Ladies and gentlemen, thank you for standing by. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. Welcome to Avery Dennison’s Earnings Conference Call for the Fourth Quarter and Full Year Ended January 2, 2021. This call is being recorded and will be available for replay from noon, Pacific Time, today through midnight Pacific Time, February 6. To access the replay, please dial 800-633-8284, or for international callers, Plus 1-402-977-9140. The conference ID number is 21969418. I'd now like to turn the call over to John Eble, Avery Dennison’s Senior Director of Investor Relations. Please go ahead.

Thank you, Mulad. 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 A9 of the financial statements accompanying today's 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. We undertake no obligation to update these statements to reflect subsequent events or circumstances other than as may be required by law. On the call today are Mitch Butier, Chairman, President, and Chief Executive Officer; and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Mitch.

Okay. Thanks, John and hello, everyone. Good day. Apologies for that quick technical glitch there. The line dropped. So, as you can see from our results we continue to prove our resilience across business cycles at the company. We delivered another year of strong earnings growth with adjusted EPS of 8% and record free cash flow despite a 2% decline on the top line. We said coming into this year that a key focus of ours in a lower growth environment would be to protect our overall profitability. We delivered on that promise. Margins again expanded significantly reflecting the successful execution of our long-term strategies, as well as the team's fast response and implementing temporary cost-saving actions. The result combined with better than expected volumes in the second half essentially accelerated the margin expansion we had planned for 2021 into 2020 enabling us to deliver EBITDA margins of over 15%. Our strong performance reflects the remarkable preparedness and incredible agility of our teams who have come together extraordinarily well in navigating one of the most challenging periods we've experienced as a company. In this environment, our focus continues to be on ensuring the health and well-being of our employees delivering for our customers, supporting our communities, and minimizing the impact of the recession for our shareholders while continuing to invest in the long-term success of the company. I’m pleased with the progress we're making on all fronts. Now, despite our best efforts to protect employee health, we have identified roughly 1,000 confirmed cases of the virus within our 30,000 plus workforce with the majority of cases reflecting community spread rather than a work-based source of infection. Fortunately, over 80% of the employees impacted have already recovered. The recent surge of confirmed cases in a number of the regions in which we operate highlights the continued uncertainty of the current environment as well as the importance of remaining vigilant with respect to safety and agile in meeting customer needs. In light of the significant challenges throughout 2020 we also took additional measures in support of our employees and communities. We provided additional compensation and benefits in the early stages of the pandemic to reduce the financial impact on employees in some of the hardest-hit regions. We provided supplemental payments to our frontline workers to thank them for their courage and agility in serving our customers' essential needs. And we stepped up our level of community engagement including an additional $10 million contribution for charitable causes. I'm pleased with the continued progress we are making towards the success of all of our stakeholders as evidenced by the fact that we are on track to deliver the vast majority of our long-term financial and sustainability objectives. Our consistent performance reflects the strength of our markets, our industry-leading positions, the strategic foundations we've laid, and our agile and talented team. We are focused on the consistent execution of our five key strategies: driving outsized growth in high-value categories, growing profitability in our base businesses, continuing our relentless focus on productivity, being highly disciplined capital allocators, and leading with environmentally and socially responsible practices and solutions. In 2020 we made progress on each high-value category again outperformed. We protected even grew margins in our base businesses we delivered $200 million of cost reduction both structural and temporary. We completed two acquisitions: Smartrac which significantly accelerates our strategies and capabilities to build our intelligent label platform with RFID, and ACPO which enhances our position in our North American label and graphics materials business. Lastly, we continue to make solid progress towards our 2025 sustainability goals. We have substantially reduced the environmental impact of our operations while focusing increasingly on the development and launch of more innovative environmentally friendly products and solutions.

Thanks, Mitch and hello, everybody. I'll first provide an update today on performance against our long-term goals and then walk through our fourth quarter performance and our outlook for 2021. Slide 11 of our supplemental presentation materials provides an update on our progress against the five-year targets that we communicated in 2017. And recall that this represents our third set of long-term goals after meeting or beating our previous two sets. The consistent execution of our key strategies enables us to continue delivering against our targets with an overriding focus on delivering GDP plus growth in top quartile returns on capital over the long term. As you can see, we are largely on track to deliver once again. Over the four-year period, sales growth on a constant currency basis is up nearly 4% annually with organic growth of 2% annually. While both are below our initial target largely due to the late-stage recession in this cycle, we are achieving our objective of growing above GDP over this period. Reporting operating margin was 11.6% in 2020 or 12.4% on an adjusted basis, up significantly from roughly 10% in 2016. Additionally, our EBITDA margin was above 15 percent in 2020. And as always, our focus will continue to be the optimal balance of growth, margins, and capital efficiency to drive incremental EVA over the long term. Our adjusted earnings per share is up over 15% annually largely driven by the solid top line growth and strong margin expansion. And our return on total capital came in at 18% for 2020, above our 17% target reflecting top quartile performance relative to our capital market peers. And our balance sheet remains strong with our net debt to EBITDA ratio below the low end of our target range, giving us ample capacity to continue executing our strategies. Our consistent progress towards achieving these long-term goals reflects the diversity of our end markets, the strength of our position in those markets, and our resilience and agility as an organization to adjust course when needed. At the same time that we communicated our financial goals through 2021, we also laid out a five-year plan for capital allocation which you can see on slide 12. We're tracking well against this plan starting with strong cash flow generation. We've deployed a total of $3.4 billion over the last four years, allocating it in line with our long-term plan. And clearly our current leverage position gives us ample capacity to continue investing organically as well as through strategic acquisitions while continuing to return cash to shareholders in a disciplined way. Now let me turn to the fourth quarter. Overall, financial results were strong with adjusted earnings per share of $2.27, up 31% versus prior year, reflecting better than expected top and bottom line performance in each of our segments. We grew sales by 12.3% or 3.2% on an organic basis. Currency translation increased reported sales growth by 2.3 points. In the extra week in the fourth quarter increased reported sales by 4.9%. Adjusted operating margin increased by 160 basis points to 13.5% reflecting significant margin expansion in each operating segment. Our tight near-term cost controls in this environment combined with a flow-through benefit from a volume surge late in the quarter, as well as our ongoing structural productivity actions in a benefit from the 53rd week drove strong margin expansion in Q4. We realized $18 million of restructuring savings net of transition costs in the quarter due in part to the long-term actions that we accelerated into 2020 particularly in RBIS. And for the year, we generated $548 million of free cash flow up 7% compared to 2019. Total capital and IT spending came in at $219 million higher than recent expectations as we accelerated investment in our high value categories particularly in RFID. And as mentioned previously our balance sheet remains strong with a net debt-to-adjusted EBITDA ratio at year-end of '17. And as we've proven our ability to manage through the compounding global crisis we faced this year we've been putting that leverage capacity to work. For the year, we deployed $350 million for strategic acquisitions as well as returned $301 million to shareholders through the combination of share repurchases and a growing dividend. Now, let me turn to segment results for the quarter. Label and graphic material sales increased by 3.6% on an organic basis driven by the net effect of volume and mix. Sales improved sequentially across all regions. Label and Packaging Material sales were up mid-single digits organically, benefiting from a late quarter pandemic-related surge in demand. In specialty and durable label categories grew high single digits but low to mid-single digit growth in the base business. Graphics and Reflective sales were down mid-single digits, reflecting modest sequential improvement after rebounding significantly in Q3 following the sharp decline in Q2 due to government-mandated lockdowns. Looking into segment sales trends by region in Q4. In North America, LGM sales were up mid-single digits organically for the quarter with LPM up high single digits while Graphics declined modestly. In Europe, LGM sales for the quarter were roughly flat on an organic basis, reflecting strong sequential improvement. LPM was up low single digits while Graphics declined by high single digits. In Asia, LGM was up low single digits for the quarter on an organic basis with relatively consistent growth across the countries. LGM’s adjusted operating margin increased 210 basis points to 15.4%, as the benefits of productivity, favorable volume and mix in raw material deflation net of pricing, more than offset higher employee-related costs. Shifting now to Retail Branding and Information Solutions, RBIS sales were up 11.6% ex-currency, and up 3.1% on an organic basis, reflecting continued improvement in both high-value categories and the base business as retailers geared up for the holiday season early in the quarter. High-value categories were up nearly 20% organically, with enterprise-wide RFID sales up 55% ex-currency and up 21% on an organic basis. The base business was down low to mid-single digits. Looking at the total apparel business, the value channel outperformed all the other channels and was up 40% organically for the quarter. Adjusted operating margin for the segment increased 210 basis points to 15.7%. The significant margin expansion was driven by productivity initiatives, including accelerated structural actions and temporary cost controls, along with the better-than-anticipated volumes. These benefits were partially offset by higher employee-related costs. Turning to the Industrial and Healthcare Materials segment, sales increased by 0.7% on an organic basis as a high-single-digit increase for industrial categories, reflecting continued sequential improvement in transfer automotive applications in particular, was partially offset by a mid-single-digit decline in healthcare categories. Adjusted operating margin increased by 210 basis points to 12.3% as the benefits from higher volume and productivity more than offset higher employee-related costs. So turning now to our outlook for 2021, we anticipate adjusted earnings per share to be in the range of $7.65 to $8.05. We've outlined some of the key contributing factors to this guidance on slide 18 of our supplemental presentation materials. We estimate that organic sales growth will be approximately 3% to 7%, with the midpoint of that range reflecting continued recovery in our end markets across the segments. The extra week in the fourth quarter of 2020 will be a headwind of a little more than a point to reported sales growth, and a roughly $0.15 headwind to EPS for the full year. We anticipate Q1 will benefit by roughly $0.10 based on the shift in the calendar more than offset by a roughly $0.25 headwind down in Q4. Based on recent rates, currency translation is a roughly 2 point tailwind to reported sales growth with an estimated $25 million benefit to operating income. We estimate incremental pre-tax savings from restructuring net of transition costs of roughly $70 million in 2021. Given we previously accelerated some 2021 actions into the second half of 2020, the vast majority of the savings represent a carryover impact from actions that we initiated last year. We also expect a majority of the approximately $135 million in temporary cost savings we delivered in 2020 to be a headwind as markets recover. Moving to our outlook on the tax rate based on current regulations, we expect both GAAP and adjusted tax rates will be in the mid-20s for the full year. We expect free cash flow to be more than $600 million in 2021. Finally, we estimate average shares outstanding assuming dilution of $83 million to $84 million. In summary, despite the challenging environment we're pleased with the strategic and financial progress we made against our long-term goals in 2020. We're confident in our ability to continue to deliver exceptional value through our strategies for long-term profitable growth and disciplined capital allocation. And now we'll open up the call for your questions.

Thank you very much. Our first question comes from Ghansham Panjabi with Baird. Please go ahead.

Hey guys. Good day. Hope everyone's doing well. Yeah. I guess first question just on the LGM strength in the fourth quarter, 37% incremental margins year-over-year. I know you mentioned that there was a late quarter surge but G&R also got weaker which is higher margin I think for that segment. So just curious if you can give us a little bit more color on the margin strength? And then on the strength in LPM from a volume standpoint in both November and December, was that just a function of expanded lockdowns in Europe and the US or just a much better e-commerce season or whatever details you can provide there would be helpful also?

Yeah. Thanks, Ghansham. It’s Greg. So on the last part of your question, certainly as you said you can see in the backside with the monthly numbers that we saw a pickup in the LPM side of the business in November and December. And yeah, we think that's a function similar to earlier in the year as there are more lockdowns particularly in Europe and in parts of the US, we saw more consumption of packaged goods late in the fourth quarter. So that was part of what lifted the volume growth in Q4. And that also then helped drive part of the Q4 margins for LGM. As we've talked about in the past, we've been driving the temporary cost savings with volumes coming in better than expected in the quarter that helped deliver stronger margins overall. At the same time, we did have the extra week in Q4 that actually turned out to be a pretty strong week and we did see that also have about a 30-basis point margin impact in LGM, as well as the total company level.

Great. And then for my second question on the 3% to 7% core sales growth for 2021, how does that disaggregate between volumes and price the way you see it in the current context of pulp prices going up and petrochemicals and so on, and where in that range is one keep tracking thus far on a consolidated basis? Thanks again.

Yeah I think high-level, Ghansham, when we think about the range that we have for 2021, so the 3% to 7%. There are a couple of overall big drivers. One is we've talked about intelligent labels. We still expect to grow in that 15% to 20% pace as we've talked about over the years and as we demonstrated certainly in the back half of 2020. That by itself given the size of the IO business now would add about 1 point to 1.5 to overall growth for the company. At the same time when we look versus 2020 and we see the quarters that were hit the hardest Q2, and that a little bit of Q3. If we fully recovered that we think that would be somewhere in 3 to 4 points of growth for the year on a full-year basis. We've built in about 2 to 3 points of growth on recovering some of that volume decline that we saw in those most quarters in 2020. So those are a couple of big drivers of the growth that we see year-over-year. At the same time, we would expect in the businesses that were hit the hardest in 2020 to have the biggest growth rates as we see that recovery come through in those segments.

Our next question is from Adam Josephson with KeyBanc Capital Markets. Please go ahead.

Mitch and Greg, good morning and congrats on a really good end of the year. Greg. Just wondering on your margin expectations for the year. It seems like you're expecting roughly flattish margins. I assume you would expect notable expansion in IHM and RBIS and perhaps some degradation in LGM margins given how good a year you had in 2020 in LGM. Can you just talk about your margin expectations either consolidated or by segment?

As we look ahead to 2021, much like we did when entering 2020, we are focusing on maintaining our margins in a lower growth environment. This will remain our expectation for this year as well. Our guidance accounts for various factors influenced by the overall environment and macroeconomic conditions. We anticipate a notable recovery, especially in the second quarter, following the downturn some of our businesses experienced that affected margins. Overall, our priority has been to balance top-line growth with strong margins and capital efficiency to foster long-term growth in Economic Value Added. Therefore, maintaining margins is crucial as we strive to balance these three elements to achieve sustainable EVA growth over time.

Thanks. And just one more on the margin issue. So if I look at from 2015 onward, all of the company's margin expansion has come from the SG&A line, I think SG&A as a percentage of sales has gone from almost 19% to down to 15% whereas gross margins have been basically flat over that period. This coming year and thereafter do you think more of your margin expansion is likely to come from the gross margin line or the SG&A line and perhaps why? Thank you.

Yeah. I think when you look over that longer period of time certainly we were − had a number of initiatives and we've talked about few years ago in RBS the acceleration and turnaround there and that included some reductions in SG&A and other areas. So there was some focus on that. I think when we look even 2020 we start to see our gross margins improve quite a bit from the inflationary cycle that we had a couple of years before that. So we expect to continue driving strong productivity and SG&A over time but we would also expect to continue to see gross profits improve over time as well.

And our next question is from Neel Kumar, Morgan Stanley Investments. Please go ahead.

Hi. Thanks for taking my question. Could you just discuss how your LTM volumes in the fourth quarter compared to the industry? And were there any specific regions you would call out where you've gained or lost some market share?

Yes, Neel. Overall, if you're asking a share question for LTM business, so labels specifically, we don't have all the market data in for the two regions where we get it but generally for the full year, share positions are pretty comparable for 2020 versus 2019. If you look at where we are specifically in the fourth quarter, in Europe, our share positions were where we wanted to be. In North America, we're a little bit behind where we want to be. That’s overall for the year. We've been – our share position’s been pretty constant and where we are for the fourth quarter.

Thanks. That's helpful. And then just for RFID, you talked in the past about the addressable market in apparel. I think 30% or so penetrated. Where do you think that penetration rate can go over the next several years? And then, more generally, in terms of your 15% to 20% long-term RFID growth guidance, do you see upside outside that range given the potential acceleration in adoption rates or is the RFID base business already pretty large, as said, will get incrementally harder to achieve that?

Yes. Overall, there are two questions here. Regarding the apparel adoption rate, we have observed a notable acceleration in activity, not just among Tier 1 retailers and brands but also many Tier 2 ones. A significant portion of our pipeline is focused on apparel growth. We have traditionally indicated that we’re about a third penetrated, but it's evidently higher than that. Additionally, we anticipate that the addressable market will expand over time. So, we still see considerable upside in the apparel sector, and there are vast opportunities outside of it as well. To address your question about the 15% to 20% growth expectation, we do believe there is significant opportunity for us. This is primarily about developing and capturing market opportunities, and we see substantial long-term potential. The 15% to 20% figure was created based on a certain pace of adoption we experience. With the business now exceeding $500 million, as Greg mentioned, it adds 1.5 points to our overall growth, which represents a significant amount of dollar growth each year from that viewpoint. We are not restricting ourselves regarding the potential upside. The 15% to 20% remains our target, but our ambition is to grow this into a much larger business, and we believe it has a long runway ahead. Regarding your questions about the addressable market and related topics, we will provide updates on all that at our Investor Day next month.

Our next question comes from Josh Spector with UBS Securities. Please go ahead.

Yeah, hi. Thanks for taking the question. Just within RBIS and the base ticket and labeled business. I mean, there's obviously been some uncertainty on how the first half of 2021 would play out given some of the weakness we saw in early last year. And I guess you've mentioned you'd have more visibility on that kind of after the holiday season. Just curious if you can give us an update on what customers are saying about order patterns and kind of inventories here over the next six months.

Generally, the holiday season was stronger on average than retailers had anticipated, which is encouraging. However, it’s still too early to determine how things are unfolding after the holiday due to the timing of the Lunar New Year. The comparisons from the past week are relatively easy, making it difficult to provide a clear picture. We will have a better understanding after we assess January and February during the Lunar New Year. Overall, the North American market is performing better than Europe. Looking specifically at apparel import trends, US apparel imports for the entire year decreased by nearly 20%. In the last six months, where data is available, the decline was 11%, but there has been a slight increase over the past few months. This indicates an improving trend in the US market. In contrast, Europe has experienced a significant downturn, with imports down around 20% in recent months. Currently, we are observing a disconnect between the US and Europe, and while the holiday performance exceeded expectations, we will need more time beyond the holiday to ascertain future trends, especially since Europe remains a larger concern for us.

Thanks. That's helpful. And I guess going back to the RFID side of things, I think there's generally a view that, with COVID, some of the impact might be some acceleration of adoption there. I guess I was wondering if you can give us a general view of what typically the timeline looks like until a customer first engages with you about the idea, you guys work with them to develop it, and then it actually rolls out, when we actually might see some of that kind of flow through your earnings a bit more.

Within apparel, the timeline for implementation has significantly decreased from what it was a few years ago due to the strong business case supported by technology. The insights gained can be applied across different retail brands fairly quickly. On average, I would estimate the process takes about six to nine months. In other categories, the timeline can vary considerably and tends to be longer, particularly as a project progresses from the initial business case to pilot testing and further stages. The most substantial growth in our pipeline is within apparel, which is experiencing good increases. However, in addition to apparel, we are also seeing significant growth in our food and logistics sectors. We anticipate a number of pilots that could each generate around one million dollars in revenue in 2021. If these pilots are successful, which we are confident they will be, they could evolve into five million dollar programs. Regarding food, our efforts have been ongoing, and the pandemic has accelerated progress in both food and logistics. We expect to see increased revenue in 2021, laying a foundation for further growth into 2022.

Our next question is from Anthony Pettinari with Citigroup Global Markets. Please go ahead.

Good morning. Just a follow-up question on RFID and Smartrac. I think when you acquired Smartrac, you indicated it could be sort of modestly dilutive in 2020 given integration and interest expense costs. And as you said, margins would be sort of in line with the base business by 2022. Just wondering if that's still sort of accurate, how the business has performed relative to expectations and the growth rates that you called up for RFID is there any way that you could differentiate between RFID and the sort of the NFC technology that you acquired with Smartrac?

Overall, we view the combined business as integrated, particularly in terms of our market approach. The growth we’ve discussed pertains specifically to the combination of the two entities. Looking at Smartrac, approximately half of their business comes from apparel retail, while the other half is spread across automotive, food, and various other sectors. We will provide further insights into market trends for these segments but will not report a separate growth rate for Smartrac compared to the overall RFID and intelligent label platform. Regarding your first question, we were not dilutive in 2020; in fact, our adjusted EPS showed modest accretion that year. We managed to execute faster than anticipated. We expect the margins to align with the overall margins for the intelligent label platform, which are above both company and divisional averages for EBITDA margin.

Okay. That's very helpful. And then just you know it seems like COVID has pulled forward a lot of technology adoption. And you talked about how that's impacted RFID. I'm just wondering on the LGM side has COVID changed the adoption of pressure-sensitive versus glue applied versus shrink customers delayed some CapEx projects or pulled them forward. But I'm just wondering if you've seen or do you anticipate any impact from COVID really on LGM side?

I think the biggest impacts are really just what we've been talking about. It's more around just the resurgence of consumer packaged goods. So we're seeing strong demand in the market and for our business in packaged decoration particularly in film categories and then also just the e-commerce. So e-commerce growth had been quite significant and our business linked to that is growing, growing similarly. So, yes, we’re seeing those are the two trends overall. We think the e-commerce trends while there was a big surge, we think that will be just a new baseline for continued accelerated growth in packaged goods. I think everybody is – COVID’s a good reminder not just with stay-at-home, but the importance of packaging for decoration, sanitation, and everything else.

Our next question is from Jeffrey Zekauskas, JPMorgan Securities. Please go ahead.

Thanks very much. How much on average were your raw material costs down in 2020, and how much on average do you expect them to be up in 2021?

Hey, Jeff. This is Greg. Overall and across 2020, we saw kind of in the low to mid-single-digit range in terms of deflation across the year. That was a little bit different as we move to the year. More of that was earlier in the year as we got into Q4 and we look sequentially from Q3 to Q4. Overall, it was relatively stable but we did start to see some pressure midway towards the tail end of the quarter particularly on chemicals and film. So in propylene in particular and polypropylene, we started to see that pressure in the US late in Q4. We see that continuing here in the first quarter and then starting to also rise in Europe at the same time here in Q1. So right now based on what we've been seeing, we would expect somewhere in the low-single-digit inflation based on what we've seen so far without predicting what may happen as we go forward.

Okay.

And Jeff just to add to that, we are right now evaluating big question as to how much of this inflation is temporary versus sustaining. And so, from a pricing standpoint, we are evaluating price increases and that’s a surcharge in one region for propylene - polypropylene and evaluating another region and so forth. That's probably one of the bigger questions around the guidance specifically for LGM is what the volume environment and does the volume environment linked to overall consumption, and what does that do to the commodities markets and our pricing actions that get linked to that?

Okay. And your industrial and healthcare businesses had really nice margins in the second half of 2020. That is you’re up above 12%. Is that a new level of margin for that business? And then, secondly, you donated $10 million to a charity. Was there an earnings per share impact from that extra $10 million that you donated? And if there was, what was the EPS impact?

Sure, Jeff. So your second question first. So, yes, that is an increase that you see. The $10 million is on the corporate expense line in Q4. That's why corporate is higher than usual. And so that is in our numbers and we need to adjust that out or anything else. So that would be roughly a $0.09 impact to Q4. And then, as far as IHM, we're still targeting our objective here for 2021. It was 12.5% operating margins or more for this business. We're not quite there yet. Team's done a great job. And I will say under Greg's leadership, Greg's been overseeing this group of divisions for the last couple of years. Our objective, if you look at the high end of our range is to be within that targeted range by next year. So continued margin expansion is the goal.

Our next question is from George Staphos, Bank of America. Please go ahead.

Hi, everyone. Good day. Thank you for taking my question. Congratulations on the year. Hey, I wanted to take a step back and talk a bit more about return on capital Mitch and Greg. So Avery has a long successful track record and you pointed to that at the beginning of your presentation in terms of capital allocation, return on capital and that's all well and good. We have seen over the last three to four years it's not just the result of COVID, the return on capital for the company begin to tick lower. If you've evaluated that and you agree with that point, what do you think is driving that? And then relatedly it looks like COVID has really changed the growth outlook for a lot of your businesses whether to RFID or LPM you're going to have to spend money and it sounds like you've already begun to do so on capacity. How do you continue the return on capital trajectory that you'd been seeing longer term as you're now needing to spend behind this growth? And I had a follow on.

Thank you, George. This is Greg. When we examine our return of capital, we see that when we set our targets at the start of 2017, we exited 2016 with a return on total capital of approximately 17%. In the past couple of years, we experienced some impacts from pensions in 2017 and 2018, and you can find the adjusted figures in the appendix of our slides. When we adjust for that, we are around 19% for the last couple of years and at an 18% level for 2020. We believe we have consistently expanded our return on capital since we initiated this process in 2016, even with this year including a couple of acquisitions that are still in their first year. We feel positive about the progress we continue to make regarding returns, maintaining a position in the top quartile among our capital market peers. Looking ahead at our investments, Mitch already mentioned that RFID generates EBITDA margins above the average of our segments, which provides us with good returns. We are continuing to invest in areas where we expect strong returns, such as in RFID and other high-value segments like specialty labels within LGM and industrial with IHM, as well as in emerging regions. We are focusing our investments on high-return areas where we can sustain strong returns on capital.

Yeah, George, and just to reinforce the overall theme here, is GDP plus growth and top quartile returns on capital. These levels were both. And that is our continued focus. That’s a recipe for superior value creation over the long term. When we had set out the 2021 objectives back in 2017, we did say that in capital efficiency we'd gotten into the top decile of efficiency and that we would go through a period of recapitalization both organically and be looking for M&A. When we haven't done M&A for a while and then started doing M&A over the last four years. It takes a while from a returns perspective for the returns to match the invested capital base that you have in there. Once we have a series of these in the years going forward and so forth, it all starts pumping in and the returns are catching up on acquisitions you've done a few years ago, you'll see that continue to flow through.

Okay. Understood on that. I guess the other question that I had and a lot of my questions were answered earlier. If you think about where you're applying capital going forward and trying to grow the business, are these areas that you would expect would have higher margin, higher return on capital? Are they areas where in some ways you’re applying capital defensively because you don't want to see some of these markets move towards your peers in terms of share? I know that's a broad question and hard to answer in a sense or two but how would you have us think about it. Is it likely to see like to generate higher margin, higher return on capital over the next two to three years and lead to share gain? Thanks. I'll turn it over.

Yeah. So we're investing – I mean if you look at both our high-value segments and our base, we look at EVA and returns. We don't look at just the average that we disaggregated. For us it's continuing to invest in businesses where we have good EVA potential and that's in both the high-value segments and the base. It would be disproportionately in high value categories particularly in RFID. So that's been a significant part of our growth investments. As far as the base goes what you've seen in our investments is we just go back over the last five years. When we need to invest for growth we also concurrently invest for productivity. So if we look at the investment we did in Europe a few years ago, we did a significant expansion where we needed capacity for one of our plants and we subsequently were able to take offline some capacity to drive productivity. So that enabled growth for that market at the same time as lowering our cost base, which resulted in a very good return outcome from that perspective.

Our next question is from John McNulty, BMO Capital Markets. Please go ahead.

Yeah. Thanks for taking my question. Hopefully, you can hear me this time. So, I guess two things. One would be on the RBIS front. If I look at 2019 and I look at 2020, it looks like there was a geographic shift with the US kind of gaining about 5 points. And in Asia actually losing about 5 points, which seems a little surprising just considering how Asia weathered COVID maybe better than some of the other regions. So, I guess what's driving it? Is it just the RFID growth and where that's stemming from or is there something else we should be gleaning from this?

It's RFID adoption. That’s exactly it. The RFID adoption is far ahead in the US versus other regions.

Yeah. Got it. Okay.

And continue to feel like at pure volumes Asia we're actually seeing continued strength and penetration if you look at it just from a pure volume standpoint than RBIS.

Got it. Okay, no that’s helpful. And then I guess the other question was just in terms of the fourth quarter rate on the temporary savings, did you quantify that? I don't recall you saying it on the call but I guess if not can you quantify what those savings were?

Yeah, we didn't quantify the quarter. So I think we said here for the full year we had about $135 million of temporary savings. A little bit lower than what we had projected for the last few quarters just given we'd said when volumes start to come back some of those costs would return. So, a little bit lower than we had projected before. So the fourth quarter I think was in the roughly $15 million range, something like that.

Our next question is from Adam Josephson, KeyBanc. Please go ahead.

Thanks so much for taking my follow-up. Mitch, just one on the geographic situation for you just including any observations thus far in the first quarter. You mentioned that North America was really strong particularly in LTM in the last, I don't know eight months of the year, much more so than was Europe even though they both locked down much of that time. Can you just talk about what you're seeing geographically if the trends differ much than what you saw in the fourth quarter and what your expectations are if you can by region, roughly speaking as part of that 3% to 7% organic sales guidance? Thanks very much.

Yeah, Adam. As far as what we're experiencing, yes. North America is definitely having a resurgence in the volume that we're seeing right now. And that's yeah, it’s just what I explained. I think it's the drivers. If you look at it due to consumer packaged goods consumption as well e-commerce, it's hard to tell as they talk about volumes have been a bit lumpy if you look across the various months by region. There could be a little bit of inventory build within the current surge that we're seeing in North America. And Europe is definitely, it came back stronger in Q4 and I'd say all the regions came back very solid growth within Q4 and North America particularly strong. But even EMENA, they finished the year strong. And now as we look at January, which might be some of your questions, we’re continuing to see the strength in North America, EMENA is softening a bit and Asia is just too early to tell because of the Lunar New Year. All right. Well, thank you, everybody, for joining the call today. I again want to thank our team for their commitment, dedication, and agility in delivering a very strong year from a bottom line perspective and delivering for our customers in what was very challenging market conditions. I do want to just encourage everybody to join us for our Investor Day next month where we'll be sharing more about our long-term objectives and strategies. Thank you very much.

Ladies and gentlemen, that does conclude the conference call for today. And we thank you for your participation. And I’ll ask that you please disconnect your line.