<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 27, 1998
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, PASADENA, CALIFORNIA 91103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (626) 304-2000
Indicate by a check X 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 _____
-----
Number of shares of $1 par value common stock outstanding as of July 24,
1998: 117,011,192
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
INDEX TO FORM 10-Q
------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information (Unaudited):
Financial Statements:
Condensed Consolidated Balance Sheet
June 27, 1998 and December 27, 1997 3
Consolidated Statement of Income
Three and Six Months Ended June 27, 1998 and June 28, 1997 4
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 27, 1998 and June 28, 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Results of Operations and
Financial Condition 11
Part II. Other Information:
Quantitative and Qualitative Disclosures About Market Risk 16
Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
June 27, 1998 December 27, 1997
----------------------- ------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3.7 $ 3.3
Trade accounts receivable, net 485.3 457.7
Inventories, net 243.9 230.1
Prepaid expenses 22.8 19.6
Other current assets 76.0 82.8
----------------------- ------------------------
Total current assets 831.7 793.5
Property, plant and equipment, at cost 1,836.7 1,790.5
Accumulated depreciation (843.0) (805.2)
----------------------- ------------------------
993.7 985.3
Intangibles resulting from business acquisitions, net 134.4 133.7
Other assets 140.5 134.0
----------------------- ------------------------
$ 2,100.3 $ 2,046.5
======================= ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 61.5 $ 43.6
Accounts payable 265.9 245.3
Other current liabilities 313.5 341.0
----------------------- ------------------------
Total current liabilities 640.9 629.9
Long-term debt 449.8 404.1
Deferred taxes and other long-term liabilities 172.0 175.3
Shareholders' equity:
Common stock - $1 par value authorized - 400,000,000 shares;
issued - 124,126,624 shares at June 27, 1998 and
December 27, 1997 124.1 124.1
Capital in excess of par value 714.9 592.5
Retained earnings 1,125.7 1,063.6
Cumulative foreign currency translation adjustment (25.6) (21.4)
Cost of unallocated ESOP shares (19.3) (23.4)
Minimum pension liability (1.1) (1.1)
Employee stock benefit trusts, 15,503,703 shares at
June 27, 1998 and 16,693,347 shares at December 27, 1997 (822.5) (730.3)
Treasury stock at cost, 6,879,272 shares at June 27,
1998 and 5,053,046 shares at December 27, 1997 (258.6) (166.8)
----------------------- ------------------------
Total shareholders' equity 837.6 837.2
----------------------- ------------------------
$ 2,100.3 $ 2,046.5
======================= ========================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 27, 1998 June 28, 1997 June 27, 1998 June 28, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 871.5 $ 844.8 $ 1,715.1 $ 1,673.7
Cost of products sold 580.2 571.0 1,143.3 1,137.0
------------- ------------- ------------- -------------
Gross profit 291.3 273.8 571.8 536.7
Marketing, general and
administrative expense 196.0 188.7 386.1 369.0
Interest expense 8.5 8.8 16.6 17.3
------------- ------------- ------------- -------------
Income before taxes 86.8 76.3 169.1 150.4
Taxes on income 29.4 26.7 57.5 52.6
------------- ------------- ------------- -------------
Net income $ 57.4 $ 49.6 $ 111.6 $ 97.8
============= ============= ============= =============
PER SHARE AMOUNTS:
Net income per common share $ .56 $ .48 $ 1.09 $ .95
Net income per common share,
assuming dilution .55 .47 1.07 .92
Dividends .21 .17 .42 .34
AVERAGE SHARES OUTSTANDING:
Common shares 101.7 103.3 102.0 103.4
Common shares, assuming dilution 104.4 106.2 104.7 106.4
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------------
June 27, 1998 June 28, 1997
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 111.6 $ 97.8
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 55.3 52.1
Amortization 6.0 5.6
Deferred taxes (1.3) 5.8
Net change in assets and liabilities, net of the effect of
foreign currency translation and business divestitures and
acquisitions (23.5) (73.0)
------------------- -------------------
Net cash provided by operating activities 148.1 88.3
------------------- -------------------
INVESTING ACTIVITIES:
- --------------------
Purchase of property, plant and equipment (74.4) (67.6)
Net payments from sale of assets, business
divestitures and acquisitions (3.1) (4.2)
Other (6.0) (3.8)
------------------- -------------------
Net cash used in investing activities (83.5) (75.6)
------------------- -------------------
FINANCING ACTIVITIES:
- --------------------
Net increase in short-term debt 94.9 121.5
Net decrease in long-term debt (31.7) (53.0)
Dividends paid (49.5) (41.2)
Purchase of treasury stock (91.8) (40.7)
Proceeds from exercise of stock options 15.2 6.7
Other (1.3) .2
------------------- -------------------
Net cash used in financing activities (64.2) (6.5)
------------------- -------------------
Effect of foreign currency translation on cash balances -- (.5)
------------------- -------------------
Increase in cash and cash equivalents .4 5.7
------------------- -------------------
Cash and cash equivalents, beginning of period 3.3 3.8
------------------- -------------------
Cash and cash equivalents, end of period $ 3.7 $ 9.5
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements include normal
recurring adjustments necessary for a fair presentation of the Company's
interim results. Certain prior year amounts have been reclassified to conform
with current year presentation. The condensed financial statements and notes
in this Form 10-Q are presented as permitted by Regulation S-X, and as such,
they do not contain certain information included in the Company's 1997 annual
financial statements and notes.
The second quarters of 1998 and 1997 consisted of thirteen-week periods
ending June 27, 1998 and June 28, 1997, respectively. The interim results of
operations are not necessarily indicative of future financial results.
2. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", was adopted during the first quarter of 1998. The
standard establishes guidelines for the reporting and display of
comprehensive income and its components in financial statements.
Comprehensive income includes foreign currency translation adjustments and
adjustments to the minimum pension liability that are currently presented as
components of shareholders' equity. Companies are required to report total
comprehensive income for interim periods beginning first quarter of 1998.
Disclosure of comprehensive income and its components will be required
beginning fiscal year end 1998. The Company's total comprehensive income for
the three and six months ended June 27, 1998 was $63.4 million and $107.4
million, respectively. For the three and six months ended June 28, 1997,
total comprehensive income was $45.8 million and $68.5 million, respectively.
3. FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies and translation of the financial
statements of subsidiaries which operate in hyperinflationary economies
during 1998 resulted in losses of $.4 million and $1.4 million, respectively,
during the three and six months ended June 27, 1998. The Company did not
incur any losses during the second quarter of 1997 and incurred $.6 million
of losses, during the six months ended June 28, 1997. Operations in
hyperinflationary economies consist of the Company's Mexican operations for
1998 and 1997 and Brazilian operations for 1997.
4. FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward and option contracts and
interest rate contracts to manage exposure to fluctuations in foreign
currency exchange and interest rates. The Company does not hold or purchase
any foreign currency or interest rate contracts for trading purposes.
6
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. FINANCIAL INSTRUMENTS (CONTINUED)
Foreign exchange forward and option contracts that hedge existing assets,
liabilities or firm commitments are measured at fair value and the related
gains and losses on these contracts are recognized in net income currently.
Foreign exchange forward and option contracts that hedge forecasted
transactions are measured at fair value and the related gains and losses on
these contracts are deferred and subsequently recognized in net income in the
period in which the underlying transaction is consummated. In the event that
an anticipated transaction is no longer likely to occur, the Company
recognizes the change in fair value of the instrument in net income
currently.
Gains and losses resulting from foreign exchange forward and option contracts
are recorded in the same category as the related item being hedged. Cash
flows from the use of financial instruments are reported in the same category
as the hedged item in the Condensed Consolidated Statement of Cash Flows.
Gains and losses on contracts used to hedge the value of investments in
certain foreign subsidiaries are included in the cumulative foreign currency
translation adjustment component of shareholders' equity.
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.
5. INVENTORIES
Inventories consisted of (in millions):
<TABLE>
<CAPTION>
June 27, 1998 December 27, 1997
----------------------- ------------------------
<S> <C> <C>
Raw materials $ 74.4 $ 74.4
Work-in-progress 67.4 70.9
Finished goods 131.1 114.7
LIFO adjustment (29.0) (29.9)
----------------------- ------------------------
$ 243.9 $ 230.1
======================= ========================
</TABLE>
6. INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Accumulated amortization of intangible assets at June 27, 1998 and December
27, 1997 was $52 million and $49.4 million, respectively.
7. RESEARCH AND DEVELOPMENT
Research and development expense for the three and six months ended June 27,
1998 was $17.4 million and $33.6 million, respectively. For the three and six
months ended June 28, 1997, research and development expense was $16.1
million and $30.6 million, respectively.
7
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 two 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 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. Based on current site assessments, management believes that the
potential liability over the amounts currently accrued would not materially
affect the Company.
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 Company.
9. NET INCOME PER SHARE
SFAS No. 128, "Earnings Per Share", was adopted in the fourth quarter of 1997
and supersedes the Company's previous standards for computing net income per
share under Accounting Principles Board No. 15. The new standard requires
dual presentation of net income per common share and net income per common
share, assuming dilution, on the face of the income statement. All prior year
net income per share data has been restated for 1997 in accordance with the
new standard.
8
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. NET INCOME PER SHARE (CONTINUED)
In accordance with SFAS No. 128, net income per common share amounts were
computed as follows:
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- ----------------------------------
June 27, 1998 June 28, 1997 June 27, 1998 June 28, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(A) Net income available to common
shareholders $ 57.4 $ 49.6 $ 111.6 $ 97.8
============= ============= ============= =============
(B) Weighted average number of
common shares outstanding 101.7 103.3 102.0 103.4
Additional common shares issuable
under employee stock options
using the treasury stock method 2.7 2.9 2.7 3.0
------------- ------------- ------------- -------------
(C) Weighted average number of
common shares outstanding
assuming the exercise of stock
options 104.4 106.2 104.7 106.4
============= ============= ============= =============
Net income per common share (A) / (B) $ .56 $ .48 $ 1.09 $ .95
============= ============= ============= =============
Net income per common share,
assuming dilution (A) / (C) .55 .47 1.07 .92
============= ============= ============= =============
</TABLE>
10.FUTURE ACCOUNTING REQUIREMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information".
The standard establishes guidelines for reporting information on operating
segments in interim and annual financial statements. The new standard will be
effective for the 1998 fiscal year. Abbreviated quarterly disclosure will be
required beginning first quarter of 1999, and will include both 1999 and 1998
information. The Company does not believe that the new standard will have a
material impact on the reporting of its segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives will be recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. The new rules will be effective the first quarter
of 2000. The Company is in the process of determining the impact of this new
standard and anticipates that it will not have a material impact on the
Company's financial results when effective.
9
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. SUBSEQUENT EVENT
On July 23, 1998, the Board of Directors authorized the repurchase of 5
million shares of the Company's outstanding common stock. This is in addition
to prior authorizations to purchase up to an aggregate of 30.4 million
shares. Stock purchases may be made from time to time at the discretion of
Company management.
10
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS: FOR THE QUARTER
- --------------------------------------
Quarterly sales increased to $871.5 million, a 3.2 percent increase over second
quarter 1997 sales of $844.8 million. Excluding changes in foreign currency
rates, sales increased 5 percent.
The gross profit margin increased to 33.4 percent for the quarter compared to
32.4 percent for the second quarter of 1997. The increase was due to ongoing
cost reduction programs, increased productivity and improved product mix.
Marketing, general and administrative expense, as a percent of sales, was 22.5
percent compared to 22.3 percent for the second quarter of 1997, primarily due
to an increase in research and development expenses, reflecting the Company's
focus on new product development.
Interest expense declined to $8.5 million for the second quarter of 1998,
compared to $8.8 million a year ago, due to lower average debt. Income before
taxes, as a percent of sales, increased to 10 percent from 9 percent a year ago,
primarily as a result of the improvement in gross profit. The effective tax rate
declined to 33.9 percent for the second quarter of 1998 compared to 35 percent
for the second quarter of 1997, primarily due to an increase in U.S. tax credits
for research and experimentation.
Net income increased 15.7 percent to $57.4 million compared to $49.6 million in
the second quarter of 1997. Net income per common share for the quarter was $.56
compared to $.48 in the same period last year, a 16.7 percent increase. Net
income per common share, assuming dilution was $.55 for the second quarter of
1998 and $.47 for the second quarter of 1997, a 17 percent increase year over
year.
Results of Operations by Business Sector
The Pressure-sensitive adhesives and materials sector reported increased sales
and profits for the second quarter of 1998 compared to the same period last
year. The U.S. operations' reported sales and profit growth was primarily led by
increased demand for film applications and digital graphics products. The
international operations' reported sales growth was primarily due to increased
demand for digital graphics products and geographic expansion, which was
partially offset by changes in foreign currency rates. Profits for the
international operations were primarily impacted by our geographic expansion
program and changes in foreign currency rates.
The Consumer and converted products sector reported increased sales and profits
for the second quarter of 1998 compared to the same period last year. Increased
sales and profits in the U.S. operations continue to be led by growth of its
Avery-brand products and other consumer products. Increased sales in the
international operations were primarily due to new products and geographic
expansion, which were partially offset by changes in foreign currency rates.
Increased profits in the international businesses were primarily due to new
products and higher unit volume in certain European operations.
11
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS: SIX MONTHS YEAR-TO-DATE
- ----------------------------------------------
Sales for the first six months of 1998 were up 2.5 percent to $1.72 billion
compared to $1.67 billion in the corresponding period of 1997. Excluding changes
in foreign currency rates, sales increased 5 percent.
The gross profit margin for the first six months was 33.3 percent compared to
32.1 percent for the first six months of 1997. The increase was due to ongoing
cost reduction programs, increased productivity and improved product mix.
Marketing, general and administrative expense, as a percent of sales, for the
first six months was 22.5 percent compared to 22 percent for the first six
months of 1997 primarily due to increases in marketing and research and
development expenses, reflecting the Company's focus on marketing promotion and
new product development expenses.
Interest expense declined to $16.6 million for the first six months compared to
$17.3 million for the first six months of 1997. The decrease was primarily due
to lower average debt. Income before taxes, as a percent of sales, increased to
9.9 percent for the first six months of 1998 compared to 9 percent for 1997, as
a result of the improvement in gross profit. The year-to-date effective tax rate
was 34 percent for 1998 and 35 percent for 1997 primarily due to an increase in
U.S. tax credits for research and experimentation. The Company estimates that
the effective tax rate for 1998 will be 34 to 34.5 percent.
Net income was $111.6 million for the first six months of 1998 compared to $97.8
million for the first six months of 1997. Net income per common share increased
14.7 percent to $1.09 for the first six months of 1998 compared to $.95 for the
same period last year. Net income per common share, assuming dilution was $1.07
for the first six months of 1998 compared to $.92 for the same period last year,
a 16.3 percent increase year over year.
Results of Operations by Business Sector
The Pressure-sensitive adhesives and materials sector reported increased sales
and profits for the first six months of 1998 compared to the same period last
year. The U.S. operations' sales and profit growth were primarily led by
increased demand for film applications and digital graphics products. Sales and
profits for the international operations were impacted by changes in foreign
currency rates.
The Consumer and converted products sector reported increased sales and profits
for the first six months of 1998 compared to 1997. Increased sales and profits
in the U.S. operations continue to be led by growth of its Avery-brand products
and other consumer products. Increased sales in the international operations
were primarily due to new products and geographic expansion, which were
partially offset by changes in foreign currency rates. Increased profits in the
international operations were primarily due to new products and higher unit
volume in certain European operations.
12
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION
- -------------------
Average working capital, excluding short-term debt, as a percentage of sales,
improved to 7.2 percent for the quarter from 9.3 percent a year ago. Average
inventory turnover for the second quarter was 9.5 inventory turns compared to 9
inventory turns a year ago; the average number of days of sales outstanding in
accounts receivable was 51 days compared to 54 days a year ago.
Net cash flows provided by operating activities totaled $148.1 million for the
first six months of 1998 and $88.3 million for the first half of 1997. The
increase in net cash flows provided by operating activities is primarily due to
a reduction in working capital requirements and the Company's improved
profitability.
Capital spending for the quarter was $37.6 million compared to $35.9 million a
year ago. For the first six months of 1998, capital spending totaled $74.4
million compared to $67.6 million a year ago. Total capital spending for 1998 is
expected to be approximately $175 to $200 million. In addition to cash flow from
operations, the Company has more than adequate financing arrangements to conduct
its operations.
During the first six months of 1998, total debt increased $63.6 million to
$511.3 from year end 1997. During the fourth quarter of 1996, the Company
registered with the Securities and Exchange Commission, $150 million in
principal amount of medium-term notes, of which $60 million in notes had been
issued as of year end 1997. No notes were issued for the first six months of
1998. Proceeds from the medium-term notes have been used to reduce debt and for
other general corporate purposes.
Shareholders' equity increased to $837.6 million from $837.2 million at year end
1997. During the second quarter of 1998, the Company purchased .6 million shares
of common stock at a cost of $33.8 million. For the first six months of 1998,
the Company purchased 1.8 million shares of common stock at a cost of $91.8
million. The market value of shares held in the employee stock benefit trusts,
after the issuance of shares under the Company's stock and incentive plans,
increased during the quarter by $92.2 million to $822.5 million from year end
1997. Total debt to total capital was 37.9 percent at the end of second quarter
of 1998 and 39.1 percent for the same period in 1997. Dividends paid for the
first six months of 1998 totaled $49.5 million compared to $41.2 million a year
ago.
FUTURE ACCOUNTING REQUIREMENTS
- ------------------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". The standard establishes guidelines for
reporting information on operating segments in interim and annual financial
statements. The new rules will be effective for the 1998 fiscal year.
Abbreviated quarterly disclosure will be required beginning first quarter of
1999, and will include both 1999 and 1998 information. The Company does not
believe that the new standard will have a material impact on the reporting of
its segments.
13
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FUTURE ACCOUNTING REQUIREMENTS (CONTINUED)
- ------------------------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives will be recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
new rules will be effective the first quarter of 2000. The Company is in the
process of determining the impact of this new standard and anticipates that it
will not have a material impact on the Company's financial results when
effective.
YEAR 2000
- ---------
The Year 2000 (Y2K) issue is the result of computer programs being written for,
or microprocessors using, two digits (rather than four) to define the applicable
year. Company computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000, which could result
in system failures or miscalculations. The Company is currently working to
mitigate the Y2K issue and has established processes for assessing the risks and
associated costs.
The Company categorizes its Y2K efforts as follows: hardware, software, embedded
processors, vendors and customers. Progress in assessing and remediating
information technology systems (hardware and software) and non-information
technology systems (embedded processors) will be tracked in phases including
assessment, identification of non-compliant systems, remediation, testing and
verification. Hardware, software and embedded processors have been assessed and
remediation is in progress. The Company expects that a large portion of the
Company's internal remediation work will be completed by year end 1998. The
Company will use internal and external resources to remediate and test its
systems, and to develop contingency plans to mitigate risks associated with the
Y2K issue.
The Company has initiated communications with significant vendors and customers
to coordinate the Y2K issue, and is in the process of determining the Company's
vulnerability if these companies fail to remediate their Y2K issues. There can
be no guarantee that the systems of other companies will be timely remediated,
or that other companies' failure to remediate Y2K issues would not have a
material adverse effect on the Company.
Costs incurred to date in addressing the Y2K issue have not been significant and
are being funded through operating cash flows. Based on current information,
costs to remediate and test the Company's systems are not expected to be
material.
The Company presently believes that with remediation, Y2K risks can be
mitigated. However, although the Company is not currently aware of any material
internal operational or financial Y2K related issues, the Company cannot provide
assurances that the computer systems, products, services or other systems upon
which the Company depends will be Y2K ready on schedule, that the costs of its
Y2K program will not become material or that the Company's contingency plans
will be adequate. The Company is currently unable to evaluate accurately the
magnitude, if any, of the Y2K related issues arising from the Company's vendors
and customers. If any such risks (either with respect to the Company or its
vendors or customers) materialize, the Company could experience serious
consequences to its business which could have material adverse effects on the
Company's financial condition, results of operations and liquidity.
14
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SAFE HARBOR STATEMENT
- ---------------------
Except for historical information contained herein, the matters discussed in the
Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this Form 10-Q contain "forward-looking
statements" within the meaning of the Private Securities Reform Act of 1995.
These statements, which are not statements of historical fact, may contain
estimates, assumptions, projections and/or expectations regarding future events.
Such forward-looking statements, and financial or other business targets, are
subject to certain risks and uncertainties which could cause actual results to
differ materially from any future results, performance or achievements of the
Company expressed or implied by such forward-looking statements. Such risks and
uncertainties are discussed in more detail in the Company's Annual Report on
Form 10-K for the year ended December 27, 1997 and include, but are not limited
to, risks and uncertainties relating to investment in new production facilities,
timely development and successful marketing of new products, impact of
competitive products and pricing, customer and supplier and manufacturing
concentrations, changes in customer order patterns, increased competition,
impact of Year 2000 issues, litigation risks, fluctuations in foreign exchange
rates or other risks associated with foreign operations, changes in economic or
political conditions, and other factors.
Any forward looking statements should also be considered in light of the factors
detailed in Exhibit 99 in the Company's Annual Report on Form 10-K for the year
ended December 27, 1997.
The Company's forward-looking statements represent its judgment only on the
dates such statements were made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed or unanticipated
events or circumstances.
15
<PAGE>
PART II. OTHER INFORMATION
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
There are no material changes in the information provided in Item 7A of the
Company's Form 10-K for the fiscal year ended December 27, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
a. Exhibits: 3(ii) Bylaws of Avery Dennison Corporation - amended and
restated July 23, 1998
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
b. Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended June 27, 1998.
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AVERY DENNISON CORPORATION
--------------------------
(Registrant)
/s/ Robert M. Calderoni
-----------------------------------
Robert M. Calderoni
Senior Vice President, Finance, and
Chief Financial Officer
(Principal Financial Officer)
/s/ Thomas E. Miller
-----------------------------------
Thomas E. Miller
Vice President and Controller
(Chief Accounting Officer)
August 7, 1998
17
<PAGE>
EXHIBIT 3(ii)
BYLAWS
OF
AVERY DENNISON CORPORATION
ARTICLE I
---------
OFFICES
Section 1. Registered Office. The registered office of Avery Dennison
Corporation (hereinafter called the "corporation") in the State of Delaware
shall be at 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent at that address shall be United States Corporation
Company.
Section 2. Principal Office. The principal executive office for the
transaction of the business of the corporation is hereby fixed and located in
Los Angeles County, California. The board of directors is hereby granted full
power and authority to change said principal executive office from one location
to another within or without the State of California.
Section 3. Other Offices. The corporation may also have offices at such
other places within or without the State of Delaware as the board of directors
may from time to time determine, or the business of the corporation may require.
ARTICLE II
----------
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the board of
directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. Annual Meetings of Stockholders. The annual meeting of
stockholders shall be held on the last Thursday in April of each year at 1:30
p.m. of said day, or on such other day, which shall not be a legal holiday, as
shall be determined by the board of directors. Any previously scheduled annual
meeting of stockholders may be postponed by resolution of the board of directors
upon public notice given prior to the date previously scheduled for such annual
meeting of stockholders.
Section 3. Special Meetings. A special meeting of the stockholders may be
called at any time by the board of directors, or by a majority of the directors
or by a committee authorized by the board to do so. Any previously scheduled
special meeting of the stockholders may be postponed by resolution of the board
of directors upon public notice given prior to the date previously scheduled for
such special meeting of the stockholders.
Page 1 of 16
<PAGE>
Section 4. Notice of Stockholders' Meetings. All notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before the
date of the meeting being noticed. The notice shall specify the place, date and
hour of the meeting and (i) in case of a special meeting, the general nature of
the business to be transacted, or (ii) in the case of the annual meeting, those
matters which the board of directors, at the time of giving the notice, intends
to present for action by the stockholders. The notice of any meeting at which
directors are to be elected shall include the name of any nominee or nominees
who, at the time of the notice, management intends to present for election.
Section 5. Manner of Giving Notice; Affidavit of Notice. Notice of any
meeting of stockholders shall be given either personally or by mail or
telegraphic or other written communication, charges prepaid, addressed to the
stockholder at the address of such stockholder appearing on the books of the
corporation or given by the stockholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or has been so
given, notice shall be deemed to have been given if sent by mail or telegraphic
or other written communication to the corporation's principal executive office,
or if published at least once in a newspaper of general circulation in the
county where such office is located. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice
of any stockholders' meeting shall be executed by the secretary, assistant
secretary or any transfer agent of the corporation giving such notice, and shall
be filed and maintained in the minute book of the corporation.
Section 6. Quorum. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of stockholders shall
constitute a quorum for the transaction of business. The stockholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 7. Adjourned Meeting and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the Chairman of the meeting, but in the absence of a
quorum, no other business may be transacted at such meeting, except as provided
in Section 6 of this Article II.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than thirty (30) days from the date
set for the original meeting. Notice of any such adjourned meeting, if required,
shall be given to each stockholder of record entitled to vote at the adjourned
meeting in accordance with the provisions of Sections 4 and 5 of this Article
II. At any adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting.
Page 2 of 16
<PAGE>
Section 8. Voting. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section 11
of this Article II. Such vote may be by voice vote or by ballot, at the
discretion of the Chairman of the meeting. Any stockholder entitled to vote on
any matter (other than the election of directors) may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote them
against the proposal; but, if the stockholder fails to specify the number of
shares such stockholder is voting affirmatively, it will be conclusively
presumed that the stockholder's approving vote is with respect to all shares
such stockholder is entitled to vote. If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and entitled to
vote on any matter shall be the act of the stockholders, unless the vote of a
greater number or voting by classes is required by the Delaware General
Corporation Law or the certificate of incorporation or the certificate of
determination of preferences as to any preferred stock.
At a stockholders' meeting involving the election of directors,
no stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the number of the stockholder's
shares). The candidates receiving the highest number of votes, up to the number
of directors to be elected, shall be elected.
Section 9. Waiver of Notice or Consent by Absent Stockholders. The
transactions of any meeting of stockholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a
waiver of notice of such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters not included
in the notice of the meeting if such objection is expressly made at the meeting.
Section 10. No Stockholder Action by Written Consent Without a Meeting.
Stockholders may take action only at a regular or special meeting of
stockholders.
Section 11. Record Date for Stockholder Notice and Voting. For purposes
of determining the holders entitled to notice of any meeting or to vote, the
board of directors may fix, in advance, a record date, which shall not be more
than sixty (60) days nor less than ten (10) days prior to the date of any such
meeting, and in such case only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date fixed as aforesaid, except as
otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
Page 3 of 16
<PAGE>
Section 12. Proxies. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy, or (ii) written notice of the death or
incapacity of the maker of such proxy is received by the corporation before the
vote pursuant thereto is counted; provided, however, that no such proxy shall be
valid after the expiration of eleven (11) months from the date of such proxy,
unless otherwise provided in the proxy.
Section 13. Inspectors of Election; Opening and Closing the Polls. The
board of directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate has
been appointed to act or is able to act at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by law.
The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
Section 14. Nomination and Stockholder Business Bylaw.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the board of directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the corporation's notice of meeting, (b) by or
at the direction of the board of directors or (c) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A) (1)
of this Bylaw, the stockholder must have given timely notice thereof in writing
to the secretary of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for
Page 4 of 16
<PAGE>
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the board of directors of the corporation is increased and
there is no public announcement by the corporation naming all of the nominees
for director or specifying the size of the increased board of directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the board of
directors or (b) provided that the board of directors has determined that
directors shall be elected at such meeting, by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw. In the event the
corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the board of directors, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by paragraph (A) (2) of this Bylaw shall be
delivered to the secretary at the principal executive offices of the corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
Page 5 of 16
<PAGE>
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock, if any, to elect directors under certain
circumstances.
ARTICLE III
-----------
DIRECTORS
Section 1. Powers. Subject to the provisions of the Delaware General
Corporation Law and any limitations in the certificate of incorporation and
these bylaws relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
Without prejudice to such general powers, but subject to the
same limitations, it is hereby expressly declared that the directors shall have
the power and authority to:
(a) Select and remove all officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the certificate of incorporation or these bylaws,
fix their compensation, and require from them security for faithful
service.
(b) Change the principal executive office or the principal
business office in the State of California from one location to another;
cause the corporation to be qualified to do business in any other state,
territory, dependency, or foreign country and conduct business within or
outside the State of California; designate any place within or without the
State of California for the holding of any stockholders' meeting or
meetings, including annual meetings; adopt, make and use a corporate seal,
and prescribe the forms of certificates of stock, and alter the form of
such seal and of such certificates from time to time as in their judgment
they may deem best, provided that such forms shall at all times comply with
the provisions of law.
Page 6 of 16
<PAGE>
(c) Authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually rendered,
debts or securities canceled or tangible or intangible property actually
received.
(d) Borrow money and incur indebtedness for the purpose of the
corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and
securities therefor.
Section 2. Number and Qualification of Directors. The number of directors
of the corporation shall be ten (10) until changed by a bylaw amending this
Section 2, duly adopted by the board of directors or by the stockholders.
Section 3. Election and Term of Office of Directors. Subject to Section
15 below, one class of the directors shall be elected at each annual meeting of
the stockholders, but if any such annual meeting is not held or the directors
are not elected thereat, the directors may be elected at any special meeting of
stockholders held for that purpose. All directors shall hold office until their
respective successors are elected. Irrespective of the provisions of Section 15
of this Article III and of the preceding sentence, a director shall
automatically be retired on the date of the expiration of the first annual
meeting following his 72nd birthday.
Section 4. Vacancies. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director. Each director elected to fill a vacancy shall hold
office for the remainder of the term of the person whom he succeeds, and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be
deemed to exist in the case of the death, retirement, resignation or removal of
any director, or if the board of directors by resolution declares vacant the
office of a director who has been declared of unsound mind by an order of court
or convicted of a felony, or if the authorized number of directors be increased,
or if the stockholders fail at any meeting of stockholders at which any director
or directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
Any director may resign or voluntarily retire upon giving
written notice to the chairman of the board, the president, the secretary or the
board of directors. Such retirement or resignation shall be effective upon the
giving of the notice, unless the notice specifies a later time for its
effectiveness. If such retirement or resignation is effective at a future time,
the board of directors may elect a successor to take office when the retirement
or resignation becomes effective.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of his term of
office. No director may be removed during his term except for cause.
Section 5. Place of Meetings and Telephonic Meetings. Regular meetings of
the board of directors may be held at any place within or without the State of
Delaware that has been designated from time to time by resolution of the board.
In the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board
shall be held at any place within or without the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or there
is no notice, at the principal executive office of the corporation. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all directors
Page 7 of 16
<PAGE>
participating in such meeting can hear one another, and all such directors shall
be deemed to be present in person at such meeting.
Section 6. Annual Meetings. Immediately following each annual meeting of
stockholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers and transaction of
other business. Notice of this meeting shall not be required.
Section 7. Other Regular Meetings. Other regular meetings of the board of
directors shall be held at such time as shall from time to time be determined by
the board of directors. Such regular meetings may be held without notice
provided that notice of any change in the determination of time of such meeting
shall be sent to all of the directors. Notice of a change in the determination
of the time shall be given to each director in the same manner as for special
meetings of the board of directors.
Section 8. Special Meetings. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two
directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at his or her
address as it is shown upon the records of the corporation. In case such notice
is mailed, it shall be deposited in the United States mail at least four (4)
days prior to the time of the holding of the meeting. In case such notice is
delivered personally, or by telephone or telegram, it shall be delivered
personally, or by telephone or to the telegraph company at least forty-eight
(48) hours prior to the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated to either the director or
to a person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose of the meeting nor the place if the meeting is to be
held at the principal executive office of the corporation.
Section 9. Quorum. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 10. Waiver of Notice. The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes thereof. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
Section 11. Adjournment. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Page 8 of 16
<PAGE>
Section 12. Notice of Adjournment. Notice of the time and place of an
adjourned meeting need not be given, unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of such time and place shall
be given prior to the time of the adjourned meeting, in the manner specified in
Section 8 of this Article III, to the directors who were not present at the time
of the adjournment.
Section 13. Action Without Meeting. Any action required or permitted to
be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
such action. Such action by written consent shall have the same force and
effect as a unanimous vote of the board of directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the board.
Section 14. Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such services.
Section 15. Classification of Directors. The board of directors shall be
and is divided into three classes, Class I, Class II and Class III. The number
of directors in each class shall be the whole number contained in the quotient
arrived at by dividing the authorized number of directors by three, and if a
fraction is also contained in such quotient then if such fraction is one-third
(1/3) the extra director shall be a member of Class III and if the fraction is
two-thirds (2/3) one of the extra directors shall be a member of Class III and
the other shall be a member of Class II. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected.
In the event of any increase or decrease in the authorized
number of directors, (a) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the expiration
of his current term, or his prior death, resignation or removal, and (b) the
newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the board of directors to such class or classes
as shall, so far as possible, bring the number of directors in the respective
classes into conformity with the formula in this Section 15, as applied to the
new authorized number of directors.
ARTICLE IV
----------
COMMITTEES
Section 1. Committees of Directors. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, including an executive committee, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall have all
the authority of the board, except with respect to:
(a) the approval of any action which, under the General
Corporation Law of Delaware, also requires stockholders' approval or
approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in
any committee;
Page 9 of 16
<PAGE>
(c) the fixing of compensation of the directors for serving on
the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation,
except at a rate or in a periodic amount or within a price range determined
by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members thereof.
Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment) and 13 (action without
meetings), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees may be
determined by resolution of the board of directors as well as the committee,
special meetings of committees may also be called by resolution of the board of
directors, and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
---------
OFFICERS
Section 1. Officers. The officers of the corporation shall be the
chairman of the board, the president, a vice president, a secretary and a
treasurer. The corporation may also have, at the discretion of the board of
directors, one or more additional vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person.
Section 2. Election of Officers. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article V, shall be chosen annually by the board of
directors, and each shall hold his office until he shall resign or be removed or
otherwise disqualified to serve or his successor shall be elected and qualified.
Section 3. Subordinate Officers, etc. The board of directors may appoint,
and may empower the president and chief executive officer to appoint, such other
officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the bylaws or as the board of directors may from time to time
determine.
Page 10 of 16
<PAGE>
Section 4. Removal and Resignation of Officers. Any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power of removal may be conferred by
the board of directors.
Any officer may resign at any time by giving written notice to
the corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. Vacancies in Office. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these bylaws for regular appointments to such office.
Section 6. Chairman of the Board. The chairman of the board shall be an
officer of the corporation and shall, subject to the control of the board of
directors, have general responsibility for strategic growth initiatives,
leadership development and other affairs as assigned by the board of directors
of the corporation.
Section 7. President. The president shall be the chief executive officer
of the corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and affairs of
the corporation.
Section 8. Vice Presidents. In the absence or disability of the
president, a vice president designated by the board of directors shall perform
all the duties of the president, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors
or the bylaws.
Section 9. Secretary. The secretary shall keep or cause to be kept, at
the principal executive office or such other place as the board of directors may
order, a book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' and committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a stock
register, or a duplicate register, showing the names of all stockholders and
their addresses, the number and classes of shares held by each, the number and
date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by the bylaws.
Page 11 of 16
<PAGE>
Section 10. Treasurer. The treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall be open at all
reasonable times to inspection by any director.
The treasurer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and chief executive officer and directors, whenever they request it,
an account of all of his transactions as treasurer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or the bylaws.
Section 11. Assistant Secretaries and Assistant Treasurers. Any assistant
secretary may perform any act within the power of the secretary, and any
assistant treasurer may perform any act within the power of the treasurer,
subject to any limitations which may be imposed in these bylaws or in board
resolutions.
ARTICLE VI
----------
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. Indemnification. The corporation shall indemnify, in the
manner and to the full extent permitted by law, any person (or the estate of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is a director
or officer of the corporation, and at the discretion of the board of directors
may indemnify any person (or the estate of any person) who is such a party or
threatened to be made such a party by reason of the fact that such person is or
was an employee or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. Unless
otherwise permitted by law, the indemnification provided for herein shall be
made only as authorized in the specific case upon a determination, in the manner
provided by law, that indemnification of the director, officer, employee or
agent is proper in the circumstances. The corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against him. To the full extent
permitted by law, the indemnification provided herein shall include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
and, in the manner provided by law, any such expenses may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Section 2. Fiduciaries of Corporate Employee Benefit Plan. This Article
VI does not apply to any proceeding against any trustee, investment manager or
other fiduciary of an employee benefit plan in such person's capacity as such,
even though such person may also be an agent of the corporation as defined in
Section 1 of this Article VI. Nothing contained in this Article VI shall limit
any right to indemnification to which such a trustee, investment manager or
other fiduciary may be entitled by contract or otherwise, which shall be
enforceable to the extent permitted by Section 410 of the Employee Retirement
Income Security Act of 1974, as amended, other than this Article VI.
Page 12 of 16
<PAGE>
ARTICLE VII
-----------
RECORDS AND REPORTS
Section 1. Maintenance and Inspection of Stock Register. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, if either be appointed, and as determined by resolution of
the board of directors, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of shares held by each
stockholder.
A stockholder or stockholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of stockholders' names and
addresses and stockholders during usual business hours upon five days prior
written demand upon the corporation, and/or (ii) obtain from the transfer agent
of the corporation, upon written demand and upon the tender of such transfer
agent's usual charges for such list, a list of the stockholders' names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings as of the most recent record date for which such list has been
compiled or as of a date specified by the stockholder subsequent to the date of
demand. Such list shall be made available to such stockholder or stockholders by
the transfer agent on or before the later of five (5) days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled.
The record of stockholders shall be open to inspection upon the
written demand of any stockholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to such
holder's interests as a stockholder or as the holder of a voting trust
certificate. Any inspection and copying under this Section 1 may be made in
person or by an agent or attorney of the stockholder or holder of a voting trust
certificate making such demand.
Section 2. Maintenance and Inspection of Bylaws. The corporation shall
keep at its principal executive office the original or a copy of the bylaws as
amended to date, which shall be open to inspection by the stockholders at all
reasonable times during office hours.
Section 3. Maintenance and Inspection of Other Corporate Records. The
accounting books and records and minutes of proceedings of the stockholders and
the board of directors and any committee or committees of the board of directors
shall be kept at such place or places designated by the board of directors, or,
in the absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable of
being converted into written form. Such minutes and accounting books and
records shall be open to inspection upon the written demand of any stockholder
or holder of a voting trust certificate, at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
stockholder or as a holder of a voting trust certificate. Such inspection may
be made in person or by an agent or attorney, and shall include the right to
copy and make extracts. The foregoing rights of inspection shall extend to the
records of each subsidiary corporation of the corporation.
Section 4. Inspection by Directors. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. Such inspection by a director may be made in
person or by agent or attorney and the right of inspection includes the right to
copy and make extracts.
Page 13 of 16
<PAGE>
Section 5. Annual Report to Stockholders. The board of directors shall
cause an annual report to be sent to the stockholders not later than one hundred
twenty (120) days after the close of the fiscal year adopted by the corporation.
Such report shall be sent at least fifteen (15) days prior to the annual meeting
of stockholders to be held during the next fiscal year and in the manner
specified in Section 5 of Article II of these bylaws for giving notice to
stockholders of the corporation. The annual report shall contain a balance
sheet and statement of changes in financial position for such fiscal year,
accompanied by any report thereon of independent accountants.
Section 6. Financial Statements. A copy of any annual financial statement
and any income statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet for the corporation as of the
end of each such period, that has been prepared by the corporation shall be kept
on file in the principal executive office of the corporation for twelve (12)
months and each such statement shall be exhibited at all reasonable times to any
stockholder demanding an examination of any such statement or a copy shall be
mailed to any such stockholder.
If a stockholder or stockholders holding at least five percent
(5%) of the outstanding shares of any class of stock of the corporation make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty (30) days prior to the date of the request, and a balance
sheet of the corporation as of the end of such period, the treasurer shall cause
such statement to be prepared, if not already prepared, and shall deliver
personally or mail such statement or statements to the person making the request
within thirty (30) days after the receipt of such request. If the corporation
has not sent to the stockholders its annual report for the last fiscal year,
this report shall likewise be delivered or mailed to such stockholder or
stockholders within thirty (30) days after such request.
The corporation also shall, upon the written request of any
stockholder, mail to the stockholder a copy of the last annual, semi-annual or
quarterly income statement which it has prepared and a balance sheet as of the
end of such period.
The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation, or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
ARTICLE VIII
------------
GENERAL CORPORATE MATTERS
Section 1. Record Date for Purposes Other Than Notice and Voting. For
purposes of determining the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days prior to any such action, and in such case only stockholders of record
on the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.
If the board of directors does not so fix a record date, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board adopts the resolution relating
thereto, or the sixtieth (60th) day prior to the date of such action, whichever
is later.
Section 2. Checks, Drafts, Evidences of Indebtedness. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the corporation shall be
Page 14 of 16
<PAGE>
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the board of directors.
Section 3. Corporate Contracts and Instruments; How Executed. The board
of directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount.
Section 4. Stock Certificates. A certificate or certificates for shares
of the capital stock of the corporation shall be issued to each stockholder when
any such shares are fully paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or the president or vice president
and by the treasurer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. Any or all of the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Section 5. Lost Certificates. Except as hereinafter in this Section 5
provided, no new stock certificate shall be issued in lieu of an old certificate
unless the latter is surrendered to the corporation and canceled at the same
time. The board of directors may in case any stock certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions as the board of
directors may require, including provision for indemnification of the
corporation secured by a bond or other adequate security sufficient to protect
the corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
Section 6. Representation of Stock of Other Corporations. The chairman of
the board, the president, or any vice president, or any other person authorized
by resolution of the board of directors by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all stock
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority herein granted to said officers to vote
or represent on behalf of the corporation any and all stock by the corporation
in any other corporation or corporations may be exercised by any such officer in
person or by any person authorized to do so by proxy duly executed by said
officer.
Section 7. Construction and Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
Delaware General Corporation Law shall govern the construction of the bylaws.
Without limiting the generality of the foregoing, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
Section 8. Fiscal Year. The fiscal year of the corporation shall commence
the first day of the calendar year.
Page 15 of 16
<PAGE>
Section 9. Seal. The seal of the corporation shall be round and shall
bear the name of the corporation and words and figures denoting its organization
under the laws of the State of Delaware and year thereof, and otherwise shall be
in such form as shall be approved from time to time by the board of directors.
ARTICLE IX
----------
AMENDMENTS
Section 1. Amendment by Stockholders. New bylaws may be adopted or these
bylaws may be amended or repealed by the vote of not less than 80% of the total
voting power of all shares of stock of the corporation entitled to vote in the
election of directors, considered for purposes of this Section 1 as one class.
Section 2. Amendment by Directors. Subject to the rights of the
stockholders as provided in Section 1 of this Article IX, to adopt, amend or
repeal bylaws, bylaws may be adopted, amended or repealed by the board of
directors.
As amended 7/23/98
Page 16 of 16
<PAGE>
EXHIBIT 12
AVERY DENNISON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
June 27, 1998 June 28, 1997 June 27, 1998 June 28, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings:
Income before taxes $ 86.8 $ 76.3 $ 169.1 $ 150.4
Add: Fixed charges* 13.3 13.2 26.2 26.3
Amortization of capitalized interest .3 1.3 .7 1.4
Less: Capitalized interest (1.2) (.5) (2.3) (1.3)
------------- ------------- ------------- -------------
$ 99.2 $ 90.3 $ 193.7 $ 176.8
============= ============= ============= =============
*Fixed charges:
Interest expense $ 8.5 $ 8.8 $ 16.6 $ 17.3
Capitalized interest 1.2 .5 2.3 1.3
Amortization of debt issuance costs .1 .1 .2 .2
Interest portion of leases 3.5 3.8 7.1 7.5
------------- ------------- ------------- -------------
$ 13.3 $ 13.2 $ 26.2 $ 26.3
============= ============= ============= =============
Ratio of Earnings to Fixed Charges 7.5 6.8 7.4 6.7
============= ============= ============= =============
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, "earnings" consist of income before taxes plus
fixed charges (excluding capitalized interest), and "fixed charges" consist of
interest expense, capitalized interest, amortization of debt issuance costs and
the portion of rent expense (estimated to be 35%) on operating leases deemed
representative of interest.
Exhibit 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUN-27-1998
<CASH> 3,700
<SECURITIES> 0
<RECEIVABLES> 485,300<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 243,900
<CURRENT-ASSETS> 831,700
<PP&E> 1,836,700
<DEPRECIATION> 843,000
<TOTAL-ASSETS> 2,100,300
<CURRENT-LIABILITIES> 640,900
<BONDS> 449,800
0
0
<COMMON> 124,100
<OTHER-SE> 713,500
<TOTAL-LIABILITY-AND-EQUITY> 2,100,300
<SALES> 1,715,100
<TOTAL-REVENUES> 1,715,100
<CGS> 1,143,300
<TOTAL-COSTS> 1,143,300
<OTHER-EXPENSES> 386,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,600
<INCOME-PRETAX> 169,100
<INCOME-TAX> 57,500
<INCOME-CONTINUING> 111,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,600
<EPS-PRIMARY> 1.09<F2>
<EPS-DILUTED> 1.07
<FN>
<F1>ACCOUNTS RECEIVABLE ARE SHOWN NET OF ANY ALLOWANCES.
<F2>REPRESENTS EPS BASIC.
</FN>
</TABLE>
