Avery Dennison Corporation

and full year ended December 29, 2018. This call is being recorded and will be available for replay from 11 a.m. Pacific Time today through midnight Pacific Time February 2nd. To access the replay, please dial 800-633-8284 or plus 1-402-977-9140 for international callers. The conference ID number is 21896767. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. I would now like to turn the call over to Cindy Gunther, Avery Dennison's Vice President of Investor Relations and Finance. Please go ahead, Madam. Thank you.

Thanks, Susie. Today we'll discuss our preliminary unaudited fourth quarter and full year results. Please note that throughout today's discussion we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified, and reconciled with GAAP on Schedules A4 to A8 of the financial statements accompanying today's earnings release and the appendix of our supplemental presentation materials. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release. On the call today are Mitch Butier, President and Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. Now I'll turn the call over to Mitch.

Thanks, Cindy, and good day, everyone. I'm pleased to report our seventh consecutive year of strong top line growth, margin expansion, and double-digit adjusted EPS growth. Our label and graphic materials business delivered strong performance in a year of significant raw material inflation. Retail branding and information solutions posted both strong top line growth and significant margin expansion. And industrial and healthcare materials made solid progress with its margin turnaround in the back half. 2018 marked an important milestone for the company. as the final year of measurement for the five-year financial targets we communicated in early 2014. This is the second long-term performance cycle we've completed since first introducing this discipline back in 2012, and I'm pleased to report that we once again achieved our company goals. Importantly, we are also on track to achieve our five-year goals through 2021. Our consistent performance reflects the resilience of our industry-leading market positions, the strategic foundations we've laid, and our agile and talented workforce. Our strategic playbook continues to work for us as we focus on four overarching priorities. Driving outsized growth in high-value product categories, growing profitably in our base businesses, relentlessly pursuing productivity improvement, and remaining disciplined in our approach to capital management. In 2018, we made good progress on all four of these strategic pillars. We delivered organic growth of 5.5%, reflecting continued solid growth in our base businesses and continuing above average volume growth from emerging markets and high value categories, such as specialty labels and RFID. Emerging markets and high value categories remain our two key catalysts for GDP plus growth across our entire portfolio. Roughly half of our total sales are linked to one or both of these catalysts. In 2018, High-value categories continued to grow at a high single-digit pace, with RFID now contributing nearly a full point to total company sales growth. And emerging market volume once again grew faster than average. Importantly, our end market exposure in emerging regions is quite broad-based, with relatively even balance among China, South Asia, and a combination of Latin America and Eastern Europe. Equally important to top line results, we also maintained our strong focus on continuous productivity improvement. The combination of product reengineering, restructuring, and the deployment of lean operating principles contributed significantly to our results in 2018. This focus remains key to our long-term success, not just as a means to expand margins, but to enhance our competitiveness and to provide a funding source for reinvestment. Now looking at how these strategies played out in each of our segments. Label and graphics materials delivered another year of strong top-line growth, reflecting above-average volume growth in emerging markets and high-value categories, as well as pricing. Specialty labels led the way for LJM's high-value categories, with organic growth of roughly 10%, while graphics and reflectives grew at a solid mid-single-digit pace. Strength in emerging markets was led by South Asia and Latin America, while China was up mid-single-digits. Mature regions delivered solid organic growth in 2018. Now, while organic growth was strong overall for the year, our volume growth did moderate a bit in both Europe and China in the second half. This trend is reflected in our guidance assumptions for LGM for 2019. LGM's operating margin remains strong in this high return business, a significant result given that raw material inflation came in much higher than we anticipated at the start of the year. Keeping up with significant and persistent inflation required multiple price increases in every region of the world over the past 18 months, as well as, of course, our continued focus on innovative product reengineering. Overall, another strong year for LGM. Retail branding and information solutions delivered both strong top-line growth and significant margin expansion, driven by continued execution of our transformation strategy and continued strength in RFID. In the base business, sales increased across all product categories, reflecting broad-based growth in performance athletic, premium, and the value channels. Our ability to grow our base business here in the face of a challenging retail environment underscores the success of our multi-year transformation strategy as our improvements in service, flexibility, and speed continue to resonate with our customers. And RFID grew by more than 20% in 2018, topping $300 million for the year. As you know, apparel represents the vast majority of our total RFID sales today, driving most of the growth last year. Outside of apparel, we're seeing early stage traction in multiple categories, including food, beauty, and aviation, which collectively contributed two points of growth for the year in RFID. Our pipeline continues to expand across all categories. driving our confidence that RFID will continue to deliver 15% to 20% plus growth annually. We continue to increase our level of investment to support this growth as we build out our intelligent labels platform to enable a future where every item can have a digital twin and a digital life. RBIS's adjusted operating margin expanded another 170 basis points, not only beating the high end of our long-term 2018 target range, but also hitting the middle of our 2021 target range ahead of schedule. The team has done a tremendous job transforming RBS into a simpler, faster, and more competitive business over the past three years and we're pleased with the momentum that we're seeing here. Turning to industrial and healthcare materials. As you know, it was a challenging year for IHM and results fell short of our goals. That said, our top-line challenge is mostly limited to the business serving the China auto market. Elsewhere, we progressed well. Our industrial businesses in both North America and Europe grew organically at mid-single-digit rate with improved profitability in the second half, and our medical business, part of the total healthcare category, grew high single digits organically. We obviously have more work to do to achieve our 2021 targets we've set for IHM. I remain confident we'll achieve these goals just as I was with RBIS a few years back. I've covered the first three of our strategic pillars, driving outsized growth in high-value products, growing profitably in the base, and relentlessly pursuing productivity gains. Now I'll cover the fourth pillar, highly disciplined capital management. In terms of the investments we're making for organic growth and productivity, our primary focus has been capacity adds in emerging regions for LBGM, recapitalizing LGM's European and North American footprint, and investing in both capacity and business development globally for RFID. Carefully planned and executed M&A is another key element of our disciplined capital allocation strategy. Though we didn't complete any acquisitions in 2018, our strategy here has not changed. We look for opportunities to increase our exposure to high value-add segments, as well as to expand and leverage our core capabilities. And finally, we continue to be disciplined in our approach to returning cash to shareholders, and as a result, significantly accelerated stock buyback in the fourth quarter. In addition to the progress made toward our 2021 strategic and financial goals, we are also making solid progress towards our 2025 sustainability goals. Just to hit a few highlights, we've reduced our greenhouse gas emissions by 25% since 2015, Roughly 80% of our paper is now Forest Stewardship Council certified, and more than 90% of our operations are now landfill free. Looking ahead, we are focused on tackling industry-wide challenges with a particular focus on packaging recyclability by leveraging our existing products and capabilities and developing new opportunities through collaboration with our customers and partners. Summing up, I'm pleased with the progress we've made toward our long-term goals. as we continue to deliver consistent GDP plus organic growth and top quartile returns on capital. For 2019, we will continue to make progress toward these goals with the midpoint of our adjusted EPS range up 12% before the headwind from currency translation. Now, while we expect the external environment may prove more challenging this year, we are prepared for it commercially, operationally, and financially. and we will seek opportunities to lean forward even as others may pull back. Now, I'll turn the call over to Greg.