Avery Dennison Corp

Liquidity

Operating Activities

During the first nine months of 2025, net cash provided by operating activities decreased compared to the same period last year primarily due to higher incentive compensation payments, changes in operational working capital, higher tax payments, net of refunds, and higher trade rebate payments, partially offset by the prior-year settlement payment for the Adasa legal matter.

Investing Activities

Purchases of Property, Plant and Equipment

During the first nine months of 2025, in our Materials Group reportable segment, we primarily invested in equipment to support growth in the U.S., certain countries in Europe and certain countries in Asia Pacific, primarily China; in our Solutions Group reportable segment, we primarily invested in buildings and equipment to support growth in certain countries in Asia Pacific, including China and Vietnam, and in the U.S. During the first nine months of 2024, in our Solutions Group reportable segment, we primarily invested in buildings and equipment in certain countries in Asia Pacific, including China and Vietnam, in the U.S. and in certain countries in Latin America, primarily Mexico; in our Materials Group reportable segment, we primarily invested in buildings and equipment to support growth in the U.S. and certain countries in Europe, primarily France.

Purchases of Software and Other Deferred Charges

During the first nine months of 2025 and 2024, we primarily invested in information technology upgrades in the U.S.

Purchases and Proceeds from Sales of Argentine Blue Chip Swap Securities

During the first nine months of 2024, we entered into Blue Chip Swap transactions that resulted in losses of approximately $10 million. Refer to Note 12, “Supplemental Financial Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Proceeds from Sales of Property, Plant and Equipment

During the first nine months of 2025, we received proceeds from the sale of properties in China and Vietnam.

Proceeds from Settlement of Net Investment Hedges

During the first nine months of 2025, we settled €420 million notional amount of net investment hedges.

Payments for Acquisitions, Net of Cash Acquired, and Venture Investments

During the first nine months of 2025 and 2024, we made venture investments of $10.7 million and $1.9 million, respectively.

Financing Activities

Borrowings and Repayment of Debt

During the first nine months of 2025 and 2024, our commercial paper borrowings were used to fund the repayment of long-term debt, dividend payments, share repurchases, capital expenditures and other general corporate purposes.

In the first quarter of 2025, we repaid our €500 million of senior notes at maturity using the net proceeds from the €500 million of senior notes we issued in the fourth quarter of 2024, cash flows from operations and commercial paper borrowings.

In the second quarter of 2025, we repaid our $25 million of medium-term notes at maturity using cash flows from operations and commercial paper borrowings.

In the third quarter of 2025, we repaid our $5 million of medium-term notes at maturity using cash flows from operations and commercial paper borrowings.

In September 2025, we issued €500 million of senior notes, due September 11, 2035, which bear an interest rate of 4.000% per year, payable annually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts and offering expenses, were approximately €494 million ($577 million), which we intend to use for general corporate purposes, including to finance acquisitions and repay existing indebtedness under our commercial paper program. Refer to Note 14, “Subsequent Events,” to the unaudited Condensed Consolidated Financial Statements for more information regarding our acquisition of W.F. Taylor Holdings, Inc.

Refer to Note 3, “Debt,” to the unaudited Condensed Consolidated Financial Statements for more information.

Dividends Paid

We paid dividends of $2.76 per share in the first nine months of 2025 compared to $2.57 per share in the same period last year. In April 2025, we increased our quarterly dividend rate to $0.94 per share, representing an increase of approximately 7% from our previous quarterly dividend rate of $0.88 per share.

Share Repurchases

During the first nine months of 2025 and 2024, we repurchased approximately 2.5 million and 0.5 million shares of our common stock, respectively.

In April 2025, our Board authorized the repurchase of shares of our common stock with a fair market value of up to $750 million, excluding any fees, commissions or other expenses related to such purchases and in addition to the amount outstanding under our previous Board authorization. Board authorizations remain in effect until shares in the amount authorized thereunder have been repurchased.

Net (Tax Withholding) Proceeds Related to Stock-based Compensation

During the first nine months of 2024, the number of stock options exercised was approximately 0.1 million. Tax withholding for stock-based compensation was lower in the first nine months of 2025 compared to 2024 primarily due to a lower number of shares vesting for certain performance-based awards based on our performance against the objectives established for the awards.

Payments for Settlement of Fair Value Hedges

During the first nine months of 2025, we settled €420 million notional amount of fair value hedges.

Analysis of Selected Balance Sheet Accounts

Long-lived Assets

In the nine months ended September 27, 2025, goodwill increased by approximately $53 million to $2.03 billion, reflecting the impact of foreign currency translation.

In the nine months ended September 27, 2025, other intangibles resulting from business acquisitions, net, decreased by approximately $61 million to $694.4 million, primarily reflecting current year amortization expense, partially offset by the impact of foreign currency translation.

Refer to Note 2, “Goodwill and Other Intangibles Resulting from Business Acquisitions,” to the unaudited Condensed Consolidated Financial Statements for more information.

Shareholders’ Equity Accounts

As of September 27, 2025, the balance of our shareholders’ equity was $2.21 billion. Refer to Note 8, “Supplemental Equity and Comprehensive Income Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Impact of Foreign Currency Translation

International operations generated approximately 69% of our net sales during the nine months ended September 27, 2025. Our future results are subject to changes in worldwide economic conditions, tariffs, social, geopolitical, and market conditions in the regions in which we operate and the impact of fluctuations in foreign currency exchange and interest rates.

The unfavorable impact of foreign currency translation on net sales in the first nine months of 2025 compared to the same period last year was primarily related to sales in Brazil and Mexico, partially offset by euro-denominated sales.

Effect of Foreign Currency Transactions

The impact on net income from transactions denominated in foreign currencies is largely mitigated because the costs of our products are generally denominated in the same currencies in which they are sold. In addition, to reduce our income and cash flow exposure to transactions in foreign currencies, we enter into foreign exchange forward, option and swap contracts where available and appropriate. Refer to Note 5, “Financial Instruments,” to the unaudited Condensed Consolidated Financial Statements for more information.

Analysis of Selected Financial Ratios

We utilize the financial ratios discussed below to assess our financial condition and operating performance. We believe this information assists our investors in understanding the factors impacting our cash flow other than net income and capital expenditures.

Operational Working Capital Ratio

Operational working capital, as a percentage of annualized current-quarter net sales, is reconciled to working capital (deficit) below. The working capital deficit (current assets minus current liabilities) as of the third quarter of 2024 was primarily due to our €500 million of senior notes due in the first quarter of 2025. Our objective is to minimize our investment in operational working capital, as a percentage of annualized current-quarter net sales, to maximize our cash flow and return on investment. As shown below, operational working capital, as a percentage of annualized current-quarter net sales, in the third quarter of 2025 increased compared to the third quarter of 2024.

Accounts Receivable Ratio

The average number of days sales outstanding was 67 days in the third quarter of 2025 compared to 66 days in the third quarter of 2024, calculated using the accounts receivable balance at quarter-end divided by the average daily sales in the respective quarter.

Inventory Ratio

Average inventory turnover was 6.1 in the third quarter of both 2025 and 2024, calculated using the annualized third-quarter cost of products sold in 2025 and 2024, respectively, and divided by the inventory balance at quarter-end.

Accounts Payable Ratio

The average number of days payable outstanding was 75 days in the third quarter of 2025 compared to 79 days in the third quarter of 2024, calculated using the accounts payable balance at quarter-end divided by the respective annualized third-quarter cost of products sold. The decrease in average number of days payable outstanding primarily reflected the timing of vendor payments and the impact of foreign currency translation.

Capital Resources

Capital resources used to fund our operational needs include cash flows from operations, cash and cash equivalents and debt financing, including access to commercial paper borrowings supported by our $1.20 billion revolving credit facility (the “Revolver”).

The Revolver is used as a back-up facility for our commercial paper borrowings and can be used for other corporate purposes. No balance was outstanding under the Revolver as of September 27, 2025 or December 28, 2024.

As of September 27, 2025, we had cash and cash equivalents of $536.3 million held in accounts at third-party financial institutions. Our cash balances are held in numerous locations around the world. As of September 27, 2025, the vast majority of our cash and cash equivalents was held in the U.S. and by our foreign subsidiaries, primarily in Asia Pacific.

To meet our U.S. cash requirements, we have several cost-effective liquidity options available. These options include borrowing funds at reasonable rates, including borrowings from foreign subsidiaries, and repatriating foreign earnings and profits. However, if we were to repatriate foreign earnings and profits, a portion would be subject to cash payments of withholding taxes imposed by foreign tax authorities. Additional U.S. taxes may also result from the impact of foreign currency fluctuations related to these earnings and profits.

Capital from Debt

The carrying value of our total debt increased by approximately $629 million in the first nine months of 2025 to $3.78 billion, primarily reflecting our September 2025 issuance of €500 million of senior notes due in 2035, higher commercial paper borrowings and the revaluation of our euro-denominated debt, partially offset by our repayment of €500 million of senior notes, $25 million of medium-term notes and $5 million of medium term notes at their maturity in the first, second and third quarters of 2025, respectively.

Credit ratings are a significant factor in our ability to raise short- and long-term financing. The credit ratings assigned to us also impact the interest rates we pay and our access to commercial paper, credit facilities and other borrowings. A downgrade of our short-term credit ratings could impact our ability to access commercial paper markets. If our access to commercial paper markets were to become limited, we believe that the Revolver and our other credit facilities would be available to meet our short-term funding requirements. When determining a credit rating, we believe that rating agencies primarily consider our competitive position, business outlook, consistency of cash flows, debt level and liquidity, geographic dispersion and management team. We remain committed to maintaining an investment grade rating.

Off-Balance Sheet Arrangements, Contractual Obligations, and Other Matters

Refer to Note 10, “Commitments and Contingencies,” to the unaudited Condensed Consolidated Financial Statements for this information. Except as indicated therein, we have no material off-balance sheet arrangements as described in Item 303(b) of Regulation S-K.