Avery Dennison Corporation

Ladies and gentlemen, thank you for standing by. During the presentation, all participants will be in a listen-only mode. If at any time during the conference you need to reach an operator, please press star zero. Welcome to Avery Dennison's earnings conference call for the first quarter ended March 30, 2019. This call is being recorded and will be available for replay from 12 p.m. Pacific Time today through midnight Pacific Time April 27th. To access the replay, please dial 800-633-8284 or 1-402-977-9140 for international callers. The conference ID number is 21896768. I'd now like to turn the conference over to Cindy Gunther, Avery Dennison's Vice President of Investor Relations and Finance. Please go ahead.

Thank you, Tina. Today we'll discuss our preliminary unaudited first quarter 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 A7 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. I'll now turn the call over to Mitch.

Thanks, Cindy, and good day, everyone. We delivered adjusted EPS in line with our expectations for the first quarter, a roughly 10% increase over prior year on a constant currency basis, despite organic revenue coming in a bit lower than usual as continued strong performance in RBIS was partially offset by soft volume in our two materials businesses. Label and graphic materials posted roughly 1.5% organic growth for the quarter, driven by pricing. Volumes were down, as growth in our high-value categories was offset by declines in our base businesses, as we seeded some share in lower-margin, less-differentiated categories due to our disciplined approach to raising prices to offset inflation. We expect to win much of this business back over the course of a few quarters. As for underlying market trends for label materials, conditions appear to have been relatively soft over the past couple of quarters, not only in Europe and China, as we've discussed previously, but in North America as well. We expect our organic growth rate to improve as we move through the year, driven by gradual focused share gain, as well as a modest improvement in underlying market demand. Despite the soft top line, productivity efforts supported a healthy operating margin for LGM in the quarter, particularly in light of transition costs associated with the European restructuring. We expect LGM's operating margin to improve through the course of the year, driven largely by benefits from the completion of this project in Europe. Retail branding and information solutions once again delivered both strong top-line growth and significant margin expansion. The base business grew by roughly 3% on an organic basis, while enterprise-wide RFID once again grew by more than 20%. As you know, apparel represents the vast majority of RFID sales and was, again, the key driver of most of our growth here in the quarter. And our pipeline continues to expand, already up roughly 15% from the beginning of this year, with engagements in categories outside of apparel, principally food, beauty, and aviation, leading the way. Given the strength of our position, strategies, and team, we are confident in our ability to achieve our long-term target for RFID solutions. That is 15% to 20% plus growth. 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 digital life. In industrial and healthcare materials, sales decline modestly on an organic basis, driven by the decline in global automobile production, which more than offset solid growth in other industrial categories, as well as strong growth in medical. And, as for margins, we've made good progress in the quarter towards achieving our target for this business. In short, another solid quarter, and we are reaffirming our earnings guidance for the year. While the year is starting off more challenging, we are prepared for it. Our relentless focus on productivity continues to enable us to increase our pace of investment in high-value segments, increase our competitiveness and grow profitably in our base businesses, while importantly continuing to expand operating margin, which we were able to do again in the first quarter and expect to deliver for the full year. We remain confident in our ability to achieve our long-term objectives, and we will continue to seek opportunities to leverage our positions of strength commercially, operationally, and financially, and lean forward even as others may pull back. Now I'll turn the call over to Greg.