Avery Dennison Corp

Note 1. General

The unaudited Condensed Consolidated Financial Statements and related notes in this Quarterly Report on Form 10-Q are presented as permitted by Article 10 of Regulation S-X and do not contain certain information included in the audited Consolidated Financial Statements and related notes in our 2025 Annual Report on Form 10-K, which should be read in conjunction with this report. These unaudited Condensed Consolidated Financial Statements contain all adjustments of a normal and recurring nature necessary for a fair statement of our interim results. Interim results of operations are not necessarily indicative of the results expected for the full fiscal year or any future period. These unaudited Condensed Consolidated Financial Statements reflect our current estimates and assumptions affecting (i) our reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and (ii) our reported amounts of sales and expenses during the reporting periods presented.

Fiscal Periods

The three and nine months ended September 30, 2026 consisted of 92 and 273 days, respectively, and the three and nine months ended September 27, 2025 consisted of 91 and 273 days, respectively.

Our 2026 fiscal year is coincident with the calendar year, beginning on January 1 and ending on December 31; our 2025 fiscal year began on December 29, 2024 and ended on December 31, 2025.

Note 2. Goodwill and Other Intangibles Resulting from Business Acquisitions

Changes in the net carrying amount of goodwill for the nine months ended September 30, 2026 by reportable segment are shown below.

(1)Measurement period adjustments related to the purchase price allocation for our 2025 acquisition of W.F. Taylor Holdings, Inc.

Amortization expense for finite-lived intangible assets resulting from business acquisitions was $25.5 million and $22.2 million for the three months ended September 30, 2026 and September 27, 2025, respectively, and $76.7 million and $66.4 million for the nine months ended September 30, 2026 and September 27, 2025, respectively.

Estimated future amortization expense related to existing finite-lived intangible assets for the remainder of fiscal year 2026 and each of the next four fiscal years and thereafter is shown below.

Note 3. Debt

The estimated fair value of our long-term debt is primarily based on the credit spread above U.S. Treasury or euro government bond securities, as applicable, on notes with similar rates, credit ratings and remaining maturities. The fair value of short-term borrowings, which include commercial paper and short-term lines of credit, approximates their carrying value given the short duration of these obligations. The fair value of our total debt was $3.41 billion at September 30, 2026 and $3.67 billion at December 31, 2025. Fair value was determined based primarily on Level 2 inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable.

Our $1.20 billion revolving credit facility (the “Revolver”) contains a financial covenant requiring that we maintain a specified ratio of total debt minus unrestricted cash and cash equivalents in excess of $50 million to a certain measure of income. As of both September 30, 2026 and December 31, 2025, we were in compliance with this financial covenant. No balance was outstanding under the Revolver as of September 30, 2026 or December 31, 2025.

Note 4. Cost Reduction Actions

2026 Actions

We recorded $40.4 million in restructuring charges, net of reversals, during the nine months ended September 30, 2026 related to our 2026 cost reduction actions. These charges consisted of severance and related costs for the reduction of approximately 690 positions, as well as asset impairment and lease cancellation charges, at certain locations across our company related to actions taken to optimize our operational footprint and workforce headcount.

During the nine months ended September 30, 2026, restructuring charges and payments were as follows:

Accruals for severance and related costs, as well as lease cancellation charges, were included in “Other current liabilities” and “Long-term retirement benefits and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. Asset impairment charges were based on the estimated market value of the assets, less selling costs, if applicable. Restructuring charges were included in “Other expense (income), net” in the unaudited Condensed Consolidated Statements of Income.

The table below shows the amount of restructuring charges, net of reversals, incurred by reportable segment and Corporate.

Note 5. Financial Instruments

We use various derivative financial instruments to manage risks in foreign currency exchange rates, commodity prices and interest rates. We recognize derivative financial instruments as either assets or liabilities at fair value in the unaudited Condensed Consolidated Balance Sheets. Refer to Note 9, “Fair Value Measurements,” to the unaudited Condensed Consolidated Financial Statements for more information.

Fair Value Hedges

We enter into foreign currency forward contracts to hedge our euro-denominated debt to offset changes in the fair value of the hedged item attributable to foreign currency risk. As of September 30, 2026, the foreign currency forward contracts hedging our €500 million of senior notes due in the fourth quarter of 2034 and €500 million of senior notes due in the third quarter of 2035 mature in December 2026 and September 2027, respectively.

Cash Flow Hedges

We entered into U.S. dollar to euro cross-currency swap contracts with a total notional amount of $250 million to effectively convert our fixed-rate U.S. dollar-denominated debt to euro-denominated debt, including semiannual interest payments and the payment of principal at maturity. During the term of the contracts, which end on April 30, 2030, we pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars.

We designate commodity forward contracts on forecasted purchases of commodities, as well as certain foreign currency forward contracts on forecasted transactions, as cash flow hedges.

Net Investment Hedges

We enter into foreign currency contracts and zero-cost collars, which are combined as net investment hedges for accounting purposes. These net investment hedges minimize the effect of foreign currency exchange rates on our net investment in certain foreign operations between the sold put strike and bought call strike rates of the contracts. As of September 30, 2026, the notional amount of these hedges was €1.0 billion, consisting oftwo €500 million tranches that mature in December 2026 and September 2027.

We enter into cross-currency swap contracts and zero-cost collars, which are also combined as net investment hedges for accounting purposes. These net investment hedges minimize the effect of foreign currency exchange rates on our net investment in certain foreign operations between the sold put strike and bought call strike rates of the contracts. These cross-currency swap contracts and zero-cost collars mature in February 2036 and February 2027, respectively.

Other Derivatives

We enter into foreign currency exchange contracts to reduce the risk from foreign currency exchange rate fluctuations associated with our receivables, payables, loans and firm commitments denominated in certain foreign currencies that arise primarily as a result of our operations outside the U.S. The impact of these foreign currency exchange contracts on the unaudited Condensed Consolidated Financial Statements was not material.

The following table shows the fair value and balance sheet locations of our derivative instruments as of September 30, 2026 and December 31, 2025:

The following table shows the components of net gain (loss) recognized in income related to derivative instruments:

The impact of the hedged items associated with the derivatives in the table above is recorded to the same income statement line as the derivative instrument. The net gains (losses) recognized in income related to our cross-currency swap contracts and commodity contracts were not material to the unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2026 and September 27, 2025.

We recognized gains in translation for the net investment hedges of approximately $1 million and $22 million for the three and nine months ended September 30, 2026, respectively, and losses in translation of approximately $6 million and $41 million for the three and nine months ended September 27, 2025, respectively.

Note 6. Taxes Based on Income

The following table summarizes our income before taxes, provision for income taxes, and effective tax rate:

Our provision for income taxes for the three and nine months ended September 30, 2026 included a net tax charge of $2.4 million and $7.4 million, respectively, related to the tax on recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived deduction eligible income. Our provision for income taxes for these periods was also negatively affected by the recognition of uncertain tax positions in certain foreign jurisdictions. In addition, our provision for income taxes for the nine months ended September 30, 2026 included a net discrete charge from increases in tax reserves related to a court ruling in a foreign jurisdiction impacting tax group requirements.

Our provision for income taxes for the three and nine months ended September 27, 2025 included a net tax charge of $5.6 million and $14.0 million, respectively, related to the tax on global intangible low-taxed income of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived intangible income. In addition, our provision for income taxes for these periods was negatively affected by the recognition of uncertain tax positions in certain foreign jurisdictions and included a discrete benefit from a favorable tax ruling in a foreign jurisdiction related to deductibility of interest expense.

The amount of income taxes we pay is subject to ongoing audits by taxing jurisdictions around the world. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. The final determination of tax audits and any related legal proceedings could materially differ from the amounts currently reflected in our provision for income taxes and the related liabilities. We and our U.S. subsidiaries have completed the IRS Compliance Assurance Process through 2023. With limited exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2010.

Note 7. Net Income Per Common Share

Net income per common share was computed as follows:

Certain stock-based compensation awards were excluded from the computation of net income per common share, assuming dilution, because they would not have had a dilutive effect. Stock-based compensation awards excluded from the computation totaled 0.1 million shares for both the three and nine months ended September 30, 2026 and September 27, 2025.

Note 8. Supplemental Equity and Comprehensive Income Information

Consolidated Changes in Shareholders’ Equity

(1)We fund a portion of our employee-related costs using shares of our common stock held in treasury. We reduce capital in excess of par value based on the grant date fair value of vesting awards and record net gains or losses associated with using treasury shares to retained earnings.

(2)In the first quarter of 2025, we adopted accounting guidance that requires crypto assets to be measured at fair value, which resulted in an adjustment to reflect the difference between the carrying value of our holdings in crypto assets and their fair value as of the beginning of 2025. Crypto assets were not material to the unaudited Condensed Consolidated Financial Statements.

Dividends per common share were as follows:

Changes in Accumulated Other Comprehensive Loss

The changes in “Accumulated other comprehensive loss” (net of tax) for the nine-month period ended September 30, 2026 were as follows:

(1)Included the impact of our derivative financial instruments accounted for as net investment hedges. Refer to Note 5, “Financial Instruments,” to the unaudited Condensed Consolidated Financial Statements for more information.

The changes in “Accumulated other comprehensive loss” (net of tax) for the nine-month period ended September 27, 2025 were as follows:

(1)Included the impact of our derivative financial instruments accounted for as net investment hedges. Refer to Note 5, “Financial Instruments,” to the unaudited Condensed Consolidated Financial Statements for more information.

Note 9. Fair Value Measurements

Recurring Fair Value Measurements

Assets and liabilities carried at fair value, measured on a recurring basis, as of September 30, 2026 were as follows:

Assets and liabilities carried at fair value, measured on a recurring basis, as of December 31, 2025 were as follows:

Investments include fixed income securities (primarily U.S. government and corporate debt) and equity securities measured at fair value using quoted prices/bids and a money market fund measured at fair value using net asset value. Investments of $1.5 million and $1.1 million were included in "Cash and cash equivalents," $47.1 million and $46.9 million in "Other current assets," and $0.2 million and $1.1 million in “Other assets” as of September 30, 2026 and December 31, 2025, respectively, in the unaudited Condensed Consolidated Balance Sheets. Derivatives that are exchange-traded are measured at fair value using quoted market prices and classified within Level 1 of the valuation hierarchy. Derivatives measured based on foreign currency exchange rate inputs that are readily available in public markets are classified within Level 2 of the valuation hierarchy. Bank drafts (maturities greater than three months), which are valued at face value due to their short-term nature, were included in “Other current assets” in the unaudited Condensed Consolidated Balance Sheets.

Contingent consideration liabilities as of September 30, 2026 and December 31, 2025 relate to estimated earn-out payments associated with an acquisition completed in 2021, which are subject to the acquired company achieving certain post-acquisition performance targets. These liabilities were recorded based on the expected payments and have been classified within Level 3 of the valuation hierarchy. Activity related to contingent consideration was immaterial for the nine months ended September 30, 2026 and September 27, 2025.

Note 10. Venture Investments

We invest primarily in privately held companies and utilize the measurement alternative for venture investments where we do not exercise significant influence. These investments do not have a readily determinable fair value; therefore, we measure them at cost less impairment plus or minus observable price changes in an orderly transaction. Venture investments in publicly traded companies are recorded at fair value using Level 1 inputs. The carrying value of our venture investments was included in “Other assets” in the unaudited Condensed Consolidated Balance Sheets.

On April 27, 2026, we completed an approximately $75 million minority investment in Wiliot Ltd., a company specializing in physical artificial intelligence for supply chains. We expect this investment to enhance our portfolio of sensor technologies and solutions. We funded this investment using cash and commercial paper borrowings.

Venture investments by form and measurement category as of September 30, 2026 were as follows:

Venture investments by form and measurement category as of December 31, 2025 were as follows:

Unrealized gain (loss) on venture investments, net, was as follows and recorded in “Other expense (income), net” in the unaudited Condensed Consolidated Statements of Income:

Cumulative upward adjustments on venture investments recorded under the measurement alternative were $27.7 million at both September 30, 2026 and December 31, 2025. Cumulative downward adjustments and impairments on venture investments recorded under the measurement alternative were $8.4 million and $7.6 million at September 30, 2026 and December 31, 2025, respectively.

Note 11. Commitments and Contingencies

Legal Proceedings

We are involved in various lawsuits, claims, inquiries and other regulatory and compliance matters, most of which arise in the ordinary course of business. When it is probable that a loss will be incurred and where a range of the loss can be reasonably estimated, the best estimate within the range is accrued. When the best estimate within the range cannot be determined, the low end of the range is accrued. The ultimate resolution of these claims could affect future results of operations should our exposure be materially different from our estimates or should we incur liabilities that were not previously accrued. Probable insurance reimbursements are not offset against potential liabilities.

Because of the uncertainties associated with claims resolution and litigation, future expenses to resolve legal proceedings could be higher than the liabilities we have accrued. If information were to become available that allowed us to reasonably estimate an amount higher or lower than what we have accrued in the range of potential expenses determined to be probable, we would adjust our accrued liabilities accordingly. Additional lawsuits, claims, inquiries and other regulatory and compliance matters could arise in the future. The range of expenses for resolving any future matters would be assessed as they arise; until then, a range of potential expenses for their resolution cannot be determined. Based upon current information, we believe that the impact of the resolution of legal proceedings would not be, individually or in the aggregate, material to our financial position, results of operations or cash flows.

Environmental Expenditures

Environmental expenditures are generally expensed. When it is probable that a loss will be incurred and where a range of the loss can be reasonably estimated, the best estimate within the range is accrued. When the best estimate within the range cannot be determined, the low end of the range is accrued. The ultimate resolution of these matters could affect future results of operations should our exposure be materially different from our estimates or should we incur liabilities that were not previously accrued. Probable insurance reimbursements are not offset against potential liabilities. We review our estimates of the costs of complying with environmental laws related to the remediation and cleanup of various sites, including sites in which governmental agencies have designated us as a potentially responsible party (“PRP”). However, environmental expenditures for newly acquired assets and those that extend or improve the economic useful life of existing assets are capitalized and amortized over the shorter of the estimated useful life of the acquired asset or the remaining life of the existing asset.

As of September 30, 2026, we have been designated by the U.S. Environmental Protection Agency (“EPA”) and/or other responsible state agencies as a PRP atten waste disposal or waste recycling sites that are the subject of separate investigations or proceedings concerning alleged soil and/or groundwater contamination. No settlement of our liability related to any of these sites has been agreed upon. We are participating with other PRPs at these sites and anticipate that our share of remediation costs will be determined pursuant to agreements that we enter into with the EPA or other governmental authorities.

These estimates could change as a result of changes in planned remedial actions, remediation technologies, site conditions, the estimated time to complete remediation, environmental laws and regulations, and other factors. Because of the uncertainties associated with environmental assessment and remediation activities, our future expenses to remediate these sites could be higher than the liabilities we have accrued. If information were to become available that allowed us to reasonably estimate an amount higher or lower than what we have accrued in the range of potential expenses, we would adjust our environmental liabilities accordingly. In addition, we may be identified as a PRP at additional sites in the future. The range of expenses for remediation of any future-identified sites would be addressed as they arise; until then, a range of expenses for their remediation cannot be determined.

The activity related to our environmental liabilities for the nine months ended September 30, 2026 is shown below.

Approximately $2 million of this balance was classified as short-term and included in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets as of both September 30, 2026 and December 31, 2025.

Note 12. Segment and Disaggregated Revenue Information

Disaggregated Revenue Information

Disaggregated revenue information is shown below in the manner that best reflects how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenue from our Materials Group reportable segment is attributed to geographic areas based on the location from which products are shipped. Revenue from our Solutions Group reportable segment is shown by product group.

(1)Beginning in the first quarter of 2026 and to better align with our growth strategy, incremental revenues for certain radio-frequency identification products were included in the Materials Group reportable segment; in prior years, these revenues were included in the Solutions Group reportable segment. Prior-year amounts were not material.

Segment Information

Our chief operating decision maker uses adjusted operating income to evaluate segment performance and allocate resources. Segment adjusted operating income is defined as income before taxes adjusted for other expense (income), net; interest expense; and other non-operating expense (income), net. Segment results and reconciliation to income before taxes are presented below.

(1)Segment expense included cost of products sold and marketing, general and administrative expense and excluded other expense (income), net.

(1)Corporate expense generally includes unallocated corporate headquarter expenses such as administrative and stock-based compensation costs.

Additional Segment Information

Additional financial information by reportable segment is shown below. We do not disclose total assets by reportable segment since we neither generate nor review that information internally.

(1)Corporate capital expenditures and depreciation and amortization expense are allocated to the reportable segments based on their percentage of consolidated net sales.

(2)Capital expenditures for property, plant and equipment included accruals.

Other expense (income), net, by type was as follows:

Note 13. Supplemental Financial Information

Inventories

The table below summarizes amounts in inventories.

Property, Plant and Equipment, Net

The table below summarizes amounts in property, plant and equipment, net.

Allowance for Credit Losses

The activity related to our allowance for credit losses is shown below.

Supplier Finance Programs

We have agreements with third-party financial institutions to facilitate payments to suppliers. These third-party financial institutions offer voluntary supply chain finance programs that enable certain of our suppliers, at the supplier’s sole discretion, to sell our payment obligations to a financial institution on terms directly negotiated with the financial institution. Participating suppliers decide which payment obligations are sold to the financial institution and we have no economic interest in a supplier’s decision to sell these payment obligations. We make payments to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers' decisions to sell amounts under these arrangements. Amounts due under our supply chain finance programs were included inaccounts payable in our unaudited Condensed Consolidated Balance Sheets and activities related to these programs were presented as operating activities in our unaudited Condensed Consolidated Statements of Cash Flows. As of September 30, 2026 and December 31, 2025, $401.5 million and $383.8 million, respectively, were due to financial institutions for suppliers that participate in these programs.