SUPPLEMENTAL FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2025

Inventories

Inventories at year-end were as follows:


(In millions)	2025		2024
Raw materials	$	387.6	$	435.0
Work-in-progress	242.5		224.9
Finished goods	345.7		318.2
Inventories	$	975.8	$	978.1

Property, Plant and Equipment, Net

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


(In millions)	2025		2024
Land	$	37.4	$	35.1
Buildings and improvements	903.5		852.3
Machinery and equipment	3,192.6		2,903.4
Construction-in-progress	138.4		202.7
Property, plant and equipment	4,271.9		3,993.5
Accumulated depreciation	(2,664.2)		(2,406.8)
Property, plant and equipment, net	$	1,607.7	$	1,586.7

Software

Capitalized software costs at year-end were as follows:


(In millions)	2025		2024
Cost	$	396.3	$	360.0
Accumulated amortization	(278.7)		(249.3)
Software, net	$	117.6	$	110.7

Software amortization expense was $28.5 million in 2025, $25.1 million in 2024 and $23.4 million in 2023.

Cloud Computing Arrangements

Capitalized implementation costs at year-end were as follows:


(In millions)	2025		2024
Cost	$	134.4	$	97.1
Accumulated amortization	(29.7)		(17.9)
Capitalized implementation costs, net	$	104.7	$	79.2

Capitalized implementation cost amortization expense was $11.7 million in 2025, $8.0 million in 2024 and $4.5 million in 2023.

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. 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)	2025		2024
Balance at beginning of year	$	29.0	$	34.4
Provision for credit losses	3.2		4.6
Amounts written off	(5.9)		(8.9)
Other, including foreign currency translation	1.8		(1.1)
Balance at end of year	$	28.1	$	29.0

The provision for credit losses was $4.4 million in 2023.

Research and Development

Research and development expense, which was included in “Marketing, general and administrative expense” in the Consolidated Statements of Income, was as follows:


(In millions)	2025		2024		2023
Research and development expense	$	136.6	$	137.8	$	135.8

Supplemental Cash Flow Information

Cash paid for interest was as follows:


(In millions)	2025		2024		2023
Interest	$	131.3	$	111.8	$	109.9

The accrued amount of excise taxes payable on 2025 share repurchases was $4.9 million as of December 31, 2025.

Foreign Currency Effects

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 2025, 2024 or 2023.

Deferred Revenue

Deferred revenue primarily relates to constrained variable consideration on supply agreements for sales of products, as well as 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, 2025 and December 28, 2024:


(In millions)	December 31, 2025		December 28, 2024
Other current liabilities	$	16.2	$	15.5
Long-term retirement benefits and other liabilities	1.6		1.2
Total deferred revenue	$	17.8	$	16.7

Revenue recognized from amounts included in deferred revenue as of December 28, 2024 was $14.9 million in 2025. Revenue recognized from amounts included in deferred revenue as of December 30, 2023 was $17.5 million in 2024. Revenue recognized from amounts included in deferred revenue as of December 31, 2022 was $21.0 million in 2023. This revenue was included in “Net sales” in the Consolidated Statements of Income.

Supplier Finance Programs

We have agreements with third-party financial institutions to facilitate payments to suppliers. These third-party financial institutions offer voluntary supply chain finance programs that enable certain of our suppliers, at the supplier’s sole discretion, to sell our payment obligations to a financial institution on terms directly negotiated with the financial institution. Participating suppliers decide which payment obligations are sold to the financial institution and we have no economic interest in a supplier’s decision to sell these payment obligations. We make payments to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers' decisions to sell amounts under these arrangements. Amounts due under our supply chain finance programs are included in accounts payable in our Consolidated Balance Sheets and activities related to these programs are presented as operating activities in our Consolidated Statements of Cash Flows. As of December 31, 2025 and December 28, 2024, the amounts due to financial institutions for suppliers that participate in these programs were $383.8 million and $384.6 million, respectively.

The activity related to our supplier finance programs was as follows:


(In millions)	2025		2024
Balance at beginning of year	$	384.6	$	397.4
Invoices confirmed during the year	1,291.3		1,339.3
Invoices paid during the year	(1,316.6)		(1,328.9)
Other, including foreign currency translation	24.5		(23.2)
Balance at end of year	$	383.8	$	384.6

Argentine Blue Chip Swap Transactions

In 2019, the Argentine government instituted exchange controls restricting the ability of entities and individuals to exchange Argentine pesos for foreign currencies or remit foreign currency out of Argentina. Due to these restrictions, markets in Argentina use a legal trading mechanism known as the Blue Chip Swap that allows entities to transfer U.S. dollars in and out of Argentina. During 2024, we entered into Blue Chip Swap transactions that resulted in losses of approximately $10 million that we recorded in "Other expense (income), net" in our Consolidated Statements of Income. Purchases and the proceeds from sales of Argentine Blue Chip Swap securities were included in investing activities in our Consolidated Statements of Cash Flows.

Avery Dennison Corp 10-K