Avery Dennison Corp

Fiscal Year

In January 2025, the Audit Committee of our Board of Directors approved a change to our previous 52- or 53-week fiscal year generally ending on the Saturday closest to December 31 to a fiscal year coincident with the calendar year. Our 2025 fiscal year began on December 29, 2024 and ended on December 31, 2025, which resulted in four extra days compared to prior years; fiscal years 2026 and beyond will be coincident with the calendar year beginning on January 1 and ending on December 31.

Our 2024 and 2023 fiscal years consisted of 52-week periods ending December 28, 2024 and December 30, 2023, respectively.

The factors impacting reported net sales change, as compared to the prior-year period, are shown in the table below.

(1)Totals may not sum due to rounding.

In 2025, net sales on an organic basis were comparable to the prior year, reflecting the impact of higher volume offset by the impact of raw material deflation-related price reductions. In 2024, net sales increased on an organic basis primarily due to higher volume, partially offset by the impact of raw material deflation-related price reductions.

Net Income

Net income decreased from approximately $705 million in 2024 to approximately $688 million in 2025. The primary factors affecting this decrease were:

•The net impact of raw material deflation-related price reductions

•Higher employee-related costs

•Higher interest expense

•Growth investments

These items were partially offset by the following factors:

•Benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs

•Higher volume/mix

Cost Reduction Actions

2025 Actions

During 2025, we recorded $48.8 million in restructuring charges, net of reversals, related to our 2025 actions. These charges consisted of severance and related costs for the reduction of approximately 1,200 positions, as well as asset impairment charges, at numerous locations across our company, as a result of actions taken to optimize our operational footprint.

In the fourth quarter of 2024, we recorded $13.1 million in restructuring charges related to our 2025 actions. These charges consisted of severance and related costs for the reduction of approximately 90 positions, as well as asset impairment charges, reflecting actions at numerous locations in our Solutions Group reportable segment.

The cumulative restructuring charges, net of reversals, related to our 2025 actions was approximately $62 million.

2023 Actions

During 2024, we recorded $28.8 million in restructuring charges, net of reversals, related to these actions. These charges consisted of severance and related costs for the reduction of approximately 1,280 positions, as well as asset impairment charges, at numerous locations across our company.

During 2025, we recorded $1.6 million of reversals related to our 2023 Actions that were completed in the fourth quarter of 2025.

Savings from Restructuring Actions

We realized more than $60 million in incremental savings from restructuring actions, net of transition costs, in each of 2025 and 2024.

Restructuring charges were included in “Other expense (income), net” in the Consolidated Statements of Income. Refer to Note 13, “Cost Reduction Actions,” to the Consolidated Financial Statements for more information.

Business Acquisitions

2025 Business Acquisition

On October 20, 2025, we completed our business acquisition of W.F. Taylor Holdings, Inc. ("Taylor Adhesives"), a Georgia-based flooring adhesives business, for the purchase price of approximately $390 million. This acquisition expanded the high-value category portfolio in our Materials Group reportable segment.

We funded the Taylor Adhesives acquisition using cash and proceeds from our issuance of senior notes in September 2025.

The final allocations of purchase consideration to assets and liabilities are ongoing as we continue to evaluate certain balances, estimates and assumptions during the measurement period (up to one year from the acquisition date). Our valuation of certain acquired assets and liabilities is currently pending finalization within the allowable time to complete our assessment.

The Taylor Adhesives acquisition was not material to the Consolidated Financial Statements.

2023 Business Acquisitions

On November 23, 2023, we completed our business acquisition of Silver Crystal Group ("Silver Crystal"), a Canada-based provider of sports apparel customization and application solutions across in-venue, direct-to-business and e-commerce platforms. On May 22, 2023, we completed our business acquisition of LG Group, Inc. ("Lion Brothers"), a Maryland-based designer and manufacturer of apparel brand embellishments. On March 6, 2023, we completed our business acquisition of Thermopatch, Inc. ("Thermopatch"), a New York-based manufacturer specializing in labeling, embellishments and transfers for the sports, industrial laundry, workwear and hospitality industries. These acquisitions expanded the product portfolio in our Solutions Group reportable segment. The acquisitions of Silver Crystal, Lion Brothers and Thermopatch are referred to collectively as the "2023 Acquisitions."

The aggregate purchase consideration, including purchase consideration payable, for the 2023 Acquisitions was approximately $231 million. We funded the 2023 Acquisitions using cash and commercial paper borrowings. In addition to the cash paid at closing, the sellers in one of these acquisitions are eligible for earn-out payments of up to $5 million, subject to the acquired company achieving certain post-acquisition performance targets. As of the acquisition date, we included an estimate of the fair value of these earn-out payments in the aggregate purchase consideration.

The 2023 Acquisitions were not material, individually or in the aggregate, to the Consolidated Financial Statements.

Accounting Guidance Updates

Refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for this information.

Cash Flow

In 2025, net cash provided by operating activities decreased compared to 2024 primarily due to higher incentive compensation payments, higher tax payments, net of refunds, lower net income and higher trade rebate payments, partially offset by the prior-year settlement payment for the Adasa legal matter and changes in operational working capital. In 2025, adjusted free cash flow increased compared to 2024 primarily due to lower purchases of property, plant and equipment and higher proceeds from sales of property, plant and equipment, partially offset by lower net cash provided by operating activities.

Outlook

Beginning in the first quarter of 2025, the U.S. announced tariffs on goods imported into the U.S. from numerous countries, many of which responded with reciprocal tariffs and other actions on goods imported from the U.S. The U.S. government continues to negotiate with countries regarding the tariffs. As it relates to the direct impact of these tariffs, a relatively small portion of our global materials purchases is impacted. To mitigate this direct impact to our operations, we have implemented strategic sourcing adjustments and pricing actions. The indirect impact on demand for our products and solutions is more uncertain. While a majority of our products and solutions relates to less discretionary consumer staples, we also serve more discretionary and cyclical markets, such as industrials, durables and apparel. The indirect impact of tariffs resulted in an aggregate low single digit rate decrease in sales in our overall apparel categories over the second, third and fourth quarters of 2025. While our outlook assumes that tariff-related uncertainty will persist, further developments in international trade relations and their broader impact to macroeconomic conditions could have a material adverse effect on our business.

Certain factors that we believe will contribute to our 2026 results are described below.

•We anticipate a favorable impact to our full-year net sales and operating income from foreign currency translation, based on recent rates.

•We anticipate an unfavorable impact to our operating income from higher interest expense.

•We anticipate our full-year effective tax rate to be in the mid-twenty percent range.

•We anticipate incremental savings from restructuring actions, net of transition costs.

•We anticipate an unfavorable impact to our operating income from normalization of the majority of our 2025 temporary cost savings, which was largely related to lower incentive compensation.