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Ladies and gentlemen, thank you for standing by. [Operator Instructions] Welcome to the Avery Dennison's Earnings Conference Call for the Second Quarter ended June 30, 2018. This call is being recorded and will be available for replay from 11:00 a.m. Pacific Time today through midnight Pacific Time, July 26. To access the replay, please dial 800-633-8284 or +1-402-977-9140 for international callers. The conference ID number is 21857412.
I would now like to turn the call over to Cindy Guenther, Avery Dennison's Vice President of Investor Relations and Finance. Please go ahead, madam.
Thank you, Susie. Today, we’ll discuss our preliminary unaudited second 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 A-4 to A-8 of the financial statements accompanying today’s earnings release.
We remind you that during this call we will 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 another good quarter. Sales grew 10% on a constant currency basis, adjusted operating margin expanded by 30 basis points and adjusted EPS grew 27%, with our two largest operating segments exceeding our expectations for the quarter.
Label and Graphics Materials delivered a strong quarter, sales grew organically by over 7% driven by continued solid demand as well as the timing factors we discussed on previous calls. High value categories and emerging markets continue to deliver above average growth. As you know, these are the two key catalysts that enable our consistent GDP plus growth over the long term not only in LGM but across the portfolio.
Since the beginning of 2017 in light of ongoing inflationary pressure, we've implemented multiple price increases in every region which LGM operates. Our standard operating procedure during periods of inflation, as you know, is to use our material re-engineering capabilities to offset rising costs and as necessary to raise prices.
During the past three months, inflation has been more pronounced and persistent than our ability to offset it requiring another round of price adjustments in multiple regions. Despite the inflation, operating margins remain strong in LGM during the first half of this year, once again demonstrating the resilience of this business.
As we've discussed in previous calls, we've increased our level of investment in this high-return business to keep pace with industry growth and to drive further productivity improvement. To that end, our new coating asset in Luxembourg is now fully commercialized and as we've also discussed previously, we're adding capacity in other regions as well and we're on-track to see those assets come online by the end of next year.
Turning now to Retail Branding and Information Solutions. RBIS delivered another strong quarter with nearly 10% organic growth and significant margin expansion. The base business delivered over half of the total organic sales growth from RBIS this quarter with strength across all customer segments.
RFID once again grew more than 20% in the quarter as the market for these products continue to build momentum. We continue to see strong engagement among apparel retailers and brands across all stages of the pipeline, as well as promising early stage developments in other end markets.
And we're investing to support this growth with higher spending for business development and R&D as well as higher CapEx spending including investments to bring on new production capacity in both Eastern Europe as well as a dedicated site - a new dedicated site in Asia next year.
In short, we’re pleased with the progress we've made in building our intelligent labels platform as we lean forward to drive this high growth opportunity. At the same time, we're happy to see the positive results of the transformation of the base business that we started just a couple of years ago. Combined these catalysts should deliver another year of solid growth and margin expansion in RBIS.
The Industrial and Healthcare Materials segment delivered organic growth of 3% in Q2. We expect total segment organic growth to be back within our long-term target range of 4% to 5% plus beginning in the second half of this year.
IHM’s adjusted operating margin while down versus prior year improved sequentially in line with our expectation. The team is making good progress in integrating last year’s acquisitions and we remained confident that we will achieve our growth in margin targets for this business over the longer term.
All-in-all another good quarter, our strategic playbook continues to work for us as we focus on our four overarching priorities. Driving outside 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. We continue to position the company for superior value creation over the long-term and are well on track to deliver our seventh consecutive year of strong topline growth and double-digit adjusted EPS growth.
Now I'll turn the call over to Greg.
Thanks, Mitch, and good morning, everyone.
As Mitch mentioned, we delivered another strong quarter. Adjusted earnings per share was $1.66, up 27% compared to prior year, which was more than a nickel above our expectations, a strong operating results more than offset a modest headwind from currency translation. We grew sales by 10% excluding currency and 7.5% organically following a softer Q1 due to various timing-related factors.
Our organic growth for the first half of the year was 5.5%. Currency translation added 4 points to reported sales growth in the quarter with an $0.08 benefit to EPS compared to the same period last year. And our adjusted operating margin increased by 30 basis points to 11.5% as the benefit of higher volume more than offset higher employee-related cost and the impact of increased investment spending.
We realized $9 million of net restructuring savings in the quarter most of which benefited RBIS. Transition costs for LGM’s European restructuring are ramping up now, so we'll see a decline in second half net restructuring benefit compared to the first half of the year.
And turning now to cash generation and allocation, our free cash flow year-to-date was $128 million, up $35 million compared to prior year. During the first half of the year, we repurchased nearly 950,000 at an aggregate cost of $103 million. And with the 16% increase in our dividend rate in the quarter we paid $85 million in dividends.
Year-to-date we returned a total of $188 million to shareholders compared to $147 million for the same period last year. And we made the decision earlier this month to settle our U.S. pension plan liability through either lump sum benefits to participants or the purchase of annuities from one or more insurance companies. Our first step in this process is a planned contribution of $200 million to this underfunded plan before August 15 allowing us to deduct that contribution on our 2017 U.S. income tax return.
Later this year we’ll pay out lump sum benefits to those participants who choose to receive them and we plan to purchase the annuities for the balance of our obligations in the first half of next year. We expect to incur certain non-cash settlement charges in the fourth quarter of this year.
Based on the amount of liabilities settled with the lump sum payments and with the balance recorded next year when we purchase the annuities. This action has no impact on our leverage capacity as the unfunded liability was already largely reflected in the metrics used by rating agencies.
However, it does impact the calculation of our leverage target using a simple net debt to adjusted EBITDA ratio. And as a result we've updated this target from our previous range of 1.7% to 2% to a new range of 2.3% to 2.6%.
So let me turn now to the segment results for the quarter. Label and Graphic material sales were up over 7% organically in the quarter with strong year-to-date organic growth of 5.4%. As expected, the various timing factors that we mentioned in last quarter provided a boost to Q2’s growth rate.
Results for the quarter reflected continued above average growth for high value product lines and stronger than usual growth for the base business. The strength in high value categories was broad based with high single digit results across most product lines. In particular, sales for our Graphics and Reflective segments, which came in a bit below expectations last quarter, picked up as expected in Q2.
Breaking down LGM for organic growth in the quarter by region, both North America and Western Europe were up mid-single digits. Growth in emerging markets was high single digits with continued strong growth in South Asia and high single digit growth in China.
Sales in Latin America were up double digits due in part to the past through of currency-related inflation as we invoiced in U.S. dollars in a number of these countries. And our adjusted operating margin for the segment remained strong roughly comparable to the prior year at 13.8% despite the inflationary headwinds we've experienced. And raw material inflation came in higher than we expected at the start of the quarter.
Excluding a net benefit from currency-related changes, the net impact of pricing and raw material costs remained a headwind for us this past quarter. And we now anticipate mid-single digit inflation for 2018 compared to our low single-digit estimate at the start of the year.
In light of this trend, we've announced new price increases during the quarter in North America, Europe, South Asia and Latin America. While the inflationary pressures are more significant than we anticipated a quarter ago, we continue to expect to fully recover the cumulative gap between cost and price that we've experienced since the middle of last year.
Shifting now to Retail Branding and Information Solutions, RBIS delivered another excellent quarter. The team continues to execute very well on its business model transformation enabling market share gains while driving significant margin expansion.
RBIS sales are up nearly 10% organically driven by both the base business which was up mid-single digits and RFID which grew by more than 20%. As with LGM holiday timing between the first two quarters played a part in this. For the first half sales growth for the base apparel business was above our long-term target for this portion of the segment.
The adjusted operating margin for RBIS expanded by 260 basis points to 11.2%, driven by the benefits of higher volume and productivity, as well as the reduction in intangibles amortization. These benefits were partially offset by higher employee related cost and the impact of higher investment spending, particularly in RFID. And note that the reduction in acquisition intangibles amortization has now fully anniversaried at the end of Q2. This has been a roughly 100 basis points source of margin expansion over the past four quarters.
So finally turning to the Industrial and Healthcare Materials segment with the benefit of the Yongle and Finesse Medical acquisitions during the second quarter of last year sales rose 35% ex-currency. Sales growth on an organic basis was 3% driven by mid-single digit growth in the industrial categories partially offset by low single digit growth in healthcare categories.
IHM’s adjusted operating margin declined by 170 basis points reflecting intangibles amortization and depreciation expense associated with last year's acquisitions as well as the net impact of pricing and raw material cost. These headwinds were partially offset by the benefit of organic volume growth.
As Mitch indicated in the back half of the year we expect IHM’s organic growth will be back within its long-term target range and we expect the operating margin to expand compared to prior year. Over the long term we remain confident in our target of 4% to 5% plus organic growth for this segment and expect to see margins gradually expand LGM’s levels or better by 2021.
Turning now to our revised outlook for the company for 2018, we've raised our expectations for adjusted earnings per share and are now targeting to be in the range of $5.95 to $6.10. At the same time, we’ve incorporated the impact of the planned pension termination in our outlook for reported EPS. We've outlined some of the key contributing factors to our guidance on slide 9 of our supplemental presentation materials.
In particular, just focusing on the changes from our last guidance, we now estimate that organic sales growth will be approximately 5% to 5.5% for the year at the high end of our long-term target range reflecting a higher end or a higher contribution from pricing to offset inflation.
At recent exchange rates currency translation represents a roughly two-point addition to reported sales growth in a pretax operating income tailwind of roughly $18 million for the year, down from the roughly $35 million tailwind we anticipated in April. Due to the strengthening of the dollar in the back half of Q2, currency translation is expected to have a larger impact on the results for the back half of the year than it did for the quarter.
And finally, we estimate average shares outstanding assuming dilution of roughly $89 million shares. In summary, we're pleased with the progress we've made this quarter. And we remain confident in our ability to achieve both our 2018 and long-term goals.
Now, we’ll open up the call for your questions.
[Operator Instructions] Our first question coming from the line of Edlain Rodriguez with UBS Securities. Please proceed with your question.
One quick question on the organic world, I mean it was very strong this quarter. I mean would it be possible for you to say how much was price and then how much was like real fundamental value?
Yes, overall, we had a modest price benefit in the quarter particularly in LGM. As you know, we've announced pricing actions starting late last year in a number of the regions. It’s a relatively modest impact in the second quarter and we expect that to continue to grow in the back half of the year given that we've announced further pricing actions in the middle part of the Q2 that went effect in late second quarter.
So overall relatively modest impact in Q2, but we expect that to grow as we move through the back half.
Our next question coming from the line of George Staphos with Bank of America Merrill Lynch. Please proceed with your question.
Thanks for all the details. Good morning to you. Two questions to start and I'll turn it over. One, can you review some of the statistics you had shared on performance in LGM in Asia and what kind of sequential trend you saw there and what kind of exit rate you're seeing into the third quarter. Recognizing, obviously, a very, very short lead times on your business so just because things might be doing one thing early in a quarter, doesn't mean it's going to work out that way and later in the quarter.
And then the second question I had to the extent possible can you comment on what benefit you should get from the restructuring actions in LGM in 2019 from the 2018 charges? If you've mentioned in the past, forgive me for asking you to go what you covered in the past?
So, I'll start with the restructuring question in LGM, as we said most of that savings won't start to kick in until 2020, so little to no savings in 2019, we'll still be doing some transitioning in 2019 and actually have some incremental transition costs next year versus our baseline. So, overall no savings in 2019 that'll really kicking in 2020.
In LGM Asia, I think our trends have been relatively consistent there as we've seen strong growth across the number of the emerging countries in Asia and we expect that to continue as we go in the back half.
In China, in 2017, we saw high single-digit growth across the year, bounced around a little bit by quarter due to some of the price increase timings we’ve talked about. But overall high single-digit growth and we expect to continue seeing mid-to-high-single-growth in 2018 and going forward in China.
In South Asia, we're seeing strong growth in India. It's been generally in the high teens and we expect that to continue as well and we've seen relatively a good growth in ASEAN as well in the high single-digits. So we don't see much change in the trends there overall across Asia.
Our next question coming from the line of Anthony Pettinari with Citigroup Global Markets. Please proceed with your question.
On LGM, you know sales grew 7% and margins were sort of flattish. And I think you cited higher employee costs and raw material costs. Is it possible to quantify kind of roughly how much of the impact of those two items were? And I think you've indicated the raw material costs you should recover some of that in the second half, with the higher employee related costs is that something we can expect to continue into the second half as well?
So as you said we had an overall relatively modest impact of the net impact of pricing and inflation in the quarter. And just as you indicated, we expect to largely cover that in the back half for the pricing actions we took near the end of Q2.
Employee cost increases are largely, due to the kind of annual wage inflation that took place basically in the middle of the second quarter, so that will continue through the back half, but nothing more unusual than that from the employee cost perspective in LGM.
Our next question coming from the line of Scott Gaffner with Barclays Capital. Please proceed with your question.
My question was more on the guidance, just sort of as we look at the raise to the full year. Obviously, if the negative from currency a little bit of a positive benefit from share repurchase and then on organic goes a little bit higher. But when we look at that organic I mean how much of that organic is better volumes versus a better outlook for say price cost or pricing in the second half of the year, it didn't sound like your view on price cost was that much better because you're getting pricing, but the costs are going higher, so just really trying to flesh out that change in the organic and how that contributes to the higher earnings guidance?
Yes, Scott. So, as you indicated a lot of the increase in the organic growth is actually due to the extra pricing actions that we started taking as we saw further inflation in the second quarter since the last time we've talked. So, we've taken further pricing across each of the regions. We don't see underlying volumes being much different in the back half from what they were in the first half.
We do have a couple of headwinds in the back half such as some of the price increase pre-buys we had last year in Q4, ahead of some of the actions we took last year that weren't effective early Q1, as well as in RBIS, we had a tailwind the last year basically due to some embellishment sales related to the World Cup. And that's a headwind and for us in the back half as that has now gone past.
So, overall, we don't see outside of those couple timing related things much change in the organic volume growth rate, but we'll see some incremental price in the back half from what we saw in the first half. And as you mentioned on currency overall, the net impact of currency and share count is roughly I think $0.10 to $0.11 for the year, the majority of that as I said earlier is really in the back half as the currency rates were moving across the second quarter. We saw some impact in June and we'll really see the larger impact versus our previous guidance in the second half of the year.
Our next question coming from the line of John P. McNulty with BMO. Please proceed with your question.
So I guess, with regard to the RFID platform and the strength that you're seeing there, I guess, can you give us a little bit of color as to where that strength is coming from, if it's more on the existing customers just using you more or if it's on increased engagements and turn-ons, I guess? If you can just give us a little bit of color on that?
And then, I guess, as a follow-up question, just on the tariff side, I understand, for the most part, you're making product where it gets used, so you probably don't see any issues directly yourselves. But I guess, when you think about the potential for indirect exposure because of the customers that you're servicing and what they may have to entail, can you give us any thoughts on how you think the tariff issues may impact you, if they do at all?
So just as far as RFID, what's driving the growth, it continues to be across all stages of the pipeline. We are seeing within apparel continued ramp and there are some customers who were already in full adoption where we're seeing growth as they further deploy it. Other ones are moving from a pilot into full adoption that are driving the growth.
So it's basically a consistent trend of what we've seen of people moving through the pipeline and several customers at a time at any point in a particular year that are driving a vast majority of the growth within apparel and then outside of apparel continue to see a lot of exciting opportunities going on largely in the early stage of the pipeline we're working through the business cases and various pilots the pipeline within that area is over 65% particularly in few food beauty and aviation. We've discussed our three end markets that we're working to develop and it's still early stages.
The revenue from those are about 5% of our overall RFID growth, 5% of our overall RFID business that is. But the pipeline in those areas are growing even faster than what we're seeing overall, the revenue growth is growing fastener we're seeing overall. So a good trends across the board both in apparel as well as outside of apparel.
And the second question, sorry there was - sorry, John. Second question on tariffs. Thank you, Cindy. So specifically you're right the direct impact is relatively modest as far as the indirect impact other than what assumptions you might make about what that might do to the macro environment which would obviously affect us.
We really think about our standpoint as you know we manufacture goods in the region which were - they are ultimately sold and for anything that may happen particularly around apparel where if there is some disruption between China and the U.S., we think we're well placed to work with our customers and our markets as the industry would need to rebalance demand and supply given our global presence and that's something that we would be able to leverage our position to support our customers to make the transition that they would need to make.
So overall don't expect any real direct impact and the indirect impact would be based on what your assumptions are around the macro.
Our next question coming from the line of Ghansham Panjabi with Robert W. Baird. Please proceed with your question.
This is actually Matt Krueger sitting in for Ghansham. So my question is can you comment on what drove the outsize growth across your base RBIS business during the quarter and is this a dynamic that you foresee could continue moving forward throughout the remainder of the year?
Yes. So overall what we're seeing in the base RBIS business is a continuation of the trend we've been talking about our transformation and focusing really on getting more competitive faster and simpler has enabled us to consistently gain share for a couple of years now that is continuing and we're seeing it both in U.S. and North America.
And then the other factors we don't have the data yet on what we think markets are doing in Q2 itself, but I think there is a general pickup probably in the apparel and retail landscape overall. So those are the two key drivers in the base. In addition, we did have a little bit easier comps as Greg highlighted in his prepared remarks just around the timing of holidays and so forth that depressed Q2 of last year a little bit.
Our next question coming from the line of Adam Josephson with KeyBanc Capital Markets. Please proceed with your question.
Greg, just one more on the organic growth guidance and what happened in 2Q. So correct me if I'm wrong, but I think you said that virtually all of the increase in your organic sales growth guidance is a result of price rather than volume such that your full year volume outlook hasn't changed much if at all. If indeed that's the case, why were LGM sales above your expectations in the quarter, was that also price related?
Yes. I think overall, just as you said, the larger the increase in our guidance is largely price related again driven by the fact that we did another round of price increases late in Q2 that was not in our guidance when we talked a quarter ago. So it is really the largest increase there.
And again I mentioned earlier some of the timing challenges overall. I think otherwise, I mean, we did have some extra price in Q2, related to those increases that took effect in the middle to late part of the quarter, so that was a little bit of the impact in second quarter as well as just continued strong performance across the different regions.
So in both North America and Europe, we had kind of mid to high or sorry, low to mid-single-digit growth in each of those regions in the quarter and we had strong performances across the emerging regions in the second quarter as well. So really just good strong performance across each of the regions helped drive the strong Q2 volumes.
Our next question coming from the line of Chris Kapsch with Loop Capital. Please proceed with your question.
My question focuses around the emerging markets and the growth trends there, but also in the past you’ve characterized emerging markets and this relates to primarily to LGM you've characterized the business in those regions as above average in terms of profitability. I’m just wondering if that's still the case and if you could just talk about the maybe the regional industry structure in those areas which sort of leads to that and if there is any changes in the way you see the competitive landscape or the industry structure addressing those emerging markets is changing? Thanks.
So overall as far as the emerging market growth trends as Greg commented on pretty broad base and strong consistently above average. I think the only thing really to note that exceptions to just what we've seen over the last year, if you will India came in extremely strong as you recall we had relatively easier comps within India Q2 of last year there was the goods and service tax introduction and a number of other changes and regulations that were going on.
So that came in even a little bit stronger than expected, continue to see strong growth though across all the emerging markets. Essentially the only exceptions to that broad theme are Middle East and Africa are flattish and Korea for some macro reasons, we think Korea is not showing the same level of growth overall.
So consistently strong and as far as the EBIT margins within emerging regions yes they tended to be a little bit higher on average. The magnitude of that has diminished over time largely as we've raised the EBIT margins within some of the other mature regions over that timeframe as well. So still true but to a lesser degree than we've previously discussed.
Our next question coming from the line of George Staphos with Bank of America Merrill Lynch. Please proceed with your question.
Thanks for taking my follow on. Two questions for you. One on RFID and then one on the pension plan accounting. On RFID, Mitch, if you can comment a bit further in terms of whether you’re seeing any additional trialing and piloting by customers or in the better than 20% growth are you more or less seeing the same cadence? The reason I ask, I remember you saying your guidance is 15% to 20% or better than that, that your growth rate in 2Q was obviously at the higher end of your range. So I'm trying to parse what's driving that whether it's piloting or more adoption by existing customers?
On the second question, can you just explain in simpler terms how you get a $600 million charge next year from terminating the pension plan and funding it to the tune of $240 million, recognizing if non-cash? Thank you.
Yes, so, just specifics on RFID. Again it's following what we typically would see as far as how program has moved through the pipeline. So what the key drivers of the growth was broad-based across that. And so the biggest dollar drivers would be people moving from, firms moving from pilot into full adoption or others that were in the early stages of full adoption last year further progressing.
But if you look at on a relative basis, actually the biggest single movers actually items in the early stage of the pipeline, the early stage of the pipeline have actually increased even faster than later stage of the pipeline, which is what you would expect for a technology and a program that’s in a stage of development. So still early days relatively speaking in apparel and we see significant opportunity as you know and we’ve talked about in the past, in food, in aviation, and in beauty.
George to your second question on pension I think overall that $600 million charge relates to your part of the pension liabilities sits on the balance sheet in OCI and that's something that as we settle that actually as it gets released to the P&L.
Similar to a couple of years ago when we did a lump sum we had a charge related to that lump sum for the portion of that lump sum that was sitting in our OCI on the balance sheet. So that's basically relates to future payouts that would have been expected over time that will now happen over the next couple of quarters.
Our next question coming from the line of Adam Josephson with KeyBanc Capital Markets. Please proceed with your question.
Mitch, just one broad question. First of all kudos to you on another really good quarter. You guys have beaten and raised - you've raised your guidance for I don't know how many quarters in a row or years in a row for that matter. If you had to parse out how much is something you're doing versus just industry conditions having been consistently better than you expected that the previous quarter, how much would you tribute to which pocket and just give us a broad sense for what you think transpired over that period?
So I think it's a number of factors, Adam. So thank you. We are in growing markets and 50% of the portfolio is exposed to - are the two key catalysts for growth either a high value segments or emerging markets that clearly is a good position to be.
Second we're extremely well positioned within those growing markets and in our two primary businesses we are the market leaders and continue to gain share over time as we leverage our competitive advantages.
And then last around our strategy, our four key strategies we moved to this a couple of years ago really desegregating - this aggregating our approach to the marketplace. Our cost structure and so forth and we said when we laid out the long-term targets that those were not just aspirations for those who have commitments and that we had a redundancy of strategies in play to make sure we can deliver on those commitments.
And what you're seeing is in our execution of those strategies, we're hitting a lot more wins than losses if you will. And so all three of those combined with just having the best team within the industry, I'd say, are the recipe for success that's been enable us to be in this position.
Our next question coming from the line of Anthony Pettinari with Citigroup Global Markets. Please proceed with your question.
I just had a follow-up on IHM. When you think about recovering cost inflation, how do you characterize price cost recovery in IHM maybe compared to LGM and RBIS. Is it sort of equivalent or is it a different model. And then you know with IHM I think you've spoken about realizing synergies from the larger LGM business with adhesives and leveraging personnel from the LGM team. Just wondering if you can give an update on that as well?
Sure. So just as far as inflation within IHM, IHM there has not been as much inflation relative to the size that business a lot of the inflation we've talked about if you look year-over-year, it has been paper based and if you look going forward in the second half versus the first half it's largely paper based. So there's been some, but it's been more modest if you will.
And second, a number of the IHM categories lend themselves in some areas, if there is inflation that you put through annual price increase and so forth, so not really a story within IHM.
And then as far as the progress of IHM being able to leverage the capabilities within LGM, that is progressing. We talked to the previous couple of quarters that it was not where we wanted it to be. We took a little bit longer, but some of the margin improvement that you see here in the second quarter that you're starting to see the fruits from all those initiatives to do so and we see more opportunity to do so going forward as well.
So that is getting good traction now and is I think a key strategic element of our focus here building the IHM platform on top of the strengths of LGM.
Thank you. Mr. Butier, there are no further questions at this time. I will now turn the call back to you for any closing remarks.
All right, well, great, thank you. So obviously another good quarter and what we think is going to shape up to be another great year as we continue to execute our strategies and leverage our market leading positions in growing markets. And I just want to thank our entire team within Avery Dennison for once again delivering a great result. Thank you everybody.
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.