and General
Manager, Automotive and
Graphic Systems
Divisions
Robert D. Fletcher 60 March 1976 1967-1988 Various positions of
Group Vice President, Asia increasing
Pacific responsibility
1988-1993 Group Vice President,
International Converting
Group
Donald R. McKee 59 December 1995 1971-1989 Various positions of
Group Vice President, increasing
Converted and Fastener responsibility
Products, North America 1989-1993 Vice President and
General Manager, Fasson
Films Division
1993-1995 Vice President and
General Manager, Soabar
Systems Division
1995 Vice President, Soabar
Products and Fastener
Divisions
</TABLE>
- -------
* All officers are elected to serve a one year term and until their successors
are elected and qualify.
** Business experience prior to service with Registrant.
8
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information called for by this item appears on page 56 of Registrant's
1995 Annual Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for each of Registrant's last five fiscal years
appears on pages 34 and 35 of Registrant's 1995 Annual Report and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Sales............................................ $3,113.9 $2,856.7 $2,608.7
Cost of sales.................................... 2,156.6 1,948.9 1,790.6
-------- -------- --------
Gross profit..................................... 957.3 907.8 818.1
Marketing, general and administrative expenses... 689.8 691.9 642.7
Net gain on divestitures and restructuring
charges......................................... 1.5 -- --
-------- -------- --------
Earnings before interest and taxes............... 269.0 215.9 175.4
Gross profit (percent)........................... 30.7% 31.8% 31.4%
Earnings before interest and taxes (percent)..... 8.6% 7.6% 6.7%
</TABLE>
Sales increased to $3.11 billion in 1995, a 9 percent increase over 1994
sales of $2.86 billion. During the fourth quarter of 1995, the Company sold a
portion of its North American label converting operations. These businesses
accounted for approximately 2 percent of the Company's total sales. Excluding
the impact of business divestitures and changes in foreign currency exchange
rates for 1995, sales increased approximately 7 percent. In 1994, sales
increased 10 percent over 1993 sales of $2.61 billion. Changes in foreign
currency had little effect on 1994 total year sales. Each of the Company's
1995, 1994 and 1993 fiscal years consisted of 52 weeks. The Company's sales
growth rate may moderate during 1996 if there is slower economic growth.
Gross profit margins for the years ended 1995, 1994 and 1993 were 30.7
percent, 31.8 percent and 31.4 percent, respectively. The decrease during 1995
was primarily due to a shift in product mix, plant and major production line
start-ups, and $1.6 million in expense related to LIFO inventories compared to
a benefit of $400,000 for 1994. Gross profit margins during 1994 improved
compared to 1993 primarily due to productivity improvements throughout the
Company and an improved product mix on increased sales. The gross profit
margin in 1994 increased despite plant start-up costs for a number of large
facilities, rising raw material prices for all business sectors and almost no
benefit from the reduction of LIFO inventories compared to a benefit of $11.4
million in 1993.
Marketing, general and administrative expense as a percent of sales was 22.2
percent in 1995, 24.2 percent in 1994 and 24.6 percent in 1993. The ongoing
improvement during 1995 was primarily attributable to benefits from the
Company's cost reduction programs, a shift in product mix and increased sales.
The improvement in 1994 over 1993 was primarily attributable to cost reduction
efforts throughout the Company on increased sales and was achieved despite
major investments in geographic expansion, business realignment and new
product programs.
Business restructuring actions were taken during the fourth quarter of 1995
resulting in a net pretax gain of $1.5 million. Consistent with the Company's
strategic plan and in order to improve future profitability, the Company took
specific actions to restructure certain operations, including the sale of
certain nonstrategic North
9
<PAGE>
American label converting businesses. Certain businesses which no longer met
the Company's strategy for converting technology were sold for $95 million. A
$40.7 million pretax gain on the sale of these businesses was offset by the
Company's current restructuring program, which had an estimated cost of $39.2
million. The restructuring program included the closure of four plants and the
reorganization of certain manufacturing, distribution and administrative
sites. These costs consisted of severance and related costs for approximately
400 positions worldwide ($16.2 million), discontinuance of product lines and
related asset write-offs ($13.1 million), and plant closure and other costs
($9.9 million). The Company's restructuring programs are expected to take
approximately 9 to 18 months to complete and will result in estimated annual
savings of $14 to $17 million when fully implemented. These programs are an
integral part of the Company's ongoing effort to identify opportunities to
improve its administrative and manufacturing cost structures.
Interest expense as a percent of sales was 1.4 percent in 1995, 1.5 percent
in 1994 and 1.7 percent in 1993. Interest expense increased in 1995 due to
higher debt levels but was more than offset by the impact of increased sales.
The decrease in 1994 was due to comparable interest expense on increased
sales.
Income before taxes, as a percent of sales, was 7.2 percent for 1995, 6.1
percent for 1994 and 5.1 percent for 1993. The improvement during 1995 was
primarily due to lower operating and interest expenses as a percent of sales.
The increase in 1994 over 1993 was primarily due to improved gross profit
margins and lower operating expenses as a percent of sales. The effective tax
rate was 36 percent in 1995, 36.7 percent in 1994, and 37 percent in 1993.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -----
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net income................................................. $143.7 $109.4 $84.4
Earnings per share......................................... 2.70 1.97 1.46
Average shares outstanding................................. 53.3 55.6 58.0
</TABLE>
Net income increased to $143.7 million in 1995 compared to $109.4 million in
1994 and $84.4 million in 1993, reflecting a 31 percent increase over 1994 and
the Company's fifth consecutive year of improved profitability. Earnings per
share reached a record high of $2.70 in 1995 compared to $1.97 in 1994, a 37
percent increase. Excluding the effect of accounting changes, net income for
1993 was $83.3 million, or $1.44 per share. Net income, as a percent of sales,
was 4.6 percent, 3.8 percent and 3.2 percent in 1995, 1994 and 1993,
respectively.
RESULTS OF OPERATIONS BY BUSINESS SECTOR
PRESSURE-SENSITIVE ADHESIVES AND MATERIALS
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Sales................................................ $1,739.4 $1,538.2 $1,336.9
Income from operations before interest and taxes..... 156.8 150.7 126.4
</TABLE>
The pressure-sensitive adhesives and materials sector reported increased
sales and profitability for 1995 compared to 1994. Profitability for the
sector increased during 1995 despite $15.1 million in restructuring charges
taken during the fourth quarter. The U.S. operations reported a significant
increase in sales due to unit volume growth and pricing actions. Profitability
improvement was primarily due to sales growth and lower operating expenses as
a percent of sales, but was partially offset by plant and major equipment
start-up costs for capacity expansion, and the reorganization of certain
manufacturing sites. Sales for the European operations increased significantly
primarily as a result of volume growth from improved economic conditions over
1994, pricing actions and changes in foreign currency rates. Profitability
increased, despite costs taken for restructuring programs, primarily as a
result of sales growth, lower operating expenses as a percent of sales and a
more favorable product mix.
10
<PAGE>
The pressure-sensitive adhesives and materials sector reported significant
sales and profitability improvements for 1994 compared to 1993. The U.S.
operations reported a significant sales increase due to improved economic
conditions in major markets, and revenue and unit volume growth as a result of
new products and pricing actions. Solid profitability improvement was
primarily due to sales growth and cost reduction programs. Improved economic
conditions, pricing actions, and volume growth led to a significant sales
increase for the European operations. The sales growth, coupled with
productivity improvements and cost reduction programs, resulted in significant
profitability increases for the European operations. The Company experienced
no significant adverse effects from the Mexican currency devaluation during
1994.
OFFICE PRODUCTS
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Sales..................................................... $897.5 $842.4 $792.9
Income from operations before interest and taxes.......... 75.2 67.7 59.3
</TABLE>
The office products sector reported solid sales and profitability growth for
1995 compared to 1994. Sector profitability during 1995 was impacted by $15.6
million in restructuring charges recorded during the fourth quarter. The U.S.
operations reported increased sales and profitability for 1995. Significant
sales growth for Avery-brand labels and indexes were partially offset by the
elimination of lower margin business. Profitability increased for the U.S.
operations due to successful new products, an improved product mix and cost
reduction actions, including the consolidations of distribution warehouses and
sales forces in the U.S. The European operations reported significant sales
growth due to new products, improved economic conditions and changes in
foreign currency rates. A more favorable product mix coupled with cost
reduction actions taken in previous years led to significant profitability
increases in Europe over 1994.
The office products sector reported solid sales and profitability growth for
1994 compared to 1993. In the U.S., sales and profitability increased
primarily as a result of successful new products and promotional programs and
an improved product mix. Profitability improved at the U.S. operations despite
significantly lower benefits from the reduction of LIFO inventories in 1994
compared to 1993 and higher costs related to the consolidations of
distribution warehouses and sales forces. The European office products
businesses reported significantly improved profitability on decreased sales
compared to 1993. Decreased sales were primarily due to the effects of non-
core product pruning and the weak French economy in early 1994. Profitability
improved significantly, primarily as a result of cost reduction actions taken
in previous years and an improved product mix, and was achieved despite costs
related to continuous business improvement programs.
CONVERTED PRODUCTS
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Sales..................................................... $611.7 $576.5 $541.4
Income from operations before interest and taxes.......... 68.5 31.9 23.1
</TABLE>
The converted products sector reported increased sales for 1995 compared to
1994. Profitability during 1995 included a $40.7 million gain from the sale of
certain nonstrategic North American label converting operations, offset by
$8.5 million in restructuring charges taken in early December. Excluding the
net gain on sale and other restructuring actions, the U.S. converting
operations reported increased sales and decreased profitability for 1995. New
products, an improved European economy and changes in foreign currency rates
increased sales for the international converting businesses, while an improved
product mix and lower operating expenses as a percent of sales resulted in
significantly higher profitability.
The converted products sector reported significant profitability
improvements on solid sales growth for 1994 compared to 1993. Profitability
increased despite costs incurred to improve operations and significantly lower
11
<PAGE>
benefits from the reduction of LIFO inventories in 1994 compared to 1993.
Sales for the Soabar and fastener businesses increased due to improving retail
and apparel markets and new products. Profitability was up significantly
primarily due to increased sales, coupled with the elimination of unprofitable
product lines and lower operating expenses as a result of cost reduction
actions. The international converting businesses reported modest sales growth
and decreased profitability for 1994. The effects of an improved European
economy on sales was partially offset by sales lost from the elimination of
unprofitable lines of business and costs incurred to improve operations. The
U.S. label businesses reported a solid increase in sales and significant
profitability gains due primarily to increased sales to the automotive,
durable and consumer goods markets and lower operating expenses as a percent
of sales.
FINANCIAL CONDITION
Average working capital, excluding short-term debt, as a percent of sales
was 9.6 percent in 1995, 10 percent in 1994 and 12.3 percent in 1993. The
decrease was primarily due to higher sales and an increase in current
liabilities. Average inventory turnover was 9.0 turns in 1995, 9.3 turns in
1994 and 8.7 in 1993; the average number of days sales outstanding in accounts
receivable was 55 days in 1995 and 1994, compared to 57 days in 1993.
Net cash flow from operating activities was $187.9 million in 1995 and $265
million in 1994. The decrease was primarily due to a change in working capital
requirements which were partially offset by the increase in net income.
Total debt increased $28.7 million to $449.4 million compared to year end
1994. Total debt to total capital was 35.5 percent at year end 1995 compared
to 36.6 percent at year end 1994. Long-term debt as a percent of total long-
term capital decreased to 29 percent from 32.3 percent at year end 1994.
During 1995, the Company issued $100 million in principal amount of medium-
term notes which have an average interest rate of 7.3 percent and maturities
ranging from 2005 to 2025. A portion of the medium-term notes was used to
retire short-term debt.
Shareholders' equity increased to $815.8 million from $729 million at year
end 1994. During 1995, the Company repurchased 852,000 shares of common stock
at a cost of $35.1 million. The cost of treasury stock held, net of shares
reissued under the Company's stock option and incentive plans, at year end
1995 increased $26.5 million to $279.9 million from year end 1994. In January
1995, the Board of Directors authorized the repurchase of an additional five
million shares of the Company's outstanding common stock for an aggregate of
15.2 million shares authorized for repurchase. As of year end 1995, a
cumulative 10.8 million shares of common stock had been purchased under this
authorization.
The return on average shareholders' equity was 18.6 percent in 1995, 14.8
percent in 1994 and 11 percent in 1993. The improvements during 1995 and 1994
were primarily due to a significant increase in profitability and the
Company's share repurchase program. The return on average total capital for
those three years was 14.4 percent, 12.1 percent and 9.3 percent,
respectively. The increases during 1995 and 1994 were primarily due to
profitability improvements and more effective utilization of the Company's
assets.
The Company, like other U.S. corporations, has periodically received notices
from the U.S. Environmental Protection Agency and state environmental agencies
alleging that the Company is a potentially responsible party (PRP) for past
and future cleanup costs at hazardous waste sites. The Company has received
requests for information, notices and/or claims with respect to 16 waste sites
in which the Company has no ownership interest. Litigation has been initiated
by a governmental authority with respect to three of these sites, but the
Company does not believe that any such proceedings will result in the
imposition of monetary sanctions. Environmental investigatory and remediation
projects are also being undertaken on property presently owned by the Company.
The Company has accrued liabilities for all sites where it is probable that a
loss will be incurred and the amount of the loss can be reasonably estimated.
However, because of the uncertainties associated with environmental
assessments and remediation activities, future expense to remediate the
currently identified sites, and sites which could be identified in the future
for cleanup, could be higher than the liability currently accrued.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In addition to cash flow from operations, the Company has more than adequate
financing arrangements, at competitive rates, to conduct its operations.
The Company's 1995 restructuring program included the sale of certain
nonstrategic North American label converting businesses. Sale proceeds of $95
million are being used for general corporate purposes, including funding
capital spending, debt repayment, share repurchase and profit improvement
programs. The restructuring programs had an estimated cost of $39.2 million,
of which $24.5 million remained accrued at year end, related primarily to
employee severance and plant closure costs. Total cash expenditures for the
restructuring program are estimated at $19.7 million. By year end 1995,
approximately $1.5 million had been paid, primarily for employee severance and
related costs.
The Company continues to expand its operations in Asia Pacific, Latin
America and Europe. The Company's future results are subject to changes in
economic conditions and the impact of fluctuations in foreign currency
exchange and interest rates. To manage its exposure to these fluctuations, the
Company may enter into currency and interest rate contracts, where
appropriate.
Capital expenditures increased to $190.3 million in 1995 from $163.3 million
in 1994. In 1995, capital spending was directed primarily to the pressure-
sensitive adhesives and materials businesses. Capital expenditures for 1996
are expected to be approximately $225 million.
The annual dividends per share increased to $1.11 in 1995 from $.99 in 1994
and $.90 in 1993.
During 1995, the Company experienced moderate increases in raw materials
prices. These inflationary pressures are expected to decrease in 1996 and
should be substantially offset by pricing actions and productivity
improvements.
FUTURE ACCOUNTING REQUIREMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121 on accounting for the impairment
of long-lived assets and for long-lived assets to be disposed of. SFAS No. 121
requires the Company to review the carrying amounts of its long-lived assets
and certain identifiable intangible assets for impairment. If it is determined
the carrying amount of the asset is not recoverable, the Company is required
to recognize an impairment loss. The accounting standard will be implemented
during the first quarter of 1996; however, the loss, if any, has not yet been
determined.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is contained in Registrant's
Consolidated Financial Statements and the Notes thereto appearing on pages 40
through 52, and in the Report of Independent Certified Accountants on page 53
of Registrant's 1995 Annual Report and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors called for by this item is incorporated
by reference from pages 2, 3 and 4 of the 1996 Proxy Statement which is to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the end of the fiscal year covered by this report.
Information concerning executive officers called for by this item appears in
Part I of this report. The information concerning late filings under Section
16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by
reference from page 15 of the 1996 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by items 11, 12 and 13 is incorporated by
reference from pages 5 through 23 of the 1996 Proxy Statement which is to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) (2) Financial statements and financial statement schedules filed as
part of this report are listed in the accompanying Index to Financial
Statements and Financial Statement Schedules.
(3) Exhibits filed as a part of this report are listed in the Exhibit
Index, which follows the financial statements and schedules referred to
above. Each management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c)
is identified in the Exhibit Index.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed for the
three months ended December 30, 1995.
(c) Those Exhibits, and the Index thereto, required to be filed by Item 601
of Regulation S-K are attached hereto.
(d) Those financial statement schedules required by Regulation S-X which are
excluded from Registrant's 1995 Annual Report by Rule 14a-3(b)(1), and which
are required to be filed as financial statement schedules to this report, are
indicated in the accompanying Index to Financial Statements and Financial
Statement Schedules.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AVERY DENNISON CORPORATION
By: /s/ R. Gregory Jenkins
----------------------------------
R. Gregory Jenkins
Senior Vice President, Finance and
Chief Financial Officer
Dated: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles D. Miller Chairman and Chief Executive March 28, 1996
____________________________________ Officer; Director
Charles D. Miller
/s/ Philip M. Neal President and Chief March 28, 1996
____________________________________ Operating Officer; Director
Philip M. Neal
/s/ R. Gregory Jenkins Senior Vice President, March 28, 1996
____________________________________ Finance and Chief Financial
R. Gregory Jenkins Officer (Principal Financial
Officer)
/s/ Thomas E. Miller Vice President and March 28, 1996
____________________________________ Controller (Principal
Thomas E. Miller Accounting Officer)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Dwight L. Allison, Jr. Director March 28, 1996
____________________________________
Dwight L. Allison, Jr.
/s/ John C. Argue Director March 28, 1996
____________________________________
John C. Argue
/s/ Joan T. Bok Director March 28, 1996
____________________________________
Joan T. Bok
/s/ Frank V. Cahouet Director March 28, 1996
____________________________________
Frank V. Cahouet
/s/ Richard M. Ferry Director March 28, 1996
____________________________________
Richard M. Ferry
/s/ F. Daniel Frost Director March 28, 1996
____________________________________
F. Daniel Frost
/s/ Peter W. Mullin Director March 28, 1996
____________________________________
Peter W. Mullin
/s/ Sidney R. Petersen Director March 28, 1996
____________________________________
Sidney R. Petersen
/s/ John B. Slaughter Director March 28, 1996
____________________________________
John B. Slaughter
/s/ Lawrence R. Tollenaere Director March 28, 1996
____________________________________
Lawrence R. Tollenaere
</TABLE>
16
<PAGE>
AVERY DENNISON CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES
----------------
<TABLE>
<CAPTION>
REFERENCE (PAGE)
-------------------
FORM
10-K ANNUAL
ANNUAL REPORT TO
REPORT SHAREHOLDERS
------ ------------
<S> <C> <C>
Data incorporated by reference from the attached portions of
the 1995 Annual
Report to Shareholders of Avery Dennison Corporation:
Report of Independent Certified Public Accountants......... -- 53
Consolidated Balance Sheet at December 30, 1995 and
December 31, 1994......................................... -- 40
Consolidated Statement of Income for 1995, 1994 and 1993... -- 41
Consolidated Statement of Shareholders' Equity for 1995,
1994 and 1993............................................. -- 42
Consolidated Statement of Cash Flows for 1995, 1994 and
1993...................................................... -- 43
Notes to Consolidated Financial Statements................. -- 44-52
Individual financial statements of 50% or less owned entities accounted for
by the equity method have been omitted because, considered in the aggregate or
as a single subsidiary, they do not constitute a significant subsidiary.
With the exception of the consolidated financial statements and the
accountants' report thereon listed in the above index, and the information
referred to in Items 1, 5 and 6, all of which is included in the 1995 Annual
Report and incorporated herein by reference, the 1995 Annual Report is not to
be deemed "filed" as part of this report.
Data submitted herewith:
Report of Independent Certified Public Accountants......... S-2 --
Financial Statement Schedules (for 1995, 1994 and 1993):
II--Valuation and Qualifying Accounts and Reserves...... S-3 --
Consent of Independent Accountants......................... S-4 --
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and notes thereto.
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Avery Dennison Corporation
Our report on the consolidated financial statements of Avery Dennison
Corporation and subsidiaries has been incorporated by reference in this Form
10-K from page 53 of the 1995 Annual Report to Shareholders of Avery Dennison
Corporation. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page S-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
January 30, 1996
S-2
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE CHARGED DEDUCTIONS--
AT TO COSTS UNCOLLECTIBLE BALANCE
BEGINNING AND FROM ACCOUNTS AT END
OF YEAR EXPENSES ACQUISITIONS WRITTEN OFF OF YEAR
--------- -------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts............... $18.5 $4.7 $ -- $5.6 $17.6
===== ==== ======= ==== =====
1994
Allowance for doubtful
accounts............... $16.7 $7.5 $ -- $5.7 $18.5
===== ==== ======= ==== =====
1993
Allowance for doubtful
accounts............... $18.4 $7.7 $ -- $9.4 $16.7
===== ==== ======= ==== =====
</TABLE>
S-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Avery Dennison Corporation on Form S-8 (File Nos. 2-47617, 2-60937, 2-
82207, 33-1132, 33-3645, 33-3637, 33-27275, 33-35995-01, 33-41238, 33-45376,
33-54411, 33-58921 and 33-63979) of our report, which includes an explanatory
paragraph regarding the Company's adoption of the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits" during 1993, dated January
30, 1996, which appears on page 53 of the 1995 Annual Report to Shareholders
and is incorporated by reference in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the financial
statement schedule listed in the index on page S-1.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 28, 1996
S-4
<PAGE>
AVERY DENNISON CORPORATION
EXHIBIT INDEX
FOR THE YEAR ENDED DECEMBER 30, 1995
----------------
INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
ORIGINALLY
FILED AS
EXHIBIT EXHIBIT
NO. ITEM NO. DOCUMENT
------- ---- ---------- --------
<C> <C> <C> <S>
(3.1) Restated Articles of Incorporation.. B Proxy Statement dated
February 28, 1977
for Annual Meeting of
Stockholders
March 30, 1977; located
in File No. 0-225 at
Securities and Exchange
Commission, 450 5th St.,
N.W., Washington, D.C.
(3.1.1) Amendment to Certificate of
Incorporation, filed April 10, 1984
with Office of Delaware Secretary
of State........................... 3.1.1 1983 Annual Report on
Form 10-K
(3.1.2) Amendment to Certificate of
Incorporation, filed April 11, 1985
with Office of Delaware Secretary
of State........................... 3.1.2 1984 Annual Report on
Form 10-K
(3.1.3) Amendment to Certificate of
Incorporation filed April 6, 1987
with Office of Delaware Secretary
of State........................... 3.1.3 1986 Annual Report on
Form 10-K
(3.1.4) Amendment to Certificate of
Incorporation filed October 17,
1990 with Office of Delaware
Secretary of State................. 3.1 Current Report on Form
8-K filed
October 31, 1990
(3.2) By-laws, as amended................. 3(ii) First Quarterly Report
for 1995 on
Form 10-Q
(4.1) Rights Agreement dated as of June
30, 1988........................... 1 Current Report on Form
8-K filed
July 9, 1988
(4.1.1) Amendment to Rights Agreement dated
as of December 9, 1994............. 1 Current Report on Form
8-K filed
December 14, 1994
(4.2) Indenture, dated as of March 15,
1991, between Registrant and
Security Pacific National Bank, as
Trustee (the "Indenture").......... 4 Registration Statement
on Form S-3
(File No. 33-39491)
(4.3) Officers' Certificate establishing a
series of Securities entitled
"Medium-Term Notes" under the
Indenture.......................... 28.1 Current Report on Form
8-K filed
March 25, 1991
(4.4) First Supplemental Indenture, dated
as of March 16, 1993, between
Registrant and BankAmerica National
Trust Company, as successor Trustee
(the "Supplemental Indenture")..... 4.2 Registration Statement
on Form S-3
(File No. 33-59642)
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
ORIGINALLY
FILED AS
EXHIBIT EXHIBIT
NO. ITEM NO. DOCUMENT
------- ---- ---------- --------
<C> <C> <C> <S>
(4.5) Officers' Certificate establishing a
series of Securities entitled
"Medium-Term Notes" under the
Indenture, as amended by the
Supplemental Indenture............. 4.1 Current Report on Form
8-K filed
April 7, 1993
(4.6) Officers' Certificate establishing a
series of Securities entitled
"Medium-Term Notes, Series B" under
the Indenture, as amended by the
Supplemental Indenture ............ 4.1 Current Report on Form
8-K filed
March 29, 1994
(4.7) Officers' Certificate establishing a
series of Securities entitled
"Medium-Term Notes, Series C" under
the Indenture, as amended by the
Supplemental Indenture ............ 4.1 Current Report on Form
8-K filed
May 12, 1995
(10.1) *Amended 1973 Stock Option and Stock
Appreciation Rights Plan for Key
Em- ployees of Avery International
Corporation ("1973 Plan").......... 10.1 1987 Annual Report on
Form 10-K
(10.1.1) *Form of Incentive Stock Option
Agreement for use under 1973 Plan.. 10.1.3 1984 Annual Report on
Form 10-K
(10.1.2) *Form of Non-Qualified Stock Option
Agreement for use under 1973 Plan.. 10.1.4 1987 Annual Report on
Form 10-K
(10.1.3) *Form of coupled Stock Appreciation
Right Agreement for use under 1973
Plan............................... 10.1.5 1985 Annual Report on
Form 10-K
(10.1.4) 1985 U.K. Stock Option Scheme.......
10.1.7 1985 Annual Report on
Form 10-K
(10.1.5) Form of Incentive Stock Option
Agreement for use under U.K. Stock
Option Scheme...................... 10.1.8 1985 Annual Report on
Form 10-K
(10.1.6) Form of Stock Option Agreement for
use under U.K. Stock Option Scheme. 10.1.9 1985 Annual Report on
Form 10-K
(10.2.2) *Form of Incentive Stock Option
Agreement for use under 1988 Plan.. 10.2.2 1991 Annual Report on
Form 10-K
(10.3) *Deferred Compensation Plan for
Directors.......................... 10.3 1981 Annual Report on
Form 10-K
(10.5) *Executive Medical and Dental Plan
(description)...................... 10.5 1981 Annual Report on
Form 10-K
(10.6) *Executive Financial Counseling
Service (description).............. 10.6 1981 Annual Report on
Form 10-K
(10.7.1) *Executive Employment Security
Policy dated February 1, 1983...... 10.7.1 1982 Annual Report on
Form 10-K
(10.7.2) *Executive Employment Security
Policy dated February 1, 1985...... 10.13 1984 Annual Report on
Form 10-K
(10.7.3) *Executive Employment Security
Policy dated November 19, 1987..... 10.7.3 1993 Annual Report on
Form 10-K
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ORIGINALLY
FILED AS
EXHIBIT EXHIBIT
NO. ITEM NO. DOCUMENT
------- ---- ---------- --------
<C> <C> <C> <S>
(10.8.1) *Agreement dated October 24, 1990
with Charles D. Miller............. 10.8.1 1990 Annual Report on
Form 10-K
(10.8.2) *Agreement dated October 23, 1990
with Philip M. Neal................ 10.8.2 1990 Annual Report on
Form 10-K
(10.9) *Executive Group Life Insurance
Plan............................... 10.9 1982 Annual Report on
Form 10-K
(10.10) *Form of Indemnity Agreements
between Registrant and certain
directors and officers............. 10.10 1986 Annual Report on
Form 10-K
(10.10.1) *Form of Indemnity Agreement between
Registrant and certain directors
and officers....................... 10.10.1 1993 Annual Report on
Form 10-K
(10.11) *Supplemental Executive Retirement
Plan............................... 10.11 1983 Annual Report on
Form 10-K
(10.11.1) *Amended Letter of Grant to C.D.
Miller under Supplemental Executive
Retirement Plan.................... 10.11.2 1992 Annual Report on
Form 10-K
(10.12) *Complete Restatement and Amendment
of Avery Dennison Corporation
Executive Deferred Compensation
Plan............................... 10.12 1994 Annual Report on
Form 10-K
(10.12.1) *Form of Enrollment Agreement for
use under Executive Deferred
Compensation Plan.................. 10.13.2 1985 Annual Report on
Form 10-K
(10.13) *Fourth Amended Avery Dennison
Retirement Plan for Directors...... 10.13.2 1992 Annual Report on
Form 10-K
(10.15) *1988 Stock Option Plan for Non-
Employee Directors ("Director
Plan")............................. 10.15 1987 Annual Report on
Form 10-K
(10.15.1) *Amendment No. 1 to 1988 Stock
Option Plan for Non-Employee
Directors ("Director Plan")........ 10.15.1 1994 Annual Report on
Form 10-K
(10.15.2) *Form of Non-Employee Director Stock
Option Agreement for use under
Director Plan...................... 10.15.2 1994 Annual Report on
Form 10-K
(10.16) *Complete Restatement and Amendment
of Avery Dennison Corporation
Executive Variable Deferred
Compensation Plan.................. 10.16 1994 Annual Report on
Form 10-K
(10.16.1) *Form of Enrollment Agreement for
use under Executive Variable
Deferred Compensation Plan......... 10.16.1 1987 Annual Report on
Form 10-K
(10.17) *Complete Restatement and Amendment
of Avery Dennison Corporation
Directors Deferred Compensation
Plan............................... 10.17 1994 Annual Report on
Form 10-K
(10.17.1) *Form of Enrollment Agreement for
use under Directors Deferred
Compensation Plan.................. 10.17.2 1985 Annual Report on
Form 10-K
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ORIGINALLY
FILED AS
EXHIBIT EXHIBIT
NO. ITEM NO. DOCUMENT
------- ---- ---------- --------
<C> <C> <C> <S>
(10.18) *Complete Restatement and Amendment
of Avery Dennison Corporation
Directors Variable Deferred
Compensation Plan.................. 10.18 1994 Annual Report on
Form 10-K
(10.18.1) *Form of Enrollment Agreement for
use under Directors Variable
Deferred Compensation Plan......... 10.18.1 1989 Annual Report on
Form 10-K
(10.19) *1990 Stock Option and Incentive
Plan for Key Employees of Avery
International Corporation ("1990
Plan")............................. 10.19 1989 Annual Report on
Form 10-K
(10.19.1) *Amendment No. 1 to 1990 Plan....... 10.19.3 1993 Annual Report on
Form 10-K
(10.19.2) *Form of Incentive Stock Option
Agreement for use under 1990
Plan............................... 10.19.2 1991 Annual Report on
Form 10-K
(10.19.3) *Form of Non-Qualified Stock Option
Agreement for use under 1990 Plan.. 10.19.3 1994 Annual Report on
Form 10-K
(10.19.4) *Form of Non-Qualified Stock Option
Agreement for use under 1990 Plan
(for LTIP Participants)............ 10.19.4 1994 Annual Report on
Form 10-K
(10.20.1) *1982 Incentive Stock Option Plan of
Dennison Manufacturing Company..... 4.3 Registration Statement
on Form S-8
(File No. 33-35995-01)
(10.20.2) *1985 Incentive Stock Option Plan of
Dennison Manufacturing Company..... 4.4 Registration Statement
on Form S-8
(File No. 33-35995-01)
(10.20.3) *1988 Stock Option Plan of Dennison
Manufacturing Company.............. 4.5 Registration Statement
on Form S-8
(File No. 33-35995-01)
(10.20.4) *Amendments effective as of October
16, 1990 to the 1982 Incentive
Stock Option Plan, 1985 Incentive
Stock Option Plan and 1988 Stock
Option Plan of Dennison
Manufacturing Company.............. 4.6 Registration Statement
on Form S-8
(File No. 33-35995-01)
(10.27.1) *Amended and Restated Key Executive
Long-Term Incentive Plan ("LTIP").. 10.27.1 1993 Annual Report on
Form 10-K
(10.28) *Complete Restatement and Amendment
of Avery Dennison Corporation
Executive Deferred Retirement Plan. 10.28 1994 Annual Report on
Form 10-K
(10.28.1) *Form of Enrollment Agreement for
use under Executive Deferred
Retirement Plan.................... 10.28.1 1992 Annual Report on
Form 10-K
(10.29) *Executive Incentive Compensation
Plan............................... 10.29 1993 Annual Report on
Form 10-K
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ORIGINALLY
FILED AS
EXHIBIT EXHIBIT
NO. ITEM NO. DOCUMENT
------- ---- ---------- --------
<C> <C> <C> <S>
(10.30) *Senior Executive Incentive 1993 Annual Report on
Compensation Plan.................. 10.30 Form 10-K
(10.31) *Executive Variable Deferred
Retirement Plan.................... 10.31 Registration Statement
on Form S-8
(File No. 33-63979)
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Form 10-K pursuant to Item 14(c).
SUBMITTED HEREWITH:
<TABLE>
<CAPTION>
EXHIBIT NO. ITEM
----------- ----
<C> <S>
10.27.2 *Second Amended and Restated Key Executive Long-Term Incentive
Plan
10.31.1 *Amended and Restated Executive Variable Deferred Retirement Plan
10.32 *Benefit Restoration Plan
11 Statement re Computation of Net Income Per Share Amounts
13 Portions of Annual Report to Shareholders for fiscal year ended
December 30, 1995
21 List of Subsidiaries
23 Consent of Independent Accountants (see page S-4)
27 Financial Data Schedule
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Form 10-K pursuant to Item 14(c).
STATEMENT AND AGREEMENT REGARDING
LONG-TERM DEBT OF REGISTRANT
Except as indicated above, Registrant has no instrument with respect to long-
term debt under which securities authorized thereunder equal or exceed 10% of
the total assets of Registrant and its subsidiaries on a consolidated basis.
Registrant agrees to furnish a copy of its long-term debt instruments to the
Commission upon request.
5
<PAGE>
[LOGO OF AVERY DENNISON]
<PAGE>
EXHIBIT 10.27.2
AVERY DENNISON CORPORATION
SECOND AMENDED AND RESTATED
---------------------------
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
--------------------------------------
Effective as of January 1, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
I. PURPOSE......................................................... 1
-------
II. PARTICIPATION................................................... 1
-------------
III. DEFINITIONS..................................................... 1
-----------
IV. GENERAL PLAN DESCRIPTION........................................ 6
------------------------
A. Overview.................................................... 6
B. Stock Options............................................... 6
(1) Size of Grant........................................... 6
(2) Exercise Price And Exercise Period...................... 6
(3) Vesting Provisions...................................... 6
(4) Other Provisions........................................ 7
C. Deferred Cash Incentive Awards.............................. 7
(1) Performance Cycle....................................... 7
(2) Range Of Target And Success Factor Award
Opportunities........................................... 7
(3) Performance Measurement And Calculation
Of Target Awards........................................ 8
(a) Calculation Formula................................. 8
(b) Weighting Factors - Category 1...................... 8
(c) Weighting Factors - Category 2...................... 9
(d) Achievement Factor.................................. 9
(e) Measurement Process................................. 10
(4) Performance Measurement And Calculation
Of Success Factor Awards................................ 10
(a) Calculation Formula................................. 10
(b) Weighting Factors................................... 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(c) Achievement Factor.................................. 11
(d) Measurement Process................................. 12
(5) Discretionary Pool Participation........................ 12
V. PEER GROUP PERFORMANCE MEASUREMENT.............................. 12
----------------------------------
VI. NEW PARTICIPANTS................................................ 13
----------------
VII. TERMINATION OF SERVICE.......................................... 13
----------------------
A. Stock Options............................................... 13
B. Deferred Cash Incentive Awards.............................. 13
VIII. PAYMENT OF EARNED DEFERRED CASH INCENTIVE....................... 14
-----------------------------------------
IX. TRANSFERS....................................................... 14
---------
X. PLAN ADMINISTRATION............................................. 14
-------------------
A. General Administration...................................... 14
B. Adjustments for Extraordinary Events........................ 15
C. Amendment, Suspension or Termination of the Plan............ 15
D. Designation of Beneficiaries................................ 15
XI. CHANGE OF CONTROL............................................... 16
-----------------
XII. PRIOR PLANS..................................................... 17
-----------
XIII. MISCELLANEOUS PROVISIONS........................................ 18
------------------------
A. Unsecured Status of Claim................................... 18
B. Employment Not Guaranteed................................... 18
C. Right of Offset............................................. 18
D. Nonassignability............................................ 18
E. Validity.................................................... 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
F. Withholding-Tax............................................. 19
G. Applicable Law.............................................. 19
H. Inurement of Rights and Obligations......................... 19
</TABLE>
<PAGE>
SECOND AMENDED AND RESTATED
---------------------------
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
--------------------------------------
I. PURPOSE
-------
The purpose of the Second Amended and Restated Key Executive Long-Term Incentive
Plan (the "Plan") is to focus key executives of Avery Dennison Corporation (the
"Company") on factors that influence the Company's long-term growth and success.
The Plan provides a means whereby Participants are given an opportunity to share
financially in the future value they help to create for the Company and its
stockholders.
II. PARTICIPATION
-------------
Participation in the Plan is limited to key executives of the Company who, in
the opinion of the Compensation Committee of the Board of Directors, have the
responsibility to materially influence the Company's long-range performance, and
who have been recommended for participation by the Chief Executive Officer of
the Company and designated as Participants by the Compensation Committee.
III. DEFINITIONS
-----------
"ACHIEVEMENT FACTOR" means the percentage to be used in determining a
Participant's deferred cash incentive Award for achieving a specified percentage
of the pre-established Performance Objectives.
"AFTER-TAX INTEREST EXPENSE" means total interest expense as disclosed in the
Company's annual reports to shareholders and Peer Group companies' annual
reports to shareholders and quarterly reports on Form 10-Q, if applicable,
multiplied by one (1) minus the Tax Rate.
"AVERAGE CAPITAL" means the numerical average for a given year of ending Capital
for the five most recently completed fiscal quarters, including the last quarter
of that year.
"AVERAGE SHAREHOLDERS' EQUITY" means the numerical average for a given year of
ending Shareholders' Equity for the five most recently completed fiscal
quarters, including the last quarter of that year.
"AWARD" refers to either (a) a Stock Option granted under the 1990 Plan
evidenced by an Option Agreement which generally incorporates the terms and
provisions of the Plan relating to Stock Options, or (b) a deferred cash
incentive earned by a Participant based on the achievement of Company and, in
some cases, Business Unit financial objectives.
1
<PAGE>
"BASE SALARY" means the annual base salary rate in effect for a Participant as
of the end of a Performance Cycle.
"BUSINESS UNIT" or "UNIT" refers to a group, division or subsidiary of the
Company.
"BUSINESS UNIT NET INCOME" means net income of a Business Unit as reported in
the Company's internally prepared Summary of Operations.
"BUSINESS UNIT ROTC" means the return on total capital of a Business Unit as
reported in the Company's internally prepared Summary of Operations.
"CAPITAL" refers to the sum of Shareholders' Equity and Long-Term Debt.
"CASH FLOW FROM OPERATIONS" means net cash provided by operating activities as
disclosed in the Company's annual reports to shareholders and quarterly reports
on Form 10-Q.
"CAUSE" means (i) continued failure by a Participant to perform his or her
duties (except as a direct result of the Participant's incapacity due to
physical or mental illness) after receiving notification by the Chief Executive
Officer or an individual designated by the Chief Executive Officer (or the Board
of Directors in the case of the Chief Executive Officer) identifying the manner
in which the Participant has failed to perform his or her duties, (ii) engaging
in conduct, which, in the opinion of a majority of the Board of Directors, is
materially injurious to the Company, or (iii) conviction of the Participant of
any felony involving moral turpitude.
"CHANGE OF CONTROL" shall mean a change in control of the Company of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A,
Regulation 240.14a-101, promulgated under the Securities Exchange Act of 1934 as
now in effect or, if Item 6(e) is no longer in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serve similar purposes; provided that, without limitation, a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities, or (b)
individuals who were members of the Board of Directors of the Company
immediately prior to a meeting of the stockholders of the Company involving a
contest for the election of directors shall not constitute a majority of the
Board of Directors following such election.
"CODE" means the Internal Revenue Code of 1986, as amended.
2
<PAGE>
"COMPANY ROTC" means the return on total capital of the Company as reported in
the Company's internally prepared Summary of Operations.
"COMPENSATION COMMITTEE" or "COMMITTEE" refers to the Compensation Committee of
the Board of Directors of the Company.
"DISABILITY" refers to a physical or mental condition that prevents a
Participant from performing his or her normal duties of employment. If a
Participant makes application for disability benefits under the Company's long-
term disability program and qualifies for such benefits, the Participant shall
be presumed to qualify as totally and permanently disabled under the Plan.
"DISCRETIONARY POOL" or "POOL" refers to the sum of cash payments made available
by the Compensation Committee to Participants who have achieved exceptional
performance and to other Company employees who have made significant
contributions to the achievement of Performance Objectives.
"EARNINGS PER SHARE" or "EPS" means earnings per share, including extraordinary
gains and losses, divested operations and changes in accounting principles as
disclosed in the Company's annual reports to shareholders.
"ECONOMIC VALUE ADDED" means operating profit after taxes on income minus a
capital charge based upon the Company's weighted average cost of capital.
"EFFECTIVE DATE" means January 1, 1995, which is the first day of the initial
Performance Cycle.
"FAIR MARKET VALUE" means the average of the high and low trading price of the
Company's common stock on a given day, as reported on the New York Stock
Exchange Composite Tape.
"GAAP" means generally accepted accounting principles.
"LONG-TERM DEBT" means long-term debt as disclosed in the Company's annual
reports to shareholders and Peer Group companies' annual reports to shareholders
and quarterly reports on Form 10-Q, if applicable.
"NET INCOME" refers to after-tax net income, including extraordinary items,
discontinued operations and changes in accounting principles, as disclosed in
the Company's annual reports to shareholders and Peer Group companies' annual
reports to shareholders and quarterly reports on Form 10-Q, if applicable.
"NET SALES" means net sales as disclosed in the Company's annual reports to
shareholders and quarterly reports on Form 10-Q.
3
<PAGE>
"1990 PLAN" refers to the 1990 Stock Option and Incentive Plan for Key Employees
of Avery Dennison Corporation (formerly named Avery International Corporation),
or a successor plan.
"OPTION AGREEMENT" means a written stock option agreement evidencing options
granted under the 1990 Plan which generally incorporates the terms and
provisions of the Plan relating to Stock Options.
"PARTICIPANT" means an executive of the Company designated by the Compensation
Committee to participate in the Plan.
"PEER GROUP" refers to a specified group of companies approved by the
Compensation Committee against which the financial performance of the Company
will be compared for purposes of the Plan.
"PERFORMANCE CYCLE" or "CYCLE" refers to the three-year period over which
performance is measured for purposes of determining cash Awards under the Plan.
The initial Performance Cycle will cover the Company's 1995 through 1997 fiscal
years.
"PERFORMANCE OBJECTIVE" means one of the pre-established performance objectives
for the Company and its Business Units for a Performance Cycle including,
without limitation, ROTC, EPS, ROS, ROE, Net Income, Net Sales, Cash Flow from
Operations and Economic Value Added.
"RETIREMENT" means a termination of service in accordance with the retirement
provisions of either (a) the Company sponsored tax qualified defined benefit
retirement plan in which a Participant is participating immediately prior to the
date of such termination of service, or (b) the Company-sponsored Supplemental
Retirement Plan (SERP) in which the Participant is participating immediately
prior to the date of such termination of service. If the Participant does not
participate in either of the above retirement plans, then Retirement means a
termination of service in accordance with the retirement provisions of the
Company's tax-qualified defined contribution retirement plan in which the
Participant then participates.
"ROE" means the percentage determined by dividing "Net Income" by "Average
Shareholders' Equity."
"ROS" means the percentage determined by dividing Net Income by Net Sales.
"ROTC" means the percentage determined by dividing (a) the sum of Net Income
plus After-Tax Interest Expense by (b) Average Capital.
"SERVICE" means continuous and substantially full-time employment with the
Company.
4
<PAGE>
"SHAREHOLDERS' EQUITY" means total shareholders' equity, as disclosed in the
Company's annual reports to shareholders and Peer Group companies' annual
reports to shareholders and quarterly reports on Form 10-Q, if applicable.
"STOCK OPTION" or "OPTION" refers to an option to purchase common stock of the
Company at a fixed price for a specified period granted pursuant to the 1990
Plan and evidenced by an Option Agreement which generally incorporates the terms
and provisions of the Plan relating to Stock Options.
"SUCCESS FACTOR AWARD" refers to the additional deferred cash incentive Award
earned for achieving greater than the Target Performance Objectives established
for a Performance Cycle.
"SUCCESS FACTOR PERFORMANCE OBJECTIVE" means one of the pre-established Company
Performance Objectives used to determine the Success Factor Award.
"TARGET AWARD" refers to the deferred cash incentive Award earned for achieving
the Target Performance Objectives established for a Performance Cycle.
"TARGET PERFORMANCE OBJECTIVE" means one of the pre-established Performance
Objectives used to determine the Target Award.
"TAX RATE" refers to taxes on income divided by income before taxes on income,
each as disclosed in the Company's annual reports to shareholders and Peer Group
companies' annual reports to shareholders and quarterly reports on Form 10-Q, if
applicable, subject to adjustments to exclude the effect of unusual, non-
recurring items, as described in the Company's annual reports to shareholders
and Peer Group companies' annual reports to shareholders and quarterly reports
on Form 10-Q, if applicable.
"TERMINATION OF SERVICE" means a termination of Service from the Company for any
reason, whether voluntary or involuntary, including death, Retirement and
Disability.
"TRANSFER" means the appointment of a Participant to a new position within the
Company which may either be within the same position classification under the
Plan or in a different position classification under the Plan.
"WEIGHTING FACTOR" means the percentage of a Participant's Target Award or
Success Factor Award which will be calculated based on the achievement of a
particular Performance Objective.
5
<PAGE>
IV. GENERAL PLAN DESCRIPTION
------------------------
A. OVERVIEW
--------
Commencing as of the Effective Date, the Plan provides for each Participant (a)
the opportunity to receive an annual grant of Stock Options, and (b) the
opportunity to earn a deferred cash incentive Award based on the financial
performance of the Company and, in some cases, its Business Units.
B. STOCK OPTIONS
-------------
(1) SIZE OF GRANT
-------------
Annual Stock Option grants will be determined by the Committee.
(2) EXERCISE PRICE AND EXERCISE PERIOD
----------------------------------
The exercise price for Options will equal 100% of the Fair Market Value of
the Company's common stock as of the date of grant. Options will have a
maximum exercise period ("Term") of ten (10) years from the date of grant.
(3) VESTING PROVISIONS
------------------
Options will vest (become available for exercise) nine years and nine
months from their date of grant.
However, if certain conditions are met, Options will become eligible for
accelerated or early vesting three years from their date of grant. Such
early vesting will occur provided that the Company ROTC for the Company's
most recently completed fiscal year equals or exceeds the ROTC of the
median company among the Peer Group for that year (e.g., the performance
test for accelerated vesting for Options granted in 1995 will be based on
ROTC for the 1998 fiscal year).
If the Company meets the performance test described above, all prior non-
vested Options eligible for early vesting will become available for
exercise as soon as possible following certification of the Company's
performance and the performance of the median company among the Peer Group
by the Committee.
If the Company fails to meet the performance test described above, all
prior non-vested Options eligible for early vesting will be subject to a
similar performance test following the end of the next fiscal year. The
test for early vesting of Options will continue to "roll" in the manner
described
6
<PAGE>
above until the Company passes the performance test or nine years and nine
months have elapsed from the date of grant.
(4) OTHER PROVISIONS
----------------
All Options granted as contemplated by the Plan will be granted under the
1990 Plan. Each Option granted under the 1990 Plan will be evidenced by an
Option Agreement specifying the terms and conditions of the Option. In the
event of any inconsistency between the Plan and an Option Agreement, the
terms and conditions of the Option Agreement shall control.
C. DEFERRED CASH INCENTIVE AWARDS
------------------------------
In addition to the opportunity for annual Option grants described in Section
IV.B. above, each Participant will be provided with the opportunity to earn a
deferred cash incentive Award after the end of a three-year Performance Cycle
equal to the Target Award plus the Success Factor Award.
(1) PERFORMANCE CYCLE
-----------------
The initial Performance Cycle will cover the period beginning with the
Company's 1995 fiscal year and ending with the Company's 1997 fiscal year.
Subsequent three-year Performance Cycles will begin every two years,
starting with the Company's 1997 fiscal year.
(2) RANGE OF TARGET AND SUCCESS FACTOR AWARD OPPORTUNITIES
------------------------------------------------------
The deferred cash incentive Target Award opportunity for each Participant
during each Performance Cycle ranges from 30% to 80% of Base Salary
depending upon position classification as illustrated in Table 1 below.
The deferred cash incentive Success Factor Award opportunity for each
Participant during each Performance cycle also ranges from 30% to 80%.
Classification of Participants into the categories listed in Table 1 will
be recommended by the Chief Executive Officer of the Company and approved
by the Compensation Committee.
7
<PAGE>
TABLE 1
DEFERRED CASH INCENTIVE AWARD RANGE
BY POSITION CLASSIFICATION
<TABLE>
<CAPTION>
TOTAL AWARD SUCCESS FACTOR
RANGE AS % TARGET AWARD AS AWARD AS % OF
CATEGORY POSITION CLASSIFICATION OF BASE SALARY % OF BASE SALARY BASE SALARY
-------- ----------------------- -------------- ----------------- --------------
<C> <S> <C> <C> <C>
1 Senior Executive Officers 0% - 160% 80% 80%
1 Corporate & Staff Officers 0% - 60% 30% 30%
2 Division VP/GM's and Officers 0% - 90% 30% - 45% 30% - 45%
2 Group and Sub-Group VP's 0% - 120% 60% 60%
</TABLE>
The actual Total Award earned within the above range will depend upon the
level of achievement versus specific Performance Objectives established
under the Plan for each Performance Cycle.
(3) PERFORMANCE MEASUREMENT AND CALCULATION OF TARGET AWARDS
--------------------------------------------------------
(A) CALCULATION FORMULA
-------------------
Target Awards will be determined based upon the Company's, or in some
cases, Business Unit's achievement versus pre-established Target
Performance Objectives. The total Target Award will equal the sum of the
Awards for each Target Performance Objective. The Target Award for each
Target Performance Objective will equal the product of the Base Salary
times the Target Award as a percent of Base Salary times the Weighting
Factor (set forth in (b) and (c) below) times the Achievement Factor (set
forth in (d) below) for that Target Performance Objective.
The foregoing formula can be expressed as the following mathematical
equation:
Total Target Award = [Target Award (Base Salary x Target Award as % of Base
Salary) x Weighting Factor x Achievement Factor for first Target
Performance Objective] + [Target Award (Base Salary x Target Award as % of
Base Salary) x Weighting Factor x Achievement Factor for second Target
Performance Objective] + [Target Award (Base Salary x Target Award as % of
Base Salary) x Weighting Factor x Achievement Factor for third Target
Performance Objective, if any] + [Target Award (Base Salary x Target Award
as % of Base Salary) x Weighting Factor x Achievement Factor for fourth
Target Performance Objective, if any].
(B) WEIGHTING FACTORS - CATEGORY 1
------------------------------
For Participants classified in Category 1, Target Awards will be determined
based upon the Company's achievement versus pre-established Company Target
Performance Objectives.
8
<PAGE>
For the initial Performance Cycle, the Company Target Performance
Objectives will be weighted as follows in determining the Target Award:
<TABLE>
<CAPTION>
PERFORMANCE OBJECTIVE WEIGHTING FACTOR
--------------------- -----------------
<S> <C>
Company ROTC 50%
EPS 50%
</TABLE>
In subsequent Performance Cycles, the Compensation Committee may select
different measures (including, without limitation, ROS, ROE, Net Income,
Net Sales, Cash Flow from Operations and Economic Value Added) and
weightings to determine such Target Awards.
(C) WEIGHTING FACTORS - CATEGORY 2
------------------------------
For Participants classified in Category 2, deferred cash incentive Target
Awards will be determined based upon the performance of the Participant's
Business Unit against pre-established Business Unit Target Performance
Objectives.
For the initial Performance Cycle, the Business Unit Target Performance
Objectives will have the following Weighting Factors:
<TABLE>
<CAPTION>
PERFORMANCE OBJECTIVE WEIGHTING FACTOR
--------------------- -----------------
<S> <C>
Business Unit ROTC 50%
Business Unit Net Income 50%
</TABLE>
In subsequent Performance Cycles, the Compensation Committee may select
different measures (including, without limitation, ROS, ROE, Net Income,
Net Sales, Cash Flow from Operations and Economic Value Added) and
weightings to determine such Target Awards.
(D) ACHIEVEMENT FACTOR
------------------
The Achievement Factor for each Target Performance Objective will be
between a threshold Achievement Factor of 70% (for achieving 80% of the
Target Performance Objective) and a maximum Achievement Factor of 100%
(for achieving the Target Performance Objective) as illustrated in the
table below. The Achievement Factors for performance between the threshold
and 100% Achievement Factors will be linearly interpolated.
9
<PAGE>
<TABLE>
<CAPTION>
% ACHIEVEMENT OF TARGET
PERFORMANCE OBJECTIVE ACHIEVEMENT FACTOR
----------------------- ------------------
<S> <C>
Less than 80% 0
80% 70%
85% 77.5%
90% 85.0%
95% 92.5%
100% 100%
</TABLE>
(E) MEASUREMENT PROCESS
-------------------
The measurement of Company and Business Unit Target Performance Objectives
will be based upon performance during the final year of the Cycle. For
subsequent Performance Cycles, performance measurement may be based upon
different criteria (e.g., average performance over the Cycle) at the
discretion of the Compensation Committee.
(4) PERFORMANCE MEASUREMENT AND CALCULATION OF SUCCESS FACTOR AWARDS
----------------------------------------------------------------
(A) CALCULATION FORMULA
-------------------
Participants in Category 2 are eligible for a Success Factor Award only if
the percentage of achievement of each of their Business Unit Target
Performance Objectives equals or exceeds 80% and only if the average of the
percentages of achievement of their Business Unit Target Performance
Objectives equals or exceeds 100%.
Success Factor Awards will be determined based on the Company's achievement
versus pre-established Success Factor Performance Objectives which exceed
the Target Performance Objectives. The total Success Factor Award will
equal the sum of the Success Factor Awards for each Success Factor
Performance Objective. The Success Factor Award for each Success Factor
Performance Objective will equal the product of the Base Salary times the
Success Factor Award as a percent of Base Salary times the Weighting Factor
(set forth in (b) below) times the Achievement Factor (set forth in (c)
below) for that Success Factor Performance Objective.
The foregoing formula can be expressed as the following mathematical
equation:
Total Success Factor Award = [Success Factor Award (Base Salary x Success
Factor Award as % of Base Salary) x Weighting Factor x Achievement Factor
for first Success Factor Performance Objective] + [Success Factor Award
(Base Salary x Success Factor Award as % of Base Salary) x
10
<PAGE>
Weighting Factor x Achievement Factor for second Success Factor Performance
Objective] + [Success Factor Award (Base Salary x Success Factor Award as %
of Base Salary) x Weighting Factor x Achievement Factor for third Success
Factor Performance Objective, if any] + [Success Factor Award (Base Salary
x Success Factor Award as % of Base Salary) x Weighting Factor x
Achievement Factor for fourth Success Factor Performance Objective, if
any].
(B) WEIGHTING FACTORS
-----------------
For Participants in both Category 1 and Category 2, Success Factor Awards
will be determined based upon the Company's achievement versus pre-
established Company ROTC and EPS Success Factor Performance Objectives
which exceed the Target Performance Objectives.
For the initial Performance Cycle, the Success Factor Performance
Objectives will be weighted as follows in determining the Success Factor
Award:
<TABLE>
<CAPTION>
PERFORMANCE OBJECTIVE WEIGHTING FACTOR
--------------------- ----------------
<S> <C>
Company ROTC 50%
EPS 50%
</TABLE>
In subsequent Performance Cycles, the Compensation Committee may select
different measures (including, without limitation, ROS, ROE, Net Income,
Net Sales, Cash Flow from Operations and Economic Value Added) and
weighting to determine such Success Factor Awards.
(C) ACHIEVEMENT FACTOR
------------------
At the beginning of each Performance Cycle, the Compensation Committee will
establish two levels of Success Factor Performance Objectives which are in
excess of the Target Performance Objectives.
If the Company's performance is between the Target Performance Objective
and the first level Success Factor Performance Objective, then the
Achievement Factor for that Success Factor Performance Objective will be
between 0% and 50%. The Achievement Factor for performance between the
Target Performance Objective and the first level Success Factor Performance
Objective will be linearly interpolated.
If the Company's performance is between the first level Success Factor
Performance Objective and the second level Success Factor Performance
Objective then the Achievement Factor for that Success Factor Performance
Objective will be between 50% and 100%. The Achievement Factor
11
<PAGE>
for performance between the first level Success Factor Performance
Objective and the second level Success Factor Performance Objective will be
linearly interpolated.
(D) MEASUREMENT PROCESS
-------------------
The measurement of Company Success Factor Performance Objectives will be
based upon performance during the final year of the Performance Cycle. For
subsequent Performance Cycles, performance measurement may be based upon
different criteria (e.g., average performance over the Cycle) at the
discretion of the Compensation Committee.
(5) DISCRETIONARY POOL PARTICIPATION
--------------------------------
A Discretionary Pool will be available for each Performance Cycle to
provide the opportunity for Participants (other than those Participants
whose Target Award is 80%) who have achieved exceptional performance to
earn more than the Target Award plus the Success Factor Award, or for
individuals who are not selected to be Participants in the Plan but who
have made significant contributions to the achievement of Performance
Objectives to earn cash payments. A "target" Discretionary Pool will be
determined by the Compensation Committee prior to the beginning of each
Performance Cycle. The actual Discretionary Pool made available will be
determined by the Committee at the end of the Performance Cycle and may
exceed or fall below the "target" Pool based upon the Committee's
assessment of (i) overall Company performance during the Cycle and (ii) the
performance of the individual Business Units.
The actual Discretionary Pool approved by the Compensation Committee will
be allocated among individuals recommended by the Chief Executive Officer
and approved by the Compensation Committee; provided, however, that
Participants whose Target Award is 80% will not be eligible for
participation in the Discretionary Pool. No payments will be made from the
Discretionary Pool unless at least one of the Company's EPS or ROTC
threshold Target Performance Objectives (i.e., 80% of the Target
Performance Objective) for the Performance Cycle has been met.
V. PEER GROUP PERFORMANCE MEASUREMENT
----------------------------------
In order to facilitate the Peer Group performance comparison needed to determine
the accelerated Option vesting, the Peer Group ROTC figures for the individual
years used to determine accelerated Option vesting will be based upon the twelve
months performance for each company in the Peer Group closest to the Company's
fiscal year end, based on the most recent publicly available financial
information for such company.
12
<PAGE>
VI. NEW PARTICIPANTS
----------------
New Participants may be added to the Plan at any time at the discretion of the
Compensation Committee. The timing and performance test for determining
accelerated vesting for the grant will be identical to the test and timing
associated with the regular Option grant made to other Participants for that
fiscal year. If an executive becomes a Participant, he or she will be eligible
to receive an Option grant at the time of the next regular Option grant.
For the deferred cash incentive portion of the Plan, the Award opportunity of a
new Participant will be prorated for each Performance Cycle based on the number
of months of participation in the Plan divided by 36. Notwithstanding the
above, an individual must participate in the Plan for at least 12 months during
any Performance Cycle to be eligible to receive a deferred cash incentive Award
for that Cycle.
VII. TERMINATION OF SERVICE
----------------------
A. STOCK OPTIONS
-------------
Options may be exercised following a Termination of Service in the manner and to
the extent provided for in the Option Agreement which governs the grant.
B. DEFERRED CASH INCENTIVE AWARDS
------------------------------
If a Participant terminates Service with the Company prior to the end of a
Performance Cycle due to voluntary termination or termination for Cause, the
Participant will not receive any deferred cash incentive Award for that
Performance Cycle.
Upon a Termination of Service during a Performance Cycle due to death or
Disability, a Participant's deferred cash incentive Award opportunity for that
Cycle will be prorated by dividing the number of full months of participation in
the Cycle by thirty-six (36).
If a Participant's Service is terminated involuntarily without Cause prior to
the completion of a Performance Cycle, the Participant will be entitled to
receive the following percentage of his or her earned deferred cash incentive
Award for the Cycle:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS BETWEEN % OF EARNED
X MONTHS FROM START OF CYCLE AWARD TO BE PAID
----------------------------- ----------------
<S> <C>
0 - 27 Months 0%
27 - 36 Months 33 1/3%
</TABLE>
13
<PAGE>
Upon a Termination of Service due to Retirement prior to the completion of a
Performance Cycle, the Participant will be entitled to receive the following
percentage of his or her earned deferred cash incentive Award for the Cycle:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS BETWEEN % OF EARNED
X MONTHS FROM START OF CYCLE AWARD TO BE PAID
----------------------------- ----------------
<S> <C>
0 - 3 Months 0%
3 - 12 Months 33 1/3%
12 - 15 Months 50%
15 - 24 Months 66 2/3%
24 - 27 Months Prorate to 100%
27 - 36 Months 100%
</TABLE>
VIII. PAYMENT OF EARNED DEFERRED CASH INCENTIVE
-----------------------------------------
Earned Awards under the deferred cash incentive portion of the Plan (net of any
applicable taxes) will be paid in cash as soon as possible following the
determination of Company and Business Unit performance for the Performance
Cycle. Upon the death of a Participant, the Compensation Committee may elect to
provide early payment in order to facilitate the settlement of the Participant's
estate.
IX. TRANSFERS
---------
Upon a Transfer prior to the completion of a Performance Cycle, the Participant
will earn his or her deferred cash incentive Award for the Cycle based on his or
her old and/or new positions, as follows:
<TABLE>
<CAPTION>
IF TRANSFER OCCURS BETWEEN
X MONTHS FROM START OF CYCLE AWARD EARNED IN OLD/NEW POSITION
- ---------------------------- ----------------------------------------
<S> <C>
0 - 6 Months 100% in new position
6 - 30 Months Prorated between old and new positions
30 - 36 Months 100% in old position
</TABLE>
X. PLAN ADMINISTRATION
-------------------
A. GENERAL ADMINISTRATION
----------------------
The Compensation Committee will administer the Plan, and will interpret the
provisions of the Plan. The interpretation and application of these terms by
the Compensation Committee shall be binding and conclusive. The Committee's
authority will include, but is not limited to:
. The selection of Participants;
14
<PAGE>
. The establishment and modification of performance measures,
Performance Objectives and weighting of objectives;
. The determination of performance results and Awards;
. Exceptions to the provisions of the Plan made in good faith and for
the benefit of the Company.
B. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
------------------------------------
If an event occurs during a Performance Cycle that materially influences Company
or Business Unit financial performance and is deemed by the Compensation
Committee to be extraordinary and out of the control of management, the
Committee may, in its sole discretion, increase or decrease the Performance
Objectives used to determine deferred cash incentive Awards or Option vesting.
Events warranting such action may include, but are not limited to, changes in
accounting, tax or regulatory rulings and significant changes in economic
conditions resulting in "windfall" gains or losses.
C. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
------------------------------------------------
The Committee may amend, suspend or terminate the Plan, whole or in part, at any
time, if, in the sole judgment of the Committee, such action is in the best
interests of the Company. Notwithstanding the above, any such amendment,
suspension or termination must be prospective in that it may not deprive
Participants of that which they otherwise would have received under the Plan for
the current Performance Cycle had the Plan not been amended, suspended or
terminated.
D. DESIGNATION OF BENEFICIARIES
----------------------------
Each Participant shall have the right at any time to designate any person or
persons as beneficiary(ies) to whom any cash payments earned under the Plan
shall be made in the event of the Participant's death prior to the distribution
of all benefits due the Participant under the Plan. Each beneficiary
designation shall be effective only when filed in writing with the Company
during the Participant's lifetime, on a Beneficiary Designation Form approved by
the Compensation Committee.
The filing of a new Beneficiary Designation Form will cancel all designations
previously filed. Any finalized divorce or marriage (other than a common law
marriage) of a Participant subsequent to the date of filing of a Beneficiary
Designation Form shall revoke such designation unless:
. In the case of divorce, the previous spouse was not designated as
beneficiary, and
15
<PAGE>
. In the case of marriage, the Participant's new spouse had previously
been designated as beneficiary.
The spouse of a married Participant shall join in any designation of a
beneficiary other than the spouse on a form prescribed by the Compensation
Committee.
If a Participant fails to designate a beneficiary as provided for above, or if
the beneficiary designation is revoked by marriage, divorce or otherwise without
execution of a new designation, then the Compensation Committee shall direct the
distribution of Plan benefits to the Participant's estate.
XI. CHANGE OF CONTROL
-----------------
A. Subject to paragraphs (C) through (E) of this Section XI, upon a Change of
Control: (i) each Participant shall receive a cash payment equal to his or her
Target Award under the deferred cash incentive portion of the Plan for each
Performance Cycle that begins on or before the date of the Change of Control and
ends after the date of the Change of Control, based on the Participant's annual
base salary rate in effect at the time of the Change of Control; and (ii)
treatment of Options upon a Change of Control will be governed by the provisions
of the relevant Option Agreement.
B. Following a Change of Control, each Participant shall continue to be
entitled to receive payments under the deferred cash incentive portion of the
Plan for each Performance Cycle that begins on or before the date of the Change
of Control and ends after the date of the Change of Control, as earned in
accordance with the terms of the Plan, to the extent such Participant has not
already received such payment for that Performance Cycle pursuant to paragraph
(A) of this Section XI.
C. Notwithstanding the foregoing, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the terms
of the Plan or otherwise) (a "Payment") would be nondeductible by the Company
for Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of amounts payable or distributable to or for the
benefit of the Participant pursuant to the Plan (such payments or distributions
pursuant to the Plan are hereinafter referred to as "Plan Payments") shall be
reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall
be an amount expressed in present value that maximizes the aggregate present
value of Plan Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this Section XI,
present value shall be determined in accordance with Section 280(d)(4) of the
Code.
D. All determinations required to be made under paragraphs (C) through (E) of
this Section XI shall be made by Coopers & Lybrand (the "Accounting Firm"),
which shall provide detailed supporting calculations to both the Company and the
Participant within 30 business days of the date of the Change of
16
<PAGE>
Control or such earlier time as is requested by the Company. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Participant. The Participant shall determine which and how much of the Plan
Payments (or, at the election of the Participant, other Payments) shall be
eliminated or reduced consistent with the requirements of paragraph (C) of this
Section XI, provided that, if the Participant does not make such determination
within ten business days of the receipt of the calculations made by the
Accounting Firm, the Company shall elect which and how much of the Plan Payments
shall be eliminated or reduced consistent with the requirements of paragraph (C)
of this Section XI and shall notify the Participant promptly of such election.
Within five business days thereafter, the Company shall pay to or distribute to
or for the benefit of the Participant such amounts as are then due to the
Participant under the Plan.
E. As a result of the uncertainty in the application of Section 280G of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Plan Payments will have been made by the Company that should
not have been made ("Overpayment") or that additional Plan Payments that will
not have been made by the Company could have been made ("Underpayment"), in each
case, consistent with the calculations required to be made hereunder. In the
event that the Accounting Firm determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to the Participant,
which the Participant shall repay to the Company together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Participant to the
Company (or if paid by the Participant to the Company shall be returned to the
Participant) if and to the extent such payment would not reduce the amount which
is subject to taxation under Section 4999 of the Code. In the event that the
Accounting Firm determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Participant together with interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Code.
XII. PRIOR PLANS
-----------
The Company's Key Executive Long-Term Incentive Plan, effective as of January 1,
1991 and the Company's Amended and Restated Key Executive Long-Term Incentive
Plan effective as of January 3, 1993 (the "Prior Plans"), shall remain in effect
as to all Participants therein for the balance of the initial Performance Cycles
thereunder (1991 to 1993 and 1993 to 1995, respectively) and for Options granted
thereunder. Nothing contained in this Plan shall affect the calculation or
payment of benefits under the Prior Plans as to such initial Performance Cycles,
or the vesting of Options granted under the Prior Plans.
17
<PAGE>
XIII. MISCELLANEOUS PROVISIONS
------------------------
A. UNSECURED STATUS OF CLAIM
-------------------------
Participants and their beneficiaries, heirs, successors and assigns shall have
no legal or equitable rights, interests or claims in any specific property or
assets of the Company. No assets of the Company shall be held under any trust
for the benefit of Participants, their beneficiaries, heirs, successors or
assigns, or held in any way as collateral security for the fulfillment of the
Company's obligations under the Plan.
Any and all of the Company's assets shall be, and shall remain, the general
unpledged and unrestricted assets of the Company. The Company's obligations
under the Plan shall be merely that of an unfunded and unsecured promise of the
Company to pay benefits in the future.
B. EMPLOYMENT NOT GUARANTEED
-------------------------
Nothing contained in the Plan nor any action taken in the administration of the
Plan shall be construed as a contract of employment or as giving a Participant
any right to be retained in the Service of the Company.
C. RIGHT OF OFFSET
---------------
If a Participant becomes entitled to a payment under the deferred cash incentive
portion of the Plan, and if at such time the Participant has outstanding any
debt, obligation or other liability representing any amount owing to the
Company, then the Company may offset such amount against the amount of the
payment otherwise due the Participant under the Plan.
D. NONASSIGNABILITY
----------------
No person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, hypothecate or convey, in advance of
actual receipt, the benefits, if any, payable under the Plan, or any part
thereof, or any interest therein, which are, and all rights to which are,
expressly declared to be unassignable and non-transferable. No portion of the
amounts payable shall, prior to actual payment, be subject to seizure,
attachment, lien or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of the Participant's or any
other person's bankruptcy or insolvency. Any such transfer or attempted
transfer in violation of the preceding provisions shall be null and void.
18
<PAGE>
E. VALIDITY
--------
In the event that any provision of the Plan is held to be invalid, void or
unenforceable, the same shall not effect, in any respect whatsoever, the
validity of any other provision of the Plan.
F. WITHHOLDING-TAX
---------------
The Company shall withhold from all benefits due under the Plan an amount
sufficient to satisfy any federal, state and local tax withholding requirements.
G. APPLICABLE LAW
--------------
The Plan shall be governed in accordance with the laws of the State of Delaware.
H. INUREMENT OF RIGHTS AND OBLIGATIONS
-----------------------------------
The rights and obligations under the Plan shall inure to the benefit of, and
shall be binding upon the Company, its successors and assigns, and the
Participants and their beneficiaries.
19
<PAGE>
EXHIBIT 10.31.1
AVERY DENNISON CORPORATION
AMENDED AND RESTATED
EXECUTIVE VARIABLE DEFERRED
RETIREMENT PLAN
===============================================================================
December 2, 1995
<PAGE>
AVERY DENNISON CORPORATION
EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1: PURPOSE 1
ARTICLE 2: DEFINITIONS AND CERTAIN PROVISIONS 1
ARTICLE 3: ADMINISTRATION OF THE PLAN 6
ARTICLE 4: PARTICIPATION 7
4.1 PARTICIPATION ELECTION
4.2 ANNUAL DEFERRAL
4.3 DURATION OF ANNUAL DEFERRAL
4.4 MAXIMUM DEFERRAL
4.5 DEFERRAL ACCOUNTS
4.6 INTEREST ON DEFERRAL ACCOUNTS
4.7 VALUATION OF ACCOUNTS
4.8 STATEMENT OF ACCOUNTS
ARTICLE 5: BENEFITS 9
5.1 RETIREMENT BENEFIT
5.2 DISABILITY
5.3 TERMINATION BENEFIT
5.4 SURVIVOR BENEFITS
5.5 EMERGENCY BENEFIT
5.6 SMALL BENEFIT
5.7 WITHHOLDING; UNEMPLOYMENT TAXES
5.8 MAXIMUM PAYOUT PERIOD
5.9 DISCOUNTED CASH OUT ELECTION
ARTICLE 6: BENEFICIARY DESIGNATION 16
ARTICLE 7: AMENDMENT OR TERMINATION OF PLAN 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 8: MISCELLANEOUS 17
8.1 EFFECTIVE DATE
8.2 UNSECURED GENERAL CREDITOR
8.3 WAIVER OF STAY, EXTENSION AND USURY LAWS
8.4 OBLIGATIONS TO EMPLOYER
8.5 NONASSIGNABILITY
8.6 EMPLOYMENT NOT GUARANTEED
8.7 PROTECTIVE PROVISIONS
8.8 GENDER, SINGULAR & PLURAL
8.9 CAPTIONS
8.10 VALIDITY
8.11 NOTICE
8.12 APPLICABLE LAW
</TABLE>
<PAGE>
AVERY DENNISON CORPORATION
EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN
===============================================================================
ARTICLE I
PURPOSE
The purpose of this Executive Variable Deferred Retirement Plan (the
"Plan") is to provide a means whereby Avery Dennison Corporation, a Delaware
corporation (the "Company"), may afford an opportunity for financial planning to
a select group of management and highly compensated employees of the Company and
its subsidiaries who have rendered and continue to render valuable services to
the Company or its subsidiaries which constitute an important contribution
towards the Company's continued growth and success, by providing for additional
future retirement payments so that these employees may be retained and their
productive efforts encouraged.
ARTICLE 2
DEFINITIONS AND CERTAIN PROVISIONS
Annual Base Salary. "Annual Base Salary" means with respect to a
------------------
Participant for any Plan Year such Participant's fixed, basic, straight time,
and regularly recurring wages and salary, any payments for overtime hours,
vacation pay, compensation paid in lieu of vacation, and holiday pay; but
excluding all Bonus, long-term incentive cash awards, other discretionary
bonuses, severance allowances, forms of incentive compensation, Savings Plan or
other qualified plan contributions made by the Company, Retirement Plan or other
qualified plan benefits, retainers, insurance premiums or benefits,
reimbursements, and all other payments.
Annual Deferral. "Annual Deferral" means the amount of Annual Base
---------------
Salary and Bonus which the Participant elects to defer for a Plan Year.
1
<PAGE>
Authorization Form. "Authorization Form" means the authorization form
------------------
which an Eligible Employee files with the Company to participate in the Plan for
a given Plan Year.
Beneficiary. "Beneficiary" means the person or persons or entity
-----------
designated as such in accordance with Article 6.
Benefit Unit. "Benefit Unit" means an annual unit (and related Annual
------------
Deferral) enrolled in by a Participant pursuant to Article 4 providing the
benefits described in Article 5. Each Benefit Unit will be covered by a
separate annual Authorization Form.
Bonus. "Bonus" means with respect to a Participant for any Plan Year
-----
the bonus paid to the Participant in such Plan Year under the Bonus Plan on
account of services rendered to the Company during the immediately preceding
Plan Year. "1995 Bonus" means a Participant's bonus earned in 1995 but paid in
1996. "1996 Bonus" means a Participant's bonus earned in 1996 but paid in 1997.
Bonus Plan. "Bonus Plan" means all annual bonus plans sponsored by the
----------
Company from time to time.
Committee. "Committee" means the deferred compensation plan committee
---------
appointed to administer the Plan pursuant to Article 3.
Declared Rate. "Declared Rate" means, with respect to any of the
-------------
investment funds listed below that are maintained by Pacific Mutual Life
Insurance Company for its variable life insurance policy that is known as
"Select Exec." and any month of a Plan Year, the rate of return equal to that
which would have been generated had a Participant's Deferral Account balance
been invested in such investment fund for such month, determined as follows. At
the end of each month of a Plan Year, Pacific Mutual Life Insurance Company will
report to the Company the actual gross performance of each investment fund. The
rate of return determined based on such gross performance for an
2
<PAGE>
investment fund, less an administrative charge of 0.017%, will be the Declared
Rate for the investment fund for the month.
Declared Rate 1. This rate is based on the performance of the
---------------
Money Market Fund.
Declared Rate 2. This rate is based on the performance of the
---------------
Managed Bond Fund.
Declared Rate 3. This rate is based on the performance of the
---------------
Growth LT Fund.
Declared Rate 4. This rate is based on the performance of the
---------------
Equity Index Fund.
Declared Rate 5. This rate is based on the performance of the
---------------
International Fund.
Deferrals will not necessarily be invested by the Company in the above
investment funds, even though the actual performance of the investment fund will
be used to measure the Declared Rate.
Deferral Account. "Deferral Account" means the notional account
----------------
established for record keeping purposes for a Participant pursuant to Section
4.5.
Direct Cash Compensation. "Direct Cash Compensation" means for any
------------------------
date within a Plan Year the sum of (a) the Participant's Annual Base Salary as
of the first day of the Plan Year plus (b) the Participant's Bonus paid in such
Plan Year, but before reduction pursuant to this Plan.
Disability. "Disability" means any inability on the part of an
----------
Employee, commencing before age 64 1/2, as determined by the Committee, in its
complete and sole discretion, to perform the substantial and material duties of
3
<PAGE>
his or her job due to injury or sickness lasting for more than one hundred
eighty (180) consecutive days. Disability for purposes of this Plan shall be
deemed to commence as of the first day following the end of such one hundred
eighty (180) day period. If an Employee makes application for disability
benefits under the Social Security Act, as now in effect or as hereafter
amended, and qualifies for such benefits, the Employee shall be presumed to
suffer from a Disability under this Plan, subject to the above timing
requirements. The Committee may require the Employee to submit to an
examination by a physician or medical clinic selected by the Committee. On the
basis of such medical evidence and in the absence of qualification for
disability benefits under the Social Security Act, the determination of the
Committee as to whether or not a condition of Disability exists shall be
conclusive. To constitute Disability, the same must commence after the Employee
has become a Participant in the Plan.
Discounted Cash Out Election. "Discounted Cash Out Election" means the
----------------------------
written election by a Participant or Beneficiary in a form acceptable to the
Committee to receive all or part of the Participant's Deferral Account pursuant
to the terms and conditions of Section 5.9.
Early Retirement. "Early Retirement" means with respect to any Benefit
----------------
Unit the termination of a Participant's employment with Employer for reasons
other than death (a) between ages 55 and 65, and (b) after fifteen (15) years of
employment with Employer.
Eligible Employee. "Eligible Employee" means an Employee who is
-----------------
eligible to participate in the Plan based on criteria established by the
Committee.
Emergency Benefit. "Emergency Benefit" means the benefit that is
-----------------
payable pursuant to Section 5.5 of the Plan.
Employee. "Employee" means any person employed by the Employer on a
--------
regular full-time salaried basis, including officers of the Employer.
4
<PAGE>
Employer. "Employer" means the Company and any of its wholly-owned
--------
subsidiaries.
Enrollment Period. "Enrollment Period" means the periods designated
-----------------
from year to year by the Committee for open enrollments. The initial Enrollment
Period will be between November 13-30, 1995. Authorization Forms shall be
submitted to the Committee prior to the beginning of any Plan Year. For
subsequent Enrollment Periods, the Eligible Employee must submit an
Authorization Form during the Enrollment Period designated by the Committee.
Normal Retirement. "Normal Retirement" means the termination of a
-----------------
Participant's employment with Employer for reasons other than death on or after
the Participant attains age 65.
Participant. "Participant" means an Eligible Employee who has filed a
-----------
completed and executed Authorization Form with the Committee and is
participating in the Plan in accordance with the provisions of Article 4.
Plan Year. "Plan Year" means the fiscal year beginning December 1 and
---------
ending November 30.
Rabbi Trust. "Rabbi Trust" means the trust described in Section 8.1.
-----------
Retirement Age. "Retirement Age" means the age attained by a
--------------
Participant on the birthday that precedes the date when Participant ceases to be
an Employee at age 55 or later.
Retirement Benefit. "Retirement Benefit" means benefits payable to a
------------------
Participant when Participant has satisfied all of the requirements for Normal or
Early Retirement (as defined in Article 2).
5
<PAGE>
Retirement Plan. "Retirement Plan" means the Retirement Plan for the
---------------
Employees of Avery Dennison Corporation, as amended from time to time.
Savings Plan. "Savings Plan" means the Avery Dennison Corporation
------------
Employee Savings Plan, as amended from time to time.
Survivor Benefit. "Survivor Benefit" means those Plan benefits that
----------------
become payable upon the death of a Participant pursuant to the provisions of
Section 5.4.
Termination Benefit. "Termination Benefit" means the lump sum amount
-------------------
payable to a Participant who ceases to be an Employee pursuant to the provisions
of Section 5.3.
ARTICLE 3
ADMINISTRATION OF THE PLAN
A deferred compensation plan committee ("Committee") consisting of
three or more members shall be appointed by the Company's Chairman and Chief
Executive Officer to administer the Plan and establish, adopt, or revise such
rules and regulations as it may deem necessary or advisable for the
administration of the Plan and to interpret the provisions of the Plan, with any
such interpretations to be conclusive. All decisions of the committee shall be
by vote of at least a majority of its members and shall be final and binding.
Members of the Committee shall be eligible to participate in the Plan while
serving as members of the Committee, but a member of the Committee shall not
vote or act upon any matter which relates solely to such member's interest in
the Plan as a Participant. The initial members of the Committee are the
Chairman and Chief Executive Officer, the Chief Financial Officer, the Vice
President, Human Resources, the Vice President, General Counsel and Secretary,
the Vice President, Treasurer, the Vice President, Compensation & Benefits, the
Vice President, Treasury Operations, the Director, Corporate Accounting and
Financial Reporting.
6
<PAGE>
ARTICLE 4
PARTICIPATION
4.1 Participation Election. An Eligible Employee shall become a
----------------------
Participant in the Plan on the first day of the Plan Year coincident with or
next following the date the employee becomes an Eligible Employee, provided such
Employee has filed an Authorization Form with the Committee. To be effective,
the Eligible Employee must submit the Authorization Form during the Enrollment
Period.
4.2 Annual Deferral. In the Authorization Form, and subject to the
---------------
restrictions set forth herein, the Eligible Employee shall designate the amount
of Annual Base Salary and Bonus to be deferred for the next Plan Year.
4.3 Sources of Annual Deferral. Except for the initial Plan Year,
--------------------------
Annual Deferrals may be made from Bonus earned during the following calendar
year and for Annual Base Salary earned from the next December 1 of the covered
Plan Year through the next November 30. For the initial Plan Year, Annual
Deferrals may be made from: (i) the Participant's 1995 Bonus; (ii) the
Participant's 1996 Bonus; and the Participant's Annual Base Salary between
December 1, 1995 and November 30, 1996.
4.4 Maximum Deferral. The maximum amount of Direct Cash Compensation
----------------
that may be deferred shall be 10% of an Eligible Employee's Annual Base Salary
and 10% of an Eligible Employee's Bonus without regard to amounts contributed to
the Savings Plan, provided that the Committee may permit greater Annual
Deferrals.
4.5 Deferral Accounts. Solely for record keeping purposes, the Company
-----------------
shall maintain a Deferral Account for each Participant for all Benefit Units
offered to the Participants during the eight-year period commencing December 1,
1995. The amount by which a Participant's Direct Cash Compensation is reduced
pursuant to this Article IV shall be credited by the Employer to the
Participant's Deferral Account no later than the first day of the
7
<PAGE>
month following the month in which such Direct Cash Compensation would otherwise
have been paid. The Deferral Account shall be debited by the amount of any
payments made by the Employer to the Participant or the Beneficiary pursuant to
this Plan.
4.6 Interest on Deferral Accounts. A Participant may elect to credit
-----------------------------
the deferrals to any combination of Declared Rates in 25% increments, as long as
the total equals 100% of the deferrals. The Participant's Deferral Account will
be credited with a rate of return (positive or negative) based on the Declared
Rate(s) which he elects. The rate of return (positive or negative) will be
credited monthly to Deferral Accounts. The rate to be credited to a
Participant's Deferral Account will be calculated each month as the weighted
average of the Declared Rate(s) elected by the Participant for that Deferral
Account, with the weights being based on the Declared Rate(s) election for that
Deferral Account in effect at the beginning of the month.
A Participant may change his Declared Rate(s) election twice a year
effective as of the following June 1 and December 1 of each year by filing a
written notice with the Committee at least 30 days in advance. Deferral Account
balances will not necessarily be invested in these investment funds by the
Company, even though the actual performance of the investment fund that is
chosen to measure the Declared Rate will determine the rate of return (positive
or negative) on the Participant's Deferral Account.
4.7 Valuation of Accounts. The value of a Deferral Account as of any
---------------------
date shall equal the amounts theretofore credited to such account, plus the
interest deemed to be earned on such account in accordance with this Article IV
through the day preceding such date, less the amounts theretofore debited to
such account.
4.8 Statement of Accounts. The Committee shall submit to each
---------------------
Participant, within one hundred twenty (120) days after the close of each Plan
Year, a statement in such form as the Committee deems desirable setting forth
the balance standing to the credit of each Participant in his Deferral Account.
8
<PAGE>
Each statement of account shall show the Participant's deferrals and the
interest credited to the Participant's Deferral Account.
ARTICLE 5
BENEFITS
5.1 Retirement Benefit. A Participant is eligible for a Retirement
------------------
Benefit under this Plan when he has satisfied all of the requirements for Normal
Retirement or Early Retirement. The Retirement Benefit will be based on the
total value of the Deferral Account.
The Retirement Benefit will be paid beginning on the date and in the
manner which the Participant elects no earlier than thirteen months prior to
retirement. A Participant may elect to receive his Retirement Benefit at
retirement in either a lump sum or installments over a specified number of years
or a combination of a lump sum payment and installment payments; provided,
however, that the maximum payout period for Retirement Benefits shall be subject
to Section 5.8. In the event a payout election period exceeds the maximum period
permitted by Section 5.8, the elected payout period shall be reduced to the
maximum period permitted by Section 5.8. All installment payments will be
calculated on an annual basis but paid in such intervals as may be determined by
the Committee, provided that such intervals shall not be less frequent than
quarterly.
If a Participant elects to receive his Retirement Benefit in
installment payments, the payments will be made in such intervals as may be
determined by the Committee, provided that such intervals shall not be less
frequent than quarterly, based on the Deferral Account balance at the beginning
of the payment period. The payments will be redetermined annually by dividing
the Participant's current Deferral Account balance at the beginning of the year
by the number of remaining years in the payment period based on the
Participant's retirement payment election. The rate of return (positive or
negative) during any payment year will be credited during the year on the unpaid
Deferral Account balance at the applicable Declared Rate(s). A Participant may
continue to
9
<PAGE>
change his Declared Rate(s) election twice a year, effective as of the following
June 1 or December 1 of each year by filing a written notice with the Committee
at least 30 days in advance, as long as he has a remaining Deferral Account
balance.
5.2 Disability. If a Participant suffers a Disability, Participant
----------
deferrals that otherwise would have been credited to the Participant's Deferral
Accounts will cease during such Disability. The Participant's Deferral Accounts
will continue to earn interest at the Declared Rate(s) which he has chosen. The
Participant's Deferral Account will be distributed as a Retirement Benefit,
Termination Benefit or Survivor Benefit, whichever is applicable, beginning on
the date and in the form which the Participant elected in his Authorization
Form. If a Participant recovers from a Disability and returns to employment with
the Employer during the Benefit Deferral Period, the Participant shall resume
making deferrals pursuant to his Authorization Form.
5.3 Termination Benefit.
-------------------
(a) Certain Terminations of Employment. If a Participant (i)
----------------------------------
ceases to be an Employee for any reason other than death, Disability or
Normal or Early Retirement, or (ii) fails to return to the status of an
Employee within sixty (60) days following recovery from a Disability prior
to Normal or Early Retirement, the Employer shall pay to the Participant in
one lump sum an amount (the "Termination Benefit") equal to the value of
the Deferral Account for such Benefit Unit. In computing the Termination
Benefit, the value of the Deferral Account will be based on interest at the
applicable Declared Rate. The Participant shall be entitled to no further
benefits under this Plan for such Benefit Units.
(b) Termination of a Benefit Unit. With the written consent of
-----------------------------
the Committee, a Participant may terminate an Authorization Form by filing
with the Committee a written request to so terminate the Authorization
Form. Upon termination of an Authorization Form, no further reductions
shall be made in the Participant's Direct Cash Compensation
10
<PAGE>
pursuant to the Authorization Form, and the Participant shall immediately
cease to be eligible for any benefits with respect to such Authorization
Form, other than the Termination Benefit. No other benefit shall be payable
to either the Participant or any Beneficiary of such Participant with
respect to the terminated Authorization Form. In its sole discretion, the
Committee may pay the Termination Benefit with respect to a terminated
Authorization From on a date earlier than a Participant's termination of
employment with the Employer, with such Termination Benefit to be
calculated as if the Participant had terminated employment with the
Employer on the date of such payment.
5.4 Survivor Benefits.
-----------------
(a) Pre-Retirement. If a Participant dies and is not receiving
--------------
Retirement Benefit payments with respect to his Benefit Unit(s), a Survivor
Benefit will be paid to his Beneficiary in annual installments over five
years. The aggregate Survivor Benefit will be equal to the Deferral Account
balance for the Benefit Units. The annual Survivor Benefit payments shall
be redetermined each year based upon the value of the Deferral Account at
that time. However, if the value of the Deferral Account is less than or
equal to $50,000 for a Beneficiary, the Company, will pay said amount in a
lump sum.
(b) Post-Retirement. If a Participant dies and is not receiving
---------------
Retirement Benefit payments with respect to his Benefit Unit(s), a Survivor
Benefit will be paid to his Beneficiary in annual installments over five
years. The aggregate Survivor Benefit will be equal to the Deferral Account
balance for the Benefit Units. The annual Survivor Benefit payments shall
be redetermined each year based upon the value of the Deferral Account at
that time. However, if the value of the Deferral Account is less than or
equal to $50,000 for a Beneficiary, the Company, will pay said amount in a
lump sum.
5.5 Emergency Benefit. In the event that the Committee, upon written
-----------------
petition of the Participant or Beneficiary, determines, in its sole discretion,
that the Participant or Beneficiary has suffered an unforeseeable financial
11
<PAGE>
emergency, the Employer shall pay to the Participant or Beneficiary, as soon as
practicable following such determination, an amount necessary to meet the
emergency not in excess of the Termination Benefit to which the Participant is
entitled hereunder if said Participant had a termination of service on the date
of such determination (the "Emergency Benefit"). For purposes of this Plan, an
unforeseeable financial emergency is an unexpected need for cash arising from an
illness, casualty loss, sudden financial reversal, or other such unforeseeable
occurrence. An unforeseeable financial emergency for purposes of this Plan shall
exist for any Participant or Beneficiary who is deemed to be in constructive
receipt of income on account of deferred benefits payable under the terms of the
Plan, and in such event all deferred benefits giving rise to said constructive
receipt of income shall be paid to the Participant or Beneficiary in question.
Notwithstanding the foregoing, the final determination by the Internal Revenue
Service ("IRS") or court of competent jurisdiction, all time for appeal having
lapsed, that the Employer is not the owner of the assets of the Rabbi Trust,
with the result that the income of the Rabbi Trust is not treated as income of
the Company pursuant to Sections 671 through 679 of the Code, or the final
determination by (i) the IRS, (ii) a court of competent jurisdiction, all time
for appeal having lapsed, or (iii) counsel to the Company that a federal tax is
payable by the Participant or Beneficiary with respect to assets of the Rabbi
Trust or the Participant's or Beneficiary's Deferral Accounts prior to the
distribution of those assets or Deferral Accounts to the Participant or
Beneficiary shall in any event constitute an unforeseeable financial emergency
entitling such Participant or Beneficiary to an Emergency Benefit provided for
in this Section. Cash needs arising from foreseeable events such as the purchase
of a home or education expenses for children shall not be considered to be the
result of an unforeseeable financial emergency. The amount of benefits otherwise
payable under the Plan shall thereafter be adjusted to reflect the reduction of
a Deferral Account due to the early payment of the Emergency Benefit.
5.6 Small Benefit. Notwithstanding anything herein to the contrary,
-------------
in the event the total amount owed to a Participant or a Beneficiary after the
Participant ceases to be an Employee is $50,000 or less, the Company, in its
12
<PAGE>
sole discretion, may elect to distribute any such amount in a single lump sum
payment.
5.7 Withholding; Unemployment Taxes. To the extent required by the
-------------------------------
law in effect at the time payments are made, the Employer shall withhold from
payments made hereunder the minimum taxes required to be withheld by the federal
or any state or local government. To the extent FICA or Medicare Tax is payable
on account of compensation deferred hereunder, such tax shall, to the extent
possible, be withheld from the Participant's Direct Cash Compensation that is
not deferred into this Plan.
5.8 Maximum Payout Period. Notwithstanding any Eligible Employee's
---------------------
election to the contrary, the maximum number of years over which benefits may be
paid from the Plan shall be limited as follows: (i) Retirement Age 55 receives
lump sum; (ii) Retirement Ages 56 and 57 may receive benefits in a lump sum or
for five years; (iii) Retirement Ages 58 and 59 may receive benefits in a lump
sum or for five or ten years; (iv) Retirement Ages 60 and 61 may receive
benefits in a lump sum or for five, ten, or fifteen years; and (v) Retirement
Ages 62 and above may receive benefits in a lump sum or for five, ten, fifteen
or twenty years.
5.9 Discounted Cash Out Election
----------------------------
(a) During the course of any Plan Year prior to the date on which a
Participant ceases employment with the Company, the Participant may make one
election to receive all or part of the Participant's Deferral Account in a
single lump-sum payment that shall be paid within fifteen (15) days after the
end of the month in which the Participant files a written election to receive
a discounted lump sum payment pursuant to this Section 5.9 (a). Interest on
the amount elected to be withdrawn shall cease to accrue at the end of the
month in which the Discounted Cash Out Election is made. The requirements for
a valid Discounted Cash Out Election and the manner of determining the amount
to be paid to a
13
<PAGE>
Participant who makes a pre-retirement Discounted Cash Out Election are
as follows:
(i) The Discounted Cash Out Election must be for an amount
of $200,000 or greater, unless a Participant has a Deferral Account
worth less than $200,000 at the time of the Discounted Cash Out
Election in which case the amount of the Discounted Cash Out Election
may be equal to 100% of the Deferral Account in question.
(ii) The amount available for the Discounted Cash Out
Election shall be determined by establishing the value of the
Participant's Deferral Account as if the Participant ceased employment
with the Company on the last day of the month during which the
Participant files a written Discounted Cash Out Election.
(iii) If a Participant elects to receive his entire
Deferral Account via a Discounted Cash Out Election, the Participant's
Deferral Account shall be deemed fully distributed to the Participant.
The amount, however, actually distributed to the Participant shall be
the amount of the Deferral Account less a penalty equal to six percent
(6%) of the amount otherwise distributable.
(iv) If a Participant elects to receive $200,000, or some
higher dollar amount of his Deferral Account, the amount elected shall
be deemed distributed to the Participant. The amount, however,
actually distributed to the Participant shall be the elected amount
less a penalty equal to six percent (6%) of the elected amount.
(b) During the course of any Plan Year or part which follows a
Participant's Early or Normal Retirement date, the Participant or the
Beneficiary may make up to two elections to receive all or part of the
Participant's Deferral Account in single lump sum payments that shall be
14
<PAGE>
paid within fifteen (15) days after the end of the month in which the
Participant or Beneficiary files a written election to receive a discounted
lump sum payment pursuant to this Section 5.9(b). Interest on the amount
elected to be withdrawn from such Deferral Account shall cease to accrue at
the end of the month in which the Discounted Cash Out Election is filed.
The requirements for each valid Discounted Cash Out Election and the manner
of determining the amount to be paid to a Participant or Beneficiary who
makes a post-retirement Discounted Cash Out Election are as follows:
(i) The Discounted Cash Out Election must be for an amount
of $200,000 or greater, unless a Participant or Beneficiary has a
Deferral Account worth less than $200,000 at the time of the
Discounted Cash Out Election in which case the amount of the
Discounted Cash Out Election may be equal to 100% of the Deferral
Account in question.
(ii) If a Participant or Beneficiary elects to receive his
entire Deferral Account via a Discounted Cash Out Election, the
Participant's or Beneficiary's Deferral Account shall be deemed fully
distributed to the Participant or Beneficiary. The amount, however,
actually distributed to the electing Participant or Beneficiary shall
be the amount of the Deferral Account less a penalty equal to six
percent (6%) of the amount otherwise distributable.
(iii) If a Participant or Beneficiary elects to receive
$200,000 or some higher dollar amount of his Deferral Account, the
amount elected shall be deemed fully distributed to the Participant or
Beneficiary. The amount, however, actually distributed to the
Participant or Beneficiary shall be the elected amount less a penalty
equal to six percent (6%) of the elected amount.
15
<PAGE>
(iv) If a Participant or Beneficiary makes a Discounted Cash
Out Election(s) or receives payment(s) of an Emergency Benefit and a
portion of a Deferral Account remains unpaid, future monthly benefit
payments shall be reduced to reflect the withdrawn part of the
Deferral Account and there shall be no reduction in the previously
scheduled number of monthly benefit payments.
ARTICLE 6
BENEFICIARY DESIGNATION
Each Participant shall have the right, at any time, to designate any
person or persons as Beneficiary or Beneficiaries to whom payment under this
Plan shall be made in the event of Participant's death prior to complete
distribution to Participant of the benefits due under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with the Committee
during the Participant's lifetime on a form prescribed by the Committee.
The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. Any finalized divorce or marriage
(other than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary designation form shall revoke such designation unless in
the case of divorce the previous spouse or a trust naming as a beneficiary said
previous spouse was not designated as a Beneficiary and unless in the case of
marriage the Participant's new spouse or a trust naming as a beneficiary said
new spouse had previously been designated as a Beneficiary.
If a Participant fails to designate a Beneficiary as provided above,
or if his Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Committee shall direct the distribution of such
benefits to the Participant's estate.
16
<PAGE>
ARTICLE 7
AMENDMENT OR TERMINATION OF PLAN
The Chairman and Chief Executive Officer of the Company may amend the
Plan; provided, however, that (i) no such amendment shall be effective to
decrease the benefits accrued by any Participant or Beneficiary of a deceased
Participant (including, but not limited to, the rate of interest credited to the
Deferral Accounts) prior to the Plan Year commencing after the date of such
amendment; (ii) no such amendment shall decrease the Declared Rates established
herein; (iii) Section 5.1 may not be amended; (iv) the definition of Declared
Rate may not be amended; and (v) the other substantive provisions of the Plan
related to the calculation of benefits or the manner or timing of payments to be
made under the Plan shall not be amended so as to prejudice the rights of any
Participant or Beneficiary of a deceased Participant.
Notwithstanding any terms herein to the contrary, the Company may not
terminate the Plan. The Company shall not have any obligation to, but may, in
its discretion, allow additional deferrals into this Plan.
ARTICLE 8
MISCELLANEOUS
8.1 Effective Date. The effective date of this Plan is December 1,
--------------
1995.
8.2 Unsecured General Creditor. The Company intends to establish and
--------------------------
fund the Avery Dennison Corporation Executive Compensation Trust ("Rabbi
Trust"). The assets of the Rabbi Trust shall be subject to the claims of the
Company's creditors. To the extent any benefits provided under the Plan are
actually paid from the Rabbi Trust, the Employer shall have no further
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Employer. Participants
and their Beneficiaries, heirs, successors, and assigns shall have no legal or
equitable rights, interest, or claims in any specific property or assets of
17
<PAGE>
Employer, nor shall they be beneficiaries of, or have any rights, claims, or
interests in any life insurance policies, annuity contracts, or the proceeds
therefrom owned or which may be acquired by Employer ("Policies"). Apart from
the Rabbi Trust, such Policies or other assets of Employer shall not be held
under any trust for the benefit of Participants, their Beneficiaries, heirs,
successors, or assigns, or held in any way as collateral security for the
fulfilling of the obligations of Employer under this Plan. Any and all of the
Employer's assets and Policies shall be, and remain, the general, unpledged,
unrestricted assets of Employer. Employer's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of Employer to pay money in the
future.
8.3 Waiver of Stay, Extension and Usury Laws. The Company covenants
----------------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law that would prohibit
or forgive the Company from paying all or any portion of the benefits due
hereunder, wherever such laws may be enacted, now or at any time hereafter in
force, or which may affect the administration or performance of this Plan; and
(to the extent that it may lawfully do so) the Company hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the realization of any benefits to which the Participants
hereunder are entitled, but will suffer and permit the realization of all such
benefits as though no such law had been enacted.
8.4 Obligations To Employer. If a Participant becomes entitled to a
-----------------------
distribution of benefits under the Plan, and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount
owing to the Employer, then the Employer may offset such amount owed to it
against the amount of benefits otherwise distributable. Such determination shall
be made by the Committee.
8.5 Nonassignability. Neither a Participant nor any other person
----------------
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey in advance of actual
18
<PAGE>
receipt the amounts, if any, payable, hereunder, or any part thereof, or
interest therein which are, and all rights to which are, expressly declared to
be unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a Participant
or any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
8.6 Employment Not Guaranteed. Nothing contained in this Plan nor
-------------------------
any action taken hereunder shall be construed as a contract of employment or as
giving any Employee any right to be retained in the employ of the Company.
8.7 Protective Provisions. Each Participant shall cooperate with the
---------------------
Employer by furnishing any and all information requested by the Employer in
order to facilitate the payment of benefits hereunder, taking such physical
examinations as the Employer may deem necessary and taking such other relevant
action as may be requested by the Employer. If a Participant refuses so to
cooperate, the Employer shall have no further obligation to the Participant
under the Plan, other than payment to such Participant of the cumulative
reductions in Direct Cash compensation theretofore made pursuant to this Plan.
8.8 Gender, Singular & Plural. All pronouns and any variations
-------------------------
thereof shall be deemed to refer to the masculine, feminine, or neuter, as the
identity of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.
8.9 Captions. The captions of the articles, sections, and paragraphs
--------
of this Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
8.10 Validity. In the event any provision of this Plan is held
--------
invalid, void, or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
19
<PAGE>
8.11 Notice. Any notice or filing required or permitted to be given
------
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Employer, directed to the attention of the Vice President, General Counsel
and Secretary of the Employer. Such notice shall be deemed given as of the date
of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
8.10 Applicable Law. This Plan shall be governed and construed in
--------------
accordance with the laws of the State of California
20
<PAGE>
Exhibit 10.32
THE BENEFIT RESTORATION PLAN
OF AVERY DENNISON CORPORATION
<PAGE>
THE BENEFIT RESTORATION PLAN
OF AVERY DENNISON CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - DEFINITIONS....................................... 1
Section 1.1 - General................................... 1
Section 1.2 - Actuarial Equivalent...................... 1
Section 1.3 - Administrator............................. 1
Section 1.4 - Beneficiary............................... 2
Section 1.5 - Benefit................................... 2
Section 1.6 - Board..................................... 2
Section 1.7 - Code...................................... 2
Section 1.8 - Committee................................. 2
Section 1.9 - Company; Company Affiliate................ 2
Section 1.10 - Effective Date............................ 2
Section 1.11 - Employee.................................. 3
Section 1.12 - Enrolled Actuary.......................... 3
Section 1.13 - ERISA..................................... 3
Section 1.14 - Former Participant........................ 3
Section 1.15 - Included Affiliate Employee............... 3
Section 1.16 - Military Leave............................ 4
Section 1.17 - Participant............................... 4
Section 1.18 - Plan...................................... 4
Section 1.19 - Plan Year................................. 4
Section 1.20 - Qualified Benefit......................... 4
Section 1.21 - Qualified Plan............................ 4
Section 1.22 - Separation from the Service............... 4
Section 1.23 - Vested Benefit............................ 5
ARTICLE II - ELIGIBILITY...................................... 5
Section 2.1 - Requirements for Participation............ 5
ARTICLE III - FUNDING OF BENEFITS............................. 5
Section 3.1 - Source of Benefits........................ 5
ARTICLE IV - BENEFITS......................................... 6
Section 4.1 - Determination of Benefits................. 6
ARTICLE V - PAYMENT OF BENEFITS............................... 6
Section 5.1 - Beneficiary; Form of Benefits............. 6
Section 5.2 - Payment of Benefits....................... 7
Section 5.3 - Forfeitures............................... 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI - ADMINISTRATIVE PROVISIONS........................ 7
Section 6.1 - Administrator's Duties and Powers......... 7
Section 6.2 - Limitations Upon Powers................... 8
Section 6.3 - Final Effect of Administrator Action...... 8
Section 6.4 - Committee................................. 8
Section 6.5 - Resignation............................... 8
Section 6.6 - Vacancies................................. 8
Section 6.7 - Majority Rule............................. 8
Section 6.8 - Indemnification by the Company;
Liability Insurance....................... 9
Section 6.9 - Recordkeeping............................. 9
Section 6.10 - Inspection of Records..................... 9
Section 6.11 - Claims Procedure.......................... 9
Section 6.12 - Conflicting Claims........................ 10
Section 6.13 - Service of Process........................ 10
ARTICLE VII - MISCELLANEOUS PROVISIONS........................ 10
Section 7.1 - Amendment, Termination or Suspension of
the Plan.................................. 10
Section 7.2 - Limitation on Rights of Employees......... 10
Section 7.3 - Plan Binding in Event of Consolidation
or Merger; Adoption of Plan by
Other Companies........................... 11
Section 7.4 - Assignments, etc. Prohibited.............. 11
Section 7.5 - Errors and Misstatements.................. 11
Section 7.6 - Payment on Behalf of Minor, Etc........... 12
Section 7.7 - Governing Law............................. 12
Section 7.8 - Pronouns and Plurality.................... 12
Section 7.9 - Titles.................................... 12
Section 7.10 - References................................ 12
</TABLE>
ii
<PAGE>
BENEFIT RESTORATION PLAN
OF
AVERY DENNISON CORPORATION
Avery Dennison Corporation, a Delaware corporation, adopted the
Benefit Restoration Plan of Avery Dennison Corporation (the "Plan"), effective
as of December 1, 1994 (the "Effective Date"), for the benefit of its eligible
Employees.
The Plan constitutes an unfunded "excess benefit plan" within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). The Plan is maintained primarily for the purpose of
providing deferred Compensation for a select group of management or highly
compensated employees, within the meaning of ERISA Sections 201(2), 301(a)(3)
and 401(a)(1).
ARTICLE I
DEFINITIONS
Section 1.1 - General
- ----------- -------
Whenever the following terms are used in the Plan with the first
letter capitalized, they shall have the meaning specified below unless the
context clearly indicates to the contrary.
Section 1.2 - Actuarial Equivalent
- ----------- --------------------
"Actuarial Equivalent" shall mean the equivalent of a given Benefit or
a given amount payable in another manner or by other means, determined by or
under the direction of the Administrator in accordance with actuarial
principles, methods and assumptions which are found to be appropriate by the
Enrolled Actuary, acting independently of the Administrator or the Company and
in the exercise of his sole professional judgment. Such principles, methods and
assumptions, however, shall be reasonable in the aggregate and shall constitute
the Enrolled Actuary's best estimate of anticipated experience under the Plan.
Such assumptions shall include at any time, those assumptions then in effect
under the Qualified Plan. For purposes of calculating lump sum amounts under
Section 5.2, such assumptions shall be those set forth in Sections 1.2(a)(i)b
-
and 1.2(a)(ii)b of the Qualified Plan.
-
Section 1.3 - Administrator
- ----------- -------------
"Administrator" shall mean Avery Dennison Corporation, acting through
its Board or its delegates, except that if it appoints a Committee under Section
6.4, the term "Administrator" shall mean the Committee as to those duties,
powers and responsibilities specifically conferred upon the Committee.
<PAGE>
Avery Dennison Corporation shall have all duties and responsibilities imposed by
ERISA, except as specifically assigned to, delegated to or reserved to the
Board, and the Committee under the Plan.
Section 1.4 - Beneficiary
- ----------- -----------
"Beneficiary" shall mean a person or trust properly designated by a
Participant or Former Participant in the manner provided in the Qualified Plan.
Section 1.5 - Benefit
- ----------- -------
"Benefit" of a Participant shall mean the benefit payable pursuant to
Article IV.
Section 1.6 - Board
- ----------- -----
"Board" shall mean the Board of Directors of Avery Dennison
Corporation. The Board may delegate any power or duty otherwise allocated to
the Administrator to any other person or persons, including a Committee
appointed under Section 6.4.
Section 1.7 - Code
- ----------- ----
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
Section 1.8 - Committee
- ----------- ---------
"Committee" shall mean the BRP Committee of Avery Dennison
Corporation, as appointed pursuant to Section 6.4, if any.
Section 1.9 - Company; Company Affiliate
- ----------- --------------------------
(a) "Company" shall mean Avery Dennison Corporation, any other company
which subsequently adopts the Plan as a whole or as to any one or more
divisions, in accordance with Section 7.3(b), and any successor company which
continues the Plan under Section 7.3(a).
(b) "Company Affiliate" shall mean any employer which, at the time of
reference, was, with the Company, a member of a controlled group of corporations
or trades or businesses under common control, or a member of an affiliated
service group, as determined under regulations issued by the Secretary under
Code Sections 414(b), (c), (m) and 415(h) and any other entity required to be
aggregated with the Company pursuant to regulations issued under Code Section
414(o).
Section 1.10 - Effective Date
- ------------ --------------
"Effective Date" shall mean the effective date of the Plan which shall
be December 1, 1994.
2
<PAGE>
Section 1.11 - Employee
- ------------ --------
(a) "Employee" shall mean any person who renders services to the
Company in the status of an employee as the term is defined in Code Section
3121(d), excluding any person retained to render services as an independent
contractor. "Employee" shall not include leased Employees treated as Employees
of the Company pursuant to Code Sections 414(n) and 414(o) or employees of a
Company Affiliate.
(b) For purposes of this Plan, a United States citizen shall be
treated as an employee of the Company if he is employed by a foreign subsidiary
of the Company or a Company Affiliate to which there applies an agreement under
Section 3121(a) of the Code and if no contributions to a funded plan of deferred
compensation (whether or not a plan described in Sections 401(a), 403(a) or
405(a) of the Code) are provided by any other person with respect to the
compensation paid to such citizen by the foreign subsidiary, unless otherwise
elected by the Vice President, Compensation and Benefits of Avery Dennison
Corporation.
(c) "Employee" shall also mean any Included Affiliate Employee.
Section 1.12 - Enrolled Actuary
- ------------ ----------------
"Enrolled Actuary" shall mean the person enrolled by the Joint Board
for the Enrollment of Actuaries established under subtitle C of title III of
ERISA who has been engaged by the Administrator on behalf of all Participants to
make and render all necessary actuarial determinations, statements, opinions,
assumptions, reports and valuations under the Plan as required by law or
requested by the Administrator.
Section 1.13 - ERISA
- ------------ -----
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
Section 1.14 - Former Participant
- ------------ ------------------
"Former Participant" shall mean a Participant who has had a Separation
from the Service.
Section 1.15 - Included Affiliate Employee
- ------------ ---------------------------
"Included Affiliate Employee" shall mean any person who is employed by
a Company Affiliate and would not be an Employee but for the fact that the Vice
President, Compensation and Benefits of Avery Dennison Corporation has
determined that he be so treated.
3
<PAGE>
Section 1.16 - Military Leave
- ------------ --------------
Any Employee who leaves the Company or a Company Affiliate directly to
perform service in the Armed Forces of the United States or in the United States
Public Health Service under conditions entitling him to reemployment rights as
provided in the laws of the United States, shall, solely for the purposes of the
Plan and irrespective of whether he is compensated by the Company or such
Company Affiliate during such period of service, be presumed an Employee on
Military Leave. An Employee's Military Leave shall expire if such Employee
voluntarily resigns from the Company or such Company Affiliate during such
period of service, or if he fails to make application for reemployment within
the period specified by such laws for the preservation of his reemployment
rights. For purposes of computing an Employee's service, no more than 365 days
of service shall be credited for any Military leave except as required by Treas.
Reg. Section 1.410(a)-7(b)(6)(iii).
Section 1.17 - Participant
- ------------ -----------
"Participant" shall mean any person included in the Plan as provided
in Article II.
Section 1.18 - Plan
- ------------ ----
"Plan" shall mean the Benefit Restoration Plan of Avery Dennison
Corporation.
Section 1.19 - Plan Year
- ------------ ---------
"Plan Year" shall be the twelve month period from December 1 through
the last day of the following November, including all such years prior to the
adoption of the Plan.
Section 1.20 - Qualified Benefit
- ------------ -----------------
"Qualified Benefit" of a Participant for a Plan Year shall mean the
benefit calculated pursuant to Article IV of the Qualified Plan (as applicable
based upon the circumstances of the Participant's Separation from the Service).
Section 1.21 - Qualified Plan
- ------------ --------------
"Qualified Plan" shall mean The Retirement Plan for Employees of Avery
Dennison Corporation, as in effect on the date hereof and as may be amended from
time to time.
Section 1.22 - Separation from the Service
- ------------ ---------------------------
(a) "Separation from the Service" of an Employee shall mean his
retirement or resignation from or discharge by the Company or a Company
Affiliate, or his death but not his transfer among the Company and Company
Affiliates.
4
<PAGE>
(b) A leave of absence or sick leave authorized by the Company or a
Company Affiliate in accordance with established policies, a vacation period, a
temporary layoff for lack of work or a Military Leave shall not constitute a
Separation from the Service; provided, however, that
(i) continuation upon a temporary layoff for lack of work for a
period in excess of twelve months shall be considered a discharge effective
as of the expiration of the twelfth month of such period, and
(ii) failure to return to work upon expiration of any leave of
absence, sick leave, Military Leave or vacation or within three days after
recall from a temporary layoff for lack of work shall be considered a
resignation effective as of the date of expiration of such leave of
absence, sick leave, Military Leave, or vacation or the expiration of the
third day after recall from any such temporary layoff.
Section 1.23 - Vested Benefit
- ------------ --------------
"Vested Benefit" of a Participant on a given date shall mean the
Benefit provided hereunder if the Participant were to have a Separation from
Service on such date with a "Vested Benefit" under the Qualified Plan.
ARTICLE II
ELIGIBILITY
Section 2.1 - Requirements for Participation
- ----------- ------------------------------
Only those Employees of the Company who satisfy criteria set by the
Administrator from time to time, shall be Participants. The Administrator shall
have the power to make or revoke such designation hereunder in its sole
discretion, and any designation or revocation by the Board shall be binding and
final on all Employees, Beneficiaries and other interested persons.
ARTICLE III
FUNDING OF BENEFITS
Section 3.1 - Source of Benefits
- ----------- ------------------
The Plan shall be unfunded. All benefits payable under the Plan shall
be paid from the Company's general assets, and nothing contained in the Plan
shall require the Company to set aside or hold in trust any funds for the
benefit of a Participant or his Beneficiary, each of whom shall have the status
of a general unsecured creditor with respect to the Company's
5
<PAGE>
obligation to make payments under the Plan. Any funds of the Company available
to pay benefits under the Plan shall be subject to the claims of general
creditors of the Company and may be used for any purpose by the Company.
ARTICLE IV
BENEFITS
Section 4.1 - Determination of Benefits
- ----------- -------------------------
(a) A Participant's Benefit shall be the excess of
(i) the total, for each Plan Year commencing on or after the
Effective Date, of the Qualified Benefit, but
a with "Compensation," as defined in the Qualified Plan,
-
1 determined without reference to the limitations of
-
Code Section 401(a)(17) ($150,000 annual limit adjusted for
increases in the cost of living), and
2 including the Participant's deferrals under the
-
Company's non-qualified deferred compensation program earned on
or after the Effective Date, and
b without application of the limitation on benefits under
-
Code Section 415, over
(ii) the total of the actual Qualified Benefits for such years,
but not less than zero.
ARTICLE V
PAYMENT OF BENEFITS
Section 5.1 - Beneficiary; Form of Benefits
- ----------- -----------------------------
Each Participant shall designate his Beneficiary and elect the form
and the timing of his Benefits hereunder in accordance with the procedures set
forth in the Qualified Plan; provided, however, that any designations and/or
elections made by Participant under Article IV of the Qualified Plan with
respect to his "Benefits" thereunder shall be equally applicable to his Benefits
under this Plan.
6
<PAGE>
Section 5.2 - Payment of Benefits
- ----------- -------------------
A Participant's Benefits shall be paid in accordance with Section 5.1,
except that a Participant will receive his Benefit in an Actuarially Equivalent
lump sum if it would otherwise have been paid in the form of an annuity with
monthly payments of less than $300.
Section 5.3 - Forfeitures
- ----------- -----------
If a Participant has a Separation from the Service while all or any
portion of his Benefit is not a Vested Benefit, such portion of his Benefit
shall immediately be forfeited.
ARTICLE VI
ADMINISTRATIVE PROVISIONS
Section 6.1 - Administrator's Duties and Powers
- ----------- ---------------------------------
(a) The Administrator shall conduct the general administration of the
Plan in accordance with the Plan and shall have all the necessary power and
authority to carry out that function. Among its necessary powers and duties are
the following:
(i) To delegate all or part of its function as Administrator to
others and to revoke any such delegation.
(ii) To determine questions of vesting of Participants and their
entitlement to benefits, subject to the provisions of Section 6.11.
(iii) To select and engage attorneys, accountants, actuaries,
appraisers, brokers, consultants, administrators, physicians, the
Committee under Section 6.4, or other persons to render service or
advice with regard to any responsibility the Administrator or the
Board has under the Plan, or otherwise, to designate such persons to
carry out fiduciary responsibilities under the Plan, and (with the
Committee, the Companies, the Board and its officers, and Employees)
to rely upon the advice, opinions or valuations of any such persons,
to the extent permitted by law, being fully protected in acting or
relying thereon in good faith.
(iv) To interpret the Plan for purpose of the administration and
application of the Plan, in a manner not inconsistent with the Plan or
applicable law and to amend or revoke any such interpretation.
7
<PAGE>
(v) To conduct claims procedures as provided in Section 6.11
(b) Every finding, decision, and determination made by the
Administrator shall, to the full extent permitted by law, be final and binding
upon all parties, except to the extent found by a court of competent
jurisdiction to constitute an abuse of discretion.
Section 6.2 - Limitations Upon Powers
- ----------- -----------------------
The Plan shall be uniformly and consistently administered, interpreted
and applied with regard to all Participants in similar circumstances. The Plan
shall be administered, interpreted and applied fairly and equitably and
accordance with the specified purposes of the Plan.
Section 6.3 - Final Effect of Administrator Action
- ----------- ------------------------------------
Except as provided in Section 6.11, all actions taken and all
determinations made by the Administrator in good faith shall be final and
binding upon all Participants and any person interested in the Plan.
Section 6.4 - Committee
- ----------- ---------
The Administrator may, but need not, appoint a Committee consisting of
three or more members to hold office during the pleasure of the Administrator.
The Committee shall have such powers and duties as are delegated to it by the
Administrator and shall function as specified in Section 1.3. Committee members
shall not receive payment for their services as such.
Section 6.5 - Resignation
- ----------- -----------
A Committee member may resign at any time by delivering written notice
to the Administrator.
Section 6.6 - Vacancies
- ----------- ---------
Vacancies in the Committee shall be filled by the Administrator.
Section 6.7 - Majority Rule
- ----------- -------------
The Committee shall act by a majority of its members in office;
provided, however, that the Committee may appoint one of its members or a
delegate to act on behalf of the Committee on matters arising in the ordinary
course of administration of the Plan or on specific matters.
8
<PAGE>
Section 6.8 - Indemnification by the Company; Liability Insurance
- ----------- ---------------------------------------------------
(a) The Company shall pay or reimburse any of the Company's officers,
directors, Committee members or Employees who are fiduciaries with respect to
the Plan for all expenses incurred by such persons in, and shall indemnify and
hold them harmless from, all claims, liability and costs (including reasonable
attorneys' fees) arising out of the good faith performance of their fiduciary
functions.
(b) The Company may obtain and provide for any such person, at the
Company's expense, liability insurance against liabilities imposed on him by
law.
Section 6.9 - Recordkeeping
- ----------- -------------
(a) The Administrator shall maintain suitable records as follows:
(i) Records of each Participant's individual Benefit.
(ii) Records which show the operations of the Plan during each
Plan Year.
(iii) Records of the Administrator's deliberations and
decisions.
(b) The Administrator shall appoint a secretary, and at its
discretion, an assistant secretary, to keep the record of proceedings, to
transmit its decisions, instructions, consents or directions to any interested
party, to execute and file, on behalf of the Committee, such documents, reports
or other matters as may be necessary or appropriate to perform ministerial acts.
(c) The Administrator shall not be required to maintain any records or
accounts which duplicate any records or accounts maintained by the Company.
Section 6.10 - Inspection of Records
- ------------ ---------------------
Copies of the Plan and records of a Participant's Benefit shall be
open to inspection by him or his duly authorized representatives at the office
of the Administrator at any reasonable business hour.
Section 6.11 - Claims Procedure
- ------------ ----------------
The claims procedures hereunder shall be in accordance with the claims
procedures set forth in the Qualified Plan; provided that for purposes of the
claims procedure under this Plan, the review official described in the Qualified
Plan shall be the President of the Company.
9
<PAGE>
Section 6.12 - Conflicting Claims
- ------------ ------------------
The procedures for the resolution of conflicting claims by the Committee
shall be in accordance with the procedures set forth in the applicable section
of the Qualified Plan.
Section 6.13 - Service of Process
- ------------ ------------------
The Secretary of the Avery Dennison Corporation is hereby designated
as agent of the Plan for the service of legal process.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 - Amendment, Termination or Suspension of the Plan
- ----------- ------------------------------------------------
(a) The Plan may be amended or terminated by the Board at any time.
Such amendment or termination may modify or eliminate any benefit hereunder
other than a benefit or a portion of a benefit that is a Vested Benefit.
(b) If the Board determines that payments under the Plan would have a
material adverse effect on the Company's ability to carry on its business, the
Board may suspend such payments temporarily for such time as in its sole
discretion it deems advisable, but in no event for a period in excess of one
year. The Company shall pay such suspended payments immediately upon the
expiration of the period of suspension.
(c) The Plan is intended to provide benefits for "a select group of
management or highly compensated employees" within the meaning of Sections 201,
301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2,
3 and 4 of Title I of ERISA. Accordingly, the Plan shall terminate and, except
for benefits or portions of benefits that have vested (which at the option of
the Board, may be accelerated and the balance paid in a single, Actuarial
Equivalent lump sum), no further benefits shall be paid hereunder in the event
it is determined by a court of competent jurisdiction or by an opinion of the
Company's regular outside employee benefits counsel that the Plan constitutes an
employee pension benefit plan within the meaning of Section 3(2) of ERISA which
is not so exempt.
Section 7.2 - Limitation on Rights of Employees
- ----------- ---------------------------------
The Plan is strictly a voluntary undertaking on the part of the
Company and shall not constitute a contract between the Company and any
Employee, or consideration for, or an inducement or condition of, the employment
of an Employee. Nothing contained in the Plan shall give any Employee the right
to be retained in the service of the Company or to interfere with or restrict
the right of the Company, which is hereby expressly
10
<PAGE>
reserved, to discharge or retire any Employee, except as provided by law, at any
time without notice and with or without cause. Inclusion under the Plan will
not give any Employee any right or claim to any benefit hereunder except to the
extent such right has specifically become fixed under the terms of the Plan and
there are funds available therefor in the hands of the Company. The doctrine of
substantial performance shall have no application to Employees, Participants or
any other persons entitled to payments under the Plan. Each condition and
provision, including numerical items, has been carefully considered and
constitutes the minimum limit on performance which will give rise to the
applicable right.
Section 7.3 - Plan Binding in Event of Consolidation or Merger; Adoption of
- ----------- -------------------------------------------------- -----------
Plan by Other Companies
-----------------------
(a) In the event of the consolidation or merger of a Company with or
into any other corporation, this Plan shall be binding on such new corporation.
(b) Any Company or Company Affiliate may, with the approval of the
Board, adopt the Plan as a whole company or as to any one or more divisions
effective as of the first day of any Plan Year by resolution of its own board of
directors or agreement of its partners. Such Company or Company Affiliate shall
give written notice of such adoption to the Committee by its duly authorized
officers.
Section 7.4 - Assignments, etc. Prohibited
- ----------- ----------------------------
Except for the withholding of any tax under the laws of the United
States or any state or locality, no part of a Participant's Benefit hereunder
shall be liable for the debts, contracts or engagements of any Participant, his
Beneficiaries or successors in interest, or be taken in execution by levy,
attachment or garnishment or by any other legal or equitable proceeding prior to
distribution, nor shall any such person have any rights to alienate, anticipate,
commute, pledge, incumber or assign any Benefits or payments hereunder in any
manner whatsoever except to designate a Beneficiary as provided herein.
Section 7.5 - Errors and Misstatements
- ----------- ------------------------
In the event of any misstatement or omission of fact by a Participant
to the Committee or any clerical error resulting in payment of benefits in an
incorrect amount, the Committee shall promptly cause the amount of future
payments to be corrected upon discovery of the facts and shall cause the Company
to pay the
11
<PAGE>
Participant or any other person entitled to payment under the Plan any
underpayment in cash in a lump sum or to recoup any overpayment from future
payments to the participant or any other person entitled to payment under the
Plan in such amounts as the Committee shall direct or to proceed against the
Participant or any other person entitled to payment under the Plan for recovery
of any such overpayment.
Section 7.6 - Payment on Behalf of Minor, Etc.
- ----------- --------------------------------
In the event any amount becomes payable under the Plan to a minor or a
person who, in the sole judgment of the Committee is considered by reason of
physical or mental condition to be unable to give a valid receipt therefor, the
Committee may direct that such payment be made to any person found by the
Committee in its sole judgment, to have assumed the care of such minor or other
person. Any payment made pursuant to such determination shall constitute a full
release and discharge of the Company, the Board, the Committee and their
officers, directors and employees.
Section 7.7 - Governing Law
- ----------- -------------
This Plan shall be construed, administered and governed in all
respects under and by applicable federal laws and, where state law is
applicable, the laws of the State of California.
Section 7.8 - Pronouns and Plurality
- ----------- ----------------------
The masculine pronoun shall include the feminine pronoun, and the
singular the plural where the context so indicates.
Section 7.9 - Titles
- ----------- ------
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
Section 7.10 - References
- ------------ ----------
Unless the context clearly indicates to the contrary, a reference to a
statute, regulation or document shall be construed as referring to any
subsequently enacted, adopted or executed statute, regulation or document.
12
<PAGE>
EXHIBIT 11
AVERY DENNISON CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE AMOUNTS
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
(A) Weighted average number of common
shares outstanding.................. 53,251,458 55,559,318 57,953,287
Additional common shares issuable
under employee stock options using
the treasury stock method........... 1,394,264 1,290,606 776,241
------------ ------------ -----------
(B) Weighted average number of common
shares outstanding assuming the
exercise of stock options........... 54,645,722 56,849,924 58,729,528
============ ============ ===========
(C) Net income applicable to common stock. $143,702,000 $109,400,000 $84,400,000
============ ============ ===========
Net income per share as reported (C / A). $2.70 $1.97 $1.46
===== ===== =====
Net income per share giving effect to the
exercise of outstanding stock options
(C / B)................................. $2.63 $1.92 $1.44
===== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 13
ELEVEN-YEAR SUMMARY AVERY DENNISON CORPORATION
- ----------------------------------------------------------------------------------------------------------------------------
Compound
Growth Rate
----------------
(Dollars and shares in millions) 5 Year 10 Year 1995/(1)/ 1994 1993/(2)/ 1992 1991 1990/(3)/
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR
Net sales 3.8 6.9 $ 3,113.9 $2,856.7 $ 2,608.7 $2,622.9 $2,545.1 $2,590.2
Gross profit 3.4 6.0 957.3 907.8 818.1 838.2 796.2 808.3
Marketing, general and
administrative expense
/(3), (5), (6)/ (1.7) 4.9 689.8 691.9 642.7 665.7 653.9 752.7
Interest expense 2.1 7.4 44.3 43.0 43.2 42.3 37.5 40.0
Income before taxes /(1)/ 70.5 10.4 224.7 172.9 132.2 130.2 104.8 15.6
Taxes on income 52.9 8.7 81.0 63.5 48.9 50.1 41.8 9.7
Net income/(2)/ 89.4 11.5 143.7 109.4 84.4 80.1 63.0 5.9
Research and development
expense (.4) 3.6 52.7 49.1 45.5 46.7 48.7 53.7
Depreciation 3.4 8.2 95.3 87.9 84.1 83.8 83.1 80.8
Average shares outstanding (3.0) (.7) 53.3 55.6 58.0 60.4 61.9 62.0
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION
Net income/(2)/ 93.3 12.3 2.70 1.97 1.46 1.33 1.02 .10
Dividends/(4)/ 11.6 13.6 1.11 .99 .90 .82 .76 .64
Book value at year end 2.4 5.0 15.38 13.61 12.80 13.63 13.47 13.65
Market price at year end 18.4 10.8 50.13 35.50 29.38 28.75 25.38 21.50
Market price range 33.25 to 26.63 to 25.50 to 23.25 to 19.38 to 15.63 to
50.13 35.75 31.13 28.88 25.50 33.00
- ----------------------------------------------------------------------------------------------------------------------------
AT YEAR END
Working capital 127.6 122.8 141.6 222.6 226.0 298.8
Property, plant and
equipment, net 907.4 831.6 758.5 779.9 814.2 821.7
Total assets 1,963.6 1,763.1 1,639.0 1,684.0 1,740.4 1,890.3
Long-term debt 334.0 347.3 311.0 334.8 329.5 376.0
Total debt 449.4 420.7 397.5 427.5 424.0 510.4
Shareholders' equity 815.8 729.0 719.1 802.6 825.0 846.3
Number of employees 15,500 15,400 15,750 16,550 17,095 18,816
- ----------------------------------------------------------------------------------------------------------------------------
STATISTICS
Gross profit margin (percent) 30.7 31.8 31.4 32.0 31.3 31.2
Marketing, general and
administrative expense as a
percent of sales 22.2 24.2 24.6 25.4 25.7 25.2
Pretax profit margin (percent) 7.2 6.1 5.1 5.0 4.1 .6
Net profit margin (percent) 4.6 3.8 3.2 3.1 2.5 .2
Effective tax rate (percent) 36.0 36.7 37.0 38.5 39.9 62.2
Research and development
expense as a percent of
sales 1.7 1.7 1.7 1.8 1.9 2.1
Long-term debt as a percent
of total long-term capital 29.0 32.3 30.2 29.4 28.5 30.8
Total debt as a percent of
total capital 35.5 36.6 35.6 34.8 33.9 37.6
Return on average
shareholders' equity
(percent) 18.6 14.8 11.0 9.7 7.7 .7
Return on average total
capital (percent) 14.4 12.1 9.3 8.3 6.7 1.5
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Includes pretax income of $1.5 million related to the net gain on
divestitures and restructuring charges recorded during the fourth quarter
of 1995, which increased net income by $1 million, or $.02 per share.
/(2)/ Includes income of $1.1 million or $.02 per share related to the
cumulative effect of accounting changes recorded during the first quarter of
1993.
/(3)/ Includes pretax charges of $85.2 million in connection with a 1990
restructuring related to the merger of Avery International Corporation and
Dennison Manufacturing Company and $13.8 million of merger-related costs. After
adjusting for these charges, 1990 net income was $71.7 million, or $1.16 per
share.
/(4)/ Dividends per share in 1988 exclude a $.05 per share payment for
redemption of share purchase rights.
/(5)/ Includes pretax charges of $25.2 million in connection with a 1987
restructuring, which reduced net income by $25 million, or $.41 per share.
/(6)/ Includes pretax charges of $23.5 million in connection with a 1985
restructuring and a provision for a legal action filed against the Company,
which reduced net income by $13.9 million, or $.24 per share.
<PAGE>
Eleven - Year Summary
<TABLE>
<CAPTION>
1989 1988/(4)/ 1987/(5)/ 1986 1985/(6)/
(Dollars and shares in millions)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net sales $2,490.9 $ 2,291.4 $2,165.1 $1,828.4 $1,590.5
Gross profit 806.7 780.2 734.6 620.1 533.9
Marketing, general and
administrative expense
/(3), (5), (6)/ 591.0 554.7 571.2 460.6 428.9
Interest expense 35.1 35.5 32.4 26.6 21.6
Income before taxes /(1)/ 180.6 190.0 131.0 132.9 83.4
Taxes on income 66.4 73.0 60.8 61.0 35.1
Net income/(2)/ 114.2 117.0 70.2 71.9 48.3
Research and development
expense 51.0 47.4 41.5 37.3 37.1
Depreciation 71.5 63.8 58.8 49.9 43.3
Average shares outstanding 62.1 61.7 60.3 57.3 57.0
- -------------------------------------------------------------------------------------
PER SHARE INFORMATION
Net income/(2)/ 1.84 1.90 1.16 1.25 .85
Dividends/(4)/ .54 .465 .41 .35 .31
Book value at year end 13.06 12.48 11.48 10.25 9.43
Market price at year end 31.88 22.00 18.63 18.69 18.00
Market price range 21.00 to 17.13 to 16.00 to 17.25 to 14.13 to
31.88 26.00 29.13 23.75 19.69
- -------------------------------------------------------------------------------------
AS OF YEAR END
Working capital 323.9 314.3 325.8 319.8 299.3
Property, plant and
equipment, net 714.1 667.3 574.2 512.8 433.6
Total assets 1,715.9 1,652.2 1,558.5 1,352.4 1,089.8
Long-term debt 317.8 298.8 301.0 320.3 195.0
Total debt 418.9 411.3 393.2 384.3 255.5
Shareholders' equity 811.3 769.6 705.9 585.8 534.2
Number of employees 19,215 19,114 19,360 19,156 17,650
- -------------------------------------------------------------------------------------
STATISTICS
Gross profit margin (percent) 32.4 34.0 33.9 33.9 33.6
Marketing, general and
administrative expense as a
percent of sales 23.7 24.2 26.4 25.2 27.0
Pretax profit margin
(percent) 7.3 8.3 6.1 7.3 5.2
Net profit margin (percent) 4.6 5.1 3.2 3.9 3.0
Effective tax rate (percent) 36.8 38.4 46.4 45.9 42.1
Research and development
expense as a percent of
sales 2.0 2.1 1.9 2.0 2.3
Long-term debt as a percent
of total long-term capital 28.1 28.0 29.9 35.3 26.7
Total debt as a percent of
total capital 34.1 34.8 35.8 39.6 32.4
Return on average
shareholders' equity
(percent) 14.7 16.0 10.5 12.8 9.4
Return on average total
capital (percent) 12.0 12.7 8.3 10.6 8.5
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
(Dollars in millions) 1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 27.0 $ 3.1
Trade accounts receivable, less allowance for doubtful
accounts of $17.6 and $18.5 for 1995 and 1994, respectively 444.1 391.8
Inventories, net 223.2 206.4
Other receivables 24.8 26.7
Prepaid expenses 21.9 16.5
Deferred taxes 59.1 32.4
Total current assets 800.1 676.9
Property, plant and equipment, at cost:
Land 37.8 32.4
Buildings 388.9 375.1
Machinery and equipment 1,089.1 1,021.6
Construction-in-progress 136.3 103.2
1,652.1 1,532.3
Accumulated depreciation 744.7 700.7
907.4 831.6
Intangibles resulting from business acquisitions, net 124.3 127.6
Non-current deferred taxes 5.8 13.7
Other assets 126.0 113.3
$1,963.6 $1,763.1
Liabilities and Shareholders' Equity
Current liabilities:
Short-term and current portion of long-term debt $ 115.4 $ 73.4
Accounts payable 169.9 181.5
Accrued payroll and employee benefits 132.2 106.2
Other accrued liabilities 215.1 164.4
Income taxes payable 39.0 26.9
Deferred taxes .9 1.7
Total current liabilities 672.5 554.1
Long-term debt 334.0 347.3
Long-term retirement benefits and other accrued liabilities 99.8 92.7
Non-current deferred taxes 41.5 40.0
Shareholders' equity
Common stock, $1 par value, authorized - 200,000,000 shares;
issued - 62,063,312 shares at year end 1995 and 1994 62.1 62.1
Capital in excess of par value 191.6 193.0
Retained earnings 837.8 753.2
Cumulative foreign currency translation adjustment 33.8 16.7
Cost of unallocated ESOP shares (27.0) (37.6)
Minimum pension liability (2.6) (5.0)
Treasury stock at cost, 9,003,763 shares and 8,513,642
shares at year end 1995 and 1994, respectively (279.9) (253.4)
Total shareholders' equity 815.8 729.0
$1,963.6 $1,763.1
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statement of Income
<TABLE>
<CAPTION>
(In millions, except per share amounts) 1995 1994 1993
<S> <C> <C> <C>
Net sales $3,113.9 $2,856.7 $2,608.7
Cost of products sold 2,156.6 1,948.9 1,790.6
Gross profit 957.3 907.8 818.1
Marketing, general and administrative expense 689.8 691.9 642.7
Net gain on divestitures and restructuring
charges 1.5 -- --
Interest expense 44.3 43.0 43.2
Income before taxes on income and cumulative
effect of changes in accounting principles 224.7 172.9 132.2
Taxes on income 81.0 63.5 48.9
Income before cumulative effect of changes in
accounting principles 143.7 109.4 83.3
Cumulative effect of changes in accounting
principles -- -- 1.1
Net income $ 143.7 $ 109.4 $ 84.4
Per common share amounts
Income before cumulative effect of changes in
accounting principles $ 2.70 $ 1.97 $ 1.44
Cumulative effect of changes in accounting
principles -- -- .02
Net income $ 2.70 $ 1.97 $ 1.46
Average shares outstanding 53.3 55.6 58.0
Shares outstanding at year end 53.1 53.5 56.2
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Cumulative
foreign
Capital in currency Cost of Minimum
Common stock, $1 excess of Retained translation unallocated pension Treasury
(Dollars in millions) par value par value earnings adjustment ESOP shares liability stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal year ended 1992 $62.1 $196.8 $666.6 $ 29.6 $(64.9) -- $ (87.6)
Repurchase of 2,902,695
shares for treasury (82.9)
Stock issued under option
plans, net of tax, and
dividends paid on
stock held
by leveraged ESOPs (2.4) 6.4
Net income 84.4
Dividends: $.90 per share (52.1)
Translation adjustments, net
of tax (39.7)
ESOP transactions, net 11.7
Minimum pension liability $(8.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 1993 62.1 194.4 698.9 (10.1) (53.2) (8.9) (164.1)
Repurchase of 3,223,966
shares for treasury (105.7)
Stock issued under option
plans, net of
tax, and dividends paid on
stock held by
leverages ESOPs (1.4) 16.4
Net income 109.4
Dividends: $.99 per share (55.1)
Translation adjustments, net
of tax 26.8
ESOP transactions, net 15.6
Minimum pension liability 3.9
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 1994 62.1 193.0 753.2 16.7 (37.6) (5.0) (253.4)
Repurchase of 851,824 shares
for treasury (35.1)
Stock issued under option
plans, net of
tax, and dividends paid on
stock held by
leveraged ESOPs (1.4) 8.6
Net income 143.7
Dividends: $1.11 per share (59.1)
Translation adjustments, net
of tax 17.1
ESOP transactions, net 10.6
Minimum pension liability 2.4
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 1995 $62.1 $191.6 $837.8 $ 33.8 $(27.0) $(2.6) $(279.9)
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net income $ 143.7 $ 109.4 $ 84.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 95.3 87.9 84.1
Amortization 12.6 14.6 11.3
Net gain on divestitures and restructuring
charges (1.5) -- --
Deferred taxes (17.6) (6.7) (14.4)
Cumulative effect of changes in accounting
principles -- -- (1.1)
Changes in assets and liabilities, net of the
effect of foreign currency translation,
business divestitures and restructuring
charges:
Trade accounts receivable, net (52.5) (24.6) (8.6)
Inventories, net (18.5) (19.2) 32.4
Other receivables 1.8 2.8 (5.0)
Prepaid expenses (5.3) (2.6) 2.8
Accounts payable and accrued liabilities 18.6 96.4 32.0
Taxes on income 11.4 (.8) 21.3
Long-term retirement benefits and other
accrued liabilities (.1) 7.8 7.8
Net cash provided by operating activities 187.9 265.0 247.0
Investing Activities
Purchase of property, plant and equipment (190.3) (163.3) (100.6)
Proceeds from sale of assets and business
divestitures 96.7 16.2 4.9
Other (19.1) (10.2) (6.2)
Net cash used in investing activities (112.7) (157.3) (101.9)
Financing Activities
Additions to long-term debt 100.0 100.5 101.0
Reductions in long-term debt (107.9) (49.3) (111.9)
Net increase (decrease) in short-term debt 40.5 (16.0) (1.0)
Dividends paid (59.1) (55.1) (52.1)
Purchase of treasury stock (35.1) (105.7) (82.9)
Other 10.2 15.0 4.0
Net cash used in financing activities (51.4) (110.6) (142.9)
Effect of foreign currency translation on
balances .1 .2 (.3)
Increase (decrease) in cash and cash
equivalents 23.9 (2.7) 1.9
Cash and cash equivalents, beginning of year 3.1 5.8 3.9
Cash and cash equivalents, end of year $ 27.0 $ 3.1 $ 5.8
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Operations
The Company is a worldwide manufacturer of pressure-sensitive adhesives and
materials, office products and converted products. The Company's major markets
are in office products, retail, industrial tapes, durable goods, apparel, food,
transportation, health care and data processing. Pressure-Sensitive Adhesives
and Materials is the largest sector, contributing approximately half of the
Company's total sales with Office Products and Converted Products contributing
approximately 30 percent and 20 percent of total sales, respectively. Sales are
generated primarily in the United States, continental Europe and the United
Kingdom.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its majority-owned subsidiaries. Investments in certain affiliates (20
percent to 50 percent ownership) are accounted for by the equity method of
accounting. Certain prior year amounts have been reclassified to conform with
current year presentation.
Fiscal Year
The Company's financial reporting calendar for fiscal years 1995, 1994 and 1993
reflected 52-week periods ending December 30, 1995, December 31, 1994, and
January 1, 1994, respectively. Normally each fiscal year consists of 52 weeks,
but every fifth or sixth fiscal year consists of 53 weeks.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions for
the reporting period and as of the financial statement date. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities, and the reported amounts of revenues and
expenses. Actual results could differ from those estimates.
Changes in Accounting Principles
During 1993, the Company adopted three accounting standards issued by the
Financial Accounting Standards Board. The adoption of the accounting standards
had no effect on cash flow, but had a one-time cumulative effect on net income
as follows:
<TABLE>
<CAPTION>
Income (expense)
<S> <C> <C>
(In millions, except per share amounts) Total Per share
Accounting for income taxes $ 16.3 $ .28
Accounting for postretirement benefits,
net of tax (14.2) (.24)
Accounting for postemployment benefits,
net of tax (1.0) (.02)
Increase in net income for 1993 $ 1.1 $ .02
</TABLE>
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121 on accounting for the impairment
of long-lived assets and for long-lived assets to be disposed of. SFAS No. 121
requires the Company to review the carrying amounts of its long-lived assets and
certain identifiable intangible assets for impairment. If it is determined the
carrying amount of the asset is not recoverable, the Company is required to
recognize an impairment loss. The accounting standard will be implemented during
the first quarter of 1996; however, the loss, if any, has not yet been
determined.
<PAGE>
Revenue Recognition
Sales, provisions for estimated sales returns, and the cost of products sold are
recorded at the time of shipment.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks and short-term
investments, with maturities of three months or less when purchased, as cash and
cash equivalents. The carrying amounts of these assets approximate fair value
due to the short maturity of the instruments. At the end of 1995, $23.6 million
was held in short-term investments.
During the fourth quarter of 1995 the Company sold its nonstrategic North
American label converting operations for $95 million as part of a restructuring
plan (see Note 2). Proceeds from the sale are being used to fund capital
spending, to repay debt, fund share buyback and accelerate profit improvement
programs. Cash paid for interest and taxes was as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Interest, net of capitalized amounts $46.7 $42.7 $39.8
Income taxes, net of refunds 87.2 70.6 42.0
</TABLE>
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined
using both the first-in, first-out (FIFO) and last-in, first-out (LIFO) methods.
Inventories valued using the LIFO method comprised 40 percent, 41 percent and 38
percent of inventories before LIFO adjustment at year end 1995, 1994 and 1993,
respectively.
During 1993, certain inventories were reduced resulting in the liquidation of
LIFO inventory carried at lower costs prevailing in prior years as compared with
current costs. The effect was to reduce 1993 cost of products sold by $11.4
million and $.4 million in 1994, while $1.6 million of LIFO expense was
recognized in 1995. Inventories at year end were as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Raw materials $ 78.5 $ 81.6 $ 75.7
Work-in-process 72.4 55.9 43.2
Finished goods 109.6 105.2 101.9
LIFO adjustment (37.3) (36.3) (36.7)
$223.2 $206.4 $184.1
</TABLE>
Property, Plant and Equipment
Depreciation is generally computed using the straight-line method over the
estimated useful lives of the assets. Maintenance and repair costs are expensed
as incurred; renewals and betterments are capitalized. Upon the sale or
retirement of properties, the accounts are relieved of the cost and the related
accumulated depreciation, with any resulting profit or loss included in income.
Intangibles Resulting From
Business Acquisitions
Intangibles resulting from business acquisitions consist primarily of the excess
of the acquisition cost over the fair value of net assets acquired and are
amortized over a 25- to 40-year period using the straight-line method. The
Company evaluates the carrying value of its goodwill on an ongoing basis and
recognizes an impairment when the estimated future undiscounted cash flows from
operations are less than the carrying value of the goodwill. Accumulated
amortization at year end 1995 and 1994 was $40.3 million and $35.3 million,
respectively.
Environmental Expenditures
Environmental expenditures that do not contribute to current or future revenue
generation are expensed. Expenditures for newly acquired assets and those which
extend or improve the economic useful life of
<PAGE>
existing assets are capitalized and amortized over the remaining asset life.
The Company reviews, on a quarterly basis, its estimates of costs of
compliance with environmental laws and the cleanup of various sites, including
sites in which governmental agencies have designated the Company as a
potentially responsible party. When it is probable that obligations have been
incurred and where a minimum cost or a reasonable estimate of the cost of
compliance or remediation can be determined, the applicable amount is accrued.
For other potential liabilities, the timing of accruals coincides with the
related ongoing site assessments. Potential insurance reimbursements are not
recorded or offset against the liabilities until received, and liabilities are
not discounted.
Foreign Currency Translation
Financial statements of non-U.S. subsidiaries are translated into U.S. dollars
at current rates, except for revenue, costs and expenses which are translated at
average current rates during each reporting period. Gains and losses resulting
from foreign currency transactions, other than those transactions described
below, are included in income currently. Gains and losses resulting from
hedging the value of investments in certain non-U.S. subsidiaries and from
translation of financial statements are excluded from the statement of income
and are recorded directly to a separate component of shareholders' equity.
Translation gains and losses of subsidiaries operating in hyperinflationary
economies are included in net income currently.
Transaction and translation losses decreased net income in 1995, 1994 and
1993, by $1.8 million, $1.5 million and $3.4 million, respectively.
Financial Instruments
The Company enters into forward exchange and interest rate contracts to manage
exposure to fluctuations in foreign currency exchange and interest rates.
Gains and losses on contracts that hedge specific foreign currency commitments
are deferred and subsequently recognized in net income in the period in which
the underlying transaction is consummated.
The net amounts paid or received on interest rate agreements are recognized as
adjustments to interest expense over the terms of the agreements. Contract
premiums paid, if any, are amortized to interest expense over the terms of the
underlying instruments.
Research and Development
Research and development costs are expensed as incurred. Research and
development expense for 1995, 1994 and 1993 was $52.7 million, $49.1 million and
$45.5 million, respectively.
Note 2. Restructuring
During 1995, the Company took specific actions to restructure certain businesses
to improve future profitability. These actions, which included the sale of non-
strategic businesses and restructuring programs, resulted in a net pretax gain
of $1.5 million.
The portion of the North American label converting operations which no longer
met the Company's strategy for converting technology was sold during the fourth
quarter for $95 million. These businesses accounted for approximately 2 percent
of the Company's total sales. The cash proceeds are being used for general
corporate purposes, including funding capital spending, profit improvement
programs, debt repayment and share repurchase. The $40.7 million pretax gain on
the sale of these businesses was offset by charges related to the Company's 1995
restructuring program.
The Company's restructuring program resulted in a one-time pretax charge of
$39.2 million and included the closure of four plants and the reorganization of
certain manufacturing, distribution and administrative sites. The costs
consisted primarily of employee severance and related costs ($16.2 million) for
approximately 400 positions worldwide, discontinuance of product lines and
related asset write-offs ($13.1 million) and plant closure and other costs ($9.9
million). As of year end 1995, $24.5 million remained accrued, and related
primarily to employee severance and plant closure costs. Total cash expenditures
for the restructuring program are estimated at $19.7 million. By year end 1995,
approximately $1.5 million had been paid, primarily employee severance and
related costs. The
<PAGE>
Company's restructuring programs are expected to take approximately 9 to 18
months to complete and will result in estimated annual savings of $14 to $17
million when fully implemented.
Note 3. Debt
Long-term debt at year end was as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994
<S> <C> <C>
Domestic variable-rate short-term borrowings
refinanced on a long-term basis -- $ 31.0
Medium-term notes (6.1% to 8.5% at year end) $365.0 280.0
Leveraged ESOP borrowings (8.4% at year end) 2.8 8.4
Industrial Revenue Bonds (4.3% to 9.9%
at year end) 22.0 22.0
Other long-term debt, principally non-U.S.
(6.0% to 10.0% at year end) 23.1 30.3
412.9 371.7
Less: Amount classified as current (78.9) (24.4)
$334.0 $347.3
</TABLE>
The Company has a revolving credit agreement with four domestic banks to
provide up to $150 million in borrowings through July 1, 2000, with all amounts
borrowed under this agreement due on the same date. The Company may extend the
revolving period and due date under certain conditions with approval of the
banks. The financing available under this revolving credit agreement will be
used, as needed, to repay short-term and currently maturing long-term debt, and
to finance other corporate requirements.
In addition to the revolving credit agreement above, the Company had short-
term lines of credit available aggregating $302.0 million at the end of 1995, of
which $36.5 million was utilized at variable interest rates ranging from 5 to 13
percent.
During 1995, the Company issued $100 million in principal amount of medium-
term notes in increments of $2.5 to $20 million. The notes have a weighted
average interest rate of 7.3 percent and maturities from 2005 through 2025. A
portion of the proceeds from the medium-term notes were used to reduce short-
term debt. The Company's remaining medium-term notes have maturities from 1996
through 2005 and have a weighted average interest rate of 7.4 percent.
The amount of long-term debt outstanding at the end of 1995, which matures
during 1996 through 2000, is $78.9 million, $14.3 million, $6.2 million, $1.0
million and $2.0 million, respectively.
The fair value of the Company's debt is estimated based on the discounted
amount of future cash flows using the current rates offered to the Company for
debt of the same remaining maturities. At year end 1995 and 1994, the fair
value of the Company's total debt was $456.1 million and $395.8 million,
respectively.
The terms of the various loan agreements in effect at year end require
maintenance of specified amounts of consolidated tangible net worth and
consolidated earnings before interest and taxes to consolidated interest. Under
the most restrictive provisions, $228.5 million of retained earnings was not
restricted at the end of 1995.
The Company incurred total interest cost in 1995, 1994 and 1993 of $47.5
million, $45.7 million and $45.5 million, respectively, of which $3.2 million,
$2.7 million and $2.3 million, respectively, was capitalized as part of the cost
of assets constructed for the Company's use. Included in interest expense was
$.3 million for 1995, $5.6 million for 1994 and $8.5 million for 1993 relating
to the Company's operations in Brazil. The 1994 and 1993 amounts reflect
extraordinarily high nominal rates of interest resulting from hyperinflationary
conditions in that country, prior to July, 1994.
Note 4. Financial Instruments
The Company enters into forward exchange contracts to reduce risk from exchange
rate fluctuations associated with receivables, payables, loans and commitments
denominated in foreign currencies that
<PAGE>
arise primarily as a result of its operations outside the United States. At
the end of 1995 and 1994, the Company had forward exchange contracts with a
notional value of $221.2 million and $141.8 million, respectively,
substantially all of which were denominated in European currencies. In
general, the maturities of the contracts coincide with the underlying exposure
positions they are intended to hedge. Of the total contracts outstanding, 92
percent have maturities within 12 months. The remainder have maturities
ranging from one to two years. The carrying value approximates the fair value,
which, based on quoted market prices of comparable instruments, was a net
liability of approximately $.2 million and a net asset of approximately $1
million at the end of 1995 and 1994, respectively.
The counterparties to forward exchange contracts and interest rate agreements
consist of a large number of major international financial institutions. The
Company centrally monitors its positions and the financial strength of its
counterparties. Therefore, while the Company may be exposed to losses in the
event of nonperformance by these counterparties, it does not anticipate losses.
During 1994, the Company entered into an interest rate cap agreement to
protect itself from rising interest rates. The agreement effectively set a
ceiling interest rate of 7.6 percent on $40 million of the Company's variable-
rate borrowings commencing December 1995 for a period of three years. During
1995, the Company terminated this agreement with no significant impact on the
Company's operating results. In addition, all interest rate swap agreements
matured in 1995.
At the end of 1995, the Company had letters of credit outstanding totaling $18
million which guaranteed various trade activities. The aggregate contract
amount of all outstanding letters of credit approximates fair value.
As of year end 1995 and 1994, approximately 20 percent of trade accounts
receivables were from 7 and 6 domestic customers, respectively. While the
Company does not require its customers to provide collateral, the financial
position and operations of these customers are monitored on an ongoing basis.
Although the Company may be exposed to losses in the event of nonpayment, it
does not anticipate such losses.
The Company has an agreement with a bank whereby it has the right to sell
certain accounts receivable. The available commitment of this agreement at the
end of 1995 was $50 million, subject to limited recourse provisions. At the end
of 1994, $30 million of trade receivables had been sold and not yet collected
under the agreement. At the end of 1995, no trade receivables had been sold.
Note 5. Commitments
Minimum annual rentals on operating leases for the years 1996 to 2000 are $29.3
million, $23.5 million, $20.6 million, $17.1 million and $16.4 million,
respectively. Operating leases relate primarily to office and warehouse space
and office, EDP and transportation equipment.
The Company has an agreement to purchase certain information technology
services through June 30, 2002; however, the agreement may be terminated at the
Company's option on June 30, 2000. Total commitments remaining under the
agreement approximated $19 million as of December 30, 1995.
Rent expense for 1995, 1994 and 1993 was $39.4 million, $39.7 million and
$41.6 million, respectively.
Note 6. Taxes Based on Income
Taxes based on income were as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Current:
U.S. Federal tax $ 51.8 $34.9 $ 36.2
State taxes 10.2 6.8 6.2
Non-U.S. taxes 34.6 28.0 18.9
96.6 69.7 61.3
Deferred:
U.S. taxes (4.4) (2.1) (7.1)
Non-U.S. taxes (11.2) (4.1) (5.3)
(15.6) (6.2) (12.4)
Tax expense $ 81.0 $63.5 $ 48.9
</TABLE>
<PAGE>
The principal items accounting for the difference in taxes as computed at the
U.S. statutory rate and as recorded were as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Computed tax at 35% of income
before taxes $78.7 $60.5 $46.3
Increase (decrease) in taxes resulting from:
State taxes, net of federal tax benefits 6.6 4.4 4.0
Other items, net (4.3) (1.4) (1.4)
Tax Expense $81.0 $63.5 $48.9
</TABLE>
Consolidated income before taxes for U.S. and non-U.S. operations was as
follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
U.S. $145.3 $ 97.6 $ 88.0
Non-U.S. 79.4 75.3 44.2
$224.7 $172.9 $132.2
</TABLE>
U.S. income taxes have not been provided on undistributed earnings of non-U.S.
subsidiaries ($360.1 million at year end 1995) because such earnings are
considered to be reinvested indefinitely or because U.S. income taxes on
dividends would be substantially offset by foreign tax credits.
Operating loss carryforwards for non-U.S. subsidiaries aggregating $53.1
million are available to reduce income taxes payable for tax purposes, of which
$17.9 million will expire over the period from 1996 through 2002, while $35.2
million can be carried forward indefinitely.
Statement of Financial Accounting Standards (SFAS) No. 109 was adopted as of
the beginning of 1993 and superseded the Company's previous practice of
accounting for income taxes under APB No. 11. In accordance with SFAS No. 109,
deferred income taxes for 1995 and 1994 reflect the temporary differences
between the amounts at which assets and liabilities are recorded for financial
reporting purposes and the amounts utilized for tax purposes. SFAS No. 109
requires the use of the statutory tax rates in effect for the year in which the
differences are expected to reverse and allows the establishment of certain
deferred tax assets not previously recognized. The one-time cumulative effect
of adopting SFAS No. 109 increased net income in 1993 by $16.3 million.
The primary components of the temporary differences which gave rise to the
Company's deferred tax assets and liabilities, at year end 1995 and 1994, are as
follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Accrued expenses not currently deductible $ 71.2 $ 43.0 $ 37.6
Net operating losses 17.7 21.2 21.4
Postretirement and postemployment benefits 10.6 9.9 9.1
Pension costs 3.3 4.9 4.7
Valuation allowance (8.9) (15.0) (14.9)
Depreciation (68.6) (60.1) (60.4)
Other items, net (2.8) .5 (.1)
Total net deferred tax assets (liabilities) $ 22.5 $ 4.4 $ (2.6)
</TABLE>
<PAGE>
Note 7. Shareholders' Equity
The Company's Certificate of Incorporation authorizes five million shares of $1
par value preferred stock, with respect to which the Board of Directors may fix
the series and terms of issuance, and 200 million shares of $1 par value voting
common stock.
The Board of Directors has authorized the repurchase of an aggregate 15.2
million shares of the Company's outstanding common stock. The acquired shares
will be held as treasury stock and may be reissued under the Company's stock
option and incentive plans. At year end 1995, approximately 10.8 million shares
had been repurchased under this authorization.
The Company maintains various stock option and incentive plans. Under the
plans, incentive stock options and stock options granted to directors may be
granted at not less than 100% of the fair market value of the Company's common
stock on the date of the grant, whereas nonqualified options granted to
executives may be issued at prices no less than par value. Options that are not
exercised expire ten years from the date of grant. Shares available for grant
at the end of 1995 were .8 million. The following table sets forth stock option
information relative to all plans:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1995 1994 1993
<S> <C> <C> <C>
Options outstanding,
beginning of fiscal year 4,825.1 4,398.3 4,189.2
Options granted 896.0 1,391.5 614.9
Options exercised (477.6) (782.5) (307.8)
Options canceled/expired (131.2) (182.2) (98.0)
Options outstanding,
end of fiscal year 5,112.3 4,825.1 4,398.3
Options exercisable,
end of fiscal year 2,654.9 2,482.3 2,750.4
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Option prices per share:
Exercised $17.81 to $32.50 $12.22 to $28.00 $ 9.52 to $28.00
Outstanding 16.63 to 47.25 16.63 to 32.50 12.22 to 28.00
Exercisable 16.63 to 32.50 16.63 to 28.00 12.22 to 28.00
</TABLE>
During 1988, the Company issued preferred stock purchase rights, declaring a
dividend of one such right on each outstanding share of common stock. When
exercisable, each new right will entitle its holder to buy one one-hundredth of
a share of Series A Junior Participating Preferred Stock at a price of $95.00
per one one-hundredth of a share until July 1998. The rights will become
exercisable if a person acquires 20 percent or more of the Company's common
stock or makes an offer, the consummation of which will result in the person's
owning 20 percent or more of the Company's common stock. In the event the
Company is acquired in a merger, each right entitles the holder to purchase
common stock of the acquiring company having a market value of twice the
exercise price of the right. If a person or group acquires 20 percent or more
of the Company's common stock, each right entitles the holder to purchase the
Company common stock with a market value equal to twice the exercise price of
the right. The rights may be redeemed by the Company at a price of one cent per
right at any time prior to a person's or group's acquiring 20 percent of the
Company's common stock. The 20 percent threshold may be reduced by the Company
to as low as 10 percent at any time prior to a person's acquiring a percent of
Company stock equal to the lowered threshold.
Note 8. Contingencies
The Company has been designated by the U.S. Environmental Protection Agency
(EPA) and/or other responsible state agencies as a potentially responsible party
(PRP) at 16 waste disposal or waste recycling sites which are the subject of
separate investigations or proceedings concerning alleged soil and/or
groundwater contamination and for which no settlement of the Company's liability
has been agreed upon. Litigation has been initiated by a governmental authority
with respect to three of these sites, but the Company does not believe that any
such proceedings will result in the imposition of monetary sanctions.
<PAGE>
The Company is participating with other PRPs at all such sites, and anticipates
that its share of cleanup costs will be determined pursuant to remedial
agreements entered into in the normal course of negotiations with the EPA or
other governmental authorities.
The Company has accrued liabilities for all sites, including sites in which
governmental agencies have designated the Company as a PRP, where it is probable
that a loss will be incurred and the minimum cost or amount of loss can be
reasonably estimated. However, because of the uncertainties associated with
environmental assessment and remediation activities, future expense to remediate
the currently identified sites, and sites which could be identified in the
future for cleanup, could be higher than the liability currently accrued.
The Company and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the business.
In the opinion of management, the resolution of these matters will not
materially affect the financial position, results of operations or liquidity of
the Company.
Note 9. Employee Retirement Plans
Defined Benefit Plans
The Company sponsors a number of defined benefit plans covering substantially
all U.S. employees, employees in certain other countries and non-employee
directors. It is the Company's policy to make contributions to these plans
sufficient to meet the minimum funding requirements of applicable laws and
regulations, plus such additional amounts, if any, as the Company's actuarial
consultants advise to be appropriate. Plan assets are invested in a diversified
portfolio that consists primarily of equity securities. Benefits payable to
employees are based primarily on years of service and employees' pay during
their employment with the Company. Certain benefits provided by Avery
Dennison's U.S. defined benefit plan are paid in part from an employee stock
ownership plan. The net pension cost and the funded status of the defined
benefit plans for 1995, 1994 and 1993 are summarized as follows:
Net Pension Cost
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 8.7 $ 9.5 $ 10.2
Interest cost 26.4 24.5 23.7
Return on plan assets (69.9) (14.0) (45.6)
Net amortization and deferral 34.6 (20.1) 14.0
Net pension (income) cost $ (.2) $ (.1) $ 2.3
Assumptions used:
Weighted average discount rate 7.4% 8.0% 7.3%
Weighted average rate of increase in
future compensation levels 5.3 5.4 5.3
Weighted average expected
long-term rate of return on assets 9.7 9.7 10.0
</TABLE>
Funded Status of Pension Plans
<TABLE>
<CAPTION>
Fully Funded Plans Underfunded Plans
(In millions) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $196.0 $175.7 $132.3 $113.5
Non-vested benefits .1 .9 .2 .9
Accumulated benefit obligation 196.1 176.6 132.5 114.4
Effect of projected future
salary increases 29.2 29.8 14.9 13.4
Projected benefit obligation 225.3 206.4 147.4 127.8
Plan assets at fair value 304.6 276.6 109.3 85.2
Plan assets in excess of
(less than) projected
benefit obligation 79.3 70.2 (38.1) (42.6)
Unrecognized net loss (gain) .7 (1.1) 19.3 19.7
Unrecognized prior service cost (14.6) (15.5) 8.0 9.4
Unrecognized net asset
at year end (24.8) (28.4) (1.6) (1.9)
Adjustment to recognize
minimum liability -- -- (10.8) (13.8)
Prepaid (accrued) pension cost $ 40.6 $ 25.2 $(23.2) $(29.2)
</TABLE>
<PAGE>
As a result of changes in assumptions used during 1995 and 1994, the Company
had recorded an additional liability of $10.8 million and $13.8 million,
respectively. These amounts are offset in 1995 and 1994 by a charge to equity
of $2.6 million and $5 million, respectively, and the recording of an intangible
pension asset of $8.2 million and $8.8 million, respectively. Consolidated
pension expense for 1995, 1994 and 1993 was $2 million, $2.4 million and $4.8
million, respectively.
Defined Contribution Plans
The Company sponsors various defined contribution plans covering its U.S.
employees, including two 401(k) savings plans. The Company matches participant
contributions to the two 401(k) savings plans based on formulas within the
individual plans. The Avery Dennison Corporation Employee Savings Plan (Savings
Plan) has a leveraged employee stock ownership plan feature (ESOP II) which
allows the plan to borrow funds to purchase shares of the Company's common stock
at market prices. Savings Plan expense consists primarily of stock
contributions from ESOP II to participant accounts.
The Company also maintains a leveraged employee stock ownership plan (ESOP I)
for employees not covered by a collective bargaining agreement. ESOP I also
borrowed funds to purchase shares of the Company's common stock at market
prices.
ESOP expense is calculated using both the cost of shares allocated method and
the cash flow method. The following table sets forth certain information
relating to the Company's ESOPs on a combined basis.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Interest expense $ 3.4 $ 2.3 $ 3.1
Dividends on unallocated ESOP
shares used for debt service 1.9 2.3 2.6
Total ESOP expense 7.5 10.5 5.8
Contributions to pay interest and
principal on ESOP borrowings 7.4 10.1 5.1
</TABLE>
Consolidated expense for all defined contribution plans, including total ESOP
expense, for 1995, 1994 and 1993 was $8.2 million, $11.2 million and $10.4
million, respectively.
Other Postretirement Benefits
The Company provides postretirement health benefits to its retired employees up
to the age of 65 under a cost-sharing arrangement, and supplemental Medicare
benefits to certain U.S. retirees over the age of 65. The Company adopted
Statement of Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" as of the beginning of fiscal 1993.
The accounting standard requires the accrual of the cost of providing certain
postretirement benefits over the employees' years of service, rather than
accounting for such costs on a pay-as-you-go (cash) basis. The Company elected
to immediately recognize the accumulated postretirement benefit obligation and
recorded a one-time cumulative charge of $23 million ($14.2 million, net of tax)
upon implementation of the accounting standard in 1993. The cumulative charge
represents the benefits earned by active and retired employees prior to 1993.
<PAGE>
The following table sets forth the Company's unfunded obligation and amount
recognized in the consolidated balance sheet as of year end 1995 and 1994:
<TABLE>
<CAPTION>
(In millions) 1995 1994
<S> <C> <C>
Actuarial present value of
benefit obligation
Retirees $ 5.8 $ 6.2
Fully eligible participants 7.8 6.5
Other active participants 19.9 15.6
Accumulated postretirement
benefit obligation 33.5 28.3
Plan assets -- --
Accumulated postretirement
benefit obligation
in excess of plan assets 33.5 28.3
Unrecognized net loss 3.3 .1
Unrecognized prior service cost 1.3 1.4
Accrued postretirement
benefit obligation $28.9 $26.8
</TABLE>
<TABLE>
Net periodic postretirement
benefit costs included
(in millions): 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 1.1 $ 1.2 $ .9
Interest cost 2.2 2.1 1.8
Net amortization and deferral .1 .1 --
Net periodic postretirement expense $ 3.4 $ 3.4 $ 2.7
</TABLE>
The Company's policy is to fund the cost of the postretirement benefits on a
cash basis.
A health care cost trend rate of 12 percent was assumed for 1995 and will
decline 1 percent annually to 6 percent by 2001 and remain at that level. The
discount rates assumed were 7.25 percent for 1995 and 8 percent for 1994. A one
percent increase in the health care cost trend rate would cause the accumulated
postretirement benefit obligation to increase by $4.4 million and service and
interest cost to increase by $.5 million for 1995.
Other Retirement Plans
The Company has deferred compensation plans that permit eligible employees and
directors to defer a specified portion of their compensation. The deferred
compensation, together with certain Company contributions, earn a specified rate
of return. As of year end 1995 and 1994, the Company had accrued $48.2 million
and $40.8 million, respectively, for its obligations under these plans. The
Company's expense, which includes Company contributions and interest expense,
was $5.6 million, $4 million and $3.8 million, for 1995, 1994 and 1993,
respectively. A portion of the interest may be forfeited by participants in the
event employment is terminated before age 55 other than by reason of death,
disability or retirement.
To assist in the funding of these plans, the Company purchases corporate-owned
life insurance contracts. Proceeds from the insurance policies are payable to
the Company upon the death of the participant. The cash surrender value of
these policies, net of outstanding loans, included in "Other assets" was $16.4
million and $13.7 million as of year end 1995 and 1994, respectively.
Note 10. Sectors of Business Operations
The Company operates in three principal industry sectors: the production of
pressure-sensitive adhesives and materials; the production of office products;
and the production of converted products.
During the fourth quarter of 1995, the Company sold a portion of its North
American label converting operations. These businesses accounted for
approximately 10 percent, or $63 million, of the 1995 converted products
sector's sales. A $40.7 million gain from restructuring activities was recorded
in the converted products sector's income from operations before interest and
taxes during 1995. The businesses sold, excluding the gain on sale and
restructuring charges, accounted for $2.6 million of the converted products
sector's profitability for 1995.
Intersector sales are recorded at or near market prices and are eliminated in
determining consolidated sales. Income from operations represents total revenue
less operating expenses. General
<PAGE>
corporate expenses, interest expense and taxes on income are excluded from the
computation of income from operations. Certain prior year amounts have been
reclassified to conform with current year presentation.
Financial information by industry and geographic sectors is set forth below:
<TABLE>
<CAPTION>
(In millions) 1995/(1)/ 1994 1993
<S> <C> <C> <C>
Sales by industry sector:
Pressure-sensitive adhesives
and materials $1,739.4 $1,538.2 $1,336.9
Office products 897.5 842.4 792.9
Converted products 611.7 576.5 541.4
Intersector (134.7) (114.9) (90.3)
Divested operations -- 14.5 27.8
Net sales $3,113.9 $2,856.7 $2,608.7
Income from operations before
interest and taxes:
Pressure-sensitive adhesives
and materials $ 156.8 $ 150.7 $ 126.4
Office products 75.2 67.7 59.3
Converted products 68.5 31.9 23.1
Divested operations -- (5.8) (3.2)
300.5 244.5 205.6
Corporate administrative
and research and
development expenses (31.5) (28.6) (30.2)
Interest expense (44.3) (43.0) (43.2)
Income before taxes $ 224.7 $ 172.9 $ 132.2
Identifiable assets by
industry sector:
Pressure-sensitive adhesives
and materials $ 959.4 $ 853.2 $ 752.9
Office products 476.6 464.4 450.6
Converted products 309.9 303.4 294.3
Intersector (28.5) (25.9) (37.2)
Corporate, including
divested operations 246.2 168.0 178.4
Total assets $1,963.6 $1,763.1 $1,639.0
</TABLE>
/(1)/ Fiscal 1995 results include a pretax gain of $40.7 million from the sale
of a portion of its North American label converting operations and was
included in the converted products 1995 operating results. Fiscal 1995
results also include a pretax restructuring charge of $39.2 million, to
restructure its business and reduce costs to improve future profitability.
The restructuring charge was allocated as follows: $15.1 million to the
Pressure-sensitive adhesives and materials sector; $15.6 million to the
Office products sector; $8.5 million to the Converted products sector. The
restructuring charge, along with the gain on divestiture, was included in
pretax income as "Net gain on divestitures and restructuring charges".
<PAGE>
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Sales by geographic sector:
U.S. $2,009.4 $1,870.8 $1,693.6
Non-U.S. 1,143.1 997.2 923.4
Intersector (38.6) (25.8) (36.1)
Divested operations -- 14.5 27.8
Net sales $3,113.9 $2,856.7 $2,608.7
Income from operations before
interest and taxes:
U.S. $ 219.6 $ 189.8 $ 163.7
Non-U.S. 80.9 60.5 45.1
Divested operations -- (5.8) (3.2)
300.5 244.5 205.6
Corporate administrative
and research and
development expenses (31.5) (28.6) (30.2)
Interest expense (44.3) (43.0) (43.2)
Income before taxes $ 224.7 $ 172.9 $ 132.2
Identifiable assets by
geographic sector:
U.S. $1,009.7 $ 939.0 $ 833.2
Non-U.S. 723.1 666.0 646.2
Intersector (15.4) (9.9) (18.8)
Corporate, including
divested operations 246.2 168.0 178.4
Total assets $1,963.6 $1,763.1 $1,639.0
</TABLE>
The Company's non-U.S. operations, conducted primarily in continental Europe
and the United Kingdom, are on the FIFO basis of inventory cost accounting.
U.S. operations use both FIFO and LIFO. Export sales from the United States to
unaffiliated customers are not a material factor in the Company's business.
Identifiable assets are those assets of the Company which are identifiable
with the operations in each industry or geographic sector. Corporate assets
consist principally of Corporate property, plant and equipment, tax-related
asset accounts and other non-operating assets. Intersector receivables are
eliminated in determining consolidated identifiable assets.
Capital expenditures and depreciation expense by industry sector are set forth
below:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Capital expenditures:
Pressure-sensitive adhesives
and materials $106.1 $107.1 $ 57.1
Office products 31.2 23.0 24.2
Converted products 43.1 23.6 13.6
Corporate, including
divested operations 9.9 9.6 5.7
$190.3 $163.3 $100.6
Depreciation expense:
Pressure-sensitive adhesives
and materials $ 47.2 $ 40.5 $ 36.6
Office products 20.2 19.3 20.6
Converted products 17.6 18.7 17.8
Corporate, including
divested operations 10.3 9.4 9.1
$ 95.3 $ 87.9 $ 84.1
</TABLE>
<PAGE>
Note 11. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
(In millions, First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter/(1)(2)/
<S> <C> <C> <C> <C>
1995/(1)/
Net sales $773.2 $780.5 $783.5 $776.7
Gross profit 244.8 239.0 235.0 238.5
Net income 34.5 35.7 35.8 37.7
Net income per share .65 .67 .67 .71
1994
Net sales $667.7 $718.6 $733.7 $736.7
Gross profit 212.5 227.7 232.6 235.0
Net income 25.2 27.9 27.8 28.5
Net income per share .45 .50 .50 .52
1993/(2)/
Net sales $666.5 $662.2 $638.1 $641.9
Gross profit 210.0 207.2 198.9 202.0
Income before cumulative
effect of changes in
accounting principles 22.2 22.8 19.0 19.3
Net income 23.3 22.8 19.0 19.3
Income per share before
cumulative effect of
changes in accounting
principles .38 .39 .33 .34
Net income per share .40 .39 .33 .34
</TABLE>
/(1)/ Net income for the fourth quarter of 1995 includes income of
$1 million, or $.02 per share, related to the net gain on divestitures and
restructuring charges.
/(2)/ During the fourth quarter of 1993, certain inventories were reduced,
resulting in the liquidation of LIFO inventory. The effect was to reduce
cost of products sold by $4.4 million.
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
of Avery Dennison:
We have audited the accompanying consolidated balance sheet of Avery Dennison
Corporation and subsidiaries as of December 30, 1995, and December 31, 1994,
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion the financial statements referred to above, which appear on
pages 40 through 52 of this Annual Report, present fairly, in all material
respects, the consolidated financial position of Avery Dennison Corporation and
subsidiaries as of December 30, 1995, and December 31, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," SFAS No. 109, "Accounting for
Income Taxes" and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" during 1993.
Coopers & Lybrand L.L.P.
Los Angeles, California
January 30, 1996
<PAGE>
Corporate Information
Counsel
Latham & Watkins
Los Angeles
Independent Accountants
Coopers & Lybrand L.L.P.
Los Angeles
Transfer Agent-Registrar
First Interstate Bank of California
Corporate Trust Department
P.O. Box 54163
Terminal Annex
Los Angeles, CA 90054
(800) 522-6645
Annual Meeting
The Annual Meeting of Shareholders will be held at 1:30 pm, Thursday, April 25,
1996, in the Conference Center of the Avery Dennison Corporate Center, 150 North
Orange Grove Boulevard, Pasadena, California.
Dividend Reinvestment Plan
Shareholders of record may reinvest their cash dividends in additional shares of
Avery Dennison common stock at market price without the payment of any brokerage
commissions, service charges, or other expenses.
Shareholders may also invest optional cash payments of up to $3,000 per month
in Avery Dennison common stock at market price.
Avery Dennison investors not yet participating in the plan, as well as
brokers and custodians who hold Avery Dennison common stock for clients, may
obtain a copy of the plan by writing to First Interstate Bank of California,
Attn. Dividend Reinvestment Services. P.O. Box 60975, Los Angeles, CA 90060,
(800) 522-6645. Avery Dennison absorbs all costs of operating the plan.
Form 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, will be furnished to shareholders and interested
investors free of charge upon written request to the Secretary of the
Corporation.
Corporate Headquarters
150 North Orange Grove Boulevard
Pasadena, California 91103
(818) 304-2000
Mailing Address
P.O. Box 7090
Pasadena, California 91109-7090
Fax: (818) 792-7312
Investor Relations Contact
Wayne H. Smith, Vice President and Treasurer
(818) 304-2000
[email protected]
<PAGE>
Stock and Dividend Data
Common shares of Avery Dennison are listed on the New York and Pacific stock
exchanges. Ticker symbol: AVY.
<TABLE>
<CAPTION>
1995 1994
High Low High Low
<S> <C> <C> <C> <C>
Market Price
First Quarter 40 3/8 33 1/4 31 1/4 27 1/4
Second Quarter 43 3/4 39 31 1/8 26 5/8
Third Quarter 42 39 1/4 35 3/8 28 7/8
Fourth Quarter 50 1/8 40 7/8 35 3/4 31 1/4
</TABLE>
Prices shown represent closing prices on the NYSE.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Dividends Per Share
First Quarter .27 .24
Second Quarter .27 .24
Third Quarter .27 .24
Fourth Quarter .30 .27
</TABLE>
Number of shareholders of record at year end 1995: 9,895
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION
IN WHICH
ORGANIZED
------------
<C> <S> <C>
1. Avery Dennison Corporation (publicly-owned parent of
consolidate group)........................................ Delaware
2. A.V. Chemie A.G. ......................................... Switzerland
3. AEAC, Inc. ............................................... Delaware
4. Avery (Thailand) Co., Ltd. ............................... Thailand
5. Avery Automotive Limited.................................. United Kingdom
6. Avery Buroprodukte GmbH................................... Germany
7. Avery Chile S.A. ......................................... Chile
8. Avery China Company Limited............................... China
9. Avery Coordination Center N.V. ........................... Belgium
10. Avery Corp. .............................................. Delaware
11. Avery de Mexico S.A. de C.V. ............................. Mexico
12. Avery Dennison (Hong Kong) Limited........................ Hong Kong
13. Avery Dennison (India) Private Limited.................... India
14. Avery Dennison (Ireland) Limited.......................... Ireland
15. Avery Dennison (Retail) Limited........................... Australia
16. Avery Dennison Argentina S.A. ............................ Argentina
17. Avery Dennison Australia Limited.......................... Australia
18. Avery Dennison C.A. ...................................... Venezuela
19. Avery Dennison Canada Inc. ............................... Canada
20. Avery Dennison Danmark A/S................................ Denmark
21. Avery Dennison Foreign Sales Corporation.................. Barbados
22. Avery Dennison France S.A. ............................... France
23. Avery Dennison Holdings Limited........................... Australia
24. Avery Dennison Mexico S.A. de C.V. ....................... Mexico
25. Avery Dennison Office Products Company.................... Nevada
26. Avery Dennison Office Products U.K. Ltd. ................. United Kingdom
27. Avery Dennison Overseas Corporation....................... Massachusetts
28. Avery Dennison Singapore (Pte) Ltd. ...................... Singapore
29. Avery Dennison U.K. Limited............................... United Kingdom
30. Avery Etiketsystemer A/S.................................. Denmark
31. Avery Etiketten B.V. ..................................... Netherlands
32. Avery Etiketten N.V. ..................................... Belgium
33. Avery Etikettier-Logistik GmbH............................ Germany
34. Avery Etikettsystem Svenska AB............................ Sweden
35. Avery Foreign Sales Corporation B.V. ..................... Netherlands
36. Avery Graphic Systems, Inc. .............................. Delaware
37. Avery Guidex Limited...................................... United Kingdom
38. Avery Holding AG.......................................... Switzerland
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION
IN WHICH
ORGANIZED
------------
<C> <S> <C>
39. Avery Holding B.V. .................................. Netherlands
40. Avery Holding Limited................................ United Kingdom
41. Avery Holding S.A. .................................. France
42. Avery International France S.A. ..................... France
43. Avery International Holding GmbH..................... Germany
44. Avery International Overseas Finance N.V. ........... Netherlands Antilles
45. Avery Korea Limited.................................. Korea
46. Avery Label (Northern Ireland) Limited............... United Kingdom
47. Avery Maschinen GmbH................................. Germany
48. Avery Pacific Corporation............................ California
49. Avery Properties Pty. Limited........................ Australia
50. Avery Specialty Tape Division N.V. .................. Belgium
51. Avery, Inc. ......................................... California
52. Cardinal Insurance Limited........................... Bermuda
53. Dennison do Brasil Industria e Comercio Ltda. ....... Brazil
54. Dennison International Company....................... Massachusetts
55. Dennison International Holding B.V. ................. Netherlands
56. Dennison Ireland Limited............................. Ireland
57. Dennison Limited..................................... United Kingdom
58. Dennison Magnetic Media Limited...................... Ireland
59. Dennison Manufacturing (Trading) Ltd. ............... United Kingdom
60. Dennison Manufacturing Company....................... Nevada
61. Dennison Monarch Systems, Inc. ...................... Delaware
62. Dennison Office Products Limited..................... Ireland
63. DMC Development Corporation.......................... Nevada
64. Etikettrykkeriet A/S................................. Denmark
65. Fasson (Schweiz) A.G. ............................... Switzerland
66. Fasson Belgie N.V. .................................. Belgium
67. Fasson Canada Inc. .................................. Canada
68. Fasson de Mexico S.A. ............................... Mexico
69. Fasson Deutschland GmbH.............................. Germany
70. Fasson Espana S.A. .................................. Spain
71. Fasson France S.a.r.L. .............................. France
72. Fasson Hemel Hempstead Limited....................... United Kingdom
73. Fasson Ireland Limited............................... Ireland
74. Fasson Italia S.p.A. ................................ Italy
75. Fasson Luxembourg S.A. .............................. Luxembourg
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION
IN WHICH
ORGANIZED
------------
<C> <S> <C>
76. Fasson Nederland B.V. ..................................... Netherlands
77. Fasson Norge A/S........................................... Norway
78. Fasson Osterreich GmbH..................................... Austria
79. Fasson Portugal Produtos Auto-Adesivos Lda. ............... Portugal
80. Fasson Products (Proprietary) Limited...................... South Africa
81. Fasson Produtos Adesivos Ltda. ............................ Brazil
82. Fasson Pty. Limited........................................ Australia
83. Fasson Scandinavia A/S..................................... Denmark
84. Fasson Suomi OY............................................ Finland
85. Fasson Sverige AB.......................................... Sweden
86. Fasson U.K. Limited........................................ United Kingdom
87. Indumarco Comercial Ltda. ................................. Brazil
88. LDNA Corporation........................................... California
89. Metallised Films & Papers Ltd. ............................ United Kingdom
90. Monarch Industries, Inc. .................................. New Jersey
91. Novexx Modul Vertriebs GmbH................................ Germany
92. Presto SarL................................................ France
93. Retail Products Limited.................................... Ireland
94. Security Printing Division, Inc. .......................... Delaware
95. Soabar Systems (Hong Kong) Limited......................... Hong Kong
96. Soabar Systems Hong Kong B.V. ............................. Netherlands
97. Societe Civile Immobiliere Sarrail......................... France
98. TIADECO Participacoes, Ltda. .............................. Brazil
</TABLE>
All of the preceding subsidiaries have been consolidated in the Registrant's
financial statements and no separate financial statements have been filed.
The parent company also owns 50% of Avery-Toppan Company, Limited (Japan)
and 51% of Avery--Petofi KFT (Hungary), which companies may be deemed to be
subsidiaries. Registrant's share of the losses and profits is included on an
equity basis in the Consolidated Statement of Income.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 27,000
<SECURITIES> 0
<RECEIVABLES> 461,700
<ALLOWANCES> (17,600)
<INVENTORY> 223,200
<CURRENT-ASSETS> 800,100
<PP&E> 1,652,100
<DEPRECIATION> (744,700)
<TOTAL-ASSETS> 1,963,600
<CURRENT-LIABILITIES> 672,500
<BONDS> 334,000
<COMMON> 62,100
0
0
<OTHER-SE> 753,700
<TOTAL-LIABILITY-AND-EQUITY> 1,963,600
<SALES> 3,113,900
<TOTAL-REVENUES> 3,113,900
<CGS> 2,156,600
<TOTAL-COSTS> 2,156,600
<OTHER-EXPENSES> 688,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,300
<INCOME-PRETAX> 224,700
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 143,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,700
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 0
</TABLE>
