AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Technical and capital entry barriers are management assertions. Recurring productivity gains and high-value product traction do not establish relative costs, exclusivity or a protected market position.
durability · — · Multiple periods of productivity benefits establish operational continuity, but the duration and defensibility of any relative advantage remain unestablished. The multi-decade digital-identification thesis is prospective.
customer dependency · — · Volume recovery and high-value-category demand do not establish switching friction or customer dependence. No customer-specific renewal, substitution or integration evidence is supplied.
erosion resilience · — · Productivity and improved input-cost economics demonstrate operating resilience, but cannot establish resistance to competitive imitation or substitution. Sustainability substitution remains a risk rather than a demonstrated loss of competitive position.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · 2/4 · Observed outcomes are mixed: pricing actions partly offset 2023 volume declines, followed by deflation-related price reductions in 2024 and 2026. The pricing/input-cost relationship hurt 2025 earnings and benefited 2026 earnings. This supports a mixed assessment without proving discretionary price premiums.
retention · 2/4 · Indirect demand evidence is mixed: Materials volume recovered and grew, while Solutions high-value categories grew modestly and its base business declined. These results support continuing demand, but do not identify retained customers or quantify retention.
margin resilience · 3/4 · Repeated material re-engineering and productivity benefits supported earnings through volume and cost changes. Solutions maintained comparable first-half 2026 adjusted operating income despite higher employee costs, while Materials benefited from volume and improved input-cost economics. The 2025 decline limits the strength of the conclusion; resilience is not attributable to pricing alone.
contractual freedom · — · The passages disclose pricing actions and possible limits to passing through costs, but no customer contract terms establish repricing rights, timing, commitments or restrictions.
Predictability93
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 5.63
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 0.89
Financial strength41
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 39.43
- netDebtEbitGrade
- 33.43
- interestCoverageGrade
- 62.11
- currentRatioGrade
- 30.15
- Debt / FCF (x)
- 5.24
- Net debt / operating income (x)
- 3.33
- Current ratio (x)
- 1.13
Capital allocation94
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 18.77
- 3-year average dilution (%)
- -1.45
- 3-year average SBC / revenue (%)
- 0.30
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Substantial operating cash generation and lower capital expenditure support discipline. However, 2025 dividends, repurchases and acquisition/venture payments exceeded adjusted free cash flow, reported debt rose and ROTC declined from 2024. First-half 2026 cash improvement was driven substantially by working capital and lower incentive payments. Acquisition returns and repurchase value creation are not established.
incentive alignment · 3/4 · Actual 2025 disclosures show CEO ownership twice the six-times-salary requirement, compliance by other named executives, long-term performance awards, hedging restrictions and clawback provisions. A special Intelligent Labels award paid nothing after missing both thresholds, demonstrating downside consequences. Heavy adjusted-EPS weighting and incomplete award-target disclosure limit an exceptional assessment.
execution · 2/4 · Operating evidence shows recurring productivity benefits, growth in high-value categories and substantial cash generation. Results are mixed: 2025 net income declined, the special Intelligent Labels award missed both thresholds, and first-half 2026 Solutions base-business demand contracted. Execution is assessed from reported outcomes rather than management's general claims of excellence.
governance · 3/4 · Existing practices include annual director elections, majority voting, a single voting class, proxy access and no poison pill or supermajority requirements. The Board actually determined eight of ten directors independent in February 2026. Board discretion over leadership structure and limited evidence of governance effectiveness through adverse events prevent an exceptional grade.
Evidence
We believe that entry of competitors into the field of pressure-sensitive adhesives and materials is limited by technical knowledge and capital requirements.
Business / competition / asserted technical and capital entry barriers · Filed 25/02/2026
We believe that our technical expertise, size and scale of operations, broad line of quality products, reliable service, product and process innovation, distribution capabilities and brand strength are the primary advantages in maintaining and further developing our competitive position.
Business / competition / management's claimed competitive advantages · Filed 25/02/2026
Segment adjusted operating income increased in 2024 compared to the same period in 2023 primarily due to higher volume and benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, partially offset by higher employee-related costs and the net impact of pricing and raw material input costs.
MD&A / segment results / 2024 productivity and earnings drivers · Filed 26/02/2025
Segment Adjusted Operating Income Segment adjusted operating income decreased in 2025 compared to 2024 primarily due the net impact of pricing and raw material input costs, as well as higher employee-related costs, partially offset by favorable volume/mix and benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs.
MD&A / Materials Group / 2025 pricing, costs and productivity · Filed 25/02/2026
Segment Adjusted Operating Income Segment adjusted operating income increased in the first six months of 2026 compared to the same period last year primarily due to higher volume, favorable foreign currency translation, the net benefit of pricing and raw material costs, including material re-engineering, and benefits from productivity initiatives, including savings from restructuring actions, net of transition costs.
MD&A / Materials Group / first-half 2026 operating-income drivers · Filed 04/08/2026
In the first six months of 2026, net sales increased on an organic basis compared to the same period in the prior year primarily due to higher volume, partially offset by unfavorable mix and raw material deflation-related price reductions.
MD&A / Materials Group / first-half 2026 volume, mix and realized price reductions · Filed 04/08/2026
Changes in consumer preferences, laws and regulations related to the use of raw materials and extended producer responsibility rules focused on the end-of-life of products, particularly in Europe and certain states in the United States, present the risk of reduced demand for certain of our products if customers seek decoration technology alternatives to pressure-sensitive labeling, but also the opportunity for increased demand for our more sustainable products, a significant focus of our research and development and related innovation efforts.
Risk factors / sustainability and alternative labeling technologies · Filed 25/02/2026
In 2025, high-value categories delivered above-average organic sales growth in Materials and Solutions and higher-than-average enterprise margins.
Proxy / strategic achievements / 2025 high-value-category growth · Filed 12/03/2026
Having disproportionately driven our organic sales growth in recent years, high-value products and solutions now represent ~45% of our revenue mix.
Proxy / strategic achievements / high-value revenue mix · Filed 12/03/2026
We believe that connecting physical items with digital identities is a multi-decade growth platform where we are uniquely positioned to win by leveraging our core and emerging businesses and selectively adding capabilities to strengthen our long-term position.
Proxy / strategy / prospective digital-identification opportunity · Filed 12/03/2026
currency(1) 1 Organic sales change(1) 1 % (1)Totals may not sum due to rounding In the first six months of 2026, net sales increased on an organic basis compared to the same period in the prior year due to a low single digit rate increase in high-value categories, partially offset by a low single digit rate decrease in the base business.
MD&A / Solutions Group / first-half 2026 organic category growth and decline · Filed 04/08/2026
The threshold level of performance was not achieved for either of the performance objectives, resulting in no payout for these PUs.
Proxy / compensation / realized failure to meet special performance-unit thresholds · Filed 12/03/2026
This resulted in additional potential liability for the RFID tags sold during the period from the jury verdict to the issuance of the first instance judgment, a higher royalty imposed by the judge applicable to tags sold after the judgment and a royalty on additional late-disclosed tags, as well as sanctions, prejudgment interest, costs, and attorneys’ fees.
Commitments and contingencies / historical RFID patent judgment · Filed 21/02/2024
In addition, Adasa was awarded an ongoing royalty on in-scope tags sold after October 14, 2021.
Commitments and contingencies / historical ongoing royalty award · Filed 21/02/2024
In 2023, net sales decreased on an organic basis compared to the prior year due to lower volume driven primarily by inventory destocking, partially offset by the impact of pricing actions.
MD&A / Materials Group / 2023 destocking and pricing actions · Filed 26/02/2025
27 Table of Contents In 2024, net sales on an organic basis increased compared to the prior year due to higher volume, partially offset by the impact of raw material deflation-related price reductions.
MD&A / Materials Group / 2024 volume growth and price reductions · Filed 25/02/2026
Segment Adjusted Operating Income Segment adjusted operating income in the first six months of 2026 was comparable to the same period last year primarily due to higher employee-related costs, which were offset by benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, and the net benefit of pricing and raw material costs.
MD&A / Solutions Group / first-half 2026 earnings resilience and cost offsets · Filed 04/08/2026
Avery Dennison Corporation | 2026 Proxy Statement A-3 Table of Contents ADJUSTED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW CONVERSION ($ in millions) 2023 2024 2025 Net cash provided by operating activities $ 826.0 $ 938.8 $ 881.4 Purchases of property, plant and equipment (265.3) (208.8) (169.0) Purchases of software and other deferred charges (19.8) (31.0) (31.4) Proceeds from company-owned life insurance policies 48.1 – – Purchases of Argentine Blue Chip Swap securities – (34.2) – Proceeds from sales of Argentine Blue Chip Swap securities – 24.0 – Proceeds from sales of property, plant and equipment 1.0 0.6 22.6 Proceeds from insurance and sales (purchases) of investments, net 1.9 10.1 3.5 Adjusted free cash flow (non-GAAP) $ 591.9 $ 699.5 $ 707.1 As reported net income $ 503.0 $ 704.9 $ 688.0 Adjusted free cash flow conversion (non-GAAP) 118% 99% 103% RETURN ON TOTAL CAPITAL (ROTC) ($ in millions) 2023 2024 2025 As reported net income $ 503.0 $ 704.9 $ 688.0 Interest expense, net of tax benefit 86.2 86.5 100.7 Intangible amortization, net of tax benefit 62.5 66.1 69.0 Effective tax rate 27.6% 26.1% 25.6% Net income, excluding interest expense and intangible amortization, net of tax benefit $ 651.7 $ 857.5 $ 857.7 Total debt $ 3,244.3 $ 3,152.2 $ 3,732.9 Shareholders’ equity $ 2,127.9 $ 2,312.3 $ 2,242.1 Total debt and shareholders’ equity $ 5,372.2 $ 5,464.5 $ 5,975.0 ROTC (non-GAAP) 12.4% 15.8% 15.0% ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT) ($ in millions) 2023 2024 2025 As reported net income $ 503.0 $ 704.9 $ 688.0 Adjustments: Interest expense 119.0 117.0 135.4 Other non-operating expense (income), net (30.8) (26.7) (14.2) Provision for income taxes 191.7 248.6 237.1 Operating income before interest expense, other non-operating expense (income), and taxes $ 782.9 $ 1,043.8 $ 1,046.3 Reconciling items: Non-cash restructuring costs 8.3 6.0 3.0 Other items(1) 175.6 108.5 113.9 Adjusted earnings before interest expense, other non-operating expense (income), taxes, non-cash restructuring costs and other items (non-GAAP) $ 966.8 $ 1,158.3 $ 1,163.2 (1) Includes pretax impact of acquisitions completed after our 2023-2025 financial targets were set, intangible amortization, (gain)/loss on venture and other investments, net, (gain)/loss on sales of assets, outcomes of legal matters and settlements, net, transaction and related costs, and losses from Argentine peso remeasurement and Blue Chip Swap transactions.
Proxy / Appendix A / 2023–2025 cash generation, investment, debt and returns · Filed 12/03/2026
currency increased by 0.4% Reported EPS increased from $8.73 in 2024; adjusted EPS increased by 1.1% from $9.43 to $9.53, reflecting outsized sales growth in high-value categories, as well as mitigation of tariff-related impacts and softer consumer volumes We used adjusted free cash flow of $707.1 million to pay $288.4 million in dividends, make $572.3 million in payments for share repurchases, and expend $401.8 million for one acquisition and five venture investments Net income decreased by 2.4% from $704.9 million in 2024; ROTC was 15.0% TSR Performance Our TSR in 2025, while negative, was modestly higher than the TSR of the Dow Jones U.S.
Proxy / 2025 financial performance / dividends, repurchases, acquisitions and net income · Filed 12/03/2026
FINANCIAL CONDITION Liquidity Operating Activities Six Months Ended (In millions) June 30, 2026 June 28, 2025 Net income $ 372.2 $ 355.3 Depreciation 106.4 100.3 Amortization 66.8 58.4 Provision for credit losses and sales returns 27.2 25.3 Stock-based compensation 12.2 14.7 Deferred taxes and other non-cash taxes (19.2) (12.0) Other non-cash expense and loss (income and gain), net 29.2 20.8 Changes in assets and liabilities and other adjustments (50.1) (370.3) Net cash provided by operating activities $ 544.7 $ 192.5 During the first six months of 2026, net cash provided by operating activities increased compared to the same period last year primarily due to changes in operational working capital and lower incentive compensation payments, partially offset by higher tax payments, net of refunds.
Financial condition / first-half 2026 operating cash flow and working-capital effects · Filed 04/08/2026
PAY FOR PERFORMANCE Compensation Primarily Performance-Based ✓ 89% of CEO’s target TDC and 71% of average target TDC of other NEOs for 2025 Strategic Targeting ✓ Target TDC (base salary + target AIP opportunity + target LTI opportunity) set to incent strong performance and value creation, giving consideration to pay at similar-size companies, role responsibilities, experience, performance, retention and succession Capped Annual Incentive Consistent with Annual Financial Goals ✓ 2025 AIP awards for NEOs based on target performance objectives consistent with annual financial goals, subject to limited upward and unlimited downward discretion based on Committee’s assessment of performance of CEO against predetermined strategic objectives and other NEOs’ individual contributions; awards capped at 200% of target Majority Long-Term Equity Incentive Compensation ✓ LTI awards for NEOs prioritize longer-term stockholder value creation, with PUs cliff-vesting in three years and MSUs vesting over one-, two-, three- and four-year performance periods Capped Payout for Relative TSR in PUs ✓ Payout for relative TSR component of PUs capped at 100% of target if our absolute TSR is negative 52 2026 Proxy Statement | Avery Dennison Corporation Table of Contents COMPENSATION BEST PRACTICES No Employment Contracts ✓ NEOs employed without contract unless required by laws or market practices of home country Rigorous Stock Ownership Policy ✓ CEO required to maintain ownership of 6x his base salary and owned 2x this requirement at YE 2025; Level 2 NEOs and Level 3 NEO complied with requirements to maintain ownership of 3x and 2x of base salary, respectively No Hedging or Pledging ✓ Insider trading policy prohibits officers from engaging in short sale, option, hedging and pledging transactions in our common stock and all NEOs complied during 2025 Limited Trading Windows ✓ NEOs may only transact in company stock during approved trading windows after satisfying preclearance requirements, including certifying continued compliance with our stock ownership policy Below Median Burn Rate ✓ Three-year average burn rate of 0.37% at YE 2025, between 25th and 50th percentiles of S&P 500 companies Compensation Clawback ✓ Clawback policy requires recoupment of certain incentive-based compensation to executive officers if we have an accounting restatement to correct material noncompliance with any financial reporting requirement No Excise Tax Gross Ups ✓ No gross-up payments for excise taxes for termination following change of control Double Trigger Equity Vesting ✓ Equity awards not accelerated upon change of control unless NEO terminated without cause or NEO terminates employment for good reason within 24 months of change of control Limited Perquisites ✓ Other than capped financial planning reimbursement only for CEO and Level 2 NEOs and payment for executive physicals, our U.S.
Proxy / 2025 compensation practices / ownership compliance, incentive structure and safeguards · Filed 12/03/2026
2025 CORPORATE AIP PERFORMANCE OBJECTIVES Objective Description Adjusted Sales Growth (20%) Focuses management on top-line growth, a key contributor to long-term value creation Adjusted EPS (60%) Primary driver of stockholder value creation and measure we use to provide guidance to our investors; focuses management on profitable growth and expense control Adjusted Free Cash Flow (20%) Cash available after investment in our business, which we can deploy for dividends, share repurchases, acquisitions and venture investments; focuses management on improving capital efficiency, including working capital The AIP performance objectives for our Business NEO were tied primarily to results for the Materials business based 20% on adjusted sales growth, 45% on adjusted EBITDA and 20% on adjusted free cash flow; the remaining 15% was tied to adjusted EPS.
Proxy / adopted 2025 annual incentive objectives and weightings · Filed 12/03/2026
Stockholder Rights ✓ Market-standard proxy access ✓ Right to call special meetings of stockholders at 25% ownership threshold ✓ No supermajority voting requirements ✓ No poison pill ✓ No exclusive forum or fee-shifting bylaws Board Governance ✓ Annual election of directors ✓ Majority voting in director elections ✓ Single class of outstanding voting stock ✓ Directors 80% independent ✓ Robust Lead Independent Director role ✓ Regular director succession planning and paced Board refreshment ✓ Regular executive succession planning and leadership development ✓ Annual Board/Committee evaluations and biannual individual director feedback process ✓ Mandatory director retirement policy at age 75 with no exemptions or waivers allowed or granted ✓ Best practice Governance Guidelines ✓ Strong Board and Committee governance ✓ Direct access to management and experts Avery Dennison Corporation | 2026 Proxy Statement 9 Table of Contents OUR SUSTAINABILITY We believe that sustainability is a business imperative that drives profitable revenue growth and margin expansion while also reducing our environmental impact and ensuring we comply with evolving regulatory requirements.
Proxy / existing governance and stockholder-rights practices · Filed 12/03/2026
Upon the recommendation of the Governance Committee, our Board affirmatively determined eight of our ten directors to be independent.
Proxy / actual February 2026 director independence determination · Filed 12/03/2026
Our Governance Guidelines give our Board the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time.
Proxy / Board discretion over Chairman and CEO leadership structure · Filed 12/03/2026
For fastener products, there is a variety of competitors supplying extruded and injection molded fasteners and fastener attaching equipment.
Business / competition / generic fastener competitor coverage · Filed 25/02/2026
We believe that the most significant risk factors that could affect our financial performance in the near term include: (i) the impact on underlying demand for our products from global economic conditions, tariffs, geopolitical uncertainty, and changes in environmental standards, regulations, and preferences; (ii) competitors’ actions, including pricing, expansion in key markets, and product offerings; (iii) the cost and availability of raw materials; (iv) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through price increases, without a significant loss of volume; (v) foreign currency fluctuations; and (vi) the execution and integration of acquisitions.
Forward-looking risk discussion / competitive pricing and limits to cost pass-through · Filed 04/08/2026
Yost was granted a special LTI award of 2022-2025 PUs with a target grant date fair value of $1,000,000, which was eligible to cliff-vest at year-end 2025 based on enterprise Intelligent Labels compound annual sales growth ex.
Proxy / compensation / special 2022–2025 Intelligent Labels performance-unit award · Filed 12/03/2026
currency and cumulative adjusted EBITA.
Proxy / compensation / special award's cumulative earnings objective · Filed 12/03/2026
