Avery Dennison 10-Q 2025-09-27

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 27, 2025.

OR

For the transition period from ________________________ to ________________________

Commission file number 1-7685

AVERY DENNISON CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (440) 534-6000

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Number of shares of $1 par value common stock outstanding as of October 25, 2025: 77,295,394

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AVERY DENNISON CORPORATION

FISCAL THIRD QUARTER 2025 QUARTERLY REPORT ON FORM 10-Q

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Safe Harbor Statement

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are not statements of historical fact, contain estimates, assumptions, projections and/or expectations regarding future events, which may or may not occur. Words such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “guidance,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “project,” “seek,” “shall,” “should,” “target,” “will,” “would,” or variations thereof, and other expressions that refer to future events and trends, identify forward-looking statements. Our forward-looking statements, and financial or other business targets, are subject to certain risks and uncertainties, which could cause our actual results to differ materially from the expected results, performance or achievements expressed or implied by such forward-looking statements.

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.

Certain risks and uncertainties are discussed in more detail under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025, and subsequent quarterly reports on Form 10-Q. Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but not limited to, risks and uncertainties related to the following:

• International Operations – worldwide economic, social, geopolitical and market conditions; changes in geopolitical conditions, including those related to trade relations and tariffs, China, the Russia-Ukraine war, the Israel-Hamas war and related hostilities in the Middle East; fluctuations in foreign currency exchange rates; and other risks associated with international operations, including in emerging markets

• Our Business – fluctuations in demand affecting sales to customers; fluctuations in the cost and availability of raw materials and energy; changes in our markets due to competitive conditions, technological developments, laws and regulations, and customer preferences; environmental regulations and sustainability trends; the impact of competitive products and pricing; the execution and integration of acquisitions; selling prices; customer and supplier concentrations or consolidations; the financial condition of distributors; outsourced manufacturers; product and service quality claims; restructuring and other cost reduction actions; our ability to generate sustained productivity improvement and our ability to achieve and sustain targeted cost reductions; the timely development and market acceptance of new products, including sustainable or sustainably-sourced products; our investment in development activities and new production facilities; the collection of receivables from customers; and our sustainability and governance practices

• Information Technology – disruptions in information technology systems; cybersecurity events or other security breaches; and successful installation of new or upgraded information technology systems

• Income Taxes – fluctuations in tax rates; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; outcome of tax audits; and the realization of deferred tax assets

• Human Capital – recruitment and retention of employees and collective labor arrangements

• Our Indebtedness – our ability to obtain adequate financing arrangements and maintain access to capital; credit rating risks; fluctuations in interest rates; and compliance with our debt covenants

• Ownership of Our Stock – potential significant variability of our stock price and amounts of future dividends and share repurchases

• Legal and Regulatory Matters – protection and infringement of our intellectual property; the impact of legal and regulatory proceedings, including with respect to compliance and anti-corruption, environmental, health and safety, and trade compliance

• Other Financial Matters – fluctuations in pension costs and goodwill impairment

Our forward-looking statements are made only as of the filing date of this Form 10-Q. We assume no duty to update these forward-looking statements to reflect new, changed or unanticipated events or circumstances, other than as may be required by law.

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PART I. FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

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Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes thereto.

NON-GAAP FINANCIAL MEASURES

We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of our financial results prepared in accordance with GAAP. We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparisons with the results of competitors for quarters and year-to-date periods, as applicable. Based on feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are also useful to their assessments of our performance and operating trends, as well as liquidity. Reconciliations of our non-GAAP financial measures from the most directly comparable GAAP financial measures are provided in accordance with Regulations G and S-K.

Our non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it more difficult to assess our underlying performance in a single period. By excluding the accounting effects, positive or negative, of certain items (e.g., restructuring charges, outcomes of certain legal matters and settlements, certain effects of strategic transactions and related costs, losses from debt extinguishments, gains or losses from curtailment or settlement of pension obligations, gains or losses on sales of certain assets, gains or losses on venture and other investments, currency adjustments due to highly inflationary economies, and other items), we believe that we are providing meaningful supplemental information that facilitates an understanding of our core operating results and liquidity measures. While some of the items we exclude from GAAP financial measures recur, they tend to be disparate in amount, frequency or timing.

We use the non-GAAP financial measures defined below in this MD&A.

• Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation, and, where applicable, the currency adjustments for transitional reporting of highly inflationary economies and the reclassification of sales between segments. Additionally, where applicable, sales change ex. currency is also adjusted for extra days in our fiscal year and the calendar shift resulting from extra days in the prior fiscal year. The estimated impact of foreign currency translation is calculated on a constant currency basis, with prior-period results translated at current-period average exchange rates to exclude the effect of foreign currency fluctuations. Our 2025 fiscal year that began on December 29, 2024 will end on December 31, 2025; fiscal years 2026 and beyond will be coincident with the calendar year beginning on January 1 and ending on December 31.

• Organic sales change refers to sales change ex. currency, excluding the estimated impact of acquisitions and product line divestitures.

We believe that sales change ex. currency and organic sales change assist investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period.

• Adjusted free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, less payments for software and other deferred charges, plus proceeds from company-owned life insurance policies, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments, less net cash used for Argentine Blue Chip Swap securities. Where applicable, adjusted free cash flow is also adjusted for certain acquisition-related transaction costs. We believe that adjusted free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases and acquisitions.

• Operational working capital as a percentage of annualized current quarter net sales refers to trade accounts receivable and inventories, net of accounts payable, and excludes cash and cash equivalents, short-term borrowings, deferred taxes, other current assets and other current liabilities divided by annualized current quarter net sales. We believe that operational working capital as a percentage of annualized current quarter net sales assists investors in assessing our working capital requirements because it excludes the impact of fluctuations attributable to our financing and other activities (which affect cash and cash equivalents, deferred taxes, other current assets and other current liabilities) that tend to be disparate in amount, frequency or timing, and may increase the volatility of working capital as a percentage of sales from period to period. The items excluded from this measure are not significantly influenced by our day-to-day activities managed at the operating level and do not necessarily reflect the underlying trends in our operations.

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OVERVIEW AND OUTLOOK

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 that began on December 29, 2024 will end on December 31, 2025; fiscal years 2026 and beyond will begin on January 1 and end on December 31.

Net Sales

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 the three months and nine months ended September 27, 2025, net sales on an organic basis were comparable with the same periods in the prior year.

Net Income

Net income decreased from approximately $531 million in the first nine months of 2024 to approximately $522 million in the first nine months of 2025. The primary factors affecting this decrease were:

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

• Higher provision for income taxes

• 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

We recorded $22.8 million in restructuring charges, net of reversals, during the nine months ended September 27, 2025. These charges consisted of severance and related costs for the reduction of approximately 770 positions, as well as asset impairment charges, at various locations across our company. Our 2025 actions are primarily intended to optimize our operational footprint.

Restructuring charges were included in “Other expense (income), net” in the unaudited Condensed Consolidated Statements of Income. Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information.

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Cash Flow

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. During the first nine months of 2025, adjusted free cash flow decreased compared to the same period last year primarily due to a decrease in net cash provided by operating activities, partially offset by lower purchases of property, plant and equipment and higher proceeds from the sales of property, plant and equipment.

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 other 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 surcharges. 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. We estimate that the indirect impact of tariffs resulted in an aggregate low single digit rate decrease in sales in our overall apparel categories over the second and third quarters of 2025.

Certain factors that we believe may contribute to or impact our 2025 results are described below.

• We anticipate continued uncertainty related to trade policy and the macroeconomic environment.

• In the fourth quarter of 2025, we anticipate an increase in net sales, both sequentially and compared to the same period last year, from the impacts of favorable foreign currency translation, the extra days resulting from our transition to a December 31, 2025 fiscal year-end, and our acquisition of W.F. Taylor Holdings, Inc.

• For the full year:

◦We expect a favorable impact to our net sales and operating income from foreign currency translation, based on recent rates.

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

◦We expect our effective tax rate to be in the mid-twenty percent range.

ANALYSIS OF RESULTS OF OPERATIONS FOR THE THIRD QUARTER

Income Before Taxes

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Gross Profit

Gross profit for the third quarter of 2025 increased from the same period last year due to higher volume/mix and benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, partially offset by the net impact of raw material deflation-related price reductions and higher employee-related costs.

Marketing, General and Administrative Expense

Marketing, general and administrative expense increased in the third quarter of 2025 compared to the same period last year primarily due to growth investments and higher employee-related costs, partially offset by benefits from productivity initiatives and savings from restructuring actions, net of transition costs.

Other Expense (Income), Net

Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information regarding restructuring charges.

Interest Expense

Interest expense increased in the third quarter of 2025 compared to the same period last year primarily due to the €500 million of senior notes we issued in November 2024.

Net Income and Earnings per Share

Provision for Income Taxes

Our effective tax rate for the three months ended September 27, 2025 increased compared to the same period last year primarily due to lower discrete tax benefits and a higher net charge related to the U.S. tax on foreign earnings. Refer to Note 6, “Taxes Based on Income,” to the unaudited Condensed Consolidated Financial Statements for more information.

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RESULTS OF OPERATIONS BY REPORTABLE SEGMENT FOR THE THIRD QUARTER

During the fourth quarter of 2024, we modified our segment performance measure to exclude other expense (income), net. This change aligns with how our chief operating decision maker evaluates segment performance and allocates resources. Prior-year periods have been conformed to the current-period presentation. Segment adjusted operating income is defined as income before taxes adjusted for other expense (income), net; interest expense; other non-operating expense (income), net; and other items.

Refer to Note 11, “Segment and Disaggregated Revenue Information,” to the unaudited Condensed Consolidated Financial Statements for more information.

Materials Group

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $13.6 million and $4.4 million in the third quarters of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, outcomes of legal matters and settlements, net, (gain) loss on venture and other investments, transaction and related costs, and losses from Argentine peso remeasurement and Blue Chip Swap transactions.

Net Sales

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 the third quarter of 2025, net sales decreased on an organic basis compared to the same period in the prior year primarily due to the impact of raw material deflation-related price reductions, partially offset by favorable volume/mix. On an organic basis, net sales were comparable in North America, decreased by a low single digit rate in Europe, the Middle East and North Africa, and decreased by low single digit rates in Asia Pacific and Latin America.

Segment Adjusted Operating Income

Segment adjusted operating income increased in the third quarter of 2025 compared to the same period last year primarily due to productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and favorable volume/mix, partially offset by the net impact of pricing and raw material input costs.

Solutions Group

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $1.5 million and $10.9 million in the third quarters of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, outcomes of legal matters and settlements, net, (gain) loss on venture and other investments, and gain (loss) on sales of assets.

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Net Sales

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 the third quarter of 2025, net sales increased on an organic basis compared to the same period in the prior year due to a high single digit rate increase in high-value categories, partially offset by a low single digit rate decrease in the base business. Company-wide, on an organic basis, net sales of intelligent labels increased by a low single digit rate compared to the same period in the prior year.

Segment Adjusted Operating Income

Segment adjusted operating income decreased in the third quarter of 2025 compared to the same period last year primarily due to higher employee-related costs and the net impact of pricing and raw material costs, partially offset by higher volume and benefits from productivity initiatives, including savings from restructuring actions, net of transition costs.

ANALYSIS OF RESULTS OF OPERATIONS FOR THE NINE MONTHS YEAR-TO-DATE

Income Before Taxes

Gross Profit

Gross profit for the first nine months of 2025 decreased from the same period last year primarily due to the net impact of pricing and raw material input costs and higher employee-related costs, partially offset by benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and higher volume/mix.

Marketing, General and Administrative Expense

Marketing, general and administrative expense decreased in the first nine months of 2025 compared to the same period last year primarily due to lower employee-related costs and benefits from productivity initiatives, including temporary cost-saving actions and savings from restructuring actions, net of transition costs, partially offset by growth investments.

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Other Expense (Income), Net

Refer to Note 4, “Cost Reduction Actions,” to the unaudited Condensed Consolidated Financial Statements for more information regarding restructuring charges.

Interest Expense

Interest expense increased for the nine months of 2025 compared to the same period last year primarily due to the €500 million of senior notes we issued in November 2024.

Net Income and Earnings per Share

Provision for Income Taxes

Our effective tax rate for the nine months ended September 27, 2025 increased compared to the same period last year primarily due to lower discrete tax benefits and a higher net charge related to the U.S. tax on foreign earnings. Refer to Note 6, “Taxes Based on Income,” to the unaudited Condensed Consolidated Financial Statements for more information.

We are currently evaluating a foreign restructuring transaction that is reasonably possible to be completed before year-end. This transaction will better align our legal entity structure with our business operations, primarily by eliminating dormant entities. In addition, this transaction is expected to lift restrictions on certain previously trapped tax losses, making them available to offset future tax liabilities under the new structure. We anticipate that we would release a corresponding $10 million valuation allowance upon any completion of this transaction.

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RESULTS OF OPERATIONS BY REPORTABLE SEGMENT FOR THE NINE MONTHS YEAR-TO-DATE

Materials Group

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $11.0 million and $39.9 million in the first nine months of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, outcomes of legal matters and settlements, net, (gain) loss on venture and other investments, transaction and related costs, losses from Argentine peso remeasurement and Blue Chip Swap transactions and (gain) loss on sales of assets.

Net Sales

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 the first nine months of 2025, net sales decreased on an organic basis compared to the same period in the prior year primarily due to the impact of raw material deflation-related price reductions, partially offset by favorable volume/mix. On an organic basis, net sales increased by a low single digit rate in North America, decreased by a low single digit rate in Europe, the Middle East and North Africa, were comparable in Asia Pacific and increased by a low single digit rate in Latin America.

Segment Adjusted Operating Income

Segment adjusted operating income decreased in the first nine months of 2025 compared to the same period last year primarily due to the net impact of pricing and raw material input costs, partially offset by benefits from productivity initiatives, including material re-engineering and savings from restructuring actions, net of transition costs, and higher volume/mix.

Solutions Group

(1)Segment adjusted operating income excluded other expense (income), net, and other items of $18.8 million and $14.7 million in the first nine months of 2025 and 2024, respectively. Exclusions related to charges associated with restructuring actions, outcomes of legal matters and settlements, net, (gain) loss on venture and other investments, (gain) loss on sales of assets and transaction and related costs.

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Net Sales

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 the first nine months of 2025, net sales increased on an organic basis compared to the same period in the prior year due to a mid-single digit rate increase in high-value categories and a low single digit rate increase in the base business. Company-wide, on an organic basis, net sales of intelligent labels increased by a low single digit rate compared to the same period in the prior year.

Segment Adjusted Operating Income

Segment adjusted operating income decreased in the first nine months of 2025 compared to the same period last year primarily due to the net impact of pricing and raw material costs, higher employee-related costs and growth investments, partially offset by benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, and higher volume.

FINANCIAL CONDITION

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.

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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.

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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.

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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.

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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.

There have been no material changes to the information provided in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 that have not been disclosed in our periodic filings with the SEC.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure.

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our disclosure controls system is based upon a global chain of financial and general business reporting lines that converge in our headquarters in Mentor, Ohio. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such time to provide reasonable assurance that information was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to “Legal Proceedings” in Note 10, “Commitments and Contingencies,” to the unaudited Condensed Consolidated Financial Statements in Part 1, Item 1 for this information.

There have been no material changes to the risk factors included in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 that have not been disclosed in our periodic filings with the SEC, except as set forth below.

The demand for our products is impacted by the effects of, and changes in, worldwide economic, social, geopolitical and market conditions, and tariffs and related countermeasures, which could have a material adverse effect on our business.

We have operations in more than 50 countries and our domestic and international operations are strongly influenced by matters beyond our control, including changes in geopolitical, social, economic and labor conditions, tax laws, and U.S. and international trade regulations (including tariffs), as well as the impact these changes have on demand for our products. In 2024, approximately 70% of our net sales were produced in international operations.

Macroeconomic developments such as impacts from slower growth in the geographic regions in which we operate; inflation, resulting from, among other things, increased raw material, energy, and freight costs; labor shortages; geopolitical, social, supply chain and other disruptions; epidemics, pandemics or other outbreaks of illness, disease or virus; and uncertainty in the global credit or financial markets could result in a material adverse effect on our business as a result of, among other things, lower consumer spending, fluctuations in foreign currency exchange rates, reduced asset valuations, diminished liquidity and credit availability, volatility in securities prices, and credit rating downgrades.

Tensions remain in trade relations between the U.S. and other regions and countries, including Canada, Mexico, China and the European Union. In 2025, the U.S. implemented a 10% global baseline tariff rate on nearly all U.S. imports, with higher rates on certain goods. Additionally, it imposed significant tariffs on goods from Canada, Mexico, China and the European Union, each of which announced and/or imposed reciprocal tariffs. The amount of these tariffs or the classes of goods on which they are imposed could significantly increase. The U.S. government continues to negotiate with countries regarding the tariffs. In July 2025, the U.S. and the European Union agreed to a framework for a trade deal that included a baseline tariff rate of 15% on most goods imported from the European Union into the U.S. While the direct impacts on our operations after our mitigating actions have not been significant, our business could be materially adversely impacted by changes in U.S. and non-U.S. trade policies, including potential modifications to existing trade agreements and additional tariffs or other restrictions on free trade, impacting our raw materials or finished products. The indirect impact on demand for our products and solutions as a result of these events is more uncertain and elevated as the outlook for global gross domestic product growth has reduced. We estimate that the indirect impact of tariffs resulted in an aggregate low single digit rate decrease in sales in our overall apparel categories over the second and third quarters of 2025. Further developments in international trade relations could have a material adverse effect on our business.

In addition, business and operational disruptions or delays caused by geopolitical, social or economic instability and unrest – such as recent civil, political and economic disturbances in Argentina, Afghanistan, Syria, Iraq, Yemen, Iran, Turkey, North Korea, and Bangladesh and the related impact on global stability, the Russia-Ukraine war, the Israel-Hamas war, terrorist attacks and the potential for other hostilities or natural disasters in various parts of the world – could contribute to a climate of economic and geopolitical uncertainty that could have a material adverse effect on our business. Since the Russia-Ukraine war began in February 2022, we have maintained our position of not shipping products to the Russian market. The impact of the continuing war, as well as any further retaliatory actions taken by Russia, the U.S., the European Union and other jurisdictions, is unknown and could have a material adverse effect on our business. In addition, since the beginning of the Israel-Hamas war in late 2023, our sales in Israel have declined, with sales representing less than 1% of our total net sales in 2024. We have experienced some disruptions in our operations in Israel and the Middle East and implemented plans to address these disruptions, as well as the impacts thereof in Gaza, Lebanon and other areas of the Middle East, while focusing on the continued safety of our Israeli employees and their families. The continued impact of this war and any related hostilities in the Middle East region or elsewhere is unknown and could have a material adverse effect on our business.

We are not able to predict the duration and severity of adverse economic, social, geopolitical or market conditions in the U.S. or other countries.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Not Applicable

(b)Not Applicable

(c)Repurchases of Equity Securities by Issuer

Repurchases by us or our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) of the Exchange Act) of registered equity securities in the third quarter of 2025 are shown in the table below. Repurchased shares may be reissued under our long-term incentive plan or used for other corporate purposes.

(1)The periods shown are our fiscal months during the thirteen-week quarter ended September 27, 2025.

(2)Shares in thousands.

(3)Average price paid per share includes transaction costs to acquire the shares and excludes the non-deductible 1% excise tax on the net value of repurchases imposed under the Inflation Reduction Act of 2022.

(4)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.

(5)Dollars in millions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

There were no Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K) adopted or terminated by any of our directors or executive officers during the third quarter of 2025.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.