Avery Dennison

2022

Annual Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K

È

‘

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from

to

Commission file number 1-7685
AVERY DENNISON CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State of Incorporation)

8080 Norton Parkway
Mentor, Ohio
(Address of Principal Executive Offices)

95-1492269
(I.R.S. Employer Identification No.)

44060
(Zip Code)

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

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

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $1 par value
1.25% Senior Notes due 2025

AVY
AVY25

New York Stock Exchange
Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act:
Not applicable.

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No È

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 È No ‘

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 È No ‘

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.

Large Accelerated Filer È

Accelerated filer ‘

Non-accelerated filer ‘

Smaller reporting company ‘

Emerging growth company ‘

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. ‘

Indicate by check mark whether the registrant has filed a report on and attestation its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. È

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in

the filing reflect the correction of an error to previously issued financial statements. ‘

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ‘

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

The aggregate market value of voting and non-voting common equity held by non-affiliates as of July 2, 2022, the last business day of the

registrant’s most recently completed second fiscal quarter, was approximately $13.3 billion.

Number of shares of common stock, $1 par value, outstanding as of January 28, 2023, the end of the registrant’s most recent fiscal month:

80,824,942.

The following documents are incorporated by reference into the Parts of this Form 10-K indicated below:

Document

Incorporated by reference into:

Portions of Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 27, 2023

Parts III, IV

AVERY DENNISON CORPORATION

FISCAL YEAR 2022 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Business

PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.

Properties
Legal Proceedings
Mine Safety Disclosures

PART II
Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Item 14.

Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART IV
Item 15.
Item 16.

Exhibit and Financial Statement Schedules
Form 10-K Summary
Signatures
Power of Attorney

Page

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24
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Safe Harbor Statement

The matters discussed in this Annual Report on Form 10-K contain “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 impacts to underlying demand for our products from global economic conditions, political uncertainty, and changes
in environmental standards and governmental regulations; (ii) the cost and availability of raw materials; (iii) competitors’
actions, including pricing, expansion in key markets, and product offerings; (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 this Annual Report on Form 10-K for the fiscal year ended
December 31, 2022. 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:

(cid:129)

International Operations – worldwide and local economic and market conditions; changes in political conditions,
including those related to China and those related to the Russian invasion of Ukraine; and fluctuations in foreign
currency exchange rates and other risks associated with foreign operations, including in emerging markets

(cid:129) 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,
environmental standards, laws and regulations, and customer preferences; the impact of competitive products
and pricing; execution and integration of acquisitions; selling prices; customer and supplier concentrations or
consolidations; financial condition of distributors; outsourced manufacturers; product and service quality; timely
development and market acceptance of new products, including sustainable or sustainably-sourced products;
investment
implementation of new
manufacturing technologies and installation of manufacturing equipment; our ability to generate sustained
productivity improvement; our ability to achieve and sustain targeted cost reductions; collection of receivables
from customers; our environmental, social and governance practices; and impacts from COVID-19

in development activities and new production facilities; successful

(cid:129)

(cid:129)

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

Information Technology – disruptions in information technology systems or data security breaches, including
cyber-attacks or other intrusions to network security; and successful installation of new or upgraded information
technology systems

(cid:129) Human Capital – recruitment and retention of employees and collective labor arrangements

(cid:129) Our Indebtedness – credit risks; our ability to obtain adequate financing arrangements and maintain access to
capital; fluctuations in interest rates; volatility of financial markets; and compliance with our debt covenants

(cid:129) Ownership of Our Stock – potential significant variability of our stock price and amounts of future dividends and

share repurchases

(cid:129)

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

(cid:129) Other Financial Matters – fluctuations in pension costs and goodwill impairment

Our forward-looking statements are made only as of February 22, 2023. 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.

Avery Dennison Corporation | 2022 Annual Report 1

Item 1.

BUSINESS

Company Background

PART I

Avery Dennison Corporation (“Avery Dennison” or the “Company,” “Registrant,” or “Issuer,” and generally referred
to as “we” or “us”) was incorporated in Delaware in 1977 as Avery International Corporation, the successor corporation to
a California corporation of the same name incorporated in 1946. In 1990, we merged one of our subsidiaries into
Dennison Manufacturing Company (“Dennison”), as a result of which Dennison became our wholly-owned subsidiary and
in connection with which we changed our name to Avery Dennison Corporation. You can learn more about us by visiting
our website at www.averydennison.com. Our website address provided in this Annual Report on Form 10-K is not
intended to function as a hyperlink and the information on our website is not, nor should it be considered, part of this
report or incorporated by reference into this report.

Business Overview and Reportable Segments

We are a global materials science and digital

identification solutions company that provides branding and
information labeling solutions, including pressure-sensitive materials, radio-frequency identification (“RFID”) inlays and
tags, and a variety of converted products and solutions. We design and manufacture a wide range of labeling and
functional materials that enhance branded packaging, carry or display information that connects the physical and the
digital, and improve customers’ product performance. We serve an array of industries worldwide, including home and
personal care, apparel, e-commerce, logistics, food and grocery, pharmaceuticals and automotive.

In the fourth quarter of 2022, we changed our operating structure to align with our overall business strategy, and
our Chief Executive Officer, who is also our chief operating decision maker, requested changes in the information that he
regularly reviews to allocate resources and assess performance. As a result, our fiscal year 2022 results are reported
based on our new reportable segments described below and in Note 15, “Segment Information.” We have recast prior
periods to reflect our new operating structure.

Our reportable segments for fiscal year 2022 were:

(cid:129) Materials Group; and

(cid:129) Solutions Group

These segment changes resulted in a new segment, Materials Group, consisting of our former Label and Graphic
Materials segment and Industrial and Healthcare Materials segment. Additionally, our formerly named Retail Branding
and Information Solutions segment is referred to as Solutions Group.

In 2022, our Materials Group and Solutions Group reportable segments made up approximately 72% and 28%,

respectively, of our total net sales.

In 2022, international operations constituted a substantial majority of our business, representing approximately
72% of our net sales. As of December 31, 2022, we operated nearly 200 manufacturing and distribution facilities in over
50 countries.

Materials Group

Our Materials Group business is a leading solutions provider to the pressure-sensitive label and graphics industries
worldwide. Our label materials enhance shelf appeal for brands, inform shoppers and improve operational supply chain
efficiency. Our graphics solutions include a comprehensive portfolio of highly engineered materials that range from
vehicle wraps to architectural products. The Materials Group plays a key role in advancing our fast-growing intelligent
labels platform, providing the materials science capabilities and process engineering expertise that are essential to
developing and manufacturing intelligent labels at scale.

Materials Group manufactures and sells Fasson®-, JAC®-, and Avery Dennison®-brand pressure-sensitive label
materials and performance tapes products, Avery Dennison®- and Mactac®-brand graphics, and Avery Dennison®-brand
reflective products. Materials Group’s business tends not to be seasonal, except for certain outdoor graphics and
reflective products.
2 2022 Annual Report | Avery Dennison Corporation

Pressure-sensitive materials consist primarily of papers, plastic films, metal foils and fabrics, which are coated with
internally-developed and purchased adhesives, and then laminated with specially-coated backing papers and films. They
are then sold in roll or sheet form with either solid or patterned adhesive coatings in a wide range of face materials, sizes,
thicknesses and adhesive properties.

A pressure-sensitive, or self-adhesive, material is one that adheres to a surface by press-on contact. It generally
consists of four layers: a face material, which may be paper, metal foil, plastic film or fabric; an adhesive, which may be
permanent or removable; a release coating; and a backing material to protect the adhesive from premature contact with
other surfaces that can also serve as a carrier for supporting and dispensing individual labels. When the products are to
be used, the release coating and protective backing are removed, exposing the adhesive so that the label or other face
material may be pressed or rolled into place. Because they are easy to apply without the need for adhesive activation,
self-adhesive materials can provide cost savings compared to other materials that require heat- or moisture-activated
adhesives, while also offering aesthetic and other advantages over alternative technologies.

Label materials are sold worldwide to label converters for labeling, decorating and specialty applications in the
home and personal care, beer and beverage, durables, pharmaceutical, wine and spirits, and food market segments.
When used in package decoration applications, the visual appeal of self-adhesive materials can help increase sales of the
products on which the materials are applied. Self-adhesive materials are also used to convey variable information, such as
bar codes for mailing or weight and price information for packaged meats and other foods. Self-adhesive materials
provide consistent and versatile adhesion and are available in a large selection of materials, which can be made into labels
of varying sizes and shapes.

Our graphics and reflective products include a variety of films and other products that are sold to the architectural,
commercial sign, digital printing and other related market segments. We also sell durable cast and reflective films to the
construction, automotive and fleet transportation market segments and reflective films for traffic and safety applications.
We provide sign shops, commercial printers and designers a broad range of pressure-sensitive materials that allow them
to create impactful and informative brand and decorative graphics. We offer a wide array of pressure-sensitive vinyl and
specialty materials designed for digital imaging, screen printing and sign cutting applications.

Our performance tapes products include a variety of Fasson®-brand and Avery Dennison®-brand tapes and other
pressure-sensitive adhesive-based materials and converted products, mechanical fasteners and performance polymers.
Our pressure-sensitive adhesive-based materials are available in roll form and in a wide range of face materials, sizes,
thicknesses and adhesive properties. These materials and converted products are used in non-mechanical fastening,
bonding and sealing systems for various automotive, electronics, building and construction, general industrial, personal
care, and medical applications. Also, our performance tapes products include Yongle®-brand tapes for wire harnessing
and cable wrapping in automotive, electrical and general industrial applications. The mechanical fasteners are primarily
precision-extruded and injection-molded plastic devices used in various automotive, general
industrial and retail
applications.

Our larger competitors in label materials include UPM Raflatac, a subsidiary of UPM Corporation; Lintec
Corporation; Ritrama SpA, a subsidiary of the Fedrigoni Group; Flexcon Corporation, Inc.; and various regional and local
companies. For graphics and reflective products, our largest competitors are 3M Company (“3M”) and the Orafol Group.
For performance tapes products, our competitors include 3M; Tesa-SE, a subsidiary of Beiersdorf AG; Nitto Denko
Corporation; and numerous regional and specialty suppliers. For fastener products, there are a variety of competitors
supplying extruded and injection molded fasteners and fastener attaching equipment. We believe that entry of
competitors into the field of pressure-sensitive adhesives and materials is limited by technical knowledge and capital
requirements. We believe that our technical expertise, size and scale of operations, broad line of quality products and
service programs, distribution capabilities, brand strength and product innovation are the primary advantages in
maintaining and further developing our competitive position.

Solutions Group

Our Solutions Group offers RFID solutions, branding and embellishment solutions, data management and
identification solutions, and pricing and productivity solutions. The business provides physical and digital labeling to the
global apparel, food and general retail markets. Its products and technology optimize customers’ on-product branding and
engagement with consumers, and enable item visibility and traceability throughout a product’s lifecycle.

Avery Dennison Corporation | 2022 Annual Report 3

The branding solutions of Solutions Group include creative services, brand embellishments, graphic tickets, tags,
and labels, and sustainable packaging. Solutions Group’s information solutions include item-level RFID solutions; visibility
and loss prevention solutions; price ticketing and marking; care, content, and country of origin compliance solutions; brand
protection and security solutions; and Vestcom®-brand shelf-edge solutions.

As a large ultra high frequency RFID solutions provider, we leverage our data management capabilities, global
supply chain and market access in continually advancing our intelligent labels platform. We enable customers across
multiple retail and industrial segments to bridge the physical and digital worlds for greater supply chain visibility,
improved inventory accuracy, increased automation and labor efficiency, reduced waste and an enhanced consumer
experience.

In Solutions Group, our primary competitors include Checkpoint Systems, Inc., a subsidiary of CCL Industries Inc.;
R-pac International Corporation; and SML Group Limited. We believe that our global distribution network, reliable service,
product quality and consistency, and ability to serve customers consistently with comprehensive solutions close to where
they manufacture are the key advantages in maintaining and further developing our competitive position.

Research, Development and Innovation

As a global leader in materials science, we seek out opportunities in the markets we serve and innovate to develop
and introduce new products and solutions. Our years of experience creating solutions for customers and our core
capabilities in materials science, engineering and process technology enable us to drive continuous innovation throughout
our industries. Our innovation efforts focus on anticipating market and customer needs, and applying technology to
address them. Our investment in innovation goes beyond our research and development efforts, with initiatives that aim
to accelerate growth, expand margins and ensure customer success by leveraging scalable innovation platforms and
delivering sustainability initiatives and cutting-edge technologies.

Many of our new products result from our research and development efforts. These efforts are directed primarily
toward developing products and operating techniques and improving productivity, sustainability and product
performance, often in close association with our customers or end users. These efforts provide intellectual property that
leverages our research and development relating to adhesives, as well as printing and coating technologies, films, release
and ink chemistries in Materials Group. We focus on research projects related to RFID, external embellishments, data and
digital solutions and printing technologies in Solutions Group and medical technologies in Materials Group, in each case
for which we have and license a number of patents. Additionally, our research and development efforts include
sustainable innovation and design of products that advance the circular economy, reduce materials and waste, use
recycled content, and extend product end-of-life or enable product recycling.

Acquisitions and Venture Investments

In addition to our investments to support organic growth, we have pursued complementary and synergistic
acquisitions. In 2022, we acquired TexTrace AG (“TexTrace”), a Switzerland-based technology developer specializing in
custom-made woven and knitted radio-frequency identification products that can be sewn onto or inserted into
garments, as well as Rietveld Serigrafie B.V. and Rietveld Screenprinting Serigrafi Baski Matbaa Tekstil Ithalat Ihracat
Sanayi ve Ticaret Limited Sirketi (collectively, “Rietveld”), a Netherlands-based provider of external embellishment
solutions and application and printing methods for performance brands and team sports in Europe. The aggregate
In 2021, we
purchase consideration for the acquisitions of TexTrace and Rietveld was approximately $35 million.
acquired CB Velocity Holdings, LLC (“Vestcom”), an Arkansas-based provider of shelf-edge pricing, productivity and
consumer engagement solutions for retailers and consumer packaged goods companies, for $1.47 billion, as well as
ZippyYum, LLC (“ZippyYum”), a California-based developer of software products used in the food service and food
preparation industries, and JDC Solutions, Inc. (“JDC”), a Tennessee-based manufacturer of pressure-sensitive specialty
tapes, for an aggregate of approximately $43 million. During 2022, we also made two venture investments in companies
developing technological solutions that we believe have the potential to advance our businesses. For information
regarding our acquisitions, see Note 2, “Acquisitions,” in the Notes to Consolidated Financial Statements. For information
regarding our venture investments, see Note 9, “Fair Value Measurements,” in the Notes to Consolidated Financial
Statements.

4 2022 Annual Report | Avery Dennison Corporation

Patents, Trademarks and Licenses

The loss of individual patents or licenses would not be material to us taken as a whole, nor to our operating
segments individually. Our principal trademarks are Avery Dennison, our logo, and Fasson. We believe these trademarks
are strong in the market segments in which we operate.

Human Capital Resources

Our Global Workforce

With approximately 72% of our 2022 net sales originating outside the U.S. and approximately 40% of our net
sales originating in emerging markets (Asia Pacific, Latin America, Eastern Europe and Middle East/Northern Africa), our
employees are located in over 50 countries to best serve our customers. Approximately 83% of our employees at
year-end 2022 were located outside the U.S. and approximately 67% were located in emerging markets.

The charts below show our global employee population by region and operational function. Over 20,000 of our
approximately 36,000 employees at year-end 2022, representing approximately 57% of our global workforce, were in
Asia Pacific, serving our customers in that region. At that time, approximately 66% of our global workforce worked in the
operations of our manufacturing facilities or in positions directly supporting them from other locations.

Workforce by Region:

Asia Pacific

North America

Europe

Latin America

Workforce by Function:

Operations

Non-Operations

Talent & Development

57%

20

18

5

66%

34

Attracting, developing and retaining a pool of diverse and highly-skilled talent is critical to our ability to
continuously deliver sustainable growth. We provide ongoing support and resources to our teams worldwide to ensure
that our employees’ skills evolve with our business needs, industry trends and human capital management best practices
and enable increased productivity, peak performance and career growth. We have robust talent review and succession
planning processes, which provide individually targeted development opportunities for our team members. We
emphasize on-the-job development and coaching, and also provide facilitator-led and direct-access online training,
special projects and, in some cases, cross-functional or cross-regional work assignments.

Diversity, Equity & Inclusion

Our diversity, equity and inclusion (DEI) efforts continue to gain momentum and create impact. Our commitment to
inclusion guides our efforts in creating an engaging and inclusive employee experience in which every voice is valued. In
2021, following extensive quantitative and qualitative analysis to confirm our baseline position, we established four
global pillars of focus, including: improving fairness; increasing representation of women in manager and above roles—
which increased from 35% in 2021 to 36% in 2022; increasing inclusion within our manufacturing population; and
increasing representation and inclusion of underrepresented groups as defined by each geographic region. Since then, we
have conducted extensive listening sessions around the globe to better understand both our strengths and areas of
opportunity, and have deployed programmatic strategies such as leadership development programming targeting specific
underrepresented talent pools, sponsorship, allyship and mentorship programs, connection events to build a culture of
inclusion for our manufacturing employees in every region, and talent analytics and pipeline modeling to continuously
advance our culture of inclusion. Additionally, both Regional DEI Councils and Employee Resource Groups (ERGs)
continue to be an integral part of our DEI strategy. ERGs create opportunities for employees to learn and experience
greater belonging. ERGs bring together employees who have shared interests and a common desire to make our
Avery Dennison Corporation | 2022 Annual Report 5

company a more open and inclusive workplace. ERGs serve as a sounding board and a way for employees to collectively
amplify their voices. Our ERGs currently include 24 groups focused on driving inclusion and advancement for women,
employees of color, LGBTQ+ employees, veterans and others. In 2022, membership within our ERGs increased by 32%
compared to 2021.

Pay & Benefits

Our compensation philosophy is to offer market-based, competitive wages and benefits in all markets where we
compete for talent – all of our employees were paid at least the applicable legal minimum wage, and 98% of our
employees were paid above the applicable legal minimum wage at year-end 2022. Pay is generally positioned around the
market median, with variances based on knowledge, skills, years of experience and performance. In addition to base
wages, our compensation and benefit programs — which vary by region, country and business unit — include short-term
incentives, long-term incentives (e.g., cash- or stock-based awards), employee savings plans, healthcare and insurance
benefits, health savings and flexible spending accounts, paid time off, family leave and employee assistance programs.
We regularly evaluate pay equity, making adjustments where needed. In 2020, we expanded our review to include U.S.
race/ethnicity in addition to gender globally, and in 2021, further increased the scope to include non-managerial
professional employees as well as manufacturing employees in the U.S. In 2022, we expanded our analysis beyond base
compensation to include target bonus compensation.

We offer hybrid and remote work opportunities for much of our office-based workforce to provide greater
flexibility to balance their work and personal commitments. We established guiding principles in 2021 to ensure that
these arrangements meet the needs of our business while also supporting the needs of our employees. Our core
infrastructure, information security and digital tools support efficiency and effectiveness for our employees wherever they
work.

Workforce Health & Safety

Safety is one of our highest priorities, and we continually work to ensure our manufacturing facilities, distribution
centers and administrative offices focus on safety, so that anyone working in or visiting one of our locations feels and
remains safe from injury. Our global Recordable Incident Rate of 0.23 in 2022 was significantly lower than the
Occupational Safety and Health Administration manufacturing industry average of 3.3 in 2021 (the most recent available
industry average).

Employee Engagement

Because we believe that an engaged workforce is a more innovative, productive and satisfied workforce, which
promotes retention and minimizes employee turnover, we conduct a global employee engagement survey annually. Our
business and functional teams use the anonymized results of our survey to identify and implement actions to address
potential opportunities for improvement. While employee engagement is the result of many factors, we believe strong,
encouraging and open leadership, as well as a continued effort to foster a collaborative, supportive culture, leads to
strong workforce engagement. We want all our employees to strive to be their best and feel that they have the support
necessary to deliver strong results for themselves and our company.

Manufacturing and Environmental Matters

We use various raw materials – primarily paper, plastic films and resins, as well as specialty chemicals purchased
from various commercial and industrial sources – that are subject to price fluctuations. Although shortages can occur from
time to time, these raw materials are generally available. In 2021 and the early part of 2022, we actively managed
through a dynamic supply and demand environment in which demand across the majority of our businesses and regions
was strong while supply chains were tight and raw material, freight and labor availability was constrained.

We produce a majority of our self-adhesive materials using water-based emulsion and hot-melt adhesive
technologies. A portion of our manufacturing process for self-adhesive materials utilizes organic solvents, which, unless
controlled, could be emitted into the atmosphere or contaminate soil or groundwater. Emissions from these operations
local and foreign
contain small amounts of volatile organic compounds, which are regulated by federal, state,
governments. We continue to evaluate the use of alternative materials and technologies to minimize these emissions. In
connection with the maintenance and acquisition of certain manufacturing equipment, we invest in solvent capture and
control units to assist in regulating these emissions.
6 2022 Annual Report | Avery Dennison Corporation

We have developed adhesives and adhesive processing systems that minimize the use of solvents. Emulsion
adhesives, hot-melt adhesives, and solventless and emulsion silicone systems have been installed in many of our facilities.

Based on current information, we do not believe that the cost of complying with applicable laws regulating the
emission or discharge of materials into the environment, or otherwise relating to the protection of the environment, will
have a material effect upon our capital expenditures, consolidated financial position, results of operations or competitive
position.

For information regarding our potential responsibility for cleanup costs at certain hazardous waste sites, see Note

8, “Contingencies,” in the Notes to Consolidated Financial Statements.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed with, or furnished to, the Securities and Exchange Commission (“SEC”) pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of
charge on our investor website at www.investors.averydennison.com as soon as reasonably practicable after they are
electronically filed with or furnished to the SEC. This website address is not intended to function as a hyperlink and the
information located there is not, nor should it be considered, part of this report or incorporated by reference into this
report. We also make available on the investors section of our website under Corporate Governance – the following
documents as currently in effect: (i) Amended and Restated Certificate of Incorporation; (ii) Amended and Restated
Bylaws; (iii) Corporate Governance Guidelines; (iv) Code of Conduct, which applies to our directors, officers and
employees; (v) Code of Ethics for our Chief Executive Officer and Senior Financial Officers; (vi) charters of the Audit and
Finance, Talent and Compensation, and Governance Committees of our Board of Directors; and (vii) Audit Committee
Complaint Procedures for Accounting and Auditing Matters. These documents are also available free of charge upon
written request to our Corporate Secretary, Avery Dennison Corporation, 8080 Norton Parkway, Mentor, Ohio 44060.

Reports filed with or furnished to the SEC may be viewed at www.sec.gov.

Item 1A.

RISK FACTORS

The risk factors described in this section could materially adversely affect our business, including our results of
operations, cash flows and financial condition, and cause the value of our securities to decline. This list of risks is not
exhaustive. Our ability to attain our goals and objectives is dependent on numerous factors and risks, including, but not
limited to, the most significant ones described in this section.

Risk Related to Our International Operations

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

We have operations in over 50 countries and our domestic and international operations are strongly influenced by
matters beyond our control, including changes in political, social, economic and labor conditions, tax laws (including U.S. taxes
on foreign earnings), and international trade regulations (including tariffs), as well as the impact of these changes on the
underlying demand for our products. In 2022, approximately 72% of our net sales were from international operations.

Macroeconomic developments such as impacts from slower growth in the geographic regions in which we
operate; inflation; raw material, freight and labor availability; rising energy costs; political, social, supply chain and other
disruptions; COVID-19; and uncertainty in the global credit or financial markets leading to a loss of consumer confidence
could result in a material adverse effect on our business as a result of, among other things, reduced consumer spending,
declines in asset valuations, diminished liquidity and credit availability, volatility in securities prices, credit rating
downgrades and fluctuations in foreign currency exchange rates.

Tensions remain in relations between the U.S. and China. In recent years, the U.S. government imposed additional
tariffs on products imported into the U.S. from China. This has resulted in reciprocal tariffs on goods imported from the
U.S. into China. The impacts on our operations to date have not been significant. There remains risk that our business
could be significantly impacted if additional tariffs or other restrictions are imposed on products. Any of these actions or
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 political, social or economic instability and
unrest – such as recent civil, political and economic disturbances in the U.S., Russia, Ukraine, Afghanistan, Syria, Iraq, Iran,
Avery Dennison Corporation | 2022 Annual Report 7

Turkey, North Korea, Hong Kong and Sri Lanka and the related impact on global stability, terrorist attacks and the
potential for other hostilities, public health crises or natural disasters in various parts of the world – could contribute to a
climate of economic and political uncertainty that in turn could have a material adverse effect on our business. In February
2022, Russia invaded Ukraine after which the U.S., Canada, the European Union and other countries imposed economic
sanctions on Russia, Belarus and certain banks, companies and individuals affiliated with those countries. Russian military
actions and the resulting sanctions could adversely affect the global economy and financial markets. In the second quarter
of 2022, we ceased shipment of all products for the Russian market, where our sales in 2021 were approximately 1% of
our net sales for that year, and we maintained that position throughout the year. The impact of these government
measures and our exit from our Russia-related business, as well as any further retaliatory actions taken by Russia, the
United States, the European Union and other jurisdictions, 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, political or market conditions in

the U.S. or other countries.

Foreign currency exchange rates, and fluctuations in those rates, may materially adversely affect our business.

The substantial majority of our net sales in 2022 was in foreign currencies. Fluctuations in currencies, such as
those associated with the euro and Chinese yuan in 2022, which had an unfavorable impact for the year, can result in a
variety of negative effects,
increased
allowance for credit losses and/or write-offs of accounts receivable, and required recognition of impairments of
capitalized assets, including goodwill and other intangible assets. Foreign currency translation decreased our net sales in
2022 by approximately $417 million. Margins on sales of our products in foreign countries could be materially adversely
affected by foreign currency exchange rate fluctuations.

lower gross margin percentages,

including lower net sales,

increased costs,

We monitor our foreign currency exposures and may, from time to time, use hedging instruments to mitigate
transactional exposure to changes in foreign currencies. The effectiveness of our hedges in part depends on our ability to
accurately forecast future cash flows, which is particularly difficult during periods of uncertain demand for our products
and services and highly volatile exchange rates. Further, hedging activities may offset only a portion, or none at all, of the
material adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges
are in place and we may incur significant losses from hedging activities due to factors such as demand volatility and
foreign currency fluctuations.

Our strategy includes increased growth in emerging markets, including China, which could create greater exposure
to unstable political conditions, civil unrest, economic volatility, contagious disease and other risks applicable to
international operations.

A significant amount of our net sales – approximately 40% of our net sales in 2022 – originated in emerging
markets, including countries in Asia Pacific, Latin America, Eastern Europe and Middle East/Northern Africa. The profitable
growth of our business in emerging markets is a significant focus of our long-term growth strategy and our regional
results have and can fluctuate significantly based on economic conditions in these regions. Our business operations have
been and may be adversely affected by the current and future political environment in China, including as a result of its
response to tariffs instituted by the U.S. government on goods imported from China, tariffs imposed by China on U.S.
goods, the increasing use of economic sanctions and export control restrictions, any trade agreements entered into
between the U.S. and China, and tensions related to Hong Kong and Taiwan. Our ability to operate in China or other
emerging markets may be adversely affected by changes in the laws and regulations of these jurisdictions or the
interpretation thereof,
import and export tariffs, raw materials, environmental
regulations, land use rights, property, foreign currency conversion, the regulation of private enterprises and other matters.

including those relating to taxation,

In 2022, many of our manufacturing and other operations in China experienced limited production and/or closure
amid governmental lockdown orders. All of our manufacturing facilities are currently open, but, some of our employees
are still unable to travel easily within and outside their countries. The pandemic and other adverse developments in
emerging markets could have a material adverse effect on our business. There have been and could be further disruptions
in our supply chain or ability to manufacture our products, as well as temporary closures of our facilities or those of our
suppliers or customers, any of which could impact our sales and operating results. In 2022, COVID-19 adversely affected
global economies and financial markets primarily due to lockdowns in China, and any further escalation of the pandemic
could lead to a more significant economic downturn that could adversely affect demand for our products and negatively
8 2022 Annual Report | Avery Dennison Corporation

impact our business. In 2021, with the spread of the Delta variant mid-year, we experienced intermittent COVID-19
closures in Southeast Asia, particularly in our Solutions Group reportable segment.

If we are unable to successfully expand our business in emerging markets or achieve the return on capital we
expect as a result of our investments in these countries, our financial performance could be materially adversely affected.
In addition to the risks applicable to our international operations, factors that could negatively impact our operations in
these emerging markets include the less established or reliable legal systems and possible disruptions due to unstable
political conditions, civil unrest or economic volatility. These factors could have a material adverse effect on our business
by decreasing consumer purchasing power, reducing demand for our products or increasing our costs.

Our operations and activities outside of the U.S. may subject us to risks different from and potentially greater than those
associated with our domestic operations.

inflation; reduced protection of intellectual property rights;

A substantial portion of our employees and assets are located outside of the U.S. and, in 2022, approximately 72%
of our sales was generated outside of the U.S. International operations and activities involve risks that are different from
and potentially greater than the risks we face with respect to our domestic operations; changes in foreign political,
regulatory and economic conditions, including nationally, regionally and locally; changes in exchange rates for foreign
currencies;
laws and regulations impacting the ability to
repatriate foreign earnings; challenges of complying with a wide variety of foreign laws and regulations, including those
relating to sales, operations, taxes, employment and legal proceedings; establishing effective controls and procedures to
regulate our international operations and monitor compliance with U.S. laws and regulations such as the Foreign Corrupt
Practices Act and similar foreign laws and regulations, such as the UK’s Bribery Act of 2010; differences in lending
practices; challenges with complying with applicable export and import control laws and regulations; and differences in
language, culture and time zone.

Risks Related to Our Business

As a manufacturer, our sales and profitability depend upon the cost and availability of raw materials and energy, which
are subject to price fluctuations, and our ability to control or offset increases in raw material and labor costs. Raw material
and freight cost increases have impacted our business and could materially adversely affect our business.

The availability of raw materials used in our businesses remained constrained in 2022, which continued to present
challenges and lead to volatility, impacting availability and pricing. Additionally, energy costs continued to increase in
2022, particularly in Europe, and could remain volatile and unpredictable. Shortages and inflationary or other increases in
the costs of raw materials, labor, freight and energy remained significant in 2022. We continued to implement targeted
price increases across our businesses and regions and worked to re-engineer certain of our products, to address raw
material and freight inflation. If inflation remains persistent in 2023, we may have to implement additional pricing
measures. Our performance depends in part on our ability to offset cost increases for raw materials by raising our sales
prices or re-engineering our products and our ability to maintain our sales prices if costs for raw materials decrease.

It is important for us to obtain timely delivery of materials, equipment, and other resources from suppliers, and to
make timely delivery to customers. In 2022, we experienced supply chain interruptions due to natural and other disasters
which are becoming more frequent due to the impacts from climate change, or other events, such as COVID-19 in China
and political and social unrest in Sri Lanka, energy shortages in multiple regions, and floods in Pakistan. We continued
managing through the dynamic supply and demand environment in which demand across the majority of our businesses
and regions was strong while raw material, freight and labor availability was constrained. Inflation was significant and we
implemented pricing and material re-engineering actions to offset higher costs. We also leveraged our global scale,
working closely with our customers and suppliers to minimize disruptions and ensure preparedness through robust
scenario planning. Any such continued or prolonged disruption to our supply chain could negatively impact on our sales
and profitability, and any sustained interruption in our receipt of adequate supplies could have a material adverse effect
on our business.

We are affected by changes in our markets due to competitive conditions, technological developments,
laws and
regulations, and customer preferences. If we do not compete effectively or respond appropriately to these changes, it
could reduce market demand, or we could lose market share or be forced to reduce selling prices to maintain market
share, any of which could materially adversely affect our business.

We are at risk that existing or new competitors, which include some of our customers, distributors, and suppliers,
will expand in our key market segments or develop new technologies, enhancing their competitive position relative to
Avery Dennison Corporation | 2022 Annual Report 9

ours. Competitors also may be able to offer additional products, services, lower prices or other incentives that we cannot
or would not offer or that would make our products less profitable. There can be no assurance that we will be able to
compete successfully against current or future competitors or new technologies.

We also are at risk to changes in customer order patterns, such as changes in the levels of inventory maintained by
customers and the timing of customer purchases, which may be affected by announced price increases, changes in our
customer incentive programs, or changes in the customer’s ability to achieve incentive targets. Changes in customers’
preferences for our products can also affect demand for our products and a decline in demand for our products could
have a material adverse effect on our business.

We are affected by changes in our markets due to increasing environmental standards.
If we do not respond
appropriately to these changes, it could negatively impact market demand, our market share and pricing, any of which
could materially adversely affect our business.

A substantial amount of our label materials is sold for use in plastic packaging in the food, beverage, and home
and personal care market segments.
In recent years, there has been an accelerated focus on sustainability and
transparency in reporting, with greater concern regarding climate change and single-use plastics, corporate commitments
and increasing stakeholder expectations regarding the reuse and recyclability of plastic packaging and recycled content,
and increased regulation across multiple geographies regarding the collection, recycling and use of recycled content. We
are at risk that changes in consumer preferences or laws and regulations related to the use of plastics could reduce
demand for our products. We have established strategic innovation platforms focused on material circularity and waste
elimination/reduction to develop products and solutions that advance the circular economy and address the need for
increased recyclability of plastic packaging, in collaboration with our customers and the businesses in our supply chain.
These efforts may result in additional costs and there can be no assurance that they will be successful, and a significant
reduction in the use of plastic packaging could materially adversely affect demand for our products.

The scientific consensus is that the emission of greenhouse gases (“GHG”) is altering the composition of our
atmosphere in ways that are adversely affecting global climate. Concern regarding climate change has led and is likely to
continue to lead to increasing demands by legislators and regulators, customers, consumers,
investors and
non-governmental organizations for companies to reduce their GHG emissions. One of our 2025 sustainability goals is to
achieve at least a 3% absolute reduction in our GHG emissions year-over-year and at least a 26% absolute reduction,
compared to our 2015 baseline, by 2025; we have already exceeded this overall goal. As part of our more ambitious
2030 sustainability goals, we are aiming to reduce our Scope 1 and 2 GHG emissions by 70% compared to our 2015
baseline and work with our supply chain to reduce Scope 3 GHG emissions by 30% against our 2018 baseline, in each
case by 2030, with an ambition to be net zero by 2050. We could face risks to our reputation, investor confidence and
market share if we are unable to continue reducing our GHG emissions. Increased raw material costs, such as fuel and
electricity, and compliance-related costs could also impact customer demand for our products. The potential impact of
climate change on our business is uncertain, as it will depend on the limits imposed by, and timing of, new or stricter laws
and regulations, more stringent environmental standards and expectations, and evolving customer and consumer
preferences, but it could increase our costs and have a material adverse effect on our business.

We have recently acquired companies and are likely to acquire other companies. Acquisitions come with significant risks
and uncertainties, including those related to integration, technology and employees.

To grow existing businesses and expand into new areas, we have made acquisitions and are likely to continue
acquiring companies that increase our presence in high value product categories, increase our pace of innovation and
advance our sustainability initiatives. In 2022, we acquired TexTrace and Rietveld. The aggregate purchase consideration
for the acquisitions of TexTrace and Rietveld was approximately $35 million.
In 2021, we acquired Vestcom for
$1.47 billion, as well as ZippyYum and JDC, for an aggregate of approximately $43 million. The success of any acquisition
in part, on the ability of the combined company to realize the anticipated benefits from combining our
depends,
businesses. Realizing these benefits depends,
in part, on maintaining adequate focus on executing the business
strategies of the combined company as well as the successful integration of assets, operations, functions and personnel.
We continue to evaluate potential acquisition targets and ensure we have a robust pipeline of potential opportunities.

Various risks, uncertainties and costs are associated with acquisitions. Effective integration of systems, controls,
employees, product lines, market segments, customers, suppliers and production facilities and cost savings can be
difficult to achieve and the results of integration activities can be uncertain. While we have not experienced significant
10 2022 Annual Report | Avery Dennison Corporation

issues with our acquisitions to date, if management of our combined company is unable to continue minimizing the
potential disruption of the combined company’s ongoing business during the integration process, the anticipated benefits
of any acquisition may not be fully realized. In addition, the inability to successfully manage the implementation of
appropriate systems, policies, benefits and compliance programs for the combined company could have a material
adverse effect on our business. We may not be able to retain key employees of an acquired company or successfully
execute integration strategies and achieve projected performance targets for the business segment into which an
acquired company is integrated. Both before and after the closing of an acquisition, our business and that of the acquired
company may suffer due to uncertainty or diversion of management attention. Future acquisitions could result in
increased debt, dilution, liabilities, interest expense, restructuring charges and amortization expenses related to intangible
assets. There can be no assurance that acquisitions will be successful and contribute to our profitability. Further, we may
not be able to identify value-accretive acquisition targets that support our strategy of expanding our position in high value
product categories or execute additional acquisitions in the future.

A significant consolidation of our customer base could negatively impact our business.

A significant consolidation of our customer base could negatively impact our business. In recent years, some
converter customers served by our Materials Group reportable segment have consolidated and integrated vertically and
some of our largest customers have acquired companies with similar or complementary product lines. This broad industry
consolidation has accelerated, and could continue to increase the concentration of our business with our largest
customers. Further consolidation may be accompanied by pressure from customers for lower prices. While we have been
generally successful at managing customer consolidations in the past, increased pricing pressures from our customers
could have a material adverse effect on our business.

Because some of our products are sold by third parties, our business depends in part on the financial health of these
parties and their customers.

Some of our products are sold not only by us, but also by third-party distributors. Some of our distributors also
market products that compete with our products. Changes in the financial or business conditions, including economic
weakness, market trends or industry consolidation, or the purchasing decisions of these third parties or their customers
could materially adversely affect our business.

Our reputation, sales, and earnings could be materially adversely affected if the quality of our products and services does
not meet customer expectations. In addition, product liability claims or regulatory actions could materially adversely affect
our business or reputation.

There are occasions when we experience product quality issues resulting from defective materials, manufacturing,
packaging or design. These issues are often discovered before shipping, causing delays in shipping, delays in the
manufacturing process, and occasionally cancelled orders. When issues are discovered after shipment, they may result in
additional shipping costs, discounts, refunds or loss of future sales. Both pre-shipping and post-shipping quality issues
could have material adverse effects on our business and negatively impact our reputation.

Claims for losses or injuries purportedly caused by some of our products arise in the ordinary course of our
business. In addition to the risk of substantial monetary judgments and penalties that could have a material adverse effect
on our business, product liability claims or regulatory actions could result in negative publicity that could harm our
reputation in the marketplace and the value of our brands. We also could be required to recall and possibly discontinue
the sale of potentially defective or unsafe products, which could result in adverse publicity and significant expenses.
Although we maintain product liability insurance coverage, product liability claims are subject to a deductible or may not
be covered under the terms of the policy.

Changes in our business strategies may increase our costs and could affect the profitability of our businesses.

As our business environment changes, we have adjusted and may need to further adjust our business strategies or
restructure our operations or particular businesses. We expended approximately $8 million and $14 million for
restructuring actions in 2022 and 2021, respectively, significantly less than in 2020 when we accelerated our
restructuring activities. In 2020, we implemented restructuring and investment actions across our businesses designed to
increase profitability, with the reduction of positions and assets at numerous locations across our company, which
included actions in Materials Group and Solutions Group. The actions in Materials Group were primarily associated with
in part in response to
the consolidations of its operations in North America and its graphics business in Europe,
Avery Dennison Corporation | 2022 Annual Report 11

COVID-19. The actions in Solutions Group primarily related to global headcount and footprint reduction, with some
actions accelerated and expanded in response to COVID-19. As we continue to develop and adjust our growth strategies,
we may invest in new businesses that have short-term returns that are negative or low and whose ultimate business
prospects are uncertain or could prove unprofitable. We cannot provide assurance that we will achieve the intended
results of any of our business strategies, which involve operational complexities, consume management attention and
require substantial resources and effort. If we fail to achieve the intended results of such actions, our costs could increase,
our assets could be impaired, and our returns on investments could be lower.

If we are unable to develop and successfully market new products and applications, we could compromise our
competitive position.

The timely introduction of new products and improvements to current products helps determine our success. Many
of our current products are the result of our research and development efforts, for which we expensed $136.1 million in
2022. These efforts are directed primarily toward developing new products and operating techniques and improving
product performance, often in close association with our customers or end users. These efforts include patent and
product development work relating to printing and coating technologies, as well as adhesive, release and ink chemistries
in Materials Group. We focus on research projects related to RFID and external embellishments in Solutions Group, for
which we have and license a number of patents. Additionally, our research and development efforts include sustainable
innovation and design of products that increase the use of recycled content, reduce waste, extend life or enable recycling.
Research and development is complex and uncertain, requiring innovation and anticipation of market trends. We could
focus on products that ultimately are not accepted by customers or end users or we could suffer delays in the production
or launch of new products that may not lead to the recovery of our research and development expenditures and, as a
result, could compromise our competitive position.

Misassessment of our infrastructure needs could have a material adverse effect on our business.

We continue to invest in our long-term growth and margin expansion plans, with $298.5 million in capital
expenditures, including fixed assets and information technology, in 2022. We may not be able to recoup the costs of our
infrastructure investments if actual demand is not as we anticipate. In recent years, we expanded Materials Group’s
manufacturing capabilities in India and a location in Indiana; moved our Solutions Group’s Vietnam business into a new,
expanded facility; and made additional investments in both capacity and business development globally for our Intelligent
Labels RFID platform, including a new facility in Brazil. We also transferred Materials Group’s European medical capacity
from Belgium to Ireland. In addition, we added capacity through our acquisitions of Textrace, Rietveld, JDC, ZippyYum and
Vestcom. Infrastructure investments, which are long-term in nature, may not generate the expected return due to
changes in the marketplace, failures in execution, and other factors. Significant changes from our expected need for and/
or returns on our infrastructure investments could materially adversely affect our business.

Our profitability may be materially adversely affected if we generate less productivity improvement than projected.

We engage in restructuring actions intended to reduce our costs and increase efficiencies across our business
segments. We had incremental savings from restructuring actions, net of transition costs, of approximately $26 million in
fiscal year 2022, which largely reflected carryover savings from actions implemented in prior years. We intend to continue
efforts to reduce costs in all our businesses, which have in the past included, and may continue to include, facility closures
and square footage reductions, headcount reductions, organizational restructuring, process standardization, and
manufacturing relocation. The consolidation of Materials Group’s operations in North America and its graphics business in
Europe, the global headcount and footprint reduction in Solutions Group and the temporary cost saving actions we
implemented in 2020 to mitigate the impact of the downturn caused by COVID-19 are examples of these activities. The
success of these efforts is not assured and targeted savings may not be realized. In addition, cost reduction actions can
result in restructuring charges and could expose us to production risk, loss of sales and employee turnover.

Difficulty in the collection of receivables as a result of economic conditions or other market factors could have a material
adverse effect on our business.

Although we have processes to administer credit granted to customers and believe our allowance for credit losses
is adequate, we have increased our allowance when determined to be appropriate due to, for example, the continued
impact of COVID-19 in certain countries, supply chain challenges, issues with raw material, freight and labor availability,
and persistent inflation, and in the future may experience losses as a result of our inability to collect some of our accounts
receivable. The financial difficulties of a customer could result in reduced business with that customer. We may also
12 2022 Annual Report | Avery Dennison Corporation

assume higher credit risk relating to receivables of a customer experiencing financial difficulty. If these developments
were to occur, our inability to collect on our accounts receivable from customers could substantially reduce our cash flows
and income and have a material adverse effect on our business.

There is a rapidly evolving awareness and focus from stakeholders, including our investors, customers and employees,
with respect to global climate change and our company’s environmental, social and governance (ESG) practices, which
could affect our business.

Investor and societal expectations with respect to ESG matters have been rapidly evolving and increasing. We risk
damage to our reputation if we do not continue to act responsibly with respect to ESG matters in the following key areas:
environmental stewardship; DEI; corporate governance; support for our communities; and corporate governance and ESG
transparency. A failure to adequately meet stakeholders’ expectations could result in loss of business, diluted market
valuation, an inability to attract and retain customers and talented personnel, increased negative investor sentiment
toward us and/or our customers and the diversion of investment to other industries, which could have a negative impact
on our stock price and access to and costs of capital.

COVID-19 had an adverse effect on portions of our business and we could experience further negative consequences as
a result of COVID-19 that could have a material adverse effect on our business.

Our operations largely recovered from the impact of COVID-19 beginning in 2021, with higher volume across our
businesses. Uncertainty surrounding the global health crisis remained elevated in certain countries during 2022 as parts
of the world experienced increased number of COVID-19 cases at some point during the year. The greatest impact to our
company was in China due to lockdowns imposed by the government.

We are unable to predict the full impact that COVID-19 will have on our business in 2023 due to numerous
uncertainties, including the duration and severity of the pandemic, the impact of the spread of new and existing variants
of the virus, the availability, adoption and effectiveness of vaccines and treatments, and containment measures and the
related macroeconomic impacts. We continue to manage this dynamic environment, including updating our scenario
planning to reflect the evolving aspects of the pandemic.

Risks Related to Income Taxes

Changes in our tax rates could affect our business.

Our effective tax rate in any period could be affected by changes in the mix of earnings in countries with differing
statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws and regulations or
their interpretation. The impact of these changes could materially impact our business.

The enactment of legislation implementing changes in taxation of business activities, adoption of other corporate tax
reform policies, or other changes in tax legislation or policies could materially adversely impact our business.

Corporate tax reform, prevention of base-erosion and tax transparency continue to be high priorities for many tax
jurisdictions worldwide, including the U.S. As a result, policies regarding corporate income and other taxes are under
heightened scrutiny globally, while tax reform legislation has been proposed or enacted in a number of jurisdictions.

In addition, many countries have enacted, or plan to enact,

legislation and other guidance to align their
international tax rules with the Organisation for Economic Co-operation and Development’s (“OECD”) Base Erosion and
Profit Shifting (“BEPS”) recommendations and action plans, which aim to standardize and modernize global corporate tax
policy, with changes to cross-border tax, transfer-pricing documentation rules, and nexus-based tax incentive practices.
Moreover, the OECD continues to engage in discussions on fundamental changes to the profit allocation among tax
jurisdictions in which companies do business and the implementation of a global minimum tax. In the U.S., certain
changes to the taxation of income derived from international business activities have been proposed as a reaction to the
adoption of the BEPS framework, named Pillar Two, in domestic laws. Due to the size of our international business
activities, any substantial change in corporate tax policies, enforcement activities or legislative or regulatory actions could
have a material adverse effect on our business.

Our inability to retain or renew certain tax incentives in foreign jurisdictions could materially adversely affect our effective
tax rate.

Our effective tax rate reflects benefits from concessionary tax rates in certain foreign jurisdictions based on the
geographic location of our manufacturing activities, the industries that we serve, or the business model under which we
Avery Dennison Corporation | 2022 Annual Report 13

operate. If we do not meet the criteria required to retain or renew these tax incentives, our effective tax rate could
materially increase.

The amount of various taxes we pay is subject to ongoing compliance requirements and audits by federal, state and
foreign tax authorities.

We are subject to regular examinations of our income tax returns by various tax authorities. We regularly assess
the likelihood of material adverse outcomes resulting from these examinations to determine the adequacy of our provision
for taxes. In addition, tax enforcement has become increasingly aggressive in recent years focused primarily on transfer
pricing and intercompany documentation. Our estimate of the potential outcome of uncertain tax issues requires
significant judgment and is subject to our assessment of relevant risks, facts, and circumstances existing at the time. We
use these assessments to determine the adequacy of our provision for income taxes and other tax-related accounts. Our
results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are
made or resolved, which may materially adversely impact our effective tax rate.

We have deferred tax assets that we may not be able to realize under certain circumstances.

If we are unable to generate sufficient taxable income in certain jurisdictions, or if there is a significant change in
the time period within which the underlying temporary differences become taxable or deductible, we could be required to
increase our valuation allowances against our deferred tax assets. This would result in an increase in our effective tax rate
and could have a material adverse effect on our financial results. In addition, changes in statutory tax rates may change
our deferred tax asset or liability balances, with either a favorable or unfavorable impact on our effective tax rate. A
significant portion of our indefinite-lived net operating loss carryforwards is concentrated in Luxembourg and may require
decades to be fully utilized under our current business model. Decreases in the statutory tax rate or changes in our ability
to generate sufficient future taxable income in Luxembourg could materially adversely affect our effective tax rate. The
computation and assessment of the realizability of our deferred tax assets may also be materially impacted by new
legislation or regulations.

Risks Related to Information Technology

Significant disruption to the information technology infrastructure that stores our information could materially adversely
affect our business.

We rely on the efficient and uninterrupted operation of a large and complex information technology infrastructure
to link our global business. Like other information technology systems, ours is susceptible to a number of risks including,
but not limited to, damage or interruptions resulting from obsolescence, natural disasters, power failures, human error,
viruses, social engineering, phishing, ransomware or other malicious attacks and data security breaches. We upgrade and
install new systems, which, if installed or programmed incorrectly or on a delayed timeframe, could cause delays or
cancellations of customer orders,
impede the manufacture or shipment of products, or disrupt the processing of
transactions. We have continued to implement measures to mitigate our risk related to system and network disruptions,
but if a disruption were to occur, we could incur significant losses and remediation costs that could have a material
adverse effect on our business. Additionally, we rely on services provided by third-party vendors for certain information
technology processes, including system infrastructure management, application management, and software as a service.
While we continued to mature our cybersecurity due diligence process, this reliance on third parties makes our operations
vulnerable to a failure by any one of these vendors to perform adequately or maintain effective internal controls.

Security breaches could compromise our information and expose us to liability, which could cause our business and
reputation to suffer.

We maintain information necessary to conduct our business in digital form, which is stored in data centers and on
our networks and third-party cloud services,
including confidential and proprietary information as well as personal
information regarding our customers and employees. The secure maintenance of this information is critical to our
operations. Data maintained in digital form is subject to the risk of intrusion, tampering and theft. We develop and
maintain systems to prevent this from occurring, but the development and maintenance of these systems is costly and
requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become
increasingly sophisticated. Moreover, despite our efforts, the possibility of intrusion, tampering and theft cannot be
eliminated entirely and the threat landscape remains challenging with digital business transformation, hybrid workforces
14 2022 Annual Report | Avery Dennison Corporation

and interconnected supply chains expanding the risk of attack. Our information technology and infrastructure may
become vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.
Additionally, we provide confidential, proprietary and personal information to third parties when it is necessary to pursue
business objectives. While we obtain assurances that these third parties will protect this information and, where
appropriate, assess the protections utilized by these third parties, there is a risk the confidentiality of data held by third
parties may be compromised.

We perform cybersecurity due diligence and mitigate identified risks during our M&A diligence process. While we
believe we have substantially mitigated the risks related to acquired companies, there is still a risk that one of our recent
acquisitions or a future acquisition may experience an incident that could lead to a breach before risks are able to be
mitigated.

Any such breach or attack could compromise our network, the network of a third party to whom we have disclosed
confidential, proprietary or personal information, a data center where we have stored such information or a third-party
cloud service provider, and the information stored there could be accessed, publicly disclosed, lost or stolen. Any access,
disclosure or loss of information could result in legal claims or proceedings, disrupt our operations, damage our
reputation, impair our ability to conduct business, or result in the loss or diminished value of profitable opportunities and
the loss of revenue as a result of unlicensed use of our intellectual property. Contractual provisions with third parties,
information of our
including cloud service providers, may limit our ability to fully recover these losses. If personal
customers or employees were to be misappropriated, we could incur costs to compensate our customers or employees or
pay damages or fines as a result of litigation or regulatory actions and our reputation with our customers and employees
could be injured, resulting in loss of business or decline in morale. Data privacy legislation and regulation have been
increasing in recent years – including, for example, the General Data Protection Regulation in the EU, the Cyber Security
Law in China, the General Data Protection Law in Brazil and the state of California’s Privacy Rights Act – and although we
have made reasonable efforts to comply with all applicable laws and regulations, there can be no assurance that we will
not be subject to regulatory action in the event of an incident.

Although we have experienced some security incidents that did not have a significant or material adverse effect on
our business, this may not be the case in the future. We continue to take steps to further improve the security of our
networks and computer systems, including strengthening authentication, continuing to mature our zero trust architecture
and strategy, accessing our backups for ransomware resiliency and continuing to implement advanced malware detection
measures; enhancing our security incident response program with escalation protocols and playbooks for security events
based on risk profile; conducting third party penetration testing to assess the effectiveness of our cybersecurity;
conducting employee security awareness training and phishing exercises to protect against social engineering and
inadvertent or intentional disclosure of data; upgrading legacy information technology systems to simplify and
standardize business processes and applications; continuously improving information technology project and portfolio
management discipline; setting more aggressive key performance indicator targets and implementing appropriate
mitigation measures; continuing to mature our data loss prevention framework that identifies and protects our critical
data, network and site access controls; removing USB drive access across our company;
increasing network
segmentation; enhancing our focus on third party risk management; and improving our capabilities based on threat
intelligence and the publicized incidents experienced by other companies, as well as ones that we have experienced
despite their minimal operational or financial impact to date. We regularly review the effectiveness of our cybersecurity
preparedness program using an industry standard cybersecurity framework and best practices (e.g., ISO27000, NIST
800). Despite these and other mitigation efforts, cyber risk and ransomware attacks on companies continue to
significantly increase and there can be no assurance that we have fully protected our information, that third parties to
whom we have disclosed such information or with whom we have stored such information (in data centers and on the
cloud) are taking similar precautions, or that we will not experience future hacking or intrusion attempts that could have a
material adverse effect on our business.

Risks Related to Human Capital

For us to remain competitive, it is important to recruit and retain our key management and highly-skilled employees. We
also utilize various outsourcing arrangements for certain services, and related delays, resource availability, or errors by
these service providers may lead to increased costs or disruption in our business.

Competition to recruit and retain key management and highly-skilled employees has increased in recent years. In
particular, due to our expansion to additional geographies and ongoing productivity efforts and recent employee
Avery Dennison Corporation | 2022 Annual Report 15

restructuring actions, it may be difficult for us to recruit and retain sufficient numbers of highly-skilled employees. We
may also be unable to recruit and retain key management and highly-skilled employees if we do not offer market-
competitive employment and compensation terms. If we fail to recruit or retain our key management or sufficient numbers
of highly-skilled employees, we could experience disruption in our businesses and difficulties managing our operations
and implementing our business strategy. Further, if we are unable to timely and effectively advance our DEI strategy, it
could impact our ability to recruit and retain talent, resulting in a material adverse effect on our business.

Executive succession planning is also important to our long-term success. We experienced several recent key
management changes, including recent promotions of long-serving and experienced leaders to the positions of President
and Chief Operating Officer, Apparel Solutions Vice President/General Manager and Materials Group Worldwide
President. While we believe we have appropriate leadership development programs and succession plans in place, any
failure to ensure effective transfer of knowledge and smooth transitions involving our key management or other highly-
skilled employees could hinder our strategic planning and execution.

In addition, we have outsourced certain services to third-party service providers, and may outsource other services
in the future to achieve cost savings and operating efficiencies. Service provider delays, resource availability, business
issues or errors may disrupt our businesses and/or increase costs. If we do not effectively develop, implement and
manage outsourcing relationships, if third-party providers do not perform effectively or in a timely manner, or if we
experience problems with transitioning work to a third party, we may not be able to achieve our expected cost savings,
and may experience delays or incur additional costs to correct errors made by these service providers.

We have various non-U.S. collective labor arrangements, which make us subject to potential work stoppages, union and
works council campaigns and other labor disputes, any of which could adversely impact our business.

Work interruptions or stoppages could significantly impact the volume of products we have available for sale. In
addition, collective bargaining agreements, union contracts and labor laws may impair our ability to reduce labor costs by
closing or downsizing manufacturing facilities because of limitations on personnel and salary changes and similar
restrictions. A work stoppage at one or more of our facilities could have a material adverse effect on our business. In
addition, if any of our customers were to experience a work stoppage, that customer may halt or limit purchases of our
products, which could have a material adverse effect on our business. Similarly, if any of our suppliers were to experience
a work stoppage, they could halt or limit supplies of products necessary for us to conduct our business, which could have
a material adverse effect on our business.

Risks Related to Our Indebtedness

If our indebtedness increases significantly or our credit ratings are downgraded, we may have difficulty obtaining
acceptable short- and long-term financing.

At December 31, 2022, we had approximately $3.10 billion of debt. Our overall level of indebtedness and credit
ratings are significant factors in our ability to obtain short- and long-term financing. Higher debt levels could negatively
impact our ability to meet other business needs and could result in higher financing costs. The credit ratings assigned to
us also impact the interest rates we pay. A downgrade of our short-term credit ratings could impact our ability to access
the commercial paper markets and increase our borrowing costs. If our access to commercial paper markets were to
become limited, as they were in March 2020 as a result of COVID-19, and we were required to obtain short-term funding
under our revolving credit facility or our other credit facilities, we would face increased exposure to variable interest rates.

An increase in interest rates could have a material adverse effect on our business.

In 2022, our average variable-rate borrowings were approximately $487 million. Increases in short-term interest
rates directly impact the amount of interest we pay. Fluctuations in interest rates can increase borrowing costs and have a
material adverse effect on our business.

In response to the last global economic recession, extraordinary monetary policy actions of the U.S. Federal
Reserve and other central banking institutions, including the utilization of quantitative easing, were taken in recent years
to maintain a low interest rate environment. Given substantially increasing inflation across the globe the Federal Reserve
and similar monetary policymaking entities around the world began increasing interest rates in 2022. As of December 31,
2022 the U.S. Federal Reserve’s benchmark interest rate was between 4.25% and 4.50%, up from between 0% and
16 2022 Annual Report | Avery Dennison Corporation

0.25% the same time in 2021. If long-term interest rates rise, our borrowing costs will increase. Continued increases in
interest rates could, among other things, reduce the availability and/or increase the costs of obtaining new debt and
refinancing existing indebtedness and negatively impact our stock price.

Our current and future debt covenants may limit our flexibility.

Our credit facilities and the indentures governing our medium- and long-term notes contain, and any of our future
indebtedness likely would contain, restrictive covenants that impose operating and financial restrictions on us. Among
other things, these covenants restrict our ability to incur additional indebtedness, incur certain liens on our assets, make
certain investments, sell our assets or merge with third parties, and enter into certain transactions. We are also required
to maintain specified financial ratios under certain conditions. These restrictive covenants and ratios in our existing debt
agreements and any future financing agreements may limit or prohibit us from engaging in certain activities and
transactions that may be in our long-term best interest and could place us at a competitive disadvantage relative to our
competitors, which could materially adversely affect our business.

Risk Related to Ownership of Our Stock

Our stock price may be subject to significant variability.

Changes in our stock price may, among other things, affect our access to, or cost of financing from, capital markets
and may affect our stock-based compensation arrangements and our effective tax rate. Our stock price, which increased
significantly in 2020 and 2021 but declined in 2022, is influenced by changes in the overall stock market and demand for
equity securities in general. Other factors, including our financial performance on an absolute basis and relative to our
peers and competitors, as well as market expectations of our performance, the level of perceived growth of our industries,
and other company-specific factors, can also materially adversely affect our stock price. There can be no assurance that
our stock price will not experience significant variability in the future.

We cannot guarantee that we will continue to repurchase shares of our common stock or pay dividends on our common
stock or that repurchases will enhance long-term stockholder value. Changes in our levels of stock repurchases or
dividends could affect our stock price and significantly increase its variability.

In April 2022, our Board authorized the repurchase of shares of our common stock with a fair market value of up to
$750 million, in addition to the amount of shares that were available for repurchase under our previous authorization. As
of December 31, 2022, shares of our common stock in the aggregate amount of $730.0 million remained authorized for
repurchase under the 2022 Board authorization. In 2022, we repurchased 2.2 million shares of our common stock at an
aggregate cost of $379.5 million. We make share repurchases through a variety of methods, which may include open
market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Our share
repurchase authorizations do not obligate us to acquire any specific number of shares or to repurchase any specific
number of shares for any fixed period. The timing and amount of repurchases, if any, are subject to market and economic
conditions, applicable legal requirements and other relevant factors. We may limit, suspend or discontinue repurchasing
shares at any time at our discretion and without prior notice.

Although we increased our quarterly dividend rate by approximately 10% in April 2022, there can be no assurance
that we will maintain this rate or approve further increases in the future. Future dividends are subject to market and
economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a
dividend for any fixed period, and the payment of dividends could be suspended or discontinued at any time at our
discretion and without prior notice. We will continue to retain future earnings to develop our business, as opportunities
arise, and evaluate the amount and timing of future dividends based on our operating results, financial condition, capital
requirements and general business conditions. The amount and timing of any future dividends may vary, and the payment
of any dividend does not assure that we will pay dividends in the future.

In addition, any future repurchases of our common stock or payment of dividends, or any determination to cease
repurchasing stock or paying dividends, could affect our stock price and significantly increase its variability. Our share
repurchases and any future dividends could cause our stock price to be higher than it would otherwise be and could
potentially reduce the market liquidity for our stock. Additionally, any future repurchases of our common stock or payment
of dividends could impact our ability to finance future growth and to pursue possible future strategic opportunities and
acquisitions. Although our share repurchase program is intended to enhance long-term stockholder value, there is no
Avery Dennison Corporation | 2022 Annual Report 17

assurance that it will do so because the market price of our common stock may decline below the levels at which we
repurchased shares of stock and short-term stock price fluctuations could reduce the program’s effectiveness.

Risks Related to Legal and Regulatory Matters

Infringing intellectual property rights of third parties or inadequately acquiring or protecting our intellectual property could
harm our ability to compete or grow.

Because our products involve complex technology and chemistry, we are involved from time to time in litigation
involving patents and other intellectual property. Parties have filed, and in the future may file, claims against us alleging
that we have infringed their intellectual property rights. We are currently party to a litigation in which ADASA Inc.
(“Adasa”), an unrelated third party, alleged that certain of our RFID products infringed on its patent. We have accrued a
contingent liability in the amount of $26.6 million based on our assessment of the probabilities and associated outcomes
related to this matter. For more information on this litigation, see Note 8, “Contingencies,” in the Notes to Consolidated
Financial Statements. If we are ultimately held liable in the Adasa matter or are held liable for infringement in other
matters, we could be required to pay damages, obtain licenses or cease making or selling certain products. There can be
no assurance that licenses would be available on commercially reasonable terms or at all. The defense of these claims,
whether or not meritorious, or the development of new technologies could cause us to incur significant costs and divert
the attention of management.

We also have valuable intellectual property upon which third parties may infringe. We attempt to protect and
restrict access to our intellectual property and proprietary information by relying on the patent, trademark, copyright and
trade secret laws of the U.S. and other countries, as well as non-disclosure agreements. However, it may be possible for a
third party to obtain our information without our authorization, independently develop similar technologies, or breach a
non-disclosure agreement entered into with us. In addition, many of the countries in which we operate do not have
intellectual property laws as fulsome as those in the U.S. The use of our intellectual property by someone else without our
authorization could reduce or eliminate certain competitive advantages we have, cause us to lose sales or otherwise harm
our business. Further, the costs associated with protecting our intellectual property rights could materially adversely
impact our business.

We have obtained and applied for U.S. and foreign trademark registrations and patents, and will continue to
evaluate whether to register additional trademarks and apply for additional patents. We cannot guarantee that any of the
pending applications will be approved by the applicable governmental authorities. Further, we cannot assure that the
validity of our patents or our trademarks will not be challenged. In addition, third parties may be able to develop
competing products using technology that avoids our patents.

Unfavorable developments in legal proceedings, investigations and other legal, environmental, compliance and regulatory
matters, could impact us in a materially adverse manner.

There can be no assurance that any outcome of any litigation,

investigation or other legal, environmental,
compliance and regulatory matter will be favorable. Our financial results could be materially adversely affected by an
unfavorable outcome to pending or future litigation and investigations, and other legal, regulatory, environmental and
compliance matters. See Note 8, “Contingencies,” in the Notes to Consolidated Financial Statements for more
information.

We are required to comply with anti-corruption laws and regulations of the U.S. government and various international
jurisdictions, and our failure to comply with these laws and regulations could have a material adverse effect on our
business.

We are required to comply with the anti-corruption laws and regulations of the U.S. government and various
international jurisdictions, such as the U.S. Foreign Corrupt Practices Act and the UK’s Bribery Act of 2010. If we fail to
comply with anti-corruption laws, we could be subject to substantial civil and criminal penalties, including fines, monetary
damages and incarceration for responsible employees and managers. In addition, if our distributors or agents fail to
comply with these laws, our business may also be materially adversely affected through reputational harm and penalties.

We are required to comply with environmental, health, and safety laws at our operations around the world. The costs of
complying with these laws could materially adversely affect our business.

We are subject to national, state, provincial and/or local environmental, health, and safety laws and regulations in
the U.S. and other countries in which we operate, including those related to the disposal of hazardous waste and GHG
18 2022 Annual Report | Avery Dennison Corporation

emissions from our manufacturing processes. These laws impose liability for the costs of, and damages resulting from,
cleaning up current sites, past spills, disposals and other releases of hazardous substances. These laws are often unclear
and subject to the discretion of the enforcing authorities. Any failure to comply with existing and future environmental,
health and safety laws could subject us to fees, penalties, costs or liabilities, impact our production capabilities, limit our
ability to sell, expand or acquire facilities, and have a material adverse effect on our business. Laws and regulations
related to the environment, product content and product safety are complex, change often, and can be open to different
interpretations. In addition, we could be materially and adversely impacted by any environmental or product safety
enforcement action affecting our suppliers, particularly in emerging markets.

We have accrued liabilities for the environmental clean-up of certain sites, including the eleven sites for which U.S.
governmental agencies have designated us as a potentially responsible party as of our 2022 fiscal year-end, where it is
probable that a loss will be incurred and the cost or amount of loss can be reasonably estimated. See Note 8,
“Contingencies,” in the Notes to Consolidated Financial Statements for more information. However, because of the
uncertainties associated with environmental assessment and remediation activities, the actual expense to remediate
currently identified sites and other sites that could be identified for cleanup in the future could be higher than the liabilities
accrued.

We are subject to export and import control laws and regulations in the jurisdictions in which we do business that could
subject us to liability or impair our ability to compete in these markets.

Export control laws and economic sanctions prohibit the shipment of some of our products to embargoed or
sanctioned countries, governments and persons. While we train our employees to comply with these regulations, use
third party screening software, and take other measures, we cannot guarantee that a violation will not occur. A prohibited
shipment could have negative consequences,
including government investigations, penalties, fines, civil and criminal
sanctions and reputational harm. Any change in export or import regulations, economic sanctions or related legislation,
shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or
technologies targeted by such regulations, could decrease our ability to export or sell our products internationally. Any
limitation on our ability to export or sell our products could materially adversely affect our business.

Some of our products are subject to export control laws and regulations and may be exported only with an export
license or through an applicable export license exception. If we fail to comply with export licensing, customs regulations,
including economic
economic sanctions or other laws, we could be subject to substantial civil or criminal penalties,
sanctions against us, incarceration for responsible employees and managers, and the possible loss of export or import
privileges. In addition, if our distributors fail to obtain appropriate import, export or re-export licenses or permits, we may
also be materially adversely affected through reputational harm and penalties. Obtaining the necessary export license for
a particular sale may be time consuming and expensive and could result in the delay or loss of sales opportunities.

Risks Related to Other Financial Matters

Our pension assets are significant and subject to market, interest and credit risk that may reduce their value.

Changes in the value of our pension assets, which was approximately $585 million as of December 31, 2022,
could materially adversely affect our earnings and cash flows. In particular, the value of our investments may decline due
to increases in interest rates or volatility in the financial markets. In addition, we may take actions to reduce the financial
volatility associated with our pension liabilities, which could result in charges in the nearer term. As such, we continuously
evaluate options to better manage the volatility associated with our pension liabilities. Although we mitigate these risks
by investing in high quality securities, ensuring adequate diversification of our investment portfolio and monitoring our
portfolio’s overall risk profile, the value of our investments may nevertheless decline.

The actuarial assumptions used for valuation purposes could affect our earnings and cash flows in future periods.
Changes in accounting standards and government regulations could also affect our pension and postretirement plan
expense and funding requirements.

We evaluate the assumptions used in determining projected benefit obligations and the fair value of plan assets
for our international pension plans and other postretirement benefit plans in consultation with outside actuaries. In the
event that we were to determine that changes were warranted in the assumptions used, such as the discount rate,
expected long-term rate of return, or mortality rates, our pension and projected postretirement benefit expenses and
funding requirements could increase or decrease. Because of changing market conditions or changes in the participant
Avery Dennison Corporation | 2022 Annual Report 19

population, the actuarial assumptions that we use may differ from actual results, which could have a significant impact on
our pension and postretirement benefit obligations and related costs. Funding obligations for each plan are determined
based on the value of assets and liabilities on a specific date as required under applicable government regulations. Our
pension funding requirements, and the timing of funding payments, could also be affected by future legislation or
regulation.

An impairment in the carrying value of goodwill could negatively impact our results of operations and net worth.

Goodwill is initially recorded at fair value and not amortized, but is reviewed for impairment annually (or more
frequently if impairment indicators are present). As of December 31, 2022, the carrying value of our goodwill was
$1.9 billion. In 2022, we determined that the goodwill of our reporting units was not impaired. We review goodwill for
impairment by comparing the fair value of a reporting unit to its carrying value. In assessing fair value, we make estimates
and assumptions about sales, operating margins, growth rates, and discount rates based on our business plans, economic
projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors
and management’s judgment in applying these factors. Goodwill valuations have been calculated primarily using an
income approach based on the present value of projected future cash flows of each reporting unit. We could be required
to evaluate the carrying value of goodwill prior to the annual assessment if we experience disruptions to our business,
unexpected significant declines in operating results, divestiture of a significant component of our business or sustained
market capitalization declines. These types of events could result in goodwill
impairment charges in the future.
Impairment charges could substantially affect our business in the periods in which they are made.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

20 2022 Annual Report | Avery Dennison Corporation

Item 2.

PROPERTIES

As of December 31, 2022, we operated manufacturing facilities in excess of 100,000 square feet in the reportable

segments and locations listed below.

Materials Group

Domestic

Foreign

Solutions Group

Peachtree City, Georgia; Fort Wayne, Greenfield, and Lowell, Indiana; Fairport Harbor,
Mentor, Oak Harbor, and Painesville, Ohio; Mill Hall, Pennsylvania
Soignies and Turnhout, Belgium; Vinhedo, Brazil; Guangzhou, Kunshan, and Zhuozhou,
India; Longford,
China; Champ-sur-Drac, France; Gotha, Germany; Pune and Noida,
Ireland; Kibbutz Hanita, Israel; Rodange, Luxembourg; Bangi, Malaysia; Queretaro, Mexico;
Rayong, Thailand; and Cramlington, United Kingdom

Domestic
Foreign

New Century, Kansas and Miamisburg, Ohio
Dhaka, Bangladesh; Nansha, Panyu, and Suzhou, China; Bufalo, Honduras; Ancarano,
Italy; Kulim, Malaysia; and Long An Province, Vietnam

In addition to the manufacturing facilities described above, our other principal facilities include our corporate
headquarters in Mentor, Ohio and our divisional and corporate offices located in Glendale, California; Mentor, Ohio;
Vinhedo, Brazil; Hong Kong and Kunshan, China; and Oegstgeest, the Netherlands.

We own all of the principal properties identified above, except for the facilities in the following locations, which are
leased: Hong Kong, Panyu and Zhuozhou, China; Bufalo, Honduras; Kibbutz Hanita, Israel; New Century, Kansas; Mentor,
Ohio; and Oegstgeest, the Netherlands.

We consider all our properties, whether owned or leased, suitable and adequate for our current needs. We
generally expand production capacity as needed to meet increased demand. Owned buildings and plant equipment are
insured against major losses from fire and other usual business risks, subject to applicable deductibles. We are not aware
of any material defects in title to, or significant encumbrances on, our properties, except for certain mortgage liens.

Item 3.

LEGAL PROCEEDINGS

See Note 8, “Contingencies,” in the Notes to Consolidated Financial Statements.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

Avery Dennison Corporation | 2022 Annual Report 21

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

(a)

Our common stock is listed under the ticker symbol “AVY” on the New York Stock Exchange. We did not sell
securities in any unregistered transactions during fiscal year 2022. We have historically paid quarterly cash
dividends. Future dividend payments are subject to the approval by our Board of Directors based on our earnings,
capital requirements, financial condition and other factors.

We had 3,799 shareholders of record as of December 31, 2022, the last day of our fiscal year 2022.

Stockholder Return Performance

The graph below compares the cumulative stockholder return on our common stock, including reinvestment of
dividends, with the return on the S&P 500 Stock Index and the average return (weighted by market capitalization) of the
S&P 500 Materials and Industrials subsets (the “Market Basket”),
in each case for the five-year period ending
December 31, 2022.

Avery Dennison

S&P 500 Index

S&P 500 Industrials and Materials (Weighted Average)

$250

$200

$150

$100

$50
12/31/2017

12/31/2018

12/31/2019

12/31/2020

12/31/2021

12/31/2022

Total Return Analysis(1)

Avery Dennison
S&P 500 Index
Market Basket(2)
(1)

12/31/2017

12/31/2018

12/31/2019

12/31/2020

12/31/2021

$

100 $
100
100

80 $
96
90

118 $
126
119

143 $
149
141

202 $
192
177

12/31/2022
172
157
172

Assumes $100 invested on December 31, 2017 and reinvestment of dividends.
Average weighted by market capitalization.

(2)

(b)

Not applicable.

22 2022 Annual Report | Avery Dennison Corporation

(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 fourth quarter of 2022 are shown in the table below. Repurchased shares may be
reissued under our long-term incentive plan or used for other corporate purposes.

Period(1)
October 2, 2022 – October 29, 2022
October 30, 2022 – November 26, 2022
November 27, 2022 – December 31, 2022
Total

Total number of
shares
purchased as
part of publicly
announced
plans(2)(3)

165.2 $
103.1
83.4
351.7 $

Approximate
dollar value
of shares that
may yet be
purchased
under the
plans(4)
763.2
745.2
730.0
730.0

Total number
of shares
purchased(2)

165.2 $
103.1
83.4
351.7 $

Average
price paid
per share
168.4
174.2
182.0
173.3

(1)

(2)

(3)

(4)

The periods shown are our fiscal months during the thirteen-week quarter ended December 31, 2022.
Shares in thousands.
In April 2022, 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, 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..
Dollars in millions.

Item 6.

RESERVED

Avery Dennison Corporation | 2022 Annual Report 23

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

ORGANIZATION OF INFORMATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, provides
management’s views on our financial condition and results of operations and should be read in conjunction with the
Consolidated Financial Statements and related notes thereto, and includes the sections identified below.

Non-GAAP Financial Measures .................................................................................................................. 24
Overview and Outlook ............................................................................................................................. 25
Analysis of Results of Operations ............................................................................................................... 28
Results of Operations by Reportable Segment .............................................................................................. 30
Financial Condition .................................................................................................................................. 32
Critical Accounting Estimates .................................................................................................................... 38
Recent Accounting Requirements .............................................................................................................. 41

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. Based on feedback from investors and financial analysts, we believe that the
supplemental non-GAAP financial measures we provide are useful to their assessments of our performance and
operating trends, as well as liquidity.

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 proceedings, 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 investments 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 these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well

as to facilitate comparison to the results of competitors for quarters and year-to-date periods, as applicable.

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

(cid:129) Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of
foreign currency translation and the reclassification of sales between segments and, where applicable, an
extra week in our fiscal year, the calendar shift resulting from the extra week in the prior fiscal year and
currency adjustment for transitional reporting of highly inflationary economies. 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 currency fluctuations.

(cid:129) 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.

24 2022 Annual Report | Avery Dennison Corporation

(cid:129) Free cash flow refers to cash flow provided by operating activities, less payments for property, plant and
equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment,
plus (minus) net proceeds from insurance and sales (purchases) of investments. Free cash flow is also
adjusted for, where applicable, certain acquisition-related transaction costs. We believe that free cash flow
assists investors by showing the amount of cash we have available for debt reductions, dividends, share
repurchases, and acquisitions.

(cid:129) 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, as well as net current assets or
liabilities held-for-sale 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.

OVERVIEW AND OUTLOOK

Fiscal Year

Our fiscal years generally consist of 52 weeks, but every fifth or sixth fiscal year consists of 53 weeks; our 2022
and 2021 fiscal years consisted of 52-week periods ending December 31, 2022 and January 1, 2022, respectively. Our
2020 fiscal year consisted of a 53-week period ending January 2, 2021.

Segment Information

In the fourth quarter of 2022, we changed our operating structure to align with our overall business strategy, and
our Chief Executive Officer, who is also our chief operating decision maker, requested changes in the information that he
regularly reviews to allocate resources and assess performance. As a result, our fiscal year 2022 results are reported
based on our new reportable segments as described in Note 15, “Segment Information.” We have recast prior periods to
reflect our new operating structure.

Net Sales

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

below.

Reported net sales change

Foreign currency translation
Extra week impact

Sales change ex. currency(1)

Acquisitions and product line divestitures

Organic sales change(1)

(1) Totals may not sum due to rounding.

2022
8 %
6
—

13 %
(4)

10 %

2021
21 %
(3)
1

19 %
(3)

16 %

In 2022, net sales increased on an organic basis primarily due to pricing actions, partially offset by lower volume/
mix. In 2021, net sales increased on an organic basis primarily due to higher volume/mix and recovery from the prior-year
impact of COVID-19.

Avery Dennison Corporation | 2022 Annual Report 25

Net Income

Net income increased from approximately $740 million in 2021 to approximately $757 million in 2022. The major

factors affecting this increase were:

(cid:129) The net benefit of pricing, freight, energy and raw material costs, including material re-engineering
(cid:129) Higher income from acquisitions, net of associated amortization of other intangibles
(cid:129) Lower transaction and related costs

Offsetting factors:
(cid:129) Lower volume due to inventory destocking
(cid:129) Unfavorable foreign currency translation
(cid:129) Growth investments
(cid:129) Higher employee-related costs

Acquisitions

Subsequent to our fiscal year-end 2022, in January 2023, we entered into an agreement to acquire Thermopatch,
Inc., a New York-based manufacturer specializing in labeling, embellishments, and transfers for the sports, industrial
laundry, workwear and hospitality industries. We believe this acquisition will expand the product portfolio in our Solutions
Group reportable segment. We expect to complete this acquisition in the first quarter of 2023.

2022 Acquisitions

In January 2022, we completed our acquisitions of TexTrace AG (“TexTrace”), a Switzerland-based technology
developer specializing in custom-made woven and knitted RFID products that can be sewn onto or inserted into
garments, and Rietveld Serigrafie B.V. and Rietveld Screenprinting Serigrafi Baski Matbaa Tekstil Ithalat Ihracat Sanayi ve
Ticaret Limited Sirketi (collectively, “Rietveld”), a Netherlands-based provider of external embellishment solutions and
application and printing methods for performance brands and team sports in Europe. These acquisitions expanded the
product portfolio in our Solutions Group reportable segment. The acquisitions of TexTrace and Rietveld are referred to
collectively as the “2022 Acquisitions.”

The aggregate purchase consideration for the 2022 Acquisitions was approximately $35 million. We funded the
2022 Acquisitions using cash and commercial paper borrowings. In addition to the cash paid at closing, the sellers in one
of these acquisitions are eligible for earn-out payments of up to $30 million, subject to the acquired company achieving
certain post-acquisition performance targets. As of the acquisition date, we included an estimate of the fair value of these
earn-out payments in the aggregate purchase consideration.

The 2022 Acquisitions were not material,

individually or in the aggregate, to the Consolidated Financial

Statements.

Vestcom Acquisition

On August 31, 2021, we completed our acquisition of CB Velocity Holdings, LLC (“Vestcom”), an Arkansas-based
provider of shelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged
goods companies, for purchase consideration of $1.47 billion. We funded this acquisition using cash and proceeds from
both commercial paper borrowings and issuances of senior notes. Refer to Note 4, “Debt,” to the Consolidated Financial
Statements for more information.

Vestcom’s solutions expanded our position in high value categories and added channel access and data

management capabilities to our Solutions Group reportable segment.

Other 2021 Acquisitions

On March 18, 2021, we completed our acquisition of the net assets of ZippyYum, LLC (“ZippyYum”), a California-
based developer of software products used in the food service and food preparation industries. This acquisition enhanced
the product portfolio in our Solutions Group reportable segment.

On March 1, 2021, we completed our acquisition of the issued and outstanding stock of JDC Solutions, Inc. (“JDC”),
a Tennessee-based manufacturer of pressure-sensitive specialty tapes. This acquisition expanded the product portfolio in
our Materials Group reportable segment.
26 2022 Annual Report | Avery Dennison Corporation

The acquisitions of ZippyYum and JDC are referred to collectively as the “Other 2021 Acquisitions.”

The aggregate purchase consideration for the Other 2021 Acquisitions was approximately $43 million. We funded
the Other 2021 Acquisitions using cash and commercial paper borrowings. In addition to the cash paid at closing, the
sellers in one of these acquisitions are eligible for earn-out payments of up to approximately $13 million subject to the
acquired company’s achievement of certain post-acquisition performance targets. As of the acquisition date, we
estimated the fair value of these earn-out payments to be approximately $12 million, which was included in the
$43 million of aggregate purchase consideration.

The Other 2021 Acquisitions were not material, individually or in the aggregate, to the Consolidated Financial

Statements.

Refer to Note 2, “Acquisitions,” to the Consolidated Financial Statements for more information.

Cost Reduction Actions

2019/2020 Actions

During 2022, we recorded $7.3 million in restructuring charges, net of reversals, related to our 2019/2020 actions.
These charges consisted of severance and related costs for the reduction of approximately 830 positions and asset
impairment charges at numerous locations across our company, reflecting actions in both our reportable segments. The
actions in our Materials Group reportable segment were primarily associated with consolidations of its operations in North
America and its graphics business in Europe, in part in response to COVID-19. The actions in our Solutions Group
reportable segment were primarily related to global headcount and footprint reduction, with some actions accelerated
and expanded in response to COVID-19. During 2021, we recorded $13.3 million in restructuring charges, net of
reversals, related to our 2019/2020 actions. These charges consisted of severance and related costs for the reduction of
approximately 360 positions, as well as asset impairment charges. Our activities related to our 2019/2020 actions began
in the fourth quarter of fiscal year 2019 and continued through fiscal year 2022.

Impact of Cost Reduction Actions

In 2022 and 2021, we realized approximately $26 million and $65 million, respectively,

in savings from

restructuring, net of transition costs, primarily related to our 2019/2020 actions.

Restructuring charges were included in “Other expense (income), net” in the Consolidated Statements of Income.

Refer to Note 13, “Cost Reduction Actions,” to the Consolidated Financial Statements for more information.

Accounting Guidance Updates

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

information.

Cash Flow

(In millions)
Net cash provided by operating activities
Purchases of property, plant and equipment
Purchases of software and other deferred charges
Proceeds from sales of property, plant and equipment
Proceeds from insurance and sales (purchases) of investments, net
Payments for certain acquisition-related transaction costs

Free cash flow

2022
961.0 $
(278.1)
(20.4)
2.3
1.9
.6

667.3 $

2021
1,046.8 $
(255.0)
(17.1)
1.1
3.1
18.8

797.7 $

2020
751.3
(201.4)
(17.2)
9.2
5.6
—

547.5

$

$

In 2022, cash flow provided by operating activities decreased compared to 2021 primarily due to changes in
operational working capital, higher incentive compensation payments and the timing of payroll payments, partially offset
by higher net income and lower income tax payments, net of refunds. In 2022, free cash flow decreased compared to
2021 primarily due to lower cash provided by operating activities adjusted for payments for certain acquisition-related
transaction costs and higher purchases of property, plant and equipment.

Avery Dennison Corporation | 2022 Annual Report 27

Outlook

Certain factors that we believe will contribute to our 2023 results are described below.

(cid:129) We expect net sales to increase by approximately 0% to 4%, in part reflecting a decrease of approximately

1% from the impact of foreign currency translation.

(cid:129) We anticipate incremental savings from restructuring actions, net of transition costs, of approximately

$45 million.

(cid:129) We expect our full-year effective tax rate to be in the mid-twenty percent range.

(cid:129) We expect fixed and IT capital expenditures to be approximately $350 million.

ANALYSIS OF RESULTS OF OPERATIONS

Income before Taxes

(In millions, except percentages)
Net sales
Cost of products sold

Gross profit
Marketing, general and administrative expense
Other expense (income), net
Interest expense
Other non-operating expense (income), net

Income before taxes

Gross profit margin

Gross Profit Margin

$

$

2022
9,039.3
6,635.1

2,404.2
1,330.8
(.6)
84.1
(9.4)

$

2021
8,408.3
6,095.5

2,312.8
1,248.5
5.6
70.2
(4.1)

2020
6,971.5
5,048.2

1,923.3
1,060.5
53.6
70.0
1.9

$

999.3

$

992.6

$

737.3

26.6 %

27.5 %

27.6 %

Gross profit margin in 2022 decreased compared to 2021 primarily due the net impact of higher selling prices,
higher raw material costs and higher freight costs, as well as higher employee-related costs, partially offset by higher
volume/mix primarily related to the impact of acquisitions.

Gross profit margin in 2021 decreased slightly compared to 2020 primarily reflecting the net impact of higher
selling prices, higher raw material costs and higher freight costs, the impact of prior-year temporary cost reduction
actions and higher employee-related costs, partially offset by favorable volume/mix and the benefits from productivity
initiatives, including temporary cost reduction actions, material re-engineering and savings from restructuring actions, net
of transition costs.

Marketing, General and Administrative Expense

Marketing, general and administrative expense increased in 2022 compared to 2021 primarily due the impact of

acquisitions and growth investments, partially offset by the impact of favorable foreign currency translation.

Marketing, general and administrative expense increased in 2021 compared to 2020 primarily due to higher
employee-related costs including the impact of acquisitions, growth investments, the impact of prior-year temporary cost
reduction actions and unfavorable currency translation, partially offset by lower allowance for credit losses.

28 2022 Annual Report | Avery Dennison Corporation

Other Expense (Income), Net

(In millions)
Other expense (income), net by type
Restructuring charges:

2022

2021

2020

Severance and related costs
Asset impairment charges and lease cancellation costs

$

7.6 $
.1

10.5 $
3.1

Other items:

Transaction and related costs
Outcomes of legal proceedings, net
Gain on venture investments, net
(Gain) loss on sales of assets, net
Gain on sale of product line

.3
6.3
(13.5)
(1.4)
—

20.9
(.4)
(23.0)
.2
(5.7)

Other expense (income), net

$

(.6) $

5.6 $

49.1
6.2

4.2
—
(5.4)
(.5)
—

53.6

Refer to Note 13, “Cost Reduction Actions,” to the Consolidated Financial Statements for more information

regarding restructuring charges.

Refer to Note 9, “Fair Value Measurements,” to the Consolidated Financial Statements for more information

regarding gains on venture investments.

Refer to Note 15, “Segment and Disaggregated Revenue Information,” to the Consolidated Financial Statements

for more information regarding outcomes of legal proceedings.

Interest Expense

Interest expense increased by approximately $13.9 million in 2022 compared to 2021, primarily as a result of
additional interest from the $800 million of senior notes we issued in August 2021 and higher interest rates on short-
term borrowings. Interest expense in 2021 was comparable to 2020.

Net Income and Earnings per Share

(In millions, except percentages and per share amounts)
Income before taxes
Provision for income taxes
Equity method investment (losses) gains

Net income

Net income per common share
Net income per common share, assuming dilution

Effective tax rate

Provision for Income Taxes

$

$

$

2022
999.3
242.2
—

757.1

9.28
9.21

$

$

$

2021
992.6
248.6
(3.9)

740.1

8.93
8.83

$

$

$

2020
737.3
177.7
(3.7)

555.9

6.67
6.61

24.2 %

25.0 %

24.1 %

Our effective tax rate in 2022 decreased compared to 2021 primarily due to higher benefits related to the
settlement of certain foreign tax audits and the benefit from the interest portion of the Brazil indirect tax credit being
adjudicated as non-taxable, partially offset by U.S. federal return-to-provision benefits that were lower than in 2021. Our
effective tax rate in 2021 increased compared to 2020 primarily due to lower benefits from decreases in certain tax
reserves, including interest and penalties, as a result of closing tax years, and the tax charge related to certain legal
intangible
proceeding, partially offset by higher benefits from return-to-provision adjustments related to our global
low-taxed income (“GILTI”) exclusion elections in 2021.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”), which, among other things,
implemented a 15% corporate alternative minimum tax based on the adjusted financial statement income for certain large
corporations and a 1% excise tax on net share repurchases. The minimum tax and the excise tax, if applicable, are
effective for fiscal years beginning after December 31, 2022. We do not expect the IRA to have a material impact on our
financial position, results of operations or cash flows. We will continue to monitor additional guidance from the Internal
Revenue Service (“IRS”).

Avery Dennison Corporation | 2022 Annual Report 29

Our effective tax rate can vary from period to period due to the recognition of discrete events, such as changes in
tax reserves, settlements of income tax audits, changes in tax laws and regulations, return-to-provision adjustments, and
tax impacts related to stock-based payments, as well as recurring factors, such as changes in our mix of earnings in
countries with differing statutory tax rates and our execution of tax planning strategies.

Refer to Note 14, “Taxes Based on Income,” to the Consolidated Financial Statements for more information.

RESULTS OF OPERATIONS BY REPORTABLE SEGMENT

Operating income refers to income before taxes, interest and other non-operating expense (income), net.

Materials Group

(In millions)
Net sales including intersegment sales
Less intersegment sales

Net sales
Operating income(1)

$

$

2022
6,632.2 $
(137.1)

6,495.1 $
859.3

2021
6,312.3 $
(105.8)

6,206.5 $
883.3

2020
5,422.5
(81.9)

5,340.6
747.0

(1)

Included charges associated with restructuring actions and related costs in all years,
gain on venture investment in 2022 and 2020, outcomes of legal proceedings and gain
on sale of product line in 2021, transaction and related costs and gain on sale of assets
in 2021 and 2020

$

(13.4) $

(25.7) $

30.6

Net Sales

The factors impacting reported net sales change are shown in the table below.

Reported net sales change

Foreign currency translation
Extra week impact

Sales change ex. currency(1)

Acquisitions and product line divestitures

Organic sales change(1)

(1) Totals may not sum due to rounding.

2022
5 %
6
—

11
—

11 %

2021
16 %
(4)
1

13
(1)

13 %

In 2022, net sales increased on an organic basis compared to the same period in the prior year due to pricing
actions, partially offset by lower volume/mix. On an organic basis, net sales increased by a mid-to-high single digit rate in
emerging markets, a low double-digit rate in North America and a high-teens rate in Western Europe.

In 2021, net sales increased on an organic basis compared to the same period in the prior year due to favorable
volume/mix and pricing actions. On an organic basis, net sales increased by a mid-teens rate in emerging markets, a low
double-digit rate in North America and a mid-teens rate in Western Europe.

Operating Income

Operating income decreased in 2022 compared to the same period in 2021 primarily due to unfavorable volume/
mix, the impact of unfavorable foreign currency translation, higher employee-related costs and the impact of a Brazil
indirect tax credit in the prior year, partially offset by the net impact of higher selling prices, higher raw material costs and
higher freight costs.

Operating income increased in 2021 compared to 2020 compared to the same period last year primarily due to
favorable volume/mix, lower restructuring charges, the Brazil indirect tax credit, favorable foreign currency translation and
lower allowance for credit losses. These benefits were partially offset by the net impact of higher sales prices, higher raw
material costs, and higher freight costs, as well as higher employee-related costs.

30 2022 Annual Report | Avery Dennison Corporation

Solutions Group

(In millions)
Net sales including intersegment sales
Less intersegment sales

Net sales
Operating income(1)

(1)

Included charges associated with restructuring actions and transaction and related
costs in all years, outcomes of legal proceedings in 2022 and 2021, net gains on sales
of assets in 2022 and 2020, loss on sale of asset and gain on venture investments in
2021 and loss on venture investments in 2020.

2022
2,581.6 $
(37.4)

2,544.2 $
302.3

2021
2,239.1 $
(37.3)

2,201.8 $
257.2

2020
1,658.4
(27.5)

1,630.9
144.7

7.8 $

36.6 $

22.7

$

$

$

Net Sales

The factors impacting reported net sales change are shown in the table below.

Reported net sales change

Reclassification of sales between segments
Foreign currency translation
Extra week impact

Sales change ex. currency(1)

Acquisitions

Organic sales change(1)

(1) Totals may not sum due to rounding.

2022
16 %
(1)
4
—

19
(14)

5 %

2021
35 %
—
(2)
2

35
(10)

25 %

In 2022, on an organic basis, net sales increased by a mid-teens rate in high value categories and decreased by a
low-single digit rate in the base business. Company-wide, on an organic basis, sales of Intelligent Label solutions
increased by a mid-teens rate.

In 2021, on an organic basis, net sales in the segment related to Intelligent Labels increased over 20%. Net sales in
the base business increased by a low double-digit rate, partially due to the recovery from the prior-period impact of
COVID-19.

Operating Income

Operating income increased in 2022 compared to 2021 primarily due to the combined benefit of higher organic
volume and acquisitions, the impact of legal proceedings in the prior year, and lower transaction and related costs,
partially offset by higher amortization of other intangibles resulting from business acquisitions, growth investments and
higher employee-related costs.

Operating income increased in 2021 compared to 2020 primarily due to higher volume, including the impact of
acquisitions, benefits from productivity initiatives, including savings from restructuring actions, net of transition costs, and
lower restructuring charges, partially offset by higher employee-related costs, the impact of prior-year temporary cost
reduction actions, growth investments, outcomes of legal proceedings and higher transaction and related costs.

Avery Dennison Corporation | 2022 Annual Report 31

FINANCIAL CONDITION

Liquidity

Operating Activities

(In millions)
Net income
Depreciation
Amortization
Provision for credit losses and sales returns
Stock-based compensation
Pension plan settlements and related charges
Deferred taxes and other non-cash taxes
Other non-cash expense and loss (income and gain), net
Trade accounts receivable
Inventories
Accounts payable
Taxes on income
Other assets
Other liabilities

Net cash provided by operating activities

2022
757.1 $
177.4
113.3
50.1
47.4
—
18.4
23.5
(22.1)
(140.7)
68.2
18.9
15.3
(165.8)

961.0 $

2021
740.1 $
167.3
76.8
35.7
37.2
1.6
2.6
10.1
(113.2)
(182.7)
255.2
(7.3)
4.1
19.3

1,046.8 $

$

$

2020
555.9
154.2
51.1
64.0
24.0
.5
9.3
44.9
14.7
(6.0)
(68.2)
(35.2)
18.2
(76.1)

751.3

In 2022, cash flow provided by operating activities decreased compared to 2021 primarily due to changes in
operational working capital, higher incentive compensation payments and the timing of payroll payments, partially offset
by higher net income and lower income tax payments, net of refunds.

In 2021, cash flow provided by operating activities increased compared to 2020 primarily due to higher net
income, changes in operational working capital and lower severance payments related to restructuring actions, partially
offset by higher income tax payments, net of refunds.

Investing Activities

(In millions)
Purchases of property, plant and equipment
Purchases of software and other deferred charges
Proceeds from sales of property, plant and equipment
Proceeds from insurance and sales (purchases) of investments, net
Proceeds from sale of product line and venture investment
Payments for acquisitions, net of cash acquired, and venture
investments

$

2022
(278.1)$
(20.4)
2.3
1.9
1.1

2021
(255.0)$
(17.1)
1.1
3.1
7.6

(39.5)

(1,477.6)

Net cash used in investing activities

$

(332.7)$

(1,737.9)$

2020
(201.4)
(17.2)
9.2
5.6
—

(350.4)

(554.2)

Purchases of Property, Plant and Equipment

In 2022, we invested in buildings and equipment to support growth in certain countries in Asia, including Malaysia,
China and Vietnam, and the U.S. for our Solutions Group reportable segment and in the U.S. and certain countries in
Europe, primarily in France, and Latin America, primarily in Brazil, for our Materials Group reportable segment. In 2021,
we invested in equipment to support growth in the U.S. and certain countries in Asia Pacific, including India and China,
and Europe, including France and Luxembourg for our Materials Group reportable segment and in certain countries in
Asia Pacific, including China, Malaysia, and Bangladesh, and the U.S. for our Solutions Group reportable segment. In
2020, we invested in equipment and expanded manufacturing facilities to support growth in certain countries in Asia
Pacific, including Malaysia, China, Hong Kong, Bangladesh and Vietnam, and the U.S. for our Solutions Group reportable
segment and in the U.S. and certain countries in Asia Pacific, including India and China, for our Materials Group reportable
segment.
32 2022 Annual Report | Avery Dennison Corporation

Purchases of Software and Other Deferred Charges

In 2022, 2021 and 2020, we invested in information technology upgrades worldwide.

Proceeds from Sales of Property, Plant and Equipment

In 2022, the majority of the proceeds from sales of property, plant and equipment was related to the sale of a
building in the U.S. and a building and equipment in Europe. In 2021, the majority of the proceeds from sales of property,
plant and equipment was related to the sale of equipment in Asia Pacific. In 2020, the majority of the proceeds from sales
of property, plant and equipment was related to the sale of a property in Europe.

Proceeds from Insurance and Sales (Purchases) of Investments, Net

In 2022 and 2021, we had lower proceeds from insurance associated with our company-owned life insurance

policies.

Proceeds from Sale of Product Line and Venture Investment

In 2022, we received proceeds of $1.1 million from the sale of a venture investment. In 2021, proceeds from the

sale of a product line were in our Materials Group reportable segment.

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

In 2022, we paid purchase consideration, net of cash acquired, of approximately $30 million for the 2022
Acquisitions. We funded the 2022 Acquisitions with cash and commercial paper borrowings. In 2021, we paid purchase
consideration, net of cash acquired, of approximately $1.44 billion and $32 million for the Vestcom acquisition and the
Other 2021 Acquisitions, respectively. We funded the Vestcom acquisition using the net proceeds from the senior notes
we issued in August 2021, commercial paper borrowings and cash. We funded the Other 2021 Acquisitions using cash
and commercial paper borrowings. In 2020, we paid consideration, net of cash acquired, of approximately $255 million to
acquire Smartrac’s Transponder (RFID Inlay) division (“Smartrac”), which we initially funded through commercial paper
borrowings, and approximately $88 million to acquire ACPO, Ltd. We also made certain venture investments in 2022,
2021 and 2020.

Refer to Note 2, “Acquisitions,” to the Consolidated Financial Statements for more information.

Financing Activities

(In millions)
Net increase (decrease) in borrowings with maturities of three
months or less
Additional borrowings under revolving credit facility
Repayments of borrowings under revolving credit facility
Additional long-term borrowings
Repayments of long-term debt and finance leases
Dividends paid
Share repurchases
Net (tax withholding) proceeds related to stock-based compensation
Other

Net cash (used in) provided by financing activities

$

$

2022

2021

2020

34.6 $
—
—
—
(6.3)
(238.9)
(379.5)
(25.1)
—

(615.2)$

259.2 $
—
—
791.7
(13.4)
(220.6)
(180.9)
(25.4)
(6.3)

604.3 $

(110.4)
500.0
(500.0)
493.7
(270.2)
(196.8)
(104.3)
(19.7)
—

(207.7)

Borrowings and Repayment of Debt

During 2022, 2021 and 2020, our commercial paper borrowings were used to fund acquisitions, dividend

payments, share repurchases, capital expenditures and other general corporate purposes.

In August 2021, we issued $500 million of senior notes, due February 15, 2032, which bear an interest rate of
2.250%, payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts
and offering expenses, were $493.7 million. Additionally, in August 2021, we issued $300 million of senior notes, due
Avery Dennison Corporation | 2022 Annual Report 33

August 15, 2024, which we can repay without penalty on or after August 15, 2022 and bear an interest rate of 0.850%,
payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts and offering
expenses, were $298 million. We used the net proceeds from these two debt issuances to finance a portion of the
Vestcom acquisition.

During 2020, commercial paper borrowings were also used for the Smartrac acquisition, with those borrowings
subsequently repaid using a portion of the net proceeds, after deducting underwriting discounts and offering expenses, of
$493.7 million from the $500 million of senior notes we issued in March 2020. We used the remaining proceeds from
these notes to repay the $250 million aggregate principal amount of senior notes that matured in April 2020. We also
repaid $15 million of medium-term notes that matured in June 2020.

In the first quarter of 2020, in light of uncertainty as a result of COVID-19 regarding the availability of commercial
paper, which we typically rely upon to fund our day-to-day operational needs, and the relatively favorable terms under
our $800 million revolving credit facility (the “Revolver”), we borrowed $500 million from the Revolver with a six-month
duration. We repaid this amount in June 2020.

Refer to Note 2, “Acquisitions,” and Note 4, “Debt,” to the Consolidated Financial Statements for more information.

Dividends Paid

We paid dividends per share of $2.93, $2.66 and $2.36 in 2022, 2021 and 2020, respectively. In April 2022, we
increased our quarterly dividend rate to $.75 per share, representing an increase of approximately 10% from our previous
quarterly dividend rate of $.68 per share.
In April 2021, we increased our quarterly dividend to $.68 per share,
representing an increase of approximately 10% from our previous dividend rate of $.62 per share.

Share Repurchases

From time to time, our Board authorizes the repurchase of shares of our outstanding common stock. Repurchased
shares may be reissued under our long-term incentive plan or used for other corporate purposes. In 2022, 2021 and
2020, we repurchased approximately 2.2 million, .9 million and .8 million shares of our common stock, respectively. We
temporarily paused share repurchase activity in March 2020 as a result of COVID-19 and resumed repurchases late in the
third quarter of 2020.

In April 2022 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. Shares of our common stock in the aggregate amount of $730.0 million as
of December 31, 2022 remained authorized for repurchase under this Board authorization.

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

In 2022, tax withholding for stock-based compensation was comparable to 2021. In 2021, tax withholding for
stock-based compensation increased compared to 2020 primarily as a result of equity awards vesting at higher share
prices.

Approximately .02 million and .05 million stock options were exercised in 2021 and 2020, respectively. Refer to

Note 12, “Long-Term Incentive Compensation,” to the Consolidated Financial Statements for more information.

Analysis of Selected Balance Sheet Accounts

Long-lived Assets

Property, plant and equipment, net, increased by approximately $63 million to $1.54 billion at year-end 2022,
which primarily reflected purchases of property, plant and equipment, partially offset by depreciation expense and the
impact of foreign currency translation.

Goodwill decreased by approximately $19 million to $1.86 billion at year-end 2022, which reflected the impact of

foreign currency translation, partially offset by the acquired goodwill associated with the 2022 Acquisitions.

Other intangibles resulting from business acquisitions, net, decreased by approximately $71 million to $840 million
at year-end 2022, reflecting current year amortization expense and the impact of foreign currency translation, partially
offset by the valuation of intangible assets associated with the 2022 Acquisitions.
34 2022 Annual Report | Avery Dennison Corporation

Refer to Note 3, “Goodwill and Other Intangibles Resulting from Business Acquisitions,” to the Consolidated

Financial Statements for more information.

Shareholders’ Equity Accounts

The balance of our shareholders’ equity increased by approximately $108 million to $2.03 billion at year-end
2022. Refer to Note 11, “Supplemental Equity and Comprehensive Income Information,” to the Consolidated Financial
Statements for more information.

Impact of Foreign Currency Translation

(In millions)
Change in net sales

$

2022
(417) $

2021
201

In 2022, international operations generated approximately 72% of our net sales. Our future results are subject to
changes in political and economic conditions in the regions in which we operate and the impact of fluctuations in foreign
currency exchange and interest rates.

The unfavorable impact of foreign currency translation on net sales in 2022 compared to 2021 was primarily

related to euro-denominated sales and sales in China.

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 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. Working capital (deficit) (current assets minus current liabilities) as of the fourth quarter 2022
decreased approximately $205 million compared to the fourth quarter of 2021 primarily due to the reclassification of the
$250 million of senior notes due in the second quarter of 2023, partially offset by a decrease in accrued payroll and
employee benefits. 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. Operational working capital, as
a percentage of annualized current-quarter net sales,
in 2022 was higher compared to 2021. Further information
regarding the components of operational working capital is provided below.

(In millions, except percentages)
(A)Working capital (deficit)
Reconciling items:

Cash and cash equivalents
Other current assets
Short-term borrowings and current portion of long-term debt and finance leases
Current income taxes payable and other current accrued liabilities

(B) Operational working capital
(C) Fourth-quarter net sales, annualized
Operational working capital, as a percentage of annualized current-quarter net sales
(B) ÷ (C)

2022
(17.8)

$

2021
186.7

(167.2)
(230.5)
598.6
861.9
1,045.0
8,103.6

$
$

(162.7)
(240.2)
318.8
930.3
1,032.9
8,732.8

$

$
$

11.8 %
Avery Dennison Corporation | 2022 Annual Report 35

12.9 %

Accounts Receivable Ratio

The average number of days sales outstanding was 62 days in 2022 compared to 59 days in 2021, calculated
using the accounts receivable balance at year-end divided by the average daily sales in the fourth quarter of 2022 and
2021, respectively. The increase in average number of days sales outstanding was primarily due to the impact of foreign
currency translation, lower volumes due to customer inventory destocking and the timing of collections.

Inventory Ratio

Average inventory turnover was 6.0 in 2022 compared to 7.0 in 2021, calculated using the annualized fourth-
quarter cost of products sold in 2022 and 2021, respectively, and divided by the inventory balance at the respective
year-end. The decrease in average inventory turnover primarily reflected increased inventory due to lower volumes from
customer inventory destocking.

Accounts Payable Ratio

The average number of days payable outstanding was 80 days in 2022 compared to 74 days in 2021, calculated
using the accounts payable balance at year-end divided by the annualized fourth-quarter cost of products sold in 2022
and 2021, respectively. The increase in the average number of days payable outstanding from the prior year primarily
reflected the impact of higher accounts payable balances due to the timing of payments and the impact of foreign
currency translation.

Capital Resources

Capital resources include cash flows from operations, cash and cash equivalents and debt financing, including
access to commercial paper borrowings supported by the Revolver. We use these resources to fund our operational
needs.

At year-end 2022, we had cash and cash equivalents of $167.2 million held in accounts at third-party financial
institutions. Our cash balances are held in numerous locations throughout the world. At year-end 2022, the majority of
our cash and cash equivalents was held by our foreign subsidiaries, primarily in the Asia Pacific region.

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 our 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.

Subsequent to fiscal year 2022, in January 2023, we extended the maturity date of the Revolver by one year to
February 13, 2026, and increased the commitments by $400 million, from $800 million to $1.2 billion. Additionally, we
amended the Revolver to replace the LIBOR benchmark interest rate with Term SOFR, Euribor and SONIA benchmark
interest rates. We use the Revolver as a back-up facility for our commercial paper program and for other corporate
purposes.

The Revolver contains a financial covenant that requires us to maintain a maximum leverage ratio (calculated as a
ratio of consolidated debt to consolidated EBITDA as defined in the agreement) of not more than 3.50 to 1.00; provided
that, in the event of an acquisition by us that exceeds $250 million, which occurred when we acquired Vestcom, the
maximum leverage ratio increases to 4.00 to 1.00 for the fiscal quarter in which the acquisition occurs and the three fiscal
quarters immediately following that fiscal quarter. As of December 31, 2022 and January 1, 2022, our ratio was
substantially below the maximum ratio allowed by the Revolver.

In addition to the Revolver, we have short-term lines of credit available in various countries of approximately
$341 million in the aggregate at December 31, 2022. These lines may be cancelled at any time by us or the issuing banks.
Short-term borrowings outstanding under these lines of credit were $2.4 million and $11.2 million at December 31, 2022
and January 1, 2022, respectively, with weighted average interest rates of 0.64% and 4.97%, respectively. Refer to Note
4, “Debt,” to the Consolidated Financial Statements for more information.

We are exposed to financial market risk resulting from changes in interest and foreign currency rates, and to

possible liquidity and credit risks of our counterparties.
36 2022 Annual Report | Avery Dennison Corporation

We currently anticipate using cash flows from operations, commercial paper borrowings or other potential debt

financing to repay approximately $250 million of senior notes maturing in the second quarter of 2023.

Capital from Debt

The carrying value of our total debt decreased by approximately $3 million to $3.10 billion at year-end 2022 from
2021, primarily reflecting the revaluation of our euro-denominated senior notes, due in March 2025, partially offset by a
net increase in commercial paper borrowings.

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, as it did in the first quarter of 2020 as a result of
COVID-19 when we drew down on the Revolver, the Revolver and our other credit facilities would be available to meet
our short-term funding requirements. When determining our credit rating, we believe that rating agencies primarily
consider our competitive position, business outlook, consistency of cash flows, debt level and liquidity, geographic
footprint and management team. We remain committed to maintaining an investment grade rating.

Fair Value of Debt

The estimated fair value of our long-term debt is primarily based on the credit spread above U.S. Treasury
securities 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 includes commercial paper issuances and short-term lines of
credit, approximates their carrying value given their short duration. The fair value of our total debt was $2.85 billion at
December 31, 2022 and $3.25 billion at January 1, 2022. Fair value amounts were determined based primarily on Level 2
inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable. Refer
to Note 1, “Summary of Significant Accounting Policies,” for more information.

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

Material Cash Requirements at End of Year 2022

We have short- and long-term material cash requirements related to our contractual obligations that arise in the
normal course of business. In addition to principal and interest payments on our outstanding debt obligations, our
contractual obligations primarily consist of lease payments and purchase commitments.

Refer to Note 4, “Debt,” to the Consolidated Financial Statements for a summary of our principal payments for
short-term borrowings and long-term debt obligations as of December 31, 2022. Interest payments for long-term debt as
of December 31, 2022 were approximately $70 million in 2023; $66 million in 2024; $63 million in 2025; $55 million in
2026; $55 million in 2027; and $150 million from 2028 through maturity.

As of December 31, 2022, we have two commitments to purchase approximately $290 million of raw materials in

fiscal year 2023.

Refer to Note 7, “Commitments and Leases,” to the Consolidated Financial Statements for a summary of our lease

obligations as of December 31, 2022.

Refer to Note 6, “Pension and Other Postretirement Benefits,” to the Consolidated Financial Statements for
information regarding our defined benefit pension plan contributions and future benefit payments, deferred compensation
plan benefit payments and unfunded termination indemnity benefits.

Refer to Note 12, “Long-term Incentive Compensation,” to the Consolidated Financial Statements for information

regarding cash-based awards to employees under our long-term incentive compensation plan.

Refer to Note 14, “Taxes Based on Income,” to the Consolidated Financial Statements for more information

regarding our unrecognized tax benefits of approximately $70 million.

Avery Dennison Corporation | 2022 Annual Report 37

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires our management to make estimates and
assumptions for the reporting period and as of the financial statement date. These estimates and assumptions affect our
reported amounts of assets and liabilities, disclosure of contingent liabilities and reported amounts of revenue and
expense. Actual results could differ from these estimates.

Critical accounting estimates are those that are important to our financial condition and results, and which require
us to make difficult, subjective and/or complex judgments. Critical accounting estimates cover accounting matters that are
inherently uncertain because their future resolution is unknown. We believe our critical accounting estimates include
accounting for goodwill, business combinations, pension and postretirement benefits, taxes based on income and long-
term incentive compensation.

Goodwill

Business combinations are accounted for using the acquisition method, with the excess of the acquisition cost over
the fair value of net tangible assets and identified intangible assets acquired considered goodwill. As a result, we disclose
goodwill separately from other intangible assets. Our reporting units are composed of either a discrete business or an
aggregation of businesses with similar economic characteristics.

We perform an annual impairment test of goodwill during the fourth quarter. Certain factors may cause us to
perform an impairment test prior to the fourth quarter, including significant underperformance of a business relative to
expected operating results, significant adverse economic and industry trends, significant decline in our market
capitalization for an extended period of time relative to net book value, or a decision to divest a portion of a reporting unit.
In performing impairment tests, we have the option to first assess qualitative factors to determine whether it is necessary
to perform a quantitative assessment for goodwill impairment. If the qualitative assessment indicates that it is more-
likely-than-not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative assessment.

A quantitative assessment primarily consists of using the present value (discounted cash flow) method to
determine the fair value of reporting units with goodwill. We compare the fair value of each reporting unit to its carrying
amount, and, to the extent the carrying amount exceeds the unit’s fair value, we recognize an impairment of goodwill for
the excess up to the amount of goodwill of that reporting unit. In consultation with outside specialists, we estimate the
fair value of our reporting units using various valuation techniques, with the primary technique being a discounted cash
flow analysis. A discounted cash flow analysis requires us to make various assumptions about our reporting units,
including their respective forecasted sales, operating margins and growth rates, as well as discount rates. Our
assumptions about discount rates are based on the weighted average cost of capital for comparable companies. Our
assumptions about sales, operating margins and growth rates are based on our forecasts, business plans, economic
projections, anticipated future cash flows, and marketplace data. We also make assumptions for varying perpetual
growth rates for periods beyond the long-term business plan period. We base our fair value estimates on projected
financial information and assumptions that we believe are reasonable. However, actual future results may differ materially
from these estimates and projections. The valuation methodology we use to estimate the fair value of reporting units
requires inputs and assumptions that reflect current market conditions, as well as the impact of planned business and
operational strategies that require management judgment. The estimated fair value could increase or decrease depending
on changes in the inputs and assumptions.

In our annual impairment analysis in the fourth quarter of 2022, the goodwill of all reporting units in our Materials
Group and Solutions Group reportable segments were tested utilizing a qualitative assessment. Based on this
assessment, we determined that the fair values of these reporting units were more-likely-than-not greater than their
respective carrying values. Therefore, the goodwill of our reporting units was not impaired.

Business Combinations

The results of acquired businesses are included in our Consolidated Financial Statements from their acquisition
date. Assets and liabilities of an acquired business are recorded at their estimated fair values on the acquisition date. We
engage third-party valuation specialists to assist us in determining these fair values where necessary. Any excess
consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

38 2022 Annual Report | Avery Dennison Corporation

The allocation of purchase price requires management to make significant estimates and assumptions. While we
believe our assumptions and estimates are reasonable, they are inherently uncertain and based in part on our experience,
market conditions, our projections of future performance and information obtained from management of the acquired
companies. Critical estimates include, but are not limited to, the following:

(cid:129) Future revenue and profit margins;

(cid:129) Royalty rates;

(cid:129) Discount rates;

(cid:129) Customer retention rates;

(cid:129) Technology migration curves; and

(cid:129) Useful lives assigned to acquired intangible assets.

Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis over their respective

estimated useful lives to marketing, general and administrative expense.

Pension and Postretirement Benefits

The assumptions we use in determining projected benefit obligations and the fair value of plan assets for our
defined benefit pension plans and other postretirement benefit plans are evaluated by management in consultation with
outside actuaries. In the event that we determine that changes are warranted in the assumptions we use, such as the
discount rate, expected long-term rate of return or health care costs, future pension and postretirement benefit expenses
could increase or decrease. Due to changes in market conditions or participant population, the actuarial assumptions we
use may differ from actual results, which could have a significant impact on our pension and postretirement liability and
related costs.

Discount Rate

In consultation with our actuaries, we annually review and determine the discount rates we use in valuing our
postretirement obligations. The assumed discount rates for our international pension plans reflect market rates for high
quality corporate bonds currently available. Our discount rates are determined by evaluating yield curves consisting of
large populations of high quality corporate bonds. The projected pension benefit payment streams are then matched with
the bond portfolios to determine a rate that reflects the liability duration unique to our pension and postretirement benefit
plans. As of December 31, 2022, a .25% increase in the discount rates associated with our international plans would
have decreased our year-end projected benefit obligation by $24 million and decreased expected periodic benefit cost for
the coming year by approximately $1 million. Conversely, a .25% decrease in the discount rates associated with our
international plans would have increased our year-end projected benefit obligation by approximately $24 million and
increased expected periodic benefit cost for the coming year by approximately $1 million.

We use the full yield curve approach to estimate the service and interest cost components of net periodic benefit
cost for our pension and other postretirement benefit plans. Using this approach, we apply multiple discount rates from a
yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at
the measurement date. We believe this approach provides a more precise measurement of service and interest cost by
aligning the timing of these plans’ liability cash flows to the corresponding rates on the yield curve.

Long-term Return on Plan Assets

We determine the long-term rate of return assumption for plan assets by reviewing the historical and expected
returns of both the equity and fixed income markets, taking into account our asset allocation, the correlation between
returns in our asset classes, and our mix of active and passive investments. Additionally, current market conditions,
including interest rates, are evaluated and market data is reviewed for reasonableness and appropriateness. An increase
or decrease of .25% on the long-term return on assets associated with our international plans would have decreased or
increased our periodic benefit cost for the coming year by approximately $2 million.

Avery Dennison Corporation | 2022 Annual Report 39

Taxes Based on Income

Because we are subject to income tax in the U.S. and multiple foreign jurisdictions,

judgment is required in
evaluating and estimating our worldwide provision, accruals for taxes, deferred taxes and tax positions. Our provision for
income taxes is determined using the asset and liability approach in accordance with GAAP. Deferred tax assets
represent amounts available to reduce income taxes payable in future years. These assets arise because of temporary
differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating losses
and tax credit carryforwards. These amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in
effect when the temporary differences reverse. We evaluate the realizability of these future tax deductions and credits by
assessing the period over which recoverability is allowed by law and the adequacy of future expected taxable income
from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax
planning strategies. Our assessment of these sources of income relies heavily on estimates. Our forecasted earnings by
jurisdiction are determined by how we operate our business and any changes to our operations may affect our effective
tax rate. For example, our future income tax rate could be adversely affected by earnings being lower than anticipated in
jurisdictions in which we have significant deferred tax assets that are dependent on such earnings to be realized. We use
our historical experience and operating forecasts to evaluate expected future taxable income. To the extent we do not
consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established in the
period we make that determination.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the
actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded
when identified.

Tax laws and regulations are complex and subject to different interpretations by taxpayers and governmental
taxing authorities. We review our tax positions quarterly and adjust the balances if and as new information becomes
available. Significant judgment is required in determining our tax expense and evaluating our tax positions, including
evaluating uncertainties. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of
relevant facts and circumstances existing at the balance sheet date, taking into consideration existing laws, regulations
and practices of the governmental authorities exercising jurisdiction over our operations. We recognize and measure our
uncertain tax positions following the more-likely-than-not threshold for recognition and measurement for tax positions
we take or expect to take on a tax return.

Refer to Note 14, “Taxes Based on Income,” to the Consolidated Financial Statements for more information.

Long-Term Incentive Compensation

Valuation of Stock-Based Awards

We base our stock-based compensation expense on the fair value of awards, adjusted for estimated forfeitures,
amortized on a straight-line basis over the requisite service period for stock options and restricted stock units (“RSUs”).
We base compensation expense for performance units (“PUs”) on the fair value of awards, adjusted for estimated
forfeitures, and amortized on a straight-line basis as these awards cliff-vest at the end of the requisite service period. We
base compensation expense related to market-leveraged stock units (“MSUs”) on the fair value of awards, adjusted for
estimated forfeitures, and amortized on a graded-vesting basis over their respective performance periods.

Compensation expense for awards with a market condition as a performance objective, which includes PUs and

MSUs, is not adjusted if the condition is not met, as long as the requisite service period is met.

We determine the fair value of RSUs and the component of PUs that is subject to the achievement of a
performance objective based on a financial performance condition based on the fair market value of our common stock as
of the date of the grant, adjusted for foregone dividends. Over the performance period of the PUs, the estimated number
of shares of our common stock issuable upon vesting is adjusted upward or downward based on the probability of
achieving the performance objectives established for the award.

We determine the fair value of stock-based awards that are subject to achievement of performance objectives
based on a market condition, which includes MSUs and the other component of PUs, using the Monte-Carlo simulation
model, which utilizes multiple input variables, including expected stock price volatility and other assumptions appropriate
for determining fair value, to estimate the probability of satisfying the respective target performance objectives
established for the award.
40 2022 Annual Report | Avery Dennison Corporation

Forfeiture Rate

Changes in estimated forfeiture rates are recorded as cumulative adjustments in the period estimates are revised.

Certain of our assumptions are based on management’s estimates,

in consultation with outside specialists.
Significant changes in assumptions for future awards and actual forfeiture rates could materially impact our stock-based
compensation expense and results of operations.

Valuation of Cash-Based Awards

Cash-based awards consist of long-term incentive units (“LTI Units”) granted to eligible employees. LTI Units are
classified as liability awards and remeasured at each quarter-end over the applicable vesting or performance period. In
addition to LTI Units with terms and conditions that mirror those of RSUs, we also grant certain employees LTI Units with
terms and conditions that mirror those of PUs and MSUs.

RECENT ACCOUNTING REQUIREMENTS

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

information.

Avery Dennison Corporation | 2022 Annual Report 41

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

We are exposed to the impact of changes in foreign currency exchange rates and interest rates. We generally do

not purchase or hold foreign currency or interest rate or commodity contracts for trading purposes.

Our objective in managing our exposure to foreign currency changes is to reduce the risk to our earnings and cash
flow associated with foreign exchange rate changes. As a result, we enter into foreign exchange forward, option and
swap contracts to reduce risks associated with the value of our existing foreign currency assets,
liabilities, firm
commitments and anticipated foreign revenues and costs, when available and appropriate. The gains and losses on these
contracts are intended to offset changes in the related exposures. We do not hedge our foreign currency translation
exposure in a manner that would entirely eliminate the effects of changes in foreign exchange rates on our net income.

Our objective in managing our exposure to interest rate changes is to reduce the impact of interest rate changes
on earnings and cash flows. To achieve this objective, we may periodically use interest rate contracts to manage our
exposure to interest rate changes.

Additionally, we enter into certain natural gas futures contracts to reduce the risks associated with natural gas we

anticipate using in our manufacturing operations. These amounts are not material to our financial statements.

In the normal course of operations, we also face other risks that are either non-financial or non-quantifiable. These
risks principally include changes in economic or political conditions, other risks associated with foreign operations,
commodity price risk, and litigation and compliance risk, which are not reflected in the analyses described below.

Foreign Exchange Value-At-Risk

We use a Value-At-Risk (“VAR”) model to determine the estimated maximum potential one-day loss in earnings
associated with our foreign exchange positions and contracts. This approach assumes that market rates or prices for
foreign exchange positions and contracts are normally distributed. VAR model estimates are made assuming normal
market conditions. The model includes foreign exchange derivative contracts. Forecasted transactions, firm commitments,
accounts receivable and accounts payable denominated in foreign currencies, which certain of these instruments are
intended to hedge, are excluded from the model.

The VAR model is a risk analysis tool and does not represent actual losses in fair value that we could incur, nor

does it consider the potential effect of favorable changes in market factors.

In both 2022 and 2021, the VAR was estimated using a variance-covariance methodology. The currency
correlation was based on one-year historical data obtained from one of our domestic banks. A 95% confidence level was
used for a one-day time horizon.

The estimated maximum potential one-day loss in earnings for our foreign exchange positions and contracts was

not significant at year-end 2022 or 2021.

Interest Rate Sensitivity

In 2022 and 2021, an assumed 12 and 9 basis point, respectively, increase in interest rates affecting our variable-
rate borrowings (10% of our weighted average interest rate on floating rate debt) would not have had a significant
impact on interest expense.

42 2022 Annual Report | Avery Dennison Corporation

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022
Consolidated Statements of Income for 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for 2022, 2021 and 2020
Consolidated Statements of Shareholders’ Equity for 2022, 2021 and 2020
Consolidated Statements of Cash Flows for 2022, 2021 and 2020
Notes to Consolidated Financial Statements

Page
44

47
48
49
50
51
52

Avery Dennison Corporation | 2022 Annual Report 43

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Avery Dennison Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Avery Dennison Corporation and its
subsidiaries (the “Company”) as of December 31, 2022 and January 1, 2022, and the related consolidated statements of
income, of comprehensive income, of shareholders’ equity, and of cash flows for each of the three years in the period
ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
44 2022 Annual Report | Avery Dennison Corporation

management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.

Because of

its inherent

reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

internal control over

limitations,

financial

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i) relates
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.

Income Taxes

As described in Notes 1 and 14 to the consolidated financial statements, the Company is subject to income tax in
the U.S. and multiple foreign jurisdictions, whereby management applies judgment in evaluating and estimating the
Company’s worldwide provision, accruals for taxes, deferred taxes and for evaluating the Company’s tax positions. As of
and for the year ended December 31, 2022, management recorded a provision for income taxes of $242.2 million,
recorded total deferred tax assets of $115.1 million and disclosed unrecognized tax benefits of $69.5 million. As
disclosed by management, significant judgments and estimates are required by management when determining the
Company’s tax expense and evaluating tax positions, including uncertainties. Management’s estimate of the potential
outcome of uncertain tax issues is subject to management’s assessment of relevant facts and circumstances existing at
the balance sheet date, taking into consideration existing laws, regulations and practices of the governmental authorities
exercising jurisdiction over the Company’s operations. Management’s assessment of the future realizability of the
Company’s deferred tax assets relies heavily on forecasted earnings in certain jurisdictions, and such forecasted earnings
are determined by the manner in which the Company operates its business and the relevant carryforward periods.

The principal considerations for our determination that performing procedures relating to income taxes is a critical
audit matter are (i) the significant judgment by management when accounting for income taxes, including evaluating the
potential outcome of various uncertain tax issues and the realizability of deferred tax assets; (ii) a high degree of auditor
judgment, subjectivity, and effort in performing procedures and evaluating evidence related to the potential outcome of
uncertain tax issues and the realizability of deferred tax assets on a jurisdictional basis; and (iii) the audit effort involved
the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to accounting for income taxes, including controls over the identification and recognition of uncertain tax
issues and the realizability of deferred tax assets on a jurisdictional basis. These procedures also included, among others,
(i) testing the income tax provision and the rate reconciliation and (ii) evaluating management’s process for assessing the
potential outcome of uncertain tax issues and the future realizability of deferred tax assets. Evaluating management’s
process for assessing the potential outcome of certain uncertain tax issues included evaluating management’s
assessment of existing laws and regulations and practices of governmental authorities exercising jurisdiction over the
Company’s operations. Evaluating management’s process for assessing the future realizability of certain deferred tax
assets on a jurisdictional basis included evaluating estimates of future taxable income, evaluating management’s
application of income tax law, and testing the completeness and accuracy of underlying data used in management’s
assessment. Evaluating management’s estimates of future taxable income involved evaluating whether the estimates
used by management were reasonable considering the current and past performance of the Company on a jurisdictional
basis and whether the estimates were consistent with evidence obtained in other areas of the audit. Professionals with
specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s assessment of the
Avery Dennison Corporation | 2022 Annual Report 45

potential outcome of uncertain tax issues and the future realizability of deferred tax assets, including the application of
relevant foreign and domestic income tax laws and regulations, the provision for income taxes and the reasonableness of
management’s assessment of whether it is more-likely-than-not that certain tax positions will be sustained.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

February 22, 2023

We have served as the Company’s auditor since at least 1960, which were the Company’s first financial
statements subject to SEC reporting requirements. We have not been able to determine the specific year we began
serving as auditor of the Company or a predecessor company.

46 2022 Annual Report | Avery Dennison Corporation

Consolidated Balance Sheets

(Dollars in millions, except per share amount)

December 31, 2022

January 1, 2022

Assets

Current assets:

Cash and cash equivalents

Trade accounts receivable, less allowances of $34.4 and $33 at year-end 2022 and

$

167.2 $

162.7

2021, respectively

Inventories

Other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other intangibles resulting from business acquisitions, net

Deferred tax assets

Other assets

Liabilities and Shareholders’ Equity

Current liabilities:

Short-term borrowings and current portion of long-term debt and finance leases

$

$

Accounts payable

Accrued payroll and employee benefits

Accrued trade rebates

Income taxes payable

Other current liabilities

Total current liabilities

Long-term debt and finance leases

Long-term retirement benefits and other liabilities

Deferred tax liabilities and income taxes payable

Commitments and contingencies (see Notes 7 and 8)

Shareholders’ equity:

Common stock, $1 par value per share, authorized – 400,000,000 shares at year-end

2022 and 2021; issued – 124,126,624 shares at year-end 2022 and 2021; outstanding
– 80,810,016 and 82,605,953 shares at year-end 2022 and 2021, respectively

Capital in excess of par value

Retained earnings

Treasury stock at cost, 43,316,608 and 41,520,671 shares at year-end 2022 and 2021,

respectively

Accumulated other comprehensive loss

Total shareholders’ equity

See Notes to Consolidated Financial Statements

1,374.4

1,009.9

230.5

2,782.0

1,540.2

1,862.4

840.3

115.1

810.5

1,424.5

907.2

240.2

2,734.6

1,477.7

1,881.5

911.4

130.2

836.2

7,950.5 $

7,971.6

598.6 $

1,339.3

228.5

173.8

76.2

383.4

2,799.8

2,503.5

367.1

247.9

124.1

879.3

4,414.6

(3,021.8)

(364.0)

2,032.2

318.8

1,298.8

299.0

176.3

74.9

380.1

2,547.9

2,785.9

474.9

238.5

124.1

862.3

3,880.7

(2,659.8)

(282.9)

1,924.4

7,971.6

$

7,950.5 $

Avery Dennison Corporation | 2022 Annual Report 47

Consolidated Statements of Income

(In millions, except per share amounts)
Net sales

Cost of products sold

Gross profit

Marketing, general and administrative expense

Other expense (income), net

Interest expense

Other non-operating expense (income), net

Income before taxes

Provision for income taxes

Equity method investment (losses) gains

Net income

Per share amounts:

Net income per common share

Net income per common share, assuming dilution

Weighted average number of shares outstanding:

Common shares

Common shares, assuming dilution

See Notes to Consolidated Financial Statements

$

$

$

$

2022
9,039.3 $

6,635.1

2,404.2

1,330.8

(.6)

84.1

(9.4)

999.3

242.2

—

2021
8,408.3 $

6,095.5

2,312.8

1,248.5

5.6

70.2

(4.1)

992.6

248.6

(3.9)

757.1 $

740.1 $

9.28 $

9.21 $

81.6

82.2

8.93 $

8.83 $

82.9

83.8

2020
6,971.5

5,048.2

1,923.3

1,060.5

53.6

70.0

1.9

737.3

177.7

(3.7)

555.9

6.67

6.61

83.4

84.1

48 2022 Annual Report | Avery Dennison Corporation

Consolidated Statements of Comprehensive Income

(In millions)
Net income

Other comprehensive (loss) income, net of tax:

Foreign currency translation:

Translation (loss) gain

Pension and other postretirement benefits:

Net gain recognized from actuarial gain/loss and prior service cost/credit

Reclassifications to net income

Cash flow hedges:

Gains (losses) recognized on cash flow hedges

Reclassifications to net income

Other comprehensive (loss) income, net of tax

Total comprehensive income, net of tax

See Notes to Consolidated Financial Statements

$

$

2022
757.1 $

2021
740.1 $

2020
555.9

(96.6)

6.3

2.8

4.9

1.5

(81.1)

676.0 $

30.7

27.9

4.4

5.4

(1.7)

66.7

(3.0)

6.2

2.9

(7.5)

(.1)

(1.5)

806.8 $

554.4

Avery Dennison Corporation | 2022 Annual Report 49

Consolidated Statements of Shareholders’ Equity

(Dollars in millions, except per share amounts)
Balance as of December 28, 2019

$

Net income

Other comprehensive income (loss), net of tax

Repurchase of 792,997 shares for treasury

Issuance of 389,102 shares under stock-based
compensation plans

Contribution of 188,229 shares to 401(k) plan

Dividends of $2.36 per share

Common
stock, $1
par value

Capital in
excess of
par value

124.1 $

874.0 $

Retained
earnings
2,979.1 $

Accumulated
other
comprehensive
loss
(348.1) $

Treasury
stock
(2,425.1) $

—

—

—

—

—

—

—

—

—

(11.9)

—

—

555.9

—

—

(3.4)

14.5

(196.8)

—

—

(104.3)

20.2

8.2

—

—

(1.5)

—

—

—

—

Total
1,204.0

555.9

(1.5)

(104.3)

4.9

22.7

(196.8)

Balance as of January 2, 2021

$

124.1 $

862.1 $

3,349.3 $

(2,501.0) $

(349.6) $

1,484.9

Net income

Other comprehensive income (loss), net of tax

Repurchase of 925,425 shares for treasury

Issuance of 257,189 shares under stock-based
compensation plans

Contribution of 123,015 shares to 401(k) plan

Dividends of $2.66 per share

—

—

—

—

—

—

—

—

—

.2

—

—

740.1

—

—

(7.2)

19.1

(220.6)

—

—

(180.9)

16.6

5.5

—

—

66.7

—

—

—

—

740.1

66.7

(180.9)

9.6

24.6

(220.6)

Balance as of January 1, 2022

$

124.1 $

862.3 $

3,880.7 $

(2,659.8) $

(282.9) $

1,924.4

Net income

Other comprehensive income (loss), net of tax

Repurchase of 2,173,416 shares for treasury

Issuance of 223,676 shares under stock-based
compensation plans

Contribution of 153,803 shares to 401(k) plan

Dividends of $2.93 per share

—

—

—

—

—

—

—

—

—

17.0

—

—

757.1

—

—

(4.4)

20.1

(238.9)

—

—

(379.5)

10.6

6.9

—

—

(81.1)

—

—

—

—

757.1

(81.1)

(379.5)

23.2

27.0

(238.9)

Balance as of December 31, 2022

$

124.1 $

879.3 $

4,414.6 $

(3,021.8) $

(364.0) $

2,032.2

See Notes to Consolidated Financial Statements

50 2022 Annual Report | Avery Dennison Corporation

2022

2021

2020

$

757.1 $

740.1 $

555.9

167.3

154.2

Consolidated Statements of Cash Flows
(In millions)

Operating Activities

Net income

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation

Amortization

Provision for credit losses and sales returns

Stock-based compensation

Pension plan settlements and related charges

Deferred taxes and other non-cash taxes

Other non-cash expense and loss (income and gain), net

Changes in assets and liabilities and other adjustments:

Trade accounts receivable

Inventories

Accounts payable

Taxes on income

Other assets

Other liabilities

Net cash provided by operating activities

Investing Activities

Purchases of property, plant and equipment

Purchases of software and other deferred charges

Proceeds from sales of property, plant and equipment

Proceeds from insurance and sales (purchases) of investments, net

Proceeds from sale of product line and venture investment

Payments for acquisitions, net of cash acquired, and venture investments

Net cash used in investing activities

177.4

113.3

50.1

47.4

—

18.4

23.5

(22.1)

(140.7)

68.2

18.9

15.3

(165.8)

961.0

(278.1)

(20.4)

2.3

1.9

1.1

(39.5)

(332.7)

76.8

35.7

37.2

1.6

2.6

10.1

(113.2)

(182.7)

255.2

(7.3)

4.1

19.3

1,046.8

(255.0)

(17.1)

1.1

3.1

7.6

(1,477.6)

(1,737.9)

Financing Activities

Net increase (decrease) in borrowings with maturities of three months or less

34.6

259.2

Additional borrowings under revolving credit facility

Repayments of borrowings under revolving credit facility

Additional long-term borrowings

Repayments of long-term debt and finance leases

Dividends paid

Share repurchases

Net (tax withholding) proceeds related to stock-based compensation

Other

Net cash (used in) provided by financing activities

Effect of foreign currency translation on cash balances

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

$

See Notes to Consolidated Financial Statements

—

—

—

(6.3)

(238.9)

(379.5)

(25.1)

—

(615.2)

(8.6)

4.5

162.7

167.2 $

—

—

791.7

(13.4)

(220.6)

(180.9)

(25.4)

(6.3)

604.3

(2.8)

(89.6)

252.3

162.7 $

Avery Dennison Corporation | 2022 Annual Report 51

51.1

64.0

24.0

.5

9.3

44.9

14.7

(6.0)

(68.2)

(35.2)

18.2

(76.1)

751.3

(201.4)

(17.2)

9.2

5.6

—

(350.4)

(554.2)

(110.4)

500.0

(500.0)

493.7

(270.2)

(196.8)

(104.3)

(19.7)

—

(207.7)

9.2

(1.4)

253.7

252.3

Notes to Consolidated Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

We are a global materials science and digital

identification solutions company that provides branding and
information labeling solutions, including pressure-sensitive materials, radio-frequency identification (“RFID”) inlays and
tags, and a variety of converted products and solutions. We design and manufacture a wide range of labeling and
functional materials that enhance branded packaging, carry or display information that connects the physical and the
digital, and improve customers’ product performance. We serve an array of industries worldwide, including home and
personal care, apparel, e-commerce, logistics, food and grocery, pharmaceuticals and automotive.

Principles of Consolidation

Our Consolidated Financial Statements include the accounts of majority-owned and controlled subsidiaries.

Intercompany accounts, transactions and profits are eliminated in consolidation.

Segment Information

In the fourth quarter of 2022, we changed our operating structure to align with our overall business strategy, and
our Chief Executive Officer, who is also our chief operating decision maker, requested changes in the information that he
regularly reviews to allocate resources and assess performance. As a result, our fiscal year 2022 results are reported
based on our new reportable segments as described in Note 15, “Segment Information.” We have recast prior periods to
reflect our new operating structure.

Fiscal Year

Our fiscal years generally consist of 52 weeks, but every fifth or sixth fiscal year consists of 53 weeks; our 2022
and 2021 fiscal years consisted of 52-week periods ending December 31, 2022 and January 1, 2022, respectively. Our
2020 fiscal year consisted of a 53-week period ending January 2, 2021.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America, or GAAP, requires management to make estimates and assumptions for the reporting period and as of
the date of our financial statements. These estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expense. As future events and
their effects cannot be determined with precision, actual results could differ significantly from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash on hand, deposits in banks, cash-in-transit, and bank drafts
and short-term investments with maturities of three months or less when purchased or received. The carrying value of
these assets approximates fair value due to the short maturity of these instruments.

Inventories

We state inventories at

the lower of cost or net

realizable value and categorized as raw materials,
work-in-progress, or finished goods. Cost is determined using the first-in, first-out method. We record inventory that is
damaged, obsolete, excess and slow-moving to cost of products sold and we establish a lower cost basis for the
inventory. Slow-moving inventory is reviewed by category and may be recognized partially or fully to cost of products
sold depending on the type of product, level of usage and length of time the product has been included in inventory.

52 2022 Annual Report | Avery Dennison Corporation

Trade Accounts Receivable

We record trade accounts receivable at the invoiced amount. Our allowance for credit losses reflects customer
trade accounts receivable that are estimated to be partially or entirely uncollectible. These allowances are used to reduce
gross trade receivables to their net realizable values. We record these allowances based on estimates related to the
following:

(cid:129) The financial condition of customers;

(cid:129) The aging of receivable balances;

(cid:129) Our historical collection experience; and

(cid:129) Current and expected future macroeconomic and market conditions.

Property, Plant and Equipment

We generally compute depreciation using the straight-line method over the estimated useful

lives of the
respective assets, ranging from ten to 45 years for buildings and improvements and three to 15 years for machinery and
equipment. Leasehold improvements are depreciated over the shorter of the useful life of the asset or the term of the
associated leases. We expense maintenance and repair costs as incurred; we capitalize renewals and improvements.
Upon the sale or retirement of assets, the accounts are relieved of the cost and the related accumulated depreciation, with
any resulting gain or loss included in net income.

Leases

Our leases primarily relate to office and warehouse space, machinery, transportation, and equipment for
information technology. We determine if an arrangement is a lease or contains a lease at inception. For lease accounting
purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and
liabilities for short-term leases. We have options to renew or terminate some of our leases. We evaluate renewal and
termination options based on considerations available at the lease commencement date and over the lease term to
determine if we are reasonably certain to exercise these options. As most of our leases do not provide an implicit rate, we
use our incremental borrowing rate based on the information available at the lease commencement date to determine the
present value of lease payments. We recognize expense for operating leases using a straight-line basis over the lease
term, with variable lease payments recognized in the periods in which they are incurred.

Software

We capitalize software costs incurred during the application development stage of software development,
including costs incurred for design, coding,
installation to hardware, testing, and upgrades and enhancements that
provide the software or hardware with additional functionalities and capabilities. We expense software costs, including
internal and external training costs and maintenance costs, incurred during the preliminary project stage and the post-
implementation and/or operation stage.
In addition, we capitalize implementation costs incurred under a hosting
arrangement that is a service contract. Capitalized software, which is included in “Other assets” in the Consolidated
Balance Sheets, is amortized on a straight-line basis over the estimated useful life of the software, which is generally
between five and ten years.

Venture Investments

We invest in privately held companies and utilize the measurement alternative for equity investments that do not
have readily determinable fair values, measuring them at cost less impairment plus or minus observable price changes in
orderly transactions. The carrying value of our venture investments is included in “Other assets” in the Consolidated
Balance Sheets.

See Note 9, “Fair Value Measurements,” for more information.

Impairment of Long-lived Assets

We record impairment charges when the carrying amounts of long-lived assets are determined not to be
recoverable. We measure recoverability by comparing the undiscounted cash flows expected from the applicable asset or
asset group’s use and eventual disposition to its carrying value. We calculate the amount of impairment loss as the
excess of the carrying value over the fair value. Historically, changes in market conditions and management strategy have
caused us to reassess the carrying amount of our long-lived assets.

Avery Dennison Corporation | 2022 Annual Report 53

Goodwill and Other Intangibles Resulting from Business Acquisitions

We account for business combinations using the acquisition method, with the excess of the acquisition cost over
the fair value of net tangible assets and identified intangible assets acquired considered goodwill. As a result, we disclose
goodwill separately from other intangible assets. Other identifiable intangibles include customer relationships, patented
and other developed technology, and trade names and trademarks.

We perform an annual impairment test of goodwill during the fourth quarter and, as necessary, if changes in facts
and circumstances that indicate the fair value of a reporting unit may be less than its carrying value. Certain factors may
cause us to perform an impairment test outside of our annual assessment, including significant underperformance of a
business relative to expected operating results, significant adverse economic and industry trends, significant decline in
our market capitalization for an extended period of time relative to net book value, or our decision to divest a portion of a
reporting unit. In performing impairment tests, we have the option to first assess qualitative factors to determine whether
it is necessary to perform a quantitative assessment for goodwill impairment. If the qualitative assessment indicates that
it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative
assessment. A quantitative assessment primarily uses the present value (discounted cash flow) method to determine the
fair value of reporting units with goodwill.

We compare the fair value of each reporting unit to its carrying amount, and, to the extent the carrying amount
exceeds the unit’s fair value, we recognize an impairment of goodwill for the excess up to the amount of goodwill of that
reporting unit.

In consultation with outside specialists, we estimate the fair value of our reporting units using various valuation
techniques, with the primary technique being a discounted cash flow analysis. A discounted cash flow analysis requires
us to make various assumptions about our reporting units, including their respective forecasted sales, operating margins
and growth rates, as well as discount rates. Our assumptions about discount rates are based on the weighted average
cost of capital for comparable companies. Our assumptions about sales, operating margins and growth rates are based on
our forecasts, business plans, economic projections, anticipated future cash flows, and marketplace data. We also make
assumptions for varying perpetual growth rates for periods beyond our long-term business plan period. We base our fair
value estimates on projected financial information and assumptions that we believe are reasonable. However, actual
future results may differ materially from these estimates and projections. The valuation methodology we use to estimate
the fair value of reporting units requires inputs and assumptions that reflect current market conditions, as well as the
impact of planned business and operational strategies that require management judgment. The estimated fair value could
increase or decrease depending on changes in the inputs and assumptions.

We test indefinite-lived intangible assets, consisting of trade names and trademarks, for impairment in the fourth
quarter or whenever events or circumstances indicate that it is more-likely-than-not that their carrying amounts exceed
their fair values. In performing the impairment tests, we have the option to first assess qualitative factors to determine
whether it is necessary to perform a quantitative assessment for indefinite-lived intangible asset impairment. If we decide
not to perform a qualitative assessment, or if the qualitative assessment indicates that it is more-likely-than-not that the
fair value of an indefinite-lived intangible asset is less than its carrying value, we perform a quantitative assessment. Fair
value is estimated as the discounted value of future revenues using a royalty rate that a third party would pay to use the
asset. Variation in the royalty rates could impact our estimate of fair value. If the carrying amount of an asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess.

We amortize finite-lived intangible assets, consisting of customer relationships, patented and other developed

technology, trade names and trademarks, and other intangibles, on a straight-line basis over their estimated useful lives.

See Note 3, “Goodwill and Other Intangibles Resulting from Business Acquisitions,” for more information.

Foreign Currency

We translate asset and liability accounts of international operations into U.S. dollars at current rates. Revenues and
expenses are translated at the weighted average currency rate for the fiscal year. We record gains and losses resulting
from hedging the value of investments in certain international operations and from the translation of balance sheet
accounts directly as a component of other comprehensive income.

We account for our operations in Argentina as highly inflationary, because the country’s three-year cumulative

inflation rate exceeds 100%. As a result, the functional currency of our Argentine subsidiary is the U.S. dollar.
54 2022 Annual Report | Avery Dennison Corporation

Financial Instruments

We enter into foreign exchange derivative contracts to reduce our risk from exchange rate fluctuations associated
with receivables, payables, loans and firm commitments denominated in certain foreign currencies that arise primarily as a
result of our operations outside the U.S. From time to time, we enter into interest rate contracts to help manage our
exposure to certain interest rate fluctuations. We also enter into futures contracts to hedge certain price fluctuations for a
portion of our anticipated domestic purchases of natural gas. The maximum length of time for which we hedge our
exposure to the variability in future cash flows is 36 months for forecasted foreign exchange and commodity transactions
and 10 years for cross-currency swap transactions.

On the date we enter into a derivative contract, we determine whether the derivative will be designated as a
hedge. Derivatives designated as hedges are classified as either (1) hedges of the fair value of a recognized asset or
liability or an unrecognized firm commitment (“fair value” hedges) or (2) hedges of a forecasted transaction or the
variability of cash flows that are to be received or paid in connection with a recognized asset or liability (“cash flow”
hedges). Other derivatives not designated as hedges are recorded on the balance sheets at fair value, with changes in fair
value recognized in earnings. Our policy is not to purchase or hold any foreign currency, interest rate or commodity
contracts for trading purposes.

We assess, both at the inception of any hedge and on an ongoing basis, whether our hedges are highly effective. If
we determine that a hedge is not highly effective, we prospectively discontinue hedge accounting. For cash flow hedges,
we record gains and losses as components of other comprehensive income and reclassify them into earnings in the same
period during which the hedged transaction affects earnings. In the event that the anticipated transaction is no longer
likely to occur, we recognize the change in fair value of the instrument in current period earnings. We recognize changes
in fair value hedges in current period earnings. We also recognize changes in the fair value of underlying hedged items
(such as recognized assets or liabilities) in current period earnings and offset the changes in the fair value of the
derivative.

In the Consolidated Statements of Cash Flows, hedges are classified in the same category as the item hedged,

primarily in operating activities.

See Note 5, “Financial Instruments,” for more information.

Fair Value Measurements

We define fair value as the price that would be received from selling an asset or paid for transferring a liability in
an orderly transaction between market participants at the measurement date. In determining the fair value measurements
for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in
which we would transact and the market-based risk measurements or assumptions that market participants would use in
pricing the asset or liability.

We determine fair value based on a three-tier fair value hierarchy, which we use to prioritize the inputs used in
measuring fair value. These tiers consist of Level 1, which are observable inputs such as quoted prices in active markets;
Level 2, which are inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3, which are unobservable inputs in which little or no market data exists, and require us to develop our own
assumptions to determine the best estimate of fair value.

Revenue Recognition

We recognize sales when or as we satisfy a performance obligation by transferring control of a product or service
to a customer, in an amount that reflects the consideration which we would expect for the product or service. We
consider a number of factors in determining when we have transferred control to a customer, including the following:
(i) our present right to payment; (ii) the customer’s legal title to the asset; (iii) physical possession of the asset; (iv) the
customer’s significant risks and rewards of ownership of the asset; and (v) the customer’s acceptance of the asset.

Our payment terms with our customers are generally consistent with those used in the industries and the regions

in which we operate.

We accept sales returns in certain limited circumstances. We record an estimate for return liabilities and a
corresponding reduction to sales in the amount we expect to repay or credit customers, which we base on historical
returns and outstanding customer claims. We update our estimates each reporting period.

Avery Dennison Corporation | 2022 Annual Report 55

Sales rebates, discounts and other customer concessions represent variable consideration and are common in the
industries and regions in which we operate, which we account for as a reduction to sales based on estimates at the time
at which products are sold. We base these estimates on our historical experience, as well as current information such as
sales forecasts. We review our estimates regularly and, as additional information becomes available, we adjust our sales
and the respective accruals as necessary.

We exclude sales tax, value-added tax and other taxes we collect from customers from sales. We account for
shipping and handling activities after control of a product is transferred to a customer as fulfillment costs and not as
separate performance obligations. As a practical expedient, we have elected not to disclose the value of unsatisfied
performance obligations for contracts with an original expected length of less than one year. We generally expense sales
commissions when incurred because the amortization period would have been one year or less. We record these costs in
“Marketing, general and administrative expense” in the Consolidated Statements of Income.

Research and Development

Research and development costs are related to research, design and testing of new products and applications,

which we expense as incurred.

Long-Term Incentive Compensation

No long-term incentive compensation expense was capitalized in 2022, 2021 or 2020.

Valuation of Stock-Based Awards

We base our stock-based compensation expense on the fair value of awards, adjusted for estimated forfeitures,
amortized on a straight-line basis over the requisite service period for stock options and restricted stock units (“RSUs”).
We base compensation expense for performance units (“PUs”) on the fair value of awards, adjusted for estimated
forfeitures, and amortized on a straight-line basis as these awards cliff-vest at the end of the requisite service period. We
base compensation expense related to market-leveraged stock units (“MSUs”) on the fair value of awards, adjusted for
estimated forfeitures, and amortized on a graded-vesting basis over their respective performance periods.

Compensation expense for awards with a market condition as a performance objective, which includes PUs and

MSUs, is not adjusted if the condition is not met, as long as the requisite service period is met.

We estimate the fair value of stock options as of the date of grant using the Black-Scholes option-pricing model.
This model requires input assumptions for our expected dividend yield, expected stock price volatility, risk-free interest
rate and expected option term.

We determine the fair value of RSUs and the component of PUs that is subject to the achievement of a
performance objective using a financial performance condition based on the fair market value of our common stock as of
the date of grant, adjusted for foregone dividends. Over the performance period of the PUs, the estimated number of
shares of our common stock issuable upon vesting is adjusted upward or downward from the target shares at the time of
grant based on the probability of the financial performance objectives established for the award being achieved.

We determine the fair value of stock-based awards that are subject to achievement of performance objectives
based on a market condition, which includes MSUs and the other component of PUs, using the Monte-Carlo simulation
including expected stock price volatility and other assumptions
method, which utilizes multiple input variables,
appropriate for determining fair value, to estimate the probability of satisfying the target performance objectives
established for the award.

Certain of these assumptions are based on management’s estimates, in consultation with outside specialists.
Significant changes in assumptions for future awards and actual forfeiture rates could materially impact stock-based
compensation expense and our results of operations.

Valuation of Cash-Based Awards

Cash-based awards consist of long-term incentive units (“LTI Units”) granted to eligible employees. We classify
LTI Units as liability awards and remeasure them at each quarter-end over the applicable vesting or performance period.
In addition to LTI Units with terms and conditions that mirror those of RSUs, we also grant certain employees LTI Units
with terms and conditions that mirror those of PUs and MSUs.
56 2022 Annual Report | Avery Dennison Corporation

Forfeitures

We estimate expected forfeitures in determining the compensation cost to be recognized each period, rather than
accounting for forfeitures as they occur. We record changes in estimated forfeiture rates as cumulative adjustments in the
period estimates are revised.

See Note 12, “Long-term Incentive Compensation,” for more information.

Taxes Based on Income

Because we are subject to income tax in the U.S. and multiple foreign jurisdictions,

judgment is required in
evaluating and estimating our worldwide provision, accruals for taxes, deferred taxes and tax positions. Our provision for
income taxes is determined using the asset and liability approach in accordance with GAAP. Under this approach,
deferred taxes represent the expected future tax consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities. We record a valuation allowance to reduce our deferred tax assets when
uncertainty regarding their realizability exists. We recognize and measure our uncertain tax positions following the more-
likely-than-not threshold for recognition and measurement for tax positions we take or expect to take on a tax return.

See Note 14, “Taxes Based on Income,” for more information.

Recent Accounting Requirements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the
transparency of supplier finance programs by requiring disclosures of key program terms, information about obligations
under these programs and a rollforward of these obligations. This guidance is effective for fiscal years beginning after
December 15, 2022,
including interim periods within those fiscal years, except for the disclosure on rollforward
information, which is effective for fiscal years beginning after December 15, 2023. We plan to adopt this guidance at the
beginning of our 2023 fiscal year on January 1, 2023.

NOTE 2. ACQUISITIONS

Subsequent to our fiscal year-end 2022, in January 2023, we entered into an agreement to acquire Thermopatch,
Inc., a New York-based manufacturer specializing in labeling, embellishments, and transfers for the sports, industrial
laundry, workwear and hospitality industries. We believe this acquisition will expand the product portfolio in our Solutions
Group reportable segment. We expect to complete this acquisition in the first quarter of 2023.

2022 Acquisitions

In January 2022, we completed our acquisitions of TexTrace AG (“TexTrace”), a Switzerland-based technology
developer specializing in custom-made woven and knitted RFID products that can be sewn onto or inserted into
garments, and Rietveld Serigrafie B.V. and Rietveld Screenprinting Serigrafi Baski Matbaa Tekstil Ithalat Ihracat Sanayi ve
Ticaret Limited Sirketi (collectively, “Rietveld”), a Netherlands-based provider of external embellishment solutions and
application and printing methods for performance brands and team sports in Europe. These acquisitions expanded the
product portfolio in our Solutions Group reportable segment. The acquisitions of TexTrace and Rietveld are referred to
collectively as the “2022 Acquisitions.”

The aggregate purchase consideration for the 2022 Acquisitions was approximately $35 million. We funded the
2022 Acquisitions using cash and commercial paper borrowings. In addition to the cash paid at closing, the sellers in one
of these acquisitions are eligible for earn-out payments of up to $30 million, subject to the acquired company achieving
certain post-acquisition performance targets. As of the acquisition date, we included an estimate of the fair value of these
earn-out payments in the aggregate purchase consideration.

The 2022 Acquisitions were not material,

individually or in the aggregate, to the Consolidated Financial

Statements.

Vestcom Acquisition

On August 31, 2021, we completed our acquisition of CB Velocity Holdings, LLC (“Vestcom”), an Arkansas-based
provider of shelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged
Avery Dennison Corporation | 2022 Annual Report 57

goods companies, for purchase consideration of $1.47 billion. We funded this acquisition using cash and proceeds from
both commercial paper borrowings and issuances of senior notes. Refer to Note 4, “Debt,” to the Consolidated Financial
Statements for more information.

Vestcom’s solutions expanded our position in high value categories and added channel access and data

management capabilities to our Solutions Group reportable segment.

The table below summarizes the fair value of assets acquired and liabilities assumed in the Vestcom acquisition

based on our final allocation of the purchase consideration.

(In millions)
Cash and cash equivalents

Trade accounts receivable

Other current assets

Property, plant and equipment

Goodwill

Other intangibles resulting from business acquisition

Other assets

Total assets

Current liabilities

Other liabilities

Deferred and non-current income tax liabilities

Total liabilities

Net assets acquired

$

24.3

98.4

28.5

56.2

756.1

727.0

22.8

1,713.3

47.5

17.2

183.5

248.2

$

1,465.1

The impact of the Vestcom acquisition was not material to the pro forma net sales or net income of our combined
operations for the periods presented. Net sales and net income related to Vestcom post-acquisition were not material to
the Consolidated Statements of Income for 2021.

Other 2021 Acquisitions

On March 18, 2021, we completed our acquisition of the net assets of ZippyYum, LLC (“ZippyYum”), a California-
based developer of software products used in the food service and food preparation industries. This acquisition enhanced
the product portfolio in our Solutions Group reportable segment.

On March 1, 2021, we completed our acquisition of the issued and outstanding stock of JDC Solutions, Inc. (“JDC”),
a Tennessee-based manufacturer of pressure-sensitive specialty tapes. This acquisition expanded the product portfolio in
our Materials Group reportable segment.

The acquisitions of ZippyYum and JDC are referred to collectively as the “Other 2021 Acquisitions.”

The aggregate purchase consideration for the Other 2021 Acquisitions was approximately $43 million. We funded
the Other 2021 Acquisitions using cash and commercial paper borrowings. In addition to the cash paid at closing, the
sellers in one of these acquisitions are eligible for earn-out payments of up to approximately $13 million subject to the
acquired company’s achievement of certain post-acquisition performance targets. As of the acquisition date, we
estimated the fair value of these earn-out payments to be approximately $12 million, which was included in the
$43 million of aggregate purchase consideration.

The Other 2021 Acquisitions were not material, individually or in the aggregate, to the Consolidated Financial

Statements.

NOTE 3. GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS

Goodwill

Results from our annual goodwill impairment test in the fourth quarter of 2022 indicated that no impairment

occurred during 2022. The assumptions used in our assessment of these assets were primarily based on Level 3 inputs.
58 2022 Annual Report | Avery Dennison Corporation

During the fourth quarter of 2022, we changed our operating structure to align with our overall business strategy.
As a result, our fiscal year 2022 results are reported based on our new reportable segments described in Note 15,
“Segment Information. We have recast prior periods to reflect our new operating structure. There was no goodwill
impairment recognized as a result of the change in reportable segments.

Changes in the net carrying amount of goodwill for 2022 and 2021 by reportable segment are shown below:

(In millions)
Goodwill as of January 2, 2021

Acquisitions(1)

Acquisition adjustment(2)

Translation adjustments

Goodwill as of January 1, 2022

Acquisitions(3)

Acquisition adjustment(4)

Translation adjustments

Materials
Group
664.6 $

Solutions
Group
471.8 $

$

Total
1,136.4

781.4

1.2

(37.5)

774.5

—

(10.3)

1,236.0

1,881.5

16.3

(.5)

(8.1)

16.3

(.5)

(34.9)

6.9

1.2

(27.2)

645.5

—

—

(26.8)

Goodwill as of December 31, 2022

$

618.7 $

1,243.7 $

1,862.4

(1)

(2)

(3)

(4)

Goodwill acquired related to the acquisitions of Vestcom, JDC and ZippyYum. We expect nearly all of the recognized goodwill related to the Vestcom
and JDC acquisitions not to be deductible for income tax purposes and the recognized goodwill related to the ZippyYum acquisition to be deductible for
income tax purposes.
Measurement period adjustment related to the finalization of the purchase price allocation for the December 2020 acquisition of ACPO, Ltd.
Goodwill acquired related to the 2022 Acquisitions. We expect the recognized goodwill related to the 2022 Acquisitions to be non-deductible for
income tax purposes.
Measurement period adjustment related to the finalization of the purchase price allocation for the August 2021 acquisition of Vestcom.

The carrying amounts of goodwill at December 31, 2022 and January 1, 2022 were net of accumulated

impairment losses of $820 million recognized in fiscal year 2009 by our Solutions Group reportable segment.

Indefinite-Lived Intangible Assets

In connection with our acquisition of Vestcom, we acquired approximately $135 million of identifiable indefinite
lived intangible assets consisting of trade names and trademarks. We utilized the income approach to estimate the fair
values of acquired identifiable intangibles, primarily using Level 3 inputs. We applied significant judgment in determining
the fair value of intangible assets, which included our estimates and assumptions with respect to estimated future
revenue and related profit margins, royalty rates, discount rates and economic lives assigned to the acquired intangible
assets.

Results from our annual indefinite-lived intangible assets impairment test in the fourth quarter indicated that no
impairment occurred in 2022. The carrying value of indefinite-lived intangible assets resulting from business acquisitions,
consisting of trade names and trademarks, was $154.7 million and $155.6 million at December 31, 2022 and January 1,
2022, respectively.

Finite-Lived Intangible Assets

In connection with the 2022 Acquisitions, we acquired approximately $21 million of identifiable finite-lived

intangible assets, which consisted of patented and other developed technology as well as customer relationships.

In connection with our acquisition of Vestcom, we acquired approximately $592 million of identifiable finite-lived
intangible assets, which consisted of customer relationships and patented and other developed technology. We utilized
the income approach to estimate the fair values of acquired identifiable intangibles, primarily using Level 3 inputs. We
applied significant judgment in determining the fair value of intangible assets, which included our estimates and
assumptions with respect to estimated future revenue and related profit margins, customer retention rates, technology
migration curves, royalty rates, discount rates and economic lives assigned to the acquired intangible assets.

Avery Dennison Corporation | 2022 Annual Report 59

The table below summarizes the amounts and weighted average useful lives of these intangible assets as of the

acquisition date.

Customer relationships

Patented and other developed technology

Weighted
average
amortization
period
(in years)
12

Amount
(in millions)
492.0
$

100.4

7

The intangible assets from the Other 2021 Acquisitions were not material to the Consolidated Financial

Statements.

Refer to Note 2, “Acquisitions,” for more information.

The table below sets forth our finite-lived intangible assets resulting from business acquisitions at December 31,

2022 and January 1, 2022, which continue to be amortized.

(In millions)
Customer relationships

Patented and other
developed technology

Trade names and trademarks

Other intangibles

Total

Gross
Carrying
Amount
852.2

$

2022

Accumulated
Amortization
330.1
$

2021

Net
Carrying
Amount
522.1

$

Gross
Carrying
Amount
862.5

$

Accumulated
Amortization
$

277.2 $

Net
Carrying
Amount
585.3

261.9

14.4

3.2

104.3

10.3

1.4

157.6

4.1

1.8

247.7

14.8

3.2

84.7

163.0

9.7

.8

5.1

2.4

$ 1,131.7

$

446.1

$

685.6

$ 1,128.2

$

372.4 $

755.8

Amortization expense for finite-lived intangible assets resulting from business acquisitions was $81.8 million for

2022, $44.6 million for 2021 and $19.9 million for 2020.

We expect estimated amortization expense for finite-lived intangible assets resulting from business acquisitions

for each of the next five fiscal years and thereafter to be as follows:

Estimated
Amortization
Expense
80.9

$

79.2

78.4

75.5

75.2

296.4

(In millions)
2023

2024

2025

2026

2027

2028 and thereafter

60 2022 Annual Report | Avery Dennison Corporation

NOTE 4. DEBT

Short-Term Borrowings

We had $128 million and $189 million of outstanding borrowings from U.S. commercial paper issuances as of
December 31, 2022 and January 1, 2022, respectively, with a weighted average interest rate of 4.84% and 0.32%,
respectively.

We have a Euro-Commercial Paper Program under which we may issue unsecured commercial paper notes up to
a maximum aggregate amount outstanding of $500 million. Proceeds from issuances under this program may be used for
general corporate purposes. The maturities of the notes vary, but may not exceed 364 days from the date of issuance.
Our payment obligations with respect to any notes issued under this program are backed by our revolving credit facility
(the “Revolver”). There are no financial covenants under this program. We had balances of $213 million and
$113.1 million outstanding under this program as of December 31, 2022 and January 1, 2022, respectively, with a
weighted average interest rate of 2.06% and (0.47)%, respectively.

Short-Term Credit Facilities

Subsequent to fiscal year 2022, in January 2023, we extended the maturity date of the Revolver by one year to
February 13, 2026, and increased the commitments by $400 million, from $800 million to $1.2 billion. Additionally, we
amended the Revolver to replace the LIBOR benchmark interest rate with Term SOFR, Euribor and SONIA benchmark
interest rates. We use the Revolver as a back-up facility for our commercial paper program and for other corporate
purposes. In February 2020, we had amended and restated the Revolver, eliminating one of the financial covenants and
extending its maturity date to February 13, 2025. The Revolver allowed for a one-year extension of the maturity date
under certain circumstances and the option to increase the commitments by up to $400 million, subject to lender
approvals and customary requirements.

No balance was outstanding under the Revolver as of December 31, 2022 or January 1, 2022. Commitment fees

associated with the Revolver in 2022, 2021 and 2020 were $0.9 million, $0.9 million and $0.8 million, respectively.

In addition to the Revolver, we have short-term lines of credit available in various countries of approximately
$341 million in the aggregate at December 31, 2022. These lines may be cancelled at any time by us or the issuing banks.
Short-term borrowings outstanding under these lines of credit were $2.4 million and $11.2 million at December 31, 2022
and January 1, 2022, respectively, with weighted average interest rates of 0.64% and 4.97%, respectively.

From time to time, we provide guarantees on certain arrangements with banks. Our exposure to these guarantees

is not material.

Long-Term Borrowings

In August 2021, we issued $500 million of senior notes, due February 15, 2032, which bear an interest rate of
2.250%, payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts
and offering expenses, were $493.7 million. Additionally, in August 2021, we issued $300 million of senior notes, due
August 15, 2024, which we can repay without penalty on or after August 15, 2022 and bear an interest rate of 0.850%,
payable semiannually in arrears. Our net proceeds from this issuance, after deducting underwriting discounts and offering
expenses, were $298 million. We used the net proceeds from these two debt issuances to finance a portion of the
Vestcom acquisition.

In March 2020, we issued $500 million of senior notes, due April 2030. These senior notes bear an interest rate of
2.65% per year, payable semiannually in arrears. Our net proceeds from the issuance, after deducting underwriting
discounts and offering expenses, were $493.7 million, which we used to repay both existing indebtedness under our
commercial paper program used to fund our Smartrac acquisition and our $250 million of senior notes that matured in
April 2020.

Avery Dennison Corporation | 2022 Annual Report 61

Our long-term debt, and related interest rates, at year-end 2022 and 2021 is shown below.

(In millions)
Long-term debt

Medium-term notes:

Series 1995 due 2025

Long-term notes:

Senior notes due 2023 at 3.4%

Senior notes due 2024 at 0.85%

Senior notes due 2025 at 1.25%(1)

Senior notes due 2028 at 4.875%

Senior notes due 2030 at 2.650%

Senior notes due 2032 at 2.25%

Senior notes due 2033 at 6.0%

Less amount classified as current

Total long-term debt(2)

2022

2021

$

30.0 $

30.0

249.7

299.0

531.3

496.0

495.5

494.5

149.1

(249.7)

249.5

298.3

563.3

495.3

494.8

493.9

149.1

—

$

2,495.4 $

2,774.2

(1)

(2)

These senior notes are euro-denominated. The face value is €500 million.
Included unamortized debt issuance costs and debt discounts of $10.5 million and $7.1 million, respectively, as of year-end 2022 and $12.9 million
and $8.2 million, respectively, as of year-end 2021.

At year-end 2022 and 2021, our medium-term notes had accrued interest at a weighted average fixed rate of

7.5%. In the second quarter of 2020, we repaid $15 million of medium-term notes that matured in June 2020.

We expect maturities of our long-term debt for each of the next five fiscal years and thereafter to be as follows:

Year
2023

2024

2025

2026

2027

2028 and thereafter

(In millions)
250.0

$

300.0

562.6

—

—

1,650.0

Refer to Note 7, “Commitments and Leases,” for information related to finance leases.

Other

The Revolver contains a financial covenant that requires us to maintain a specified ratio of total debt in relation to a
certain measure of income. As of December 31, 2022 and January 1, 2022, we were in compliance with our financial
covenants.

Our total interest costs in 2022, 2021 and 2020 were $89.8 million, $75.0 million and $73.9 million, respectively,
of which $5.7 million, $4.8 million and $3.9 million, respectively, was capitalized as part of the cost of property, plant and
equipment and capitalized software.

The estimated fair value of our long-term debt is primarily based on the credit spread above U.S. Treasury
securities 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 includes commercial paper issuances and short-term lines of
credit, approximates their carrying value given their short duration. The fair value of our total debt was $2.85 billion at
December 31, 2022 and $3.25 billion at January 1, 2022. Fair value amounts were determined based primarily on Level 2
inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable. Refer
to Note 1, “Summary of Significant Accounting Policies,” for more information.
62 2022 Annual Report | Avery Dennison Corporation

NOTE 5. FINANCIAL INSTRUMENTS

As of December 31, 2022, the aggregate U.S. dollar equivalent notional value of our outstanding commodity
contracts and foreign exchange contracts was $6.1 million and $1.36 billion, respectively. Our outstanding foreign
exchange contracts as of December 31, 2022 were recorded under various currencies, primarily the U.S. dollar, euro,
Chinese renminbi, British pound sterling and Hong Kong dollar.

We recognize derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets.
We designate commodity forward contracts on forecasted purchases of commodities and foreign exchange contracts on
forecasted transactions as cash flow hedges. We also enter into foreign exchange contracts to offset certain of our
economic exposures arising from foreign exchange rate fluctuations.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or
loss on the derivative is reported as a component of “Accumulated other comprehensive loss” and reclassified into
earnings in the same period(s) during which the hedged transaction impacts earnings. Gains and losses on these
derivatives, representing either hedge ineffectiveness or hedge components excluded from the assessment of
effectiveness, are recognized in current earnings. Except for the cross-currency swap discussed below, cash flow hedges
were not material in 2022, 2021 or 2020.

Cross-Currency Swap

In March 2020, we entered into U.S. dollar to euro cross-currency swap contracts with a total notional amount of
$250 million to effectively convert the fixed-rate U.S. dollar-denominated debt into euro-denominated debt, including
semiannual interest payments and the payment of principal at maturity. During the term of the contract, which ends on
April 30, 2030, we pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars. These contracts have
been designated as cash flow hedges. The fair value of these contracts was $15.5 million as of December 31, 2022,
which was included in “Other Assets” and $(10.3) million as of January 1, 2022, which was included in “Long-term
retirement benefits and other liabilities” in the Consolidated Balance Sheets. Refer to Note 9, “Fair Value Measurements,”
to the Consolidated Financial Statements for more information.

We recorded no ineffectiveness from our cross-currency swap to earnings during 2022, 2021 or 2020.

Other Derivatives

The following table shows the fair value and balance sheet locations of other derivatives as of December 31, 2022

and January 1, 2022:

(In millions)
Foreign exchange contracts Other current

Balance Sheet
Location

Commodity contracts

assets

Other current
assets

Asset

Liability

2022

2021

$

$

4.3 $

—

4.3 $

6.3

—

6.3

Balance Sheet
Location
Other current
liabilities

Other current
liabilities

$

$

2022

2021

9.6 $

.2

9.8 $

2.9

—

2.9

For other derivative instruments not designated as hedging instruments, the gain or loss is recognized in current

earnings.

Avery Dennison Corporation | 2022 Annual Report 63

The following table shows the components of the net gains (losses) recognized in income related to these

derivative instruments:

(In millions)
Foreign exchange
contracts

Foreign exchange
contracts

Statements of
Income Location

Cost of products sold

Marketing, general and administrative
expense

NOTE 6. PENSION AND OTHER POSTRETIREMENT BENEFITS

Defined Benefit Plans

2022

2021

5.6 $

1.4 $

(4.3)

1.3 $

21.0

22.4 $

2020

1.9

(14.2)

(12.3)

$

$

We sponsor a number of defined benefit plans, the accrual of benefits under some of which has been frozen,
covering eligible employees in the U.S. and certain other countries. Benefits payable to an employee are based primarily
on years of service and the employee’s compensation during the course of his or her employment with us.

We are also obligated to pay unfunded termination indemnity benefits to certain employees outside the U.S.,
which are subject to applicable agreements, laws and regulations. We have not incurred significant costs related to these
benefits, and, therefore, no related costs have been included in the disclosures below.

Plan Assets

Assets in our international plans are invested in accordance with locally accepted practices and primarily include
equity securities, fixed income securities, insurance contracts and cash. Asset allocations and investments vary by country
and plan. Our target plan asset investment allocation for our international plans in the aggregate is approximately 26% in
equity securities, 59% in fixed income securities and cash, and 15% in insurance contracts and other investments, subject
to periodic fluctuations among these asset classes.

Fair Value Measurements

The valuation methodologies we use for assets measured at fair value are described below.

Cash is valued at nominal value. Cash equivalents and mutual funds are valued at fair value as determined by
quoted market prices, based upon the net asset value (“NAV”) of shares held at year-end. Fixed income treasury
securities are valued at fair value as determined by quoted prices in active markets. Fixed income municipal and corporate
bonds are valued at fair value based on quoted prices for similar instruments in active markets or other inputs that are
observable or can be corroborated by observable market data. Pooled funds are structured as collective trusts, not
publicly traded and valued by calculating NAV per unit based on the NAV of the underlying funds/trusts as a practical
expedient for the fair value of the pooled funds. Insurance contracts are valued at book value, which approximates fair
value and is calculated using the prior-year balance plus or minus investment returns and changes in cash flows.

These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair values. While we believe these valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments
could result in a different fair value measurement at the reporting date.

64 2022 Annual Report | Avery Dennison Corporation

The following table sets forth, by level within the fair value hierarchy (as applicable), international plan assets at

fair value:

(In millions)
2022

Cash

Insurance contracts

Pooled funds – real estate investment trusts

Pooled funds – fixed income securities(1)

Pooled funds – equity securities(1)

Pooled funds – other investments(1)

Total international plan assets at fair value

2021

Cash

Insurance contracts

Pooled funds – real estate investment trusts

Pooled funds – fixed income securities(1)

Pooled funds – equity securities(1)

Pooled funds – other investments(1)

Fair Value Measurements Using
Significant
Other
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

Quoted
Prices
in Active
Markets
(Level 1)

Total

$

6.4

$

6.4

$

— $

$

$

—

—

—

—

37.1

8.3

335.7

151.9

45.9

585.3

10.1

$

10.1

$

— $

—

—

—

—

37.9

11.0

464.4

302.8

48.4

—

37.1

8.3

—

37.9

11.0

Total international plan assets at fair value

$

874.6

(1) Pooled funds that are measured at fair value using the NAV per unit (or its equivalent) practical expedient have not been classified in
the fair value hierarchy. The fair value amounts presented in this table are intended to reconcile to total international plan assets.

The following table presents a reconciliation of Level 3 international plan asset activity during the year ended

December 31, 2022:

(In millions)
Balance at January 1, 2022

Net realized and unrealized gain (loss)

Purchases

Settlements

Impact of changes in foreign currency exchange rates

Level 3 Assets

Pooled Funds –
Real Estate
Investment
Trusts
11.0

$

$

Insurance
Contracts
37.9

$

.7

3.2

(3.2)

(1.5)

(1.6)

—

—

(1.1)

Balance at December 31, 2022

$

37.1

$

8.3

$

Total
48.9

(.9)

3.2

(3.2)

(2.6)

45.4

Plan Assumptions

Discount Rate

In consultation with our actuaries, we annually review and determine the discount rates used to value our pension
and other postretirement obligations. The assumed discount rate for each pension plan reflects market rates for high
quality corporate bonds currently available. Our discount rate is determined by evaluating yield curves consisting of large
Avery Dennison Corporation | 2022 Annual Report 65

populations of high quality corporate bonds. The projected pension benefit payment streams are then matched with bond
portfolios to determine a rate that reflects the liability duration unique to our plans.

We use the full yield curve approach to estimate the service and interest cost components of net periodic benefit
cost for our pension and other postretirement benefit plans. Under this approach, we apply multiple discount rates from a
yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at
the measurement date. We believe that this approach provides a more precise measurement of service and interest cost
by aligning the timing of a plan’s liability cash flows to its corresponding rates on the yield curve.

Long-term Return on Assets

We determine the long-term rate of return assumption for plan assets by reviewing the historical and expected
returns of both the equity and fixed income markets, taking into account our asset allocation, the correlation between
returns in our asset classes, and our mix of active and passive investments. Additionally, we evaluate current market
conditions, including interest rates, and review market data for reasonableness and appropriateness.

Measurement Date

We measure the actuarial value of our benefit obligations and plan assets using the calendar month-end closest to
our fiscal year-end and adjust for any contributions or other significant events between the measurement date and our
fiscal year-end.

Plan Balance Sheet Reconciliations

The following table provides a reconciliation of benefit obligations, plan assets, funded status of the plans and

accumulated other comprehensive loss for our defined benefit plans:

Plan Benefit Obligations

(In millions)
Change in projected benefit obligations

Pension Benefits

2022

U.S.

Int’l

2021

U.S.

Projected benefit obligations at beginning of year

$

66.8 $

882.4 $

77.3 $

Service cost

Interest cost

Participant contribution

Amendments

Actuarial (gain) loss

Benefits paid

Settlements

Foreign currency translation

—

1.2

—

—

(9.1)

(7.1)

—

—

Projected benefit obligations at end of year

Accumulated benefit obligations at end of year

$

$

51.8 $

51.8 $

16.5

10.8

4.6

—

(244.9)

(21.3)

(1.0)

(60.2)

586.9 $

540.2 $

—

1.0

—

—

(1.7)

(9.8)

—

—

66.8 $

66.8 $

Int’l

953.9

19.0

8.9

4.7

(.9)

(15.6)

(23.3)

(3.7)

(60.6)

882.4

806.4

66 2022 Annual Report | Avery Dennison Corporation

Plan Assets

(In millions)
Change in plan assets

Plan assets at beginning of year

Actual return on plan assets

Employer contributions

Participant contributions

Benefits paid

Settlements

Foreign currency translation

Plan assets at end of year

Funded Status

(In millions)
Funded status of the plans

Other assets

Other accrued liabilities

Long-term retirement benefits and other liabilities(1)

Plan assets less than benefit obligations

Pension Benefits

2022

U.S.

Int’l

2021

U.S.

Int’l

$

— $

874.6 $

— $

897.2

—

7.1

—

(7.1)

—

—

(226.5)

15.2

4.6

(21.3)

(1.0)

(60.3)

—

9.8

—

(9.8)

—

—

37.3

20.7

4.7

(23.3)

(3.7)

(58.3)

$

— $

585.3 $

— $

874.6

Pension Benefits

2022

U.S.

Int’l

2021

U.S.

Int’l

$

$

— $

70.0 $

— $

113.6

(6.2)

(45.6)

(.4)

(71.2)

(7.0)

(59.8)

(51.8) $

(1.6) $

(66.8) $

(1.0)

(120.4)

(7.8)

(1)

In accordance with our funding strategy, we have the option to fund certain of our U.S. liabilities with proceeds from our company-
owned life insurance policies.

Weighted average assumptions used to determine
year-end benefit obligations

Discount rate

Compensation rate increase

Pension Benefits

2022

U.S.

Int’l

2021

U.S.

Int’l

5.06 %

4.36 %

2.49 %

1.57 %

—

2.75

—

2.33

For U.S. and international plans combined, the projected benefit obligations and fair values of plan assets for
pension plans with projected benefit obligations in excess of plan assets were $165 million and $42 million, respectively,
at year-end 2022 and $261 million and $73 million, respectively, at year-end 2021.

For U.S. and international plans combined, the accumulated benefit obligations and fair values of plan assets for
pension plans with accumulated benefit obligations in excess of plan assets were $132 million and $23 million,
respectively, at year-end 2022 and $228 million and $67 million, respectively, at year-end 2021.

Avery Dennison Corporation | 2022 Annual Report 67

Accumulated Other Comprehensive Loss

The following table shows the pre-tax amounts recognized in “Accumulated other comprehensive loss” in the

Consolidated Balance Sheets:

(In millions)
Net actuarial loss

Prior service (credit) cost

Net amount recognized in accumulated other comprehensive loss

Pension Benefits

2022

U.S.
9.1

—

$

2021

Int’l
38.2

(3.5)

$

U.S.
15.6

—

$

Int’l
41.5

(4.0)

9.1

$

34.7

$

15.6

$

37.5

$

$

The following table shows the pre-tax amounts recognized in “Other comprehensive loss (income)”:

(In millions)
Net actuarial (gain) loss

Prior service credit

Amortization of unrecognized:

Net actuarial gain

Prior service credit (cost)

Settlements

Net amount recognized in other
comprehensive loss (income)

Plan Income Statement Reconciliations

2022

U.S.
(5.6) $

$

—

(.8)

—

(.1)

Pension Benefits
2021

Int’l

U.S.

Int’l

(.8) $

(.7) $

(34.8) $

—

—

(.9)

2020

U.S.
3.5

—

$

(2.5)

.4

.1

(.8)

—

(1.1)

(6.1)

.4

(.5)

(.6)

—

(.2)

Int’l
(13.5)

.4

(5.2)

.4

(.3)

$

(6.5) $

(2.8) $

(2.6) $

(41.9) $

2.7

$

(18.2)

The following table shows the components of net periodic benefit cost, which are recorded in net income for our

defined benefit plans:

(In millions)
Service cost

Interest cost

Actuarial (gain) loss

Expected return on plan assets

Amortization of actuarial loss

Amortization of prior service (credit) cost

Recognized loss (gain) on settlements(1)

2022

U.S.

$

— $

1.2

(3.5)

—

.8

—

.1

Int’l
16.5

10.8

—

(21.9)

2.5

(.4)

(.1)

Pension Benefits
2021

U.S.

$

— $

Int’l
19.0

8.9

—

(19.8)

6.1

(.4)

.5

2020

U.S.

$

— $

1.8

3.7

—

.6

—

.2

Int’l
17.8

11.0

—

(18.5)

5.2

(.4)

.3

1.0

(1.1)

—

.8

—

1.1

1.8

Net periodic benefit cost (credit)

$

(1.4) $

7.4

$

$

14.3

$

6.3

$

15.4

(1)

In 2022, settlements in the U.S. related to a non-qualified plan; settlements in our international plans related to lump-sum payments in Belgium. In
2021, settlements in the U.S. related to a non-qualified plan; settlements in our international plans related to lump-sum payments in Belgium and
Switzerland. In 2020, settlements in the U.S. related to a non-qualified plan; settlements in our international plans related to lump-sum payments in
Belgium, France and for certain expatriate employees.

Service cost and components of net periodic benefit cost other than service cost were included in “Marketing,
general and administrative expense” and “Other non-operating expense (income), net” in the Consolidated Statements of
Income, respectively.

68 2022 Annual Report | Avery Dennison Corporation

The following table shows the weighted average assumptions used to determine net periodic cost:

Discount rate

Expected return on assets

Compensation rate increase

Plan Contributions

2022

U.S.
2.19 %

—

—

Int’l
1.57 %

3.00

2.33

Pension Benefits
2021

2020

U.S.
2.20 %

—

—

Int’l
1.26 %

2.61

2.15

U.S.
2.89 %

—

—

Int’l
1.66 %

2.79

2.21

We make contributions to our defined benefit plans sufficient to meet the minimum funding requirements of
applicable laws and regulations, plus additional amounts, if any, we determine to be appropriate. The following table sets
forth our expected contributions in 2023:

(In millions)
U.S. pension plans

International pension plans

Future Benefit Payments

$

6.3

12.8

The future benefit payments shown below reflect the expected service periods for eligible participants.

(In millions)
2023

2024

2025

2026

2027

2028-2032

$

Pension
Benefits

$

U.S.
6.3

6.1

5.9

5.9

5.3

Int’l
22.2

22.6

23.9

26.4

27.0

20.2

142.7

Postretirement Health Benefits

We provide postretirement health benefits to certain of our retired U.S. employees up to the age of 65 under a
cost-sharing arrangement and provide supplemental Medicare benefits to certain of our U.S. retirees over the age of 65.
Our postretirement health benefit plan was closed to new participants retiring after December 31, 2021. Our policy is to
fund the cost of these postretirement benefits from operating cash flows. While we do not intend to terminate these
postretirement health benefits, we may do so at any time, subject to applicable laws and regulations. At year-end 2022,
our postretirement health benefits obligation and related loss recorded in “Accumulated other comprehensive loss” were
approximately $2 million and $11 million, respectively. At year-end 2021, our postretirement health benefits obligation
and related loss recorded in “Accumulated other comprehensive loss” were approximately $2 million and $12 million,
respectively. Net periodic benefit cost was not material in 2022, 2021 or 2020.

Defined Contribution Plans

We sponsor various defined contribution plans worldwide, the largest of which is the Avery Dennison Corporation

Employee Savings Plan (“Savings Plan”), a 401(k) plan for our U.S. employees.

We recognized expense of $27.3 million, $24.6 million and $22.7 million in 2022, 2021 and 2020, respectively,

related to our employer contributions and employer match of participant contributions to the Savings Plan.

Avery Dennison Corporation | 2022 Annual Report 69

Other Retirement Plans

We have deferred compensation plans and programs that permit eligible employees to defer a portion of their
compensation. The compensation voluntarily deferred by the participant, together with certain employer contributions,
earns specified and variable rates of return. As of year-end 2022 and 2021, we had accrued $87.3 million and
$96.1 million, respectively, for our obligations under these plans. A portion of the interest on certain of our contributions
may be forfeited by participants if their employment terminates before age 55 other than by reason of death or disability.

Our Directors Deferred Equity Compensation Program allows our non-employee directors to elect to receive their
cash compensation in deferred stock units (“DSUs”) issued under our equity plan. Additionally, two legacy deferred
compensation plans had DSUs that were issued under our then-active equity plans. Dividend equivalents, representing
the value of dividends per share paid on shares of our common stock and calculated with reference to the number of
DSUs held as of a quarterly dividend record date, are credited in the form of additional DSUs on the applicable dividend
payable date. DSUs are converted into shares of our common stock upon a director’s separation from our Board.
Approximately 0.1 million DSUs were outstanding for both year-end 2022 and 2021, with an aggregate value of
$20 million and $24 million, respectively.

We hold company-owned life insurance policies, the proceeds from which are payable to us upon the death of
covered participants. The cash surrender values of these policies, net of outstanding loans, which are included in “Other
assets” in the Consolidated Balance Sheets, were $265.0 million and $272.2 million at year-end 2022 and 2021,
respectively.

NOTE 7. COMMITMENTS AND LEASES

Supplemental cost information related to leases is shown below.

(In millions)
Operating lease costs

$

2022
70.8 $

2021
68.8 $

2020
63.1

Lease costs related to finance leases were not material in 2022, 2021 or 2020.

Supplemental balance sheet information related to leases is shown below.

Balance Sheet Location

2022

2021

(In millions)
Assets

Operating

Finance(1)

Total leased assets

Liabilities

Current:

Operating

Finance

Non-current:

Operating

Finance

Other assets

Property, plant and equipment, net

Other current liabilities

Short-term borrowings and current portion of long-term debt
and finance leases

Long-term retirement benefits and other liabilities

Long-term debt and finance leases

$

$

$

161.7 $

27.5

189.2 $

42.4 $

5.4

113.6

8.2

183.0

28.9

211.9

47.3

5.5

135.3

11.7

199.8

Total lease liabilities

$

169.6 $

(1)

Finance lease assets are net of accumulated amortization of $12.4 million and $10.4 million as of December 31, 2022 and January 1, 2022,
respectively.

Supplemental cash flow information related to leases is shown below.

(In millions)
Cash paid for amounts included in the measurement of operating
lease liabilities

Operating lease assets obtained in exchange for operating lease
liabilities

70 2022 Annual Report | Avery Dennison Corporation

2022

2021

2020

$

60.5 $

54.2 $

37.2

58.0

54.9

48.4

Cash flows related to finance leases were not material in 2022, 2021 or 2020.

Weighted average remaining lease term and discount rate information related to leases as of December 31, 2022

and January 1, 2022 is shown below.

Weighted average remaining lease term (in years):

Operating

Finance

Weighted average discount rate (percentage):

Operating

Finance

2022

2021

5.9

2.7

3.2 %

2.8

6.5

3.3

3.0 %

2.9

Operating and finance lease liabilities by maturity date from December 31, 2022 are shown below.

(In millions)
2023

2024

2025

2026

2027

2028 and thereafter

Total lease payments

Less: imputed interest

Operating
Leases

$

45.8 $

Finance
Leases
5.8

35.4

27.8

18.8

10.8

35.5

174.1

(18.1)

5.4

2.1

.7

.2

—

14.2

(.6)

13.6

Present value of lease liabilities

$

156.0 $

As of December 31, 2022, we had no significant operating or finance leases that had not yet commenced.

NOTE 8. CONTINGENCIES

Legal Proceedings

We are involved in various lawsuits, claims, inquiries, and other regulatory and compliance matters, most of which
are routine to the nature of our 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. Potential insurance reimbursements are not offset against potential liabilities.

We are currently party to a litigation in which ADASA Inc. (“Adasa”), an unrelated third party, alleged that certain
of our RFID products infringed on its patent. The case was filed on October 24, 2017 in the United States District Court in
the District of Oregon (Eugene Division) and is captioned ADASA Inc. v. Avery Dennison Corporation. We recorded a
contingent liability in the amount of $26.6 million related to this matter in the second quarter of 2021 based on a jury
verdict issued on May 14, 2021.

During the fourth quarter of 2021, the first instance judgment associated with the jury verdict was issued. 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 and a royalty on additional late-disclosed tags, as well as sanctions, prejudgment interest, costs,
and attorneys’ fees. In addition, Adasa was awarded an ongoing royalty on in-scope tags sold after October 14, 2021. On
October 22, 2021, we appealed the judgment to the United States Court of Appeals for the Federal Circuit (“CAFC”). We
have largely completed our migration to alternative encoding methods for our RFID tags.

Avery Dennison Corporation | 2022 Annual Report 71

During the fourth quarter of 2022, the CAFC issued its opinion, reversing the grant of summary judgment of
validity as to anticipation and obviousness, vacating the sanctions ruling, and remanding the case for retrial. The CAFC
affirmed subject-matter eligibility and damages if liability is determined in the retrial. On remand, the trial court must
reconsider the amount of sanctions consistent with the CAFC’s instruction to limit sanctions to the late-disclosed tags.
With continued evaluation of the matter and our defenses, as well as consultation with our outside counsel, we continue
to believe that Adasa’s patent is invalid and that the sanctions are unreasonable. In addition, we believe that there are
appealable grounds in the CAFC’s decision; as a result, we will seek U.S. Supreme Court review as the first of the
potential next steps in the litigation process. As of December 31, 2022, we continue to evaluate our options and estimate
a range of potential outcomes between approximately $5 million to $71 million. Based on our assessment, we concluded
that the current reserve of $26.6 million is representative of the estimated liability taking into consideration the potential
outcomes; as such, we did not record a change to the accrued liability.

Because of the uncertainties associated with claims resolution and litigation, future expenses to resolve these
matters could be higher than the liabilities we have accrued; however, we are unable to reasonably estimate a range of
potential expenses. If information were to become available that allowed us to reasonably estimate a range of potential
expenses determined to be probable in an amount higher or lower than what we have accrued and determined such 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 such resolution cannot be determined. Based upon
current information, we believe that the impact of the resolution of these matters 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. Potential insurance reimbursements are not offset against potential liabilities.
We review our estimates of the costs of complying with environmental laws related to remediation and cleanup of
including sites in which governmental agencies have designated us as a potentially responsible party
various sites,
(“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 December 31, 2022, we have been designated by the U.S. Environmental Protection Agency (“EPA”) and/or
other responsible state agencies as a PRP at eleven 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 negotiate 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; however, we are unable to reasonably estimate
a range of potential expenses determined to be probable. If information were to become available that allowed us to
reasonably estimate a range of potential expenses in an amount higher or lower than what we have accrued, 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 such remediation cannot be determined.

72 2022 Annual Report | Avery Dennison Corporation

The activity related to our environmental liabilities in 2022 and 2021 was as follows:

(In millions)
Balance at beginning of year

Charges, net of reversals

Payments

Balance at end of year

$

$

2022
21.9 $

4.4

(2.0)

24.3 $

2021
21.1

2.9

(2.1)

21.9

Approximately $9 million and $2 million, respectively, of this balance was classified as short-term and included in

“Other current liabilities” in the Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022.

NOTE 9. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

Assets and liabilities carried at fair value, measured on a recurring basis, as of December 31, 2022, were as

follows:

(In millions)
Assets

Investments

Derivative assets

Bank drafts

Cross-currency swap

Liabilities

Derivative liabilities

Contingent consideration liabilities

Fair Value Measurements Using
Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

Total

$

31.3 $

22.6 $

8.7 $

4.3

3.2

15.5

—

3.2

—

4.3

—

15.5

$

12.2 $

6.0

.3 $

—

11.9 $

—

—

—

—

—

—

6.0

Assets and liabilities carried at fair value, measured on a recurring basis, as of January 1, 2022 were as follows:

(In millions)
Assets

Investments

Derivative assets

Bank drafts

Liabilities

Cross-currency swap

Derivative liabilities

Contingent consideration liabilities

Fair Value Measurements Using
Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

Total

$

$

33.9 $

27.1 $

6.8 $

7.1

14.1

.6

14.1

6.5

—

10.3 $

— $

10.3 $

3.6

7.6

—

—

3.6

—

—

—

—

—

—

7.6

Investments included fixed income securities (primarily U.S. government and corporate debt securities) measured
at fair value using quoted prices/bids and a money market fund measured at fair value using NAV. As of December 31,
Avery Dennison Corporation | 2022 Annual Report 73

in the Consolidated Balance Sheets. As of January 1, 2022,

2022, investments of $0.7 million and $30.6 million were included in “Cash and cash equivalents” and “Other current
assets,” respectively,
investments of $0.5 million and
$33.4 million were included in “Cash and cash equivalents” and “Other current assets,” respectively, in the 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 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) are valued at face value due to their short-term nature and were included in “Other current assets” in
the Consolidated Balance Sheets.

Contingent consideration liabilities relate to estimated earn-out payments associated with certain acquisitions
completed in 2022 and 2021, which are subject to the acquired companies achieving certain post-acquisition
performance targets. These liabilities were recorded based on the expected payments and have been classified as Level
3. Activity related to contingent consideration in 2022 and 2021 were immaterial.

In addition to the investments described above, we hold venture investments that had a total carrying value of
$70 million and $52 million as of December 31, 2022 and January 1, 2022, respectively, which was included in “Other
assets” in the Consolidated Balance Sheets. We recognized net gains on our venture investments of $13.5 million,
$23 million and $5.4 million in 2022, 2021 and 2020, respectively, in “Other expense (income), net” in the Consolidated
Statements of Income.

NOTE 10. NET INCOME PER COMMON SHARE

Net income per common share was computed as follows:

(In millions, except per share amounts)
(A) Net income

(B) Weighted average number of common shares outstanding

Dilutive shares (additional common shares issuable under stock-
based awards)

(C) Weighted average number of common shares outstanding,
assuming

dilution

Net income per common share (A) ÷ (B)

Net income per common share, assuming dilution (A) ÷ (C)

$

$

$

2022
757.1 $

81.6

2021
740.1 $

82.9

2020
555.9

83.4

.6

.9

.7

82.2

9.28 $

9.21 $

83.8

8.93 $

8.83 $

84.1

6.67

6.61

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 were not significant in 2022, 2021 or 2020.

NOTE 11. SUPPLEMENTAL EQUITY AND COMPREHENSIVE INCOME INFORMATION

Common Stock and Share Repurchase Program

Our Amended and Restated Certificate of Incorporation authorizes five million shares of $1 par value preferred
stock (of which no shares are outstanding), with respect to which our Board may fix the series and terms of issuance, and
400 million shares of $1 par value voting common stock.

From time to time, our Board authorizes the repurchase of shares of our outstanding common stock. Repurchased
In 2022, we
shares may be reissued under our long-term incentive plan or used for other corporate purposes.
repurchased approximately 2.2 million shares of our common stock at an aggregate cost of $379.5 million. In 2021, we
repurchased approximately 0.9 million shares of our common stock at an aggregate cost of $180.9 million.

In April 2022 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. Shares of our common stock in the aggregate amount of $730 million as
of December 31, 2022 remained authorized for repurchase under this Board authorization.
74 2022 Annual Report | Avery Dennison Corporation

Treasury Shares Reissuance

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.

Accumulated Other Comprehensive Loss

The changes in “Accumulated other comprehensive loss” (net of tax) for 2022 and 2021 were as follows:

Foreign
Currency
Translation

Pension and
Other
Postretirement
Benefits

Cash Flow
Hedges

$

(248.1) $

(92.7) $

(8.8) $

(In millions)
Balance as of January 2, 2021

Other comprehensive income (loss) before
reclassifications, net of tax

Reclassifications to net income, net of tax

Net current-period other comprehensive income
(loss), net of tax

30.7

—

30.7

Balance as of January 1, 2022

$

(217.4) $

Other comprehensive income (loss) before
reclassifications, net of tax

Reclassifications to net income, net of tax

Net current-period other comprehensive income
(loss), net of tax

(96.6)

—

(96.6)

27.9

4.4

32.3

(60.4) $

6.3

2.8

9.1

5.4

(1.7)

3.7

(5.1) $

4.9

1.5

6.4

Total
(349.6)

64.0

2.7

66.7

(282.9)

(85.4)

4.3

(81.1)

(364.0)

Balance as of December 31, 2022

$

(314.0) $

(51.3) $

1.3 $

The following table sets forth the income tax (benefit) expense allocated to each component of other

comprehensive income (loss):

(In millions)
Foreign currency translation:

Translation (loss) gain

Pension and other postretirement benefits:

Net gain recognized from actuarial gain/loss and prior service
cost/credit

Reclassifications to net income

Cash flow hedges:

Gains (losses) recognized on cash flow hedges

Reclassifications to net income

2022

2021

2020

$

(7.0) $

(23.2) $

27.5

.5

1.1

1.6

.4

8.5

1.6

1.7

(.5)

3.1

.9

(2.3)

—

Income tax (benefit) expense allocated to components of other
comprehensive income (loss)

$

(3.4) $

(11.9) $

29.2

NOTE 12. LONG-TERM INCENTIVE COMPENSATION

Stock-Based Awards

Stock-Based Compensation

We grant our annual stock-based compensation awards to eligible employees in March and non-employee
directors in May. Certain awards granted to retirement-eligible employees one year or more before their retirement date
vest upon retirement; these awards are accounted for as fully vested one year from the date of grant.

Avery Dennison Corporation | 2022 Annual Report 75

Our 2017 Incentive Award Plan (the “Equity Plan”), a long-term incentive plan for employees and non-employee
directors, allows us to grant stock-based compensation awards – including stock options, RSUs, PUs, MSUs and DSUs –
or a combination of these and other awards. Under the Equity Plan, 5.4 million shares are available for issuance, and each
full value award is counted as 1.5 shares for purposes of the number of shares authorized for issuance. Full value awards
include RSUs, PUs and MSUs.

Stock-based compensation expense and the related recognized tax benefit were as follows:

(In millions)
Stock-based compensation expense

Tax benefit

$

2022
47.4 $

6.7

2021
37.2 $

4.6

2020
24.0

2.9

This expense was included in “Marketing, general and administrative expense” in the Consolidated Statements of

Income.

As of December 31, 2022, we had approximately $61 million of unrecognized compensation expense related to
unvested stock-based awards, which is expected to be recognized over the remaining weighted average requisite service
period of approximately two years.

Stock Options

Stock options may be granted to employees and non-employee directors at no less than 100% of the fair market
value of our common stock on the date of the grant and generally vest ratably over a four-year period. Options expire ten
years from the date of grant.

No stock options were granted in fiscal years 2022, 2021 or 2020.

The following table summarizes information related to stock options:

Outstanding at January 1, 2022

Exercised

Outstanding at December 31, 2022

Options vested and expected to vest at
December 31, 2022

Options exercisable at December 31, 2022

Number of
options
(in thousands)

142.0 $

(.9)

141.1 $

141.1

141.1 $

Weighted
average
exercise price
73.76

40.33

73.96

73.76

73.96

Weighted
average
remaining
contractual life
(in years)

4.40 $

3.42 $

3.42

3.42 $

Aggregate
intrinsic value
(in millions)
20.3

15.1

15.1

15.1

The total intrinsic value of stock options exercised was $3.5 million in 2021 and $4 million in 2020. We received
approximately $1 million in 2021 and $2 million in 2020 from the exercise of stock options. The tax benefit associated
with these exercised options was $0.9 million in 2021 and $1 million in 2020. The stock option exercises in 2022 were
immaterial. The intrinsic value of a stock option is based on the amount by which the market value of our stock exceeds
the exercise price of the option.

Performance Units (“PUs”)

PUs are performance-based awards granted to eligible employees under the Equity Plan. PUs are payable in
shares of our common stock at the end of a three- or four-year cliff vesting period provided that the designated
performance objectives are achieved at the end of the period. Over the performance period, the estimated number of
shares of our common stock issuable upon vesting is adjusted upward or downward based on the probability of achieving
the performance objectives established for the award. The actual number of shares issued generally ranges from 0% to
200% of the target shares at the time of grant; however certain special PU awards can be issued up to 300% of the
target shares at time of grant. The weighted average grant date fair value for PUs was $163.97, $191.86 and $115.07 in
2022, 2021 and 2020, respectively.
76 2022 Annual Report | Avery Dennison Corporation

The following table summarizes information related to awarded PUs:

Unvested at January 1, 2022

Granted at target

Adjustment for above-target performance(1)

Vested

Forfeited/cancelled

Unvested at December 31, 2022

Number of
PUs
(in thousands)

322.1 $

159.7

78.1

(182.7)

(4.5)

372.7 $

Weighted
average
grant-date
fair value
127.33

163.97

110.41

110.41

152.27

147.45

(1)

Reflects adjustments for the vesting of awards based on above-target performance for the 2019-2021 performance period.

The fair value of vested PUs was $20.2 million in 2022, $19.2 million in 2021 and $20.4 million in 2020.

Market-Leveraged Stock Units (“MSUs”)

MSUs are performance-based awards granted to eligible employees under our equity plans. MSUs are payable in
shares of our common stock over a four-year period provided that the designated performance objective is achieved as of
the end of each vesting period. MSUs accrue dividend equivalents during the vesting period, which are earned and paid
only at vesting provided that, at a minimum, threshold-level performance is achieved. The number of shares earned is
based upon our absolute total shareholder return at each vesting date and can range from 0% to 200% of the target
amount of MSUs subject to vesting. Each of the four vesting periods represents one tranche of MSUs and the fair value of
each of these four tranches was determined using the Monte-Carlo simulation model, which utilizes multiple input
variables, including expected stock price volatility and other assumptions, to estimate the probability of achieving the
performance objective established for the award. The weighted average grant date fair value for MSUs was $141.80,
$216.06 and $94.55 in 2022, 2021 and 2020, respectively.

The following table summarizes information related to awarded MSUs:

Unvested at January 1, 2022

Granted at target

Adjustments for above-target performance(1)

Vested

Forfeited/cancelled

Unvested at December 31, 2022

Number of
MSUs
(in thousands)

195.2 $

100.5

69.2

(153.0)

(3.4)

208.5 $

Weighted
average
grant- date
fair value
143.16

141.80

127.45

130.34

149.91

145.86

(1)

Reflects adjustments for the vesting of awards based on above-target performance for each of the tranches of awards vesting in 2022.

The fair value of vested MSUs was $19.9 million in 2022, $17.8 million in 2021 and $17.6 million in 2020.

Restricted Stock Units (“RSUs”)

RSUs are service-based awards granted to eligible employees and non-employee directors under our equity plans.
RSUs granted to employees generally vest ratably over a period of three or four years. RSUs granted to non-employee
directors generally vest in one year. The vesting of RSUs is subject to continued service through the applicable vesting
date. If that condition is not met, unvested RSUs are generally forfeited. The weighted average grant date fair value for
RSUs was $168.34, $196.26 and $111.71 in 2022, 2021 and 2020, respectively.

Avery Dennison Corporation | 2022 Annual Report 77

The following table summarizes information related to awarded RSUs:

Unvested at January 1, 2022

Granted

Vested

Forfeited/cancelled

Unvested at December 31, 2022

Number of
RSUs
(in thousands)

36.1 $

44.6

(19.2)

(1.7)

59.8 $

Weighted
average
grant-date
fair value
139.82

168.34

146.32

125.93

159.23

The fair value of vested RSUs was $2.8 million, $2.7 million and $3.8 million in 2022, 2021 and 2020, respectively.

Cash-Based Awards

Long-Term Incentive Units (“LTI Units”)

LTI Units are cash-based awards granted to employees under our long-term incentive unit plan. LTI Units are
service-based awards that generally vest ratably over a four-year period. The settlement value equals the number of
vested LTI Units multiplied by the average of the high and low market prices of our common stock on the vesting date.
The compensation expense related to these awards is amortized on a straight-line basis and the fair value is remeasured
using the estimated percentage of units expected to be earned multiplied by the average of the high and low market
prices of our common stock at each quarter-end.

We also grant performance-based, cash-based awards in the form of performance and market-leveraged LTI
Units to eligible employees. Performance LTI Units are payable in cash at the end of a three-year cliff vesting period
provided that certain performance objectives are achieved at the end of the performance period. Market-leveraged LTI
Units are payable in cash and vest ratably over a period of four years. The number of performance and market-leveraged
LTI Units earned at vesting is adjusted upward or downward based upon the probability of achieving the performance
objectives established for the respective award and the actual number of units issued can range from 0% to 200% of the
designated target units subject to vesting. Performance and market-leveraged LTI Units are remeasured using the
estimated percentage of units expected to be earned multiplied by the average of the high and low market prices of our
common stock at each quarter-end over their respective performance periods. The compensation expense related to
performance LTI Units is amortized on a straight-line basis over their respective performance periods. The compensation
expense related to market-leveraged LTI Units is amortized on a graded-vesting basis over their respective performance
periods.

The compensation expense related to LTI Units was $11.5 million in 2022, $21.3 million in 2021 and $13.8 million
in 2020. This expense was included in “Marketing, general and administrative expense” in the Consolidated Statements
of Income. The total recognized tax benefit related to LTI Units was $2.7 million in 2022, $5.1 million in 2021 and
$3.3 million in 2020.

NOTE 13. COST REDUCTION ACTIONS

Restructuring Charges

We have plans that provide eligible employees with severance benefits in the event of an involuntary termination.
We calculate severance using the benefit formulas under the applicable plans. We record restructuring charges from
qualifying cost reduction actions for severance and other exit costs (including asset impairment charges and lease and
other contract cancellation costs) when they are probable and estimable.

2019/2020 Actions

During 2022, we recorded $7.3 million in restructuring charges, net of reversals, related to our 2019/2020 actions.
These charges consisted of severance and related costs for the reduction of approximately 830 positions and asset
impairment charges at numerous locations across our company, reflecting actions in both our reportable segments. The
78 2022 Annual Report | Avery Dennison Corporation

actions in our Materials Group reportable segment were primarily associated with consolidations of its operations in North
America and its graphics business in Europe, in part in response to COVID-19. The actions in our Solutions Group
reportable segment were primarily related to global headcount and footprint reduction, with some actions accelerated
and expanded in response to COVID-19. During 2021, we recorded $13.3 million in restructuring charges, net of
reversals, related to our 2019/2020 actions. These charges consisted of severance and related costs for the reduction of
approximately 360 positions, as well as asset impairment charges. Our activities related to our 2019/2020 actions began
in the fourth quarter of fiscal year 2019 and continued through fiscal year 2022.

Accruals for severance and related costs and lease cancellation costs were included in “Other current liabilities” in
the 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 Consolidated
Statements of Income.

During 2022, restructuring charges and payments were as follows:

(In millions)
2019/2020 Actions

Severance and related costs

Asset impairment charges

Total

Accrual at
January 1,
2022

Charges,
Net of
Reversals

Cash
Payments

Non-cash
Impairment

Foreign
Currency
Translation

Accrual at
December 31,
2022

$

$

11.5 $

7.2 $

(13.4) $

—

.1

—

11.5 $

7.3 $

(13.4) $

— $

(.1)

(.1) $

(.2) $

—

(.2) $

5.1

—

5.1

During 2021, restructuring charges and payments were as follows:

(In millions)
2019/2020 Actions

Accrual at
January 2,
2021

Charges,
Net of
Reversals

Cash
Payments

Non-cash
Impairment

Foreign
Currency
Translation

Accrual at
January 1,
2022

Severance and related costs

$

28.3 $

10.3 $

(26.2) $

Asset impairment charges

Lease cancellation costs

2018/2019 Actions

Lease cancellation costs

—

—

.3

2.4

.6

—

—

(.6)

(.3)

— $

(2.4)

—

—

(.9) $

11.5

—

—

—

—

—

—

Total

$

28.6 $

13.3 $

(27.1) $

(2.4) $

(.9) $

11.5

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

(In millions)
Restructuring charges by reportable segment and Corporate

Materials Group

Solutions Group

Corporate

Total

2022

2021

2020

$

$

(1.0) $

5.0 $

7.9

.8

7.6

1.0

7.7 $

13.6 $

36.3

18.7

.3

55.3

Avery Dennison Corporation | 2022 Annual Report 79

NOTE 14. TAXES BASED ON INCOME

Taxes based on income were as follows:

(In millions)
Current:

U.S. federal tax

State taxes

International taxes

Deferred:

U.S. federal tax

State taxes

International taxes

2022

2021

2020

$

29.4 $

8.8

177.7

215.9

5.8

.9

19.6

26.3

7.3 $

5.3

229.9

242.5

(1.1)

(5.3)

12.5

6.1

1.1

1.9

168.5

171.5

5.0

1.6

(.4)

6.2

Provision for income taxes

$

242.2 $

248.6 $

177.7

The principal items accounting for the difference between taxes computed at U.S. federal statutory rate and taxes

recorded were as follows:

(In millions)
Tax provision computed at U.S. federal statutory rate(1)

$

2022
209.9 $

2021
208.5 $

2020
154.8

Increase (decrease) in taxes resulting from:

State taxes, net of federal tax benefit

Foreign earnings taxed at different rates(1)

GILTI high-tax exclusion election, net(2)

Valuation allowance

U.S. federal research and development tax credits

Tax contingencies and audit settlements

Other items, net

Provision for income taxes

11.8

55.3

(11.9)

(5.0)

(6.5)

(4.3)

(7.1)

4.5

75.4

(22.8)

(4.8)

(6.2)

3.9

(9.9)

6.9

51.4

(12.5)

(3.3)

(6.2)

(5.5)

(7.9)

$

242.2 $

248.6 $

177.7

(1)

(2)

All years included certain U.S. international tax provisions and foreign earnings taxed in the U.S., net of credits.
In 2022, we recognized $11.9 million of benefit related to a GILTI exclusion election made on our 2021 U.S. federal tax return. In 2021, we recognized
$14.1 million and $8.7 million of benefit related to GILTI exclusion elections made on our amended 2018 and originally filed 2020 U.S. federal tax
returns, respectively. In 2020, we recognized $12.5 million of benefit related to a GILTI exclusion election we planned to make on our amended 2019
U.S. federal tax return.

Income before taxes from our U.S. and international operations was as follows:

(In millions)
U.S.

International

Income before taxes

$

$

2022
232.4 $

766.9

999.3 $

2021
88.0 $

904.6

992.6 $

2020
123.8

613.5

737.3

Our effective tax rate was 24.2%, 25.0% and 24.1% for fiscal years 2022, 2021 and 2020, respectively.

Our 2022 provision for income taxes included (i) $18.8 million of net tax charge related to the tax on GILTI of our
foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the
including
benefit from foreign-derived intangible income (“FDII”); (ii) $17.3 million of return-to-provision benefit,
$11.9 million related to a GILTI exclusion election and a lower net tax charge from other international inclusion items
upon completion of our 2021 U.S. federal tax return, (iii) $4.3 million of net tax benefit primarily from decreases in certain
tax reserves, including interest and penalties, as a result of closing tax years and the settlement of certain foreign tax
80 2022 Annual Report | Avery Dennison Corporation

audits; and (iv) a return-to-provision benefit from the interest portion of the Brazil indirect tax credit reclaimed in 2021
being adjudicated as non-taxable, pursuant to a Brazilian court decision.

In 2020, the U.S. Department of Treasury issued final regulations that provide certain U.S. taxpayers with an
annual election to exclude foreign income subject to a high effective tax rate from their GILTI inclusions. We have not yet
determined whether to make the election for tax year 2022. We continue to evaluate the impact of the election and
currently anticipate that the benefit from making this election on our 2022 U.S. federal tax return may be significant.

Our 2021 provision for income taxes included (i) $28.5 million of net tax charge related to the tax on GILTI of our
foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the
benefit from FDII; (ii) $14.1 million of return-to-provision benefit related to a GILTI exclusion election made on our
amended 2018 U.S. federal tax return; and (iii) $11.3 million of return-to-provision benefit, including $8.7 million related
to a GILTI exclusion election and a higher FDII deduction reflected on our 2020 U.S. federal tax return. Our 2021 provision
for income taxes also included (i) net tax benefit primarily from the release of valuation allowance against certain deferred
tax assets in the U.S. and foreign jurisdictions; (ii) net tax benefit primarily from decreases in certain tax reserves,
including interest and penalties, as a result of closing tax years; and (iii) net tax charges related to the tax effects of
outcomes of certain legal proceedings.

Our 2020 provision for income taxes included (i) $22.1 million of net tax charge related to the tax on GILTI of our
foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the
benefit from FDII; (ii) a $12.5 million of return-to-provision benefit related to a GILTI exclusion election we planned to
make on our 2019 amended U.S. federal tax return; and (iii) net tax benefit primarily from decreases in certain tax
reserves, including interest and penalties, as a result of closing tax years, partially offset by increases in reserves from
changes in judgment and additional interest and penalty accruals.

Deferred Taxes

Deferred taxes reflect the temporary differences between the amounts at which assets and liabilities are recorded
for financial reporting purposes and the amounts utilized for tax purposes. The primary components of the temporary
differences that gave rise to our deferred tax assets and liabilities were as follows:

(In millions)
Accrued expenses not currently deductible

Net operating loss carryforwards

Tax credit carryforwards

Capitalized research expenses

Stock-based compensation

Pension and other postretirement benefits

Inventory reserve

Lease liabilities

Other assets

Valuation allowance

Total deferred tax assets(1)

Depreciation and amortization

Repatriation accrual

Foreign operating loss recapture

Lease assets

Total deferred tax liabilities(1)

Total net deferred tax assets (liabilities)

$

2022
32.3 $

137.2

9.7

38.6

15.4

31.5

15.6

33.2

21.3

(59.4)

275.4

(296.6)

(12.0)

(3.2)

(33.8)

(345.6)

$

(70.2) $

2021
34.6

154.4

34.6

23.7

13.6

38.8

14.7

42.5

25.3

(70.1)

312.1

(292.6)

(16.2)

(3.4)

(43.8)

(356.0)

(43.9)

(1)

Reflect gross amounts before jurisdictional netting of deferred tax assets and liabilities.

We assess the available positive and negative evidence to estimate if sufficient future taxable income is expected
to be generated to use existing deferred tax assets. On the basis of our assessment, we record valuation allowances only
Avery Dennison Corporation | 2022 Annual Report 81

with respect to the portion of the deferred tax asset that is not more-likely-than-not to be realized. Our assessment of the
future realizability of our deferred tax assets relies heavily on our forecasted earnings in certain jurisdictions determined
by the manner in which we operate our business and the relevant carryforward periods. Any changes to our operations
may affect our assessment of deferred tax assets considered realizable if the positive evidence no longer outweighs the
negative evidence.

Net operating loss carryforwards of foreign subsidiaries at December 31, 2022 and January 1, 2022 were
$463 million and $508 million, respectively. Tax credit carryforwards of both domestic and foreign subsidiaries at
December 31, 2022 and January 1, 2022 totaled $10 million and $35 million, respectively. If unused, foreign net
operating losses and tax credit carryforwards will expire as follows:

(In millions)

Year of Expiry

2023

2024

2025

2026

2027

2028-2040

Indefinite life/no expiry

Total

Net Operating
Losses(1)

Tax Credits

$

4.5 $

2.6

2.9

7.2

4.1

13.7

427.7

$

462.7 $

.3

.2

.2

.3

.8

5.9

2.0

9.7

(1)

Net operating losses are presented before tax effects and valuation allowance.

Certain indefinite-lived foreign net operating losses may require decades to be fully utilized under our current

business model.

At December 31, 2022, we had net operating loss carryforwards in certain states of $425 million before tax
effects. Based on our estimates of future state taxable income, it is more-likely-than-not that the majority of these
carryforwards will not be realized before they expire. Accordingly, a valuation allowance has been recorded on
$380 million of these carryforwards.

As of December 31, 2022, our provision for income taxes did not materially benefit from applicable tax holidays in

foreign jurisdictions.

Unrecognized Tax Benefits

As of December 31, 2022, our unrecognized tax benefits totaled $70 million, $65 million of which, if recognized,
would reduce our annual effective income tax rate. As of January 1, 2022, our unrecognized tax benefits totaled
$74 million, $68 million of which, if recognized, would reduce our annual effective income tax rate.

Where applicable, we accrue potential interest and penalties related to unrecognized tax benefits in income tax
expense. The interest and penalties we recognized during fiscal years 2022, 2021 and 2020 were not material,
individually or in aggregate, to the Consolidated Statements of Income. We have accrued balances of $16 million and
$19 million for interest and penalties, net of tax benefit, in the Consolidated Balance Sheets at December 31, 2022 and
January 1, 2022, respectively.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is set forth below.

(In millions)
Balance at beginning of year

Additions for tax positions of current year

Additions (reductions) for tax positions of prior years, net

Settlements with tax authorities

Expirations of statutes of limitations

Changes due to translation of foreign currencies

Balance at end of year

82 2022 Annual Report | Avery Dennison Corporation

2022
74.0 $

$

6.6

(2.2)

(1.1)

(4.8)

(3.0)

2021
72.0

9.1

1.2

(1.1)

(5.2)

(2.0)

$

69.5 $

74.0

It is reasonably possible that, during the next 12 months, we may realize a decrease in our uncertain tax positions,

including interest and penalties, of approximately $6 million, primarily as a result of closing tax years.

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 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 amounts reflected in our tax
provision for income taxes and the related liabilities. To date, we and our U.S. subsidiaries have completed the IRS’
Compliance Assurance Process through 2018. With limited exceptions, we are no longer subject to income tax
examinations by tax authorities for years prior to 2010.

NOTE 15. SEGMENT AND DISAGGREGATED REVENUE INFORMATION

Segment Reporting

We have the following reportable segments:

(cid:129) Materials Group – manufactures and sells pressure-sensitive label materials, films for graphic and reflective
products, performance tapes and other adhesive products for industrial, medical and other applications, as
well as fastener solutions.

(cid:129) Solutions Group – designs, manufactures and sells a wide variety of branding and information solutions,
including brand and price tickets, tags and labels (including RFID inlays), and related services, supplies and
equipment.

Intersegment sales are recorded at or near market prices and are eliminated in determining consolidated sales. We
evaluate our performance based on income from operations before interest expense and taxes. Corporate expense is
excluded from the computation of income from operations for the segments.

We do not disclose total assets by reportable segment since we neither generate nor review that information
internally. As our reporting structure is neither organized nor reviewed internally by country, results by individual country
are not provided.

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.

(In millions)
Net sales to unaffiliated customers

Materials Group(1):

U.S.

Europe

Asia

Latin America

Other international

Total Materials Group

Solutions Group:

Apparel

Identification Solutions and Vestcom

Total Solutions Group

2022

2021

2020

$

1,892.1 $

1,736.4 $

2,396.2

1,390.3

470.1

346.4

2,261.1

1,471.1

408.6

329.3

1,504.5

1,952.8

1,245.3

350.9

287.1

6,495.1

6,206.5

5,340.6

1,851.2

693.0

2,544.2

1,839.1

362.7

2,201.8

1,432.3

198.6

1,630.9

6,971.5

Net sales to unaffiliated customers

$

9,039.3 $

8,408.3 $

(1)

Previously reported segment results have been recast to reflect our new operating structure.

Avery Dennison Corporation | 2022 Annual Report 83

Revenue from our Materials Group reportable segment by product group is shown below.

(In millions)
Net sales to unaffiliated customers

Materials Group:

Labels, graphics and reflectives

Tapes and adhesives

Other

Total Materials Group

2022

2021

2020

$

$

5,725.7 $

5,430.4 $

4,715.1

696.3

73.1

703.4

72.7

565.9

59.6

6,495.1 $

6,206.5 $

5,340.6

Our total company revenue by geographic area is shown below. Revenue is attributed to geographic areas based

on the location from which products are shipped.

(In millions)
Net sales to unaffiliated customers

U.S.

Europe

Asia

Latin America

Other international

2022

2021

2020

$

2,565.9 $

2,065.2 $

2,683.6

2,817.2

605.7

366.9

2,541.4

2,914.5

537.6

349.6

1,683.6

2,164.7

2,378.5

440.3

304.4

Net sales to unaffiliated customers

$

9,039.3 $

8,408.3 $

6,971.5

Net sales to unaffiliated customers in Asia included sales in China (including Hong Kong) of $1.50 billion in 2022,

$1.68 billion in 2021 and $1.31 billion in 2020.

No single customer represented 10% or more of our net sales in year-end 2022, 2021 or 2020. During 2022,
2021 and 2020, our ten largest customers by net sales in the aggregate represented approximately 16%, 16% and 17%
of our net sales, respectively.

84 2022 Annual Report | Avery Dennison Corporation

Additional Segment Information

Additional financial information by reportable segment and Corporate is shown below.

(In millions)
Intersegment sales

Materials Group(1)

Solutions Group

Intersegment sales

Income before taxes

Materials Group(1)

Solutions Group

Corporate expense

Interest expense

Other non-operating expense (income), net

Income before taxes

Capital expenditures(2)(3)

Materials Group(1)

Solutions Group

Capital expenditures

Depreciation and amortization expense(2)

Materials Group(1)

Solutions Group

Depreciation and amortization expense

Other expense (income), net by reportable segment

Materials Group(1)

Solutions Group

Corporate

Other expense (income), net

2022

2021

2020

$

$

$

$

$

$

$

$

$

$

137.1 $

37.4

174.5 $

859.3 $

302.3

(87.6)

(84.1)

9.4

105.8 $

37.3

143.1 $

883.3 $

257.2

(81.8)

(70.2)

4.1

999.3 $

992.6 $

153.5 $

144.0

297.5 $

135.8 $

154.9

290.7 $

(13.4)$

7.8

5.0

(.6)$

170.3 $

96.3

266.6 $

141.9 $

102.2

244.1 $

(25.7)$

36.6

(5.3)

5.6 $

81.9

27.5

109.4

747.0

144.7

(82.5)

(70.0)

(1.9)

737.3

104.6

101.6

206.2

133.7

71.6

205.3

30.6

22.7

.3

53.6

(1)

(2)

(3)

Previously reported segment results have been recast to reflect our new operating structure.
Corporate capital expenditures and depreciation and amortization expense are allocated to the reportable segments based on their percentage of
consolidated net sales.
Capital expenditures for property, plant and equipment included accruals.

Avery Dennison Corporation | 2022 Annual Report 85

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

(In millions)
Other expense (income), net by type

Restructuring charges:

Severance and related costs

Asset impairment charges and lease cancellation costs

Other items:

Transaction and related costs

Outcomes of legal proceedings, net(1)

Gain on venture investments, net

(Gain) loss on sales of assets, net

Gain on sale of product line

Other expense (income), net

2022

2021

2020

$

$

7.6 $

.1

.3

6.3

(13.5)

(1.4)

—

(.6)$

10.5 $

3.1

20.9

(.4)

(23.0)

.2

(5.7)

5.6 $

49.1

6.2

4.2

—

(5.4)

(.5)

—

53.6

(1)

Amount for 2021 included an indirect tax credit based on a Brazilian Federal Supreme Court ruling in the amount of $29.1 million, partially offset by
a contingent liability related to a patent infringement lawsuit in the amount of $26.6 million. Refer to Note 8, “Contingencies” for more information
regarding the patent infringement lawsuit.

Property, plant and equipment, net, in our U.S. and international operations were as follows:

(In millions)
Property, plant and equipment, net

U.S.

International

Property, plant and equipment, net

2022

2021

2020

$

$

589.0 $

951.2

524.0 $

953.7

403.1

940.6

1,540.2 $

1,477.7 $

1,343.7

Property, plant and equipment, net, located in China (including Hong Kong) was approximately $259 million in

2022, $290 million in 2021 and $297 million in 2020.

NOTE 16. SUPPLEMENTAL FINANCIAL INFORMATION

Inventories

Inventories at year-end were as follows:

(In millions)
Raw materials

Work-in-progress

Finished goods

Inventories

2022
457.6 $

255.1

297.2

1,009.9 $

$

$

2021
393.6

233.1

280.5

907.2

86 2022 Annual Report | Avery Dennison Corporation

Property, Plant and Equipment, Net

Major classes of property, plant and equipment, stated at cost, at year-end were as follows:

(In millions)
Land

Buildings and improvements

Machinery and equipment

Construction-in-progress

Property, plant and equipment

Accumulated depreciation

Property, plant and equipment, net

Software

Capitalized software costs at year-end were as follows:

(In millions)
Cost

Accumulated amortization

Software, net

$

2022
29.3 $

781.0

2,667.8

269.6

3,747.7

2021
28.6

777.6

2,582.2

237.8

3,626.2

(2,207.5)

(2,148.5)

$

1,540.2 $

1,477.7

2022
390.6 $

(282.3)

108.3 $

2021
403.9

(280.6)

123.3

$

$

Software amortization expense was $29.5 million in 2022, $30.1 million in 2021 and $29.0 million in 2020.

Allowance for Credit Losses

Given the short-term nature of trade receivables, our allowance for credit losses is based on the financial condition
of customers, the aging of receivable balances, our historical collections experience, and current and expected future
macroeconomic and market conditions, including as a result of COVID-19. Balances are written off in the period in which
they are determined to be uncollectible.

The activity related to our allowance for credit losses was as follows:

(In millions)
Balance at beginning of year

Provision for (reversal of) credit losses

Amounts written off

Other, including foreign currency translation

Balance at end of year

$

$

2022
33.0 $

6.9

(4.3)

(1.2)

34.4 $

2021
44.6

(4.7)

(7.7)

.8

33.0

The provision for credit losses was $20.3 million in 2020 and reflected impacts on customers as a result of

COVID-19.

Research and Development

Research and development expense, which is included in “Marketing, general and administrative expense” in the

Consolidated Statements of Income, was as follows:

(In millions)
Research and development expense

$

2022
136.1 $

2021
136.6 $

2020
112.8

Avery Dennison Corporation | 2022 Annual Report 87

Supplemental Cash Flow Information

Cash paid for interest and income taxes was as follows:

(In millions)
Interest

Income taxes, net of refunds

Foreign Currency Effects

$

2022
80.9 $

204.8

2021
62.8 $

253.4

2020
69.6

203.4

Gains and losses resulting from foreign currency transactions are included in income in the period incurred.
Transactions in foreign currencies (including receivables, payables and loans denominated in currencies other than the
functional currency), including hedging impacts, were not material in 2022, 2021 or 2020.

Deferred Revenue

Deferred revenue primarily relates to constrained variable consideration on supply agreements for sales of
products, as well as to payments received in advance of performance under a contract. Deferred revenue is recognized as
revenue as or when we perform under a contract.

The following table shows the amounts and balance sheet locations of deferred revenue as of December 31, 2022

and January 1, 2022:

(In millions)
Other current liabilities

Long-term retirement benefits and other liabilities

Total deferred revenue

December 31, 2022 January 1, 2022
24.7
22.2 $

$

2.1

$

24.3 $

1.9

26.6

Revenue recognized from amounts included in deferred revenue as of January 1, 2022 was $23.5 million in 2022.
Revenue recognized from amounts included in deferred revenue as of January 2, 2021 was $18.4 million in 2021.
Revenue recognized from amounts included in deferred revenue as of December 28, 2019 was $12.0 million in 2020.
This revenue was included in “Net sales” in the Consolidated Statements of Income.

88 2022 Annual Report | Avery Dennison Corporation

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

Item 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were effective in providing reasonable
assurance that information is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our
Chief Executive Officer and our Chief Financial Officer as appropriate, to allow for timely decisions regarding required
disclosure.

Management’s Report on Internal Control Over Financial Reporting. We are responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the
Exchange Act). Under the supervision and with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based upon the framework in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the Report of Independent
Registered Public Accounting Firm contained in Item 8 of this Report.

Changes in Internal Control over Financial Reporting. There have been 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.

Item 9B.

OTHER INFORMATION

None.

Item 9C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

Avery Dennison Corporation | 2022 Annual Report 89

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning directors and corporate governance required by this Item is incorporated herein by
reference from the definitive proxy statement for our Annual Meeting of Stockholders to be held on April 27, 2023 (our
“2023 Proxy Statement”), which will be filed with the SEC pursuant to Regulation 14A within 120 days of the end of the
fiscal year covered by this report. The information concerning executive officers required by this Item appears, in part, as
referenced below. If applicable,
information concerning any late filings under Section 16(a) of the Exchange Act is
incorporated by reference from our 2023 Proxy Statement.

The information required by this Item concerning our Audit and Finance Committee is incorporated by reference

from our 2023 Proxy Statement.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS(1)

Name and Position

Mitchell R. Butier

Chairman and Chief Executive Officer

Age
51

Executive Officer
Since
March 2007

Former Positions within Past Five Years/
Officer Positions with Avery Dennison

2019-2022

Chairman, President and Chief Executive
Officer

2016-2019

President and Chief Executive Officer

2015-2016

President and Chief Operating Officer

2014-2015

2010-2014

2007-2010

President, Chief Operating Officer and Chief
Financial Officer

Senior Vice President and Chief Financial
Officer

Vice President, Global Finance and Chief
Accounting Officer

Deon Stander

54

August 2016

2015-2022

Vice President and General Manager, RBIS

President and Chief Operating Officer

2013-2015

2010-2012

Vice President and General Manager, Global
Commercial and Innovation, RBIS

Vice President and General Manager, Global
Commercial, RBIS

Gregory S. Lovins

Senior Vice President and Chief
Financial Officer

50

March 2017

2017

Vice President and Interim Chief Financial
Officer

2016-2017

Vice President and Treasurer

2011-2016

Vice President, Global Finance, Materials
Group

Deena Baker-Nel

Senior Vice President and Chief
Human Resources Officer

52

September 2020

2020-2022

Vice President and Chief Human Resources
Officer

2018-2020

Vice President, Human Resources, LGM

2015-2018

Vice President, Human Resources, RBIS

Lori J. Bondar

62

June 2010

2010-2020

Vice President, Controller and Chief
Accounting Officer

Vice President, Controller, Treasurer
and Chief Accounting Officer

Nicholas Colisto

Senior Vice President and Chief
Information Officer

2008-2010

Vice President and Controller

56

September 2020

2018-2022

Vice President and Chief Information Officer

2012-2018

Senior Vice President and Chief Information
Officer, Xylem Inc.

Ignacio Walker

46

September 2020

2020-2022

Vice President and Chief Legal Officer

Senior Vice President and Chief Legal
Officer

2020

2018-2019

2013-2017

Vice President and Assistant General
Counsel, Americas

Vice President and Assistant General
Counsel

Vice President and Assistant General
Counsel, RBIS

(1)

Executive officers are generally elected on the date of our annual stockholder meeting to serve a one-year term and until their successors are duly
elected and qualified.

90 2022 Annual Report | Avery Dennison Corporation

Item 11.

EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from our 2023 Proxy Statement.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference from our 2023 Proxy Statement.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference from our 2023 Proxy Statement.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from our 2023 Proxy Statement.

Avery Dennison Corporation | 2022 Annual Report 91

Item 15.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements, Financial Statement Schedule and Exhibits

PART IV

(1) Financial statements filed as part of this report are listed on the accompanying Index to Financial

Statements.

(2) All financial statement schedules are omitted since the required information is not present or is not
present in amounts sufficient to require submission of the schedule, or because the information
required is included in the consolidated financial statements and notes thereto.

(3) Exhibits filed as a part of this report are listed on the accompanying Exhibit Index. Each management
contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K is
identified as such on the Exhibit Index.

(b) The exhibits required to be filed by Item 601 of Regulation S-K are set forth on the accompanying Exhibit

Index.

AVERY DENNISON CORPORATION

EXHIBIT INDEX

For the Year Ended December 31, 2022

Exhibit No.

Exhibit Name

Originally
Filed as
Exhibit No.

Filing(1)

2.1

3.1(i)

Agreement and Plan of Merger, dated as
of July 27, 2021, by and among
Registrant, CB Velocity Holdings, LLC,
Lobo Merger Sub, LLC and Charlesbank
Equity Fund VIII, Limited Partnership, as
unitholder representative

Amended and Restated Certificate of
Incorporation, as filed on April 28, 2011
with the Office of Delaware Secretary of
State

2.1

3.1

Current Report on Form 8-K, filed July 30,
2021

Current Report on Form 8-K, filed April 29,
2011

3.1(ii)

Amended and Restated Bylaws, effective
as of February 24, 2022

3.1(ii)

Current Report on Form 8-K, filed
February 23, 2022

4.1

4.2

4.3

4.4

Indenture, dated as of March 15, 1991,
between Registrant and Security Pacific
National Bank, as Trustee (the “1991
Indenture”)

First Supplemental Indenture, dated as of
March 16, 1993, between Registrant and
BankAmerica National Trust Company, as
successor Trustee (the “Supplemental
Indenture”)

Officers’ Certificate establishing a series of
Securities entitled “Medium-Term Notes,
Series C” under the 1991 Indenture, as
amended by the Supplemental Indenture

Indenture, dated as of July 3, 2001,
between Registrant and Chase Manhattan
Bank and Trust Company, National
Association, as trustee (the “2001
Indenture”)

4.1

4.4

4.1

4.1

92 2022 Annual Report | Avery Dennison Corporation

Registration Statement on Form S-3 (File
No. 33-39491), filed March 19, 1991

Registration Statement on Form S-3 (File
No. 33-59642), filed March 17, 1993

Current Report on Form 8-K, filed May 12,
1995

Registration Statement on Form S-3 (File
No. 333-64558), filed July 3, 2001

Exhibit No.
4.5

Exhibit Name
Officers’ Certificate establishing Securities
entitled “6.000% Notes due 2033” under
the 2001 Indenture

4.6

4.7

4.8

6.000% Notes Due 2033

Indenture, dated as of November 20,
2007, between Registrant and Bank of
New York

Third Supplemental Indenture, dated as of
April 8, 2013, between Registrant and
Bank of NY

4.9

Form of 3.35% Senior Notes due 2023

4.10

4.11

4.12

4.13

4.14

Fourth Supplemental Indenture, dated as
of March 3, 2017, between Registrant and
The Bank of New York Mellon Trust
Company, N.A. (“BNY Mellon”) as Trustee
(including Form of 1.250% Senior Notes
due 2025 on Exhibit A thereto)

Fifth Supplemental Indenture, dated as of
December 6, 2018, between Registrant
and BNY Mellon, as Trustee (including
Form of 4.875% Senior Notes due 2028
on Exhibit A thereto)

Sixth Supplemental Indenture, dated as of
March 11, 2020, between Registrant and
BNY Mellon, as Trustee (including Form of
2.650% Senior Notes due 2030 on Exhibit
A thereto)

Seventh Supplemental Indenture, dated as
of August 18, 2021, between Registrant
and BNY Mellon, as Trustee (including
Form of 0.850% Senior Notes due 2024
on Exhibit A thereto)

Eighth Supplemental Indenture, dated as
of August 18, 2021, between Registrant
and BNY Mellon, as Trustee (including
Form of 2.250% Senior Notes due 2032
on Exhibit A thereto)

4.15

Description of Securities

10.1

Amendment No. 2 to Credit Agreement,
dated as of January 24, 2023, by and
among Avery Dennison Corporation, a
Delaware corporation, as the borrower,
Bank of America, N.A., as the
administrative agent, and the other
lenders party thereto.

Originally
Filed as
Exhibit No.
4.2

4.4

4.2

4.2

4.2

4.2

4.2

4.2

4.2

4.3

Filing(1)

Current Report on Form 8-K, filed
January 16, 2003

Current Report on Form 8-K, filed
January 16, 2003

Current Report on Form 8-K, filed
November 20, 2007

Current Report on Form 8-K, filed April 8,
2013

Current Report on Form 8-K, filed April 8,
2013

Current Report on Form 8-K, filed March 3,
2017

Current Report on Form 8-K, filed
December 6, 2018

Current Report on Form 8-K, filed
March 11, 2020

Current Report on Form 8-K filed on
August 18, 2021

Current Report on Form 8-K filed on
August 18, 2021

4.15

10.1

2020 Annual Report on Form 10-K, filed
February 25, 2021

Current Report on Form 8-K, filed
January 30, 2023

Avery Dennison Corporation | 2022 Annual Report 93

Exhibit No.
10.2*

10.3*

Exhibit Name

Amended and Restated Supplemental
Executive Retirement Plan (“SERP”)

Complete Restatement and Amendment
of Executive Variable Deferred
Compensation Plan (“EVDCP”)

Originally
Filed as
Exhibit No.
10.11.1

Filing(1)

Quarterly Report on Form 10-Q, filed
August 12, 2009

10.16

1994 Annual Report on Form 10-K, filed
March 30, 1995

10.4*

Amendment No. 1 to EVDCP

10.16.1

1999 Annual Report on Form 10-K, filed
March 30, 2000

10.5*

10.6*

Amended and Restated 2005 Directors
Variable Deferred Compensation Plan

10.18.2

Quarterly Report on Form 10-Q, filed
May 10, 2011

Amended and Restated Stock Option and
Incentive Plan (“Equity Plan”)

A

2012 Proxy Statement on Schedule 14A,
filed March 9, 2012

10.7*

First Amendment to Equity Plan

10.20

10.8*

2017 Incentive Award Plan (“2017 Plan”)

B

10.9*

10.10*

Amended and Restated Annual Incentive
Plan

Complete Restatement and Amendment
of Executive Deferred Retirement Plan
(“EDRP”)

10.1

10.28

10.11*

Amendment No. 1 to EDRP

10.28.1

10.12*

Amendment No. 2 to EDRP

10.28.2

2014 Annual Report on Form 10-K, filed
February 25, 2015

2017 Proxy Statement on Schedule 14A,
filed March 10, 2017

Quarterly Report on Form 10-Q, filed
May 1, 2020

1994 Annual Report on Form 10-K, filed
March 30, 1995

1999 Annual Report on Form 10-K, filed
March 30, 2000

2001 Annual Report on Form 10-K, filed
March 4, 2002

10.13*

10.14*

10.15*

2005 Executive Variable Deferred
Retirement Plan, amended and restated

Amended and Restated Key Executive
Change of Control Severance Plan

Amended and Restated Executive
Severance Plan

10.1

10.4

10.3

Quarterly Report on Form 10-Q, filed
May 7, 2013

Quarterly Report on Form 10-Q, filed
May 1, 2020

Quarterly Report on Form 10-Q, filed
May 1, 2020

10.16*

Form of Executive Severance Agreement

10.19

10.17*

Amended and Restated Long-Term
Incentive Unit Plan (“LTI Unit Plan”)

10.18*

Form of Restricted Stock Unit Agreement
under Equity Plan
94 2022 Annual Report | Avery Dennison Corporation

10.2

10.38

2020 Annual Report on Form 10-K, filed
February 25, 2021

Quarterly Report on Form 10-Q, filed
May 1, 2020

2013 Annual Report on Form 10-K, filed
February 26, 2014

Exhibit No.
10.19*

Exhibit Name

Form of Performance Unit Agreement
under Equity Plan

Originally
Filed as
Exhibit No.
10.39

10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

21†

23†

24†

31.1†

31.2†

32.1††

Form of Market-Leveraged Stock Unit
Agreement under Equity Plan

Form of Long-Term Incentive Unit
Agreement under LTI Unit Plan

Form of Director Restricted Stock Unit
Agreement under 2017 Plan

Form of Employee Market-Leveraged
Stock Unit Agreement under 2017 Plan

Form of Employee Performance Unit
Agreement under 2017 Plan

Form of Employee Restricted Stock Unit
Agreement under 2017 Plan

Form of Employee Non-Qualified Stock
Option Agreement under 2017 Plan

Offer Letter to Mitchell Butier

Offer Letter to Gregory Lovins

Offer Letter to Deena Baker-Nel

Offer Letter to Ignacio Walker

Offer Letter to Deon Stander

List of Subsidiaries

Consent of PricewaterhouseCoopers LLP,
Independent Registered Public
Accounting Firm

Power of Attorney (see Signatures –
Power of Attorney)

Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002

Filing(1)

2013 Annual Report on Form 10-K, filed
February 26, 2014

2013 Annual Report on Form 10-K, filed
February 26, 2014

2013 Annual Report on Form 10-K, filed
February 26, 2014

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q, filed
May 3, 2016

Quarterly Report on Form 10-Q, filed
August 1, 2017

Quarterly Report on Form 10-Q,
filed May 3, 2022

Quarterly Report on Form 10-Q,
filed May 3, 2022

Quarterly Report on Form 10-Q,
filed May 3, 2022

N/A

N/A

10.40

10.41

10.2

10.3

10.4

10.5

10.6

10.2

10.1

10.1

10.2

10.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Avery Dennison Corporation | 2022 Annual Report 95

Filing(1)

Exhibit No.
32.2††

101.INS†††

Exhibit Name

Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002

Inline XBRL Instance Filing – the instance
document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline XBRL
document

101.SCH†††

Inline XBRL Extension Schema Filing

101.CAL†††

101.DEF†††

101.LAB†††

101.PRE†††

104†††

Inline XBRL Extension Calculation
Linkbase Filing

Inline XBRL Extension Definition Linkbase
Filing

Inline XBRL Extension Label Linkbase
Filing

Inline XBRL Extension Presentation
Linkbase Filing

Inline XBRL for the cover page of this
Annual Report on Form 10-K, included as
part of the Exhibit 101 inline XBRL
document set

Originally
Filed as
Exhibit No.
N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

(1)

*

†
††

†††

Unless otherwise noted, the File Number for all filings is File No. 1-7685.
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K
pursuant to Item 15(b) of Form 10-K.
Filed herewith.
This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being
filed for purposes of Section 18 of the Exchange Act and is not to be incorporated by reference into any filing of
the registrant, whether made before or after the date hereof, regardless of any general incorporation language in
such filing.
Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are
deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act, are deemed not filed for purposes of Section 18 of the Exchange Act and otherwise are not subject
to liability under those sections.

Item 16.

FORM 10-K SUMMARY

Not applicable.

96 2022 Annual Report | Avery Dennison Corporation

Pursuant to the requirements of Section 13 or 15(d) 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.

SIGNATURES

AVERY DENNISON CORPORATION

By:

/s/ Gregory S. Lovins

Gregory S. Lovins
Senior Vice President and Chief Financial Officer

Dated: February 22, 2023

Avery Dennison Corporation | 2022 Annual Report 97

POWER OF ATTORNEY

Each person whose signature appears below does hereby constitute and appoint Gregory S. Lovins and Ignacio J.
Walker, and each of them, with full power of substitution, his or her true and lawful attorney-in-fact to act for him or her
in any and all capacities, to sign this Annual Report on Form 10-K and any or all amendments or supplements thereto,
and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in order to effectuate the same as fully, to all
intents and purposes, as he or she could do in person, hereby ratifying and confirming all that said attorneys-in-fact or
substitutes, or any of them, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the Registrant and in the capacities and as of the dates indicated.

Signature

Title

Date

/s/ Mitchell R. Butier

Chairman and Chief Executive Officer

February 22, 2023

Mitchell R. Butier

/s/ Gregory S. Lovins

Gregory S. Lovins

/s/ Lori J. Bondar

Lori J. Bondar

/s/ Bradley A. Alford

Bradley A. Alford

/s/ Anthony K. Anderson

Anthony K. Anderson

/s/ Ken C. Hicks

Ken C. Hicks

/s/ Andres A. Lopez

Andres A. Lopez

/s/ Patrick T. Siewert

Patrick T. Siewert

/s/ Julia A. Stewart

Julia A. Stewart

/s/ Martha N. Sullivan

Martha N. Sullivan

/s/ William R. Wagner

William R. Wagner

Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)

Vice President, Controller, Treasurer and
Chief Accounting Officer
(Principal Accounting Officer)

February 22, 2023

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

Director

February 22, 2023

98 2022 Annual Report | Avery Dennison Corporation