Ladies and gentlemen, thank you for standing by. [Operator Instructions] Welcome to Avery Dennison's Earnings Conference Call for the First Quarter ended March 30, 2013. This call is being recorded and will be available for replay from 1:00 p.m. Pacific Time today through midnight Pacific Time, April 26. To access the replay, please dial (800) 633-8284 or (402) 977-9140 for international callers. The conference ID number is 21610812. I'd now like to turn the call over to Eric Leeds, Avery Dennison's Head of Investor Relations. Please go ahead, sir.

Thank you. Welcome, everyone. Today we'll discuss our preliminary unaudited first quarter 2013 results. Please note that unless otherwise indicated, today's discussion will be focused on our continuing operations. The company's Office and Consumer Products and Designed and Engineered Solutions businesses are classified on our income statement as discontinued operations. The non-GAAP financial measures that we use are defined, qualified and reconciled with GAAP in Schedules A-2 to A-4 of the financial statements accompanying today's earnings release. 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 Dean Scarborough, Chairman, President and CEO; and Mitch Butier, Senior Vice President and CFO. I'll now turn the call over to Dean.

Thanks, Eric, and good day, everyone. First quarter results were in line with our expectations, highlighted by strong sales growth in emerging markets for Pressure-sensitive Materials and another good top line performance by Retail Branding and Information Solutions. Higher volumes and the benefits of our restructuring program drove a substantial increase in earnings per share over first quarter 2012. We are also on track to deliver strong annual free cash flow. Typically, we're a user of cash in the first half of the year and we ended the quarter where we expected to. During the quarter, we returned nearly $90 million to shareholders through dividends and the repurchase of approximately 1.5 million shares. Regarding the dividend, the Board will conduct its annual review at its meeting tomorrow. As we announced last December, the Board has moved its annual consideration of the dividend increase from December to April. Turning to the businesses. Pressure-sensitive Materials delivered solid overall results again, driven by strong sales of Label and Packaging Materials in emerging markets, with modest growth in mature markets. Operating margin expanded and was within our long-term target range reflecting higher volumes and the productivity gains from integrating Graphics and Reflectives into our Label and Packaging business. Trends for Retail Branding and Information Solutions continued from the back half of 2012, with continued growth in the core business and strong growth in RFID. Sales to U.S. and emerging market retailers and brands grew by double-digit percentages. And I was encouraged by mid-single-digit growth from European-based retailers and brands. Based on the latest import data, we are continuing to gain market share. RBIS operating margin expanded significantly and we expect further progress later this year as we reduce the manufacturing footprint and execute our productivity plans. Second quarter is, of course, the most important season for RBIS. And as you know, we don't have that much forward visibility. However, our order intake does remain strong. I'm pleased to say that during the quarter we received all regulatory clearances for the sale of Office and Consumer Products and Designed and Engineered Solutions. We expect to complete the deal midyear. We've also made steady progress on our restructuring initiative, which is enabling us to deliver strong bottom line improvement. We had a solid start to the year. As Mitch will explain, with the movement of Designed and Engineered Solutions to discontinued operations, we've effectively raised our earnings guidance. I'll note that Q2 is very important for us, and we'll feel even more confident about the year once we deliver the quarter. Now I'll turn it over to Mitch.

Thanks, Dean. We delivered another solid quarter with 4% organic sales growth and a 37% increase in adjusted earnings per share, in line with our expectations. These results reflect strong emerging markets growth in Pressure-sensitive Materials, continued solid progress in RBIS, the results of our restructuring program, as well as lower interest expense and the accretion from share repurchases. Our free cash flow in the quarter was negative as is consistent with our normal seasonality. With leverage in our targeted range and our consistently strong annual free cash flow, we returned $89 million of cash to shareholders with dividends of $27 million and the repurchase of 1.5 million shares. Adjusted operating margin in the quarter grew 60 basis points to 6.7% as the benefit of productivity initiatives and higher volume more than offset higher employee-related expenses and the impact of product mix as a result of our continued penetration of lower margin categories in PSM. The net impact of costs associated with raw materials and pricing was again modest in the quarter. As for our restructuring program, to save more than $100 million annually, we're on track and continue to expect to achieve our savings target by the middle of this year. In addition to expanding operating margins, we also benefited from a reduction in interest expense of approximately $6 million. This reduction is due primarily to a 3-month time lag between when a $250 million long-term note matured in mid-January and when we refinanced it in early April. The new $250 million note is due in 10 years and bears a coupon of 3.35%, and will result in a reduction to annual interest expense of $8 million going forward. Turning to the segments. Pressure-sensitive Materials sales were up 3% on an organic basis in the first quarter, primarily reflecting…

[Operator Instructions] And our first question comes from the line of George Staphos with Bank of America Merrill Lynch.

I guess my first question is on the guidance, related to what the sales trend has been. And certainly, we understand that you effectively raised your earnings per share guidance given the effect of DES. When I look at what I think is your new continuing operations schedule at the back of the slide deck, it shows that organic sales has been decelerating a little bit over the last few quarters, still at very healthy rates. And so I was wondering if, in fact, that's the trend you've been observing, what gives you more confidence in terms of raising the outlook as you've done? And I had a couple follow-ons.

Sure. So overall the reason for the raise in the outlook is really at the low-end, George, and that was pretty much just due to our performance in Q1. When you talk about the growth rate in Q1, it's -- we're right in the middle of our long-term targets coming in at 4% overall, our 3% to 5% target that we've had. And it did decelerate from the pace you saw of the last few quarters but recall, the last few quarters were benefiting from some easier comps and mid-2011 is when our sales fell off so when you look in absolute terms, this is a solid pace and the pace which we expect overall.

George, I'd also note that Easter fell in the first quarter this year, rather than in the second quarter in the prior year. So that's part of the reason for I would characterize that as deceleration.

Yes the shift in calendar had overall -- a little over -- over 1 point of impact on the quarter as well, but does not change our full year expectations.

Okay. Wouldn't Easter being early have shifted volume into the first quarter and helped the growth rate, if I'm hearing you correctly?

Easter was on the -- was 1 week earlier and so Good Friday fell into Q1 of this year, whereas Good Friday last year fell into Q2.

Understand. Now related to...

This doesn't affect all regions equally, of course, or all businesses equally so...

Sure. Now in terms of the RBIS business and apparel, you obviously gave the appropriate caveat. You don't have great lead times but your bookings thus far have been pretty healthy. And so, the question is, what are your customers saying right now about what their expectations are for the Christmas selling season in the fourth quarter?

Yes. I think there is a reasonable degree of optimism as they're looking forward. And so, we're pleased with our growth rate in -- from both European and U.S. and emerging market retailers and brands. I don't think anybody is ecstatic about the environment, but they're not pessimistic either. So I feel -- it feels -- looks okay, is how I'd characterize it.

And I think a key thing to focus on some of the comments I made about RFID with half the growth in Q1 and we do expect that growth rate to moderate somewhat.

Sure. But it sounds like your customers are feeling a little bit more confident about the consumer in turn being willing to open up their wallets to make expenditures towards the end of the year. Would that be a fair assessment? Whether or not it plays out or not, we'll see, but would that be the fair characterization of what your customers are thinking right now?

Yes. I mean certainly, based both anecdotally and on the order trends, I'd say yes, right exactly within our guidance range and pretty much what we expected.

Last question and I'll turn it over. In other specialty converting, what pace of margin improvement could we expect over a couple of years? We realize you're investing in that business right now. Is this a business that, given the current -- if we hold the macro environment constant going forward, that can get to a breakeven or better margin with the next couple of quarters, let's say, sometime as a run rate sometime in 2013? Or would you need to do more restructuring, investment or see more growth for it to be more profitable than it is right now?

Yes. Let me just maybe give a little bit of color on the Vancive medical solutions business, that's pretty much all of other specialty converting. It's a carve-out out of our Performance Tapes business, and the core business has actually been growing quite nicely. And we have invested in a couple of new growth platforms, one is on a wearable sensor, where you can wear it on your body and it tracks heart rate and respiration and whether you're sitting or standing. And as well as a new antimicrobial wound care device where we've actually embedded the antimicrobial agent into the adhesive which is actually very hard to do, and we figured out a way to do it. We actually haven't seen any sales on those products yet so we do expect -- we're in the commercialization stage so we're pretty pleased with our progress so far. I don't want to give guidance on exactly when we're going to trip over to positive EBIT because I'll be wrong whatever I forecast. And -- but we are pleased with the trajectory. We've got very specific milestones against the business. And we're going to hit the long-term targets for that business that we've communicated to Wall Street.

Our next question comes from the line of Ghansham Panjabi with Robert W. Baird & Co. Incorporated. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Hey, on PSM, Mitch, I think you mentioned negative mix on -- as part of the EBIT variance. Is that mostly because the growth rates in the emerging markets are stronger and that's maybe some of the lower margin business that you're referring to? Or how should we think about that?

No. Actually, emerging market growth is accretive to margins. But what we've been doing, even in emerging markets, is looking for places to take share that are still investment-grade opportunities, but maybe we just haven't been quite as focused on that and it's working pretty well. And so, I think the flow through margins are -- well, certainly versus the first quarter last year, are just a little bit less, but it's good profitable business, and so we feel good about it. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: And then the double-digit growth commentary across the emerging markets, was there a meaningful deviation between say China and Brazil or some of the other emerging markets?

The only deviation I'd say is Eastern Europe, as you'd expect, was a little bit softer than what we saw in Latin America as well as Asia. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then back to RBIS, I guess as follow-up to George's question. Dean, you seem pretty optimistic on the outlook there. Most retailers in the U.S. when they reported March were calling out weather and more uncertainty as it relates to the consumer. So can you just help us sort of bridge the gap between the 2 in terms of the outlook?

Yes, I mean -- it's always -- all retailers are optimistic about the upcoming season. I mean, so they're talking about what happened in the first quarter and, of course, those are goods that we shipped back in late Q3, early Q4. And at least, from our perspective, there's a lot of good things going on. I mean, we've been able -- we believe we're taking market share, so that's helpful. We still have adoption of RFID, granted the pace will slow in 2013 versus 2012. And, I would say, in general, and it's hard to generalize of course, we see a decent degree of optimism about how the year will play out. Inventories, the inventory sales ratio in apparel is still about where it should be. And apparel costs are also maintaining a good relative position. So all those factors so far look okay.

Our next question comes from the line of Scott Gaffner with Barclays Capital Incorporated.

Just my question is really on the guidance. You said -- okay, we understand the minus $0.15 for DES and then you said the offset was I think you said lower cost and higher volume. Can you kind of break down the pieces there? What's lower-cost, and then, maybe on a pennies basis? And what's the higher volume?

Sure. Just very simply, at the high-end pull $0.15 off for DES and basically, add back $0.10 for the lower-cost which is a little bit -- a couple million lower than we modeled -- had a few months ago for interest expense. And the rest of it just being lower operating costs as well as, something I didn't mention, a couple of cents from different shares outstanding assumption late in the year. And then so that's -- so plus $0.15, minus $0.10 at the high-end. And that at the low-end, you've got those same factors but then as you can see, we raised the low-end of our volume guidance for the year and so that's where you get the extra nickel.

And so is the -- you said lower share count later in the year, is that -- that's not related to DES, the sale of OCP and DES? And you would feel like [indiscernible] cash.

Yes, if you heard -- we're still saying approximately 100 million shares outstanding for the year. The averaging effect is really modest, and we were just a very modest amount, over 100 before. We're a modest amount below 100 now.

Okay. But just to be clear, that does assume that you buy back shares with the proceeds?

Yes. Yes. Yes.

Okay, all right. Just want to make sure we have the guidance right. The other thing is...

Go ahead.

I'm sorry?

No. Thank you for clarifying if I wasn't clear. So I appreciate that.

No problem. The other thing is -- with the RFID growth moderating in the second quarter, do you think it can actually turn negative in the second quarter?

I suppose it's possible because we had very strong growth last year. I haven't really looked at it quarter by quarter. We still think RFID growth will be 10% to 20% this year, something like that, maybe 10% to 30%. So again, quarter by quarter, that's very difficult to be that precise.

The key question is, we know what's going away as far as the buildup of 1 retailer that got a lot of demand last year, it's the ramp up of additional programs and so forth, and that -- the time -- predicting the exact timing of that can be challenging.

Okay. And just lastly on RBIS, I think -- Dean, I think you mentioned -- I think you said mid-single-digit growth in Europe in RBIS in the first quarter?

So for retailers and brands that are based in Europe, correct.

Right. Okay, and I mean, are you just with the right retailers or what would you attribute that to? Maybe we're mixing weak European headlines and the environment's better or is it just you're with the right customers?

We have lower relative market share in Europe. So I think part of it is -- there's several factors. One is yes, we are with the right retailers. Some of these brands also that we serve tend to be global, even though they're based in Europe. So think of someone like Adidas for example. And so it's really difficult for us to figure out exactly where all their products are shipped. So we just characterize them as European source retailer. And I sense, we don't have the import data yet, is that we're continuing to take market share in Europe and there is RFID activity going on in Europe ramping up as well.

Our next question comes from the line of Jeffrey Zekauskas with JP Morgan Securities. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: This is Silke Kueck for Jeff. I was wondering if you can discuss where the strength in the domestic pressure sensitive business is coming from? And that is any -- does any of the players selling into the North American packaging markets have reported pretty poor results so far, whether it's PPGs packaging business, or, of course, can business. And so, I think low single-digit volume growth is pretty good so I was wondering how you did that?

I'm not actually sure I'd answer the question. I think... Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Did you gain share? No?

We don't have any share data yet, Silke for the U.S. business. I do think that -- so I can't really estimate that. We did have low single-digit sales growth in the quarter. We had been taking some market share in North America in the last couple of quarters. So some of that is probably just a lapping factor is that most of our market share gains came in the back half of the year. I think anything else would be highly speculative at this point. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. In terms of cost savings, what was the run rate in the quarter? Are you at $22 million or $23 million a quarter already, something like that?

As far as the restructuring program? Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Yes.

We're at net of the some transition cost that we had in the quarter were at $15 million in the quarter, which would equate roughly to a $60 million, $65 million annualized run rate. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. And your goal is just to get to $100 million by the end of the second quarter?

Yes, by the middle of this year. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. What is your target for RFID revenue in the RBIS business for this year? If I remember it right, maybe it was close to $100 million last year and I was wondering what your target is for this year?

So I think we announced we'd hit about $100 million run rate by the end of last year, and we're expecting anywhere from 10% to 30% growth in RFID sales in total for 2013. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. And the last question I have is on raw materials. It seems that propylene prices are really coming off sharply again. And have you noticed big decreases in the derivatives materials that you've purchased as well?

Well, we definitely saw some inflation especially in North America during the first quarter and which wasn't surprising giving input costs were going up during that period of time. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: And all of that should have disappeared by now, right?

Well, I hope it does. But I -- it's still -- there is a lag time between the time those input costs change and when we get a benefit or an increase. And there's also supply and demand factors that impact those rates as well.

I think overall, the story is very similar to what we said last quarter, Silke. It's relatively stable and we're seeing some inflation in some of the specialty materials that we buy and some deflation in some other specialty items. But overall, pretty much stable.

And there are no further questions at this time. I'll now turn the call back over to you.

Okay, thanks. Well, I'd just like to say I'm pleased with the start of the year. We delivered at the high-end of our revenue range for the year, met our expectations for earnings and received regulatory clearances for the sale of DES and OCP. We are committed to meeting our long-term targets of 3% to 5% revenue growth and 15% to 20% EPS growth, while generating substantial free cash flow so that we can return more to shareholders. I'd like to thank the entire team at Avery Dennison for a good start to 2013. Thank you for joining us today.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your line.