UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



þ	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June ~~30, 2018~~29, 2019.



¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐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 001-05224



STANLEY BLACK & DECKER, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



~~CONNECTICUT~~CT		06-0548860
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)


~~1000 STANLEY DRIVE~~ ~~NEW BRITAIN, CONNECTICUT~~		~~06053~~
~~(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)~~		~~(ZIP CODE)~~

1000 STANLEY DRIVE

NEW BRITAIN, CT06053

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE 860225-5111

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

~~(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)~~

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. Yesþ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yesþ☑ 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. (Check one):



Large ~~accelerated filer~~Accelerated Filer	þ			Accelerated ~~filer~~Filer		¨

~~Non-accelerated filer~~Non-Accelerated Filer	¨	~~(Do not check if a smaller reporting company)~~	Smaller Reporting Company		~~Smaller reporting company~~		¨☐

				Emerging ~~growth company~~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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐Noþ ☑

~~153,009,803~~151,743,308 shares of the registrant’s common stock were outstanding as of July ~~17, 2018.~~19, 2019.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

THREE AND SIX MONTHS ENDED JUNE 29, 2019 AND JUNE 30, 2018 ~~AND~~ ~~JULY 1, 2017~~

(Unaudited, Millions of Dollars, Except Per Share Amounts)


	Second Quarter						Year-to-Date						Second Quarter						Year-to-Date
	2018			2017			2018			2017			2019			2018			2019			2018
Net Sales	$	3,643.6		$	3,286.7		$	6,852.9		$	6,143.0		$	3,761.3		$	3,643.6		$	7,094.9		$	6,852.9
Costs and Expenses
Cost of sales	$	2,356.5		$	2,073.4		$	4,400.1		$	3,863.7		$	2,461.5		$	2,356.5		$	4,689.5		$	4,400.1
Selling, general and administrative	801.8			738.6			1,580.6			1,420.6			776.2			801.8			1,536.8			1,580.6
Provision for doubtful accounts	4.0			5.6			10.8			13.9			6.1			4.0			24.4			10.8
Other, net	119.3			55.3			177.3			155.8			62.2			119.3			127.6			177.3
Loss (gain) on sales of businesses	0.8			0.9			0.8			(268.3		)
Pension settlement	—			0.3			—			12.8
(Gain) loss on sales of businesses													(17.2		)	0.8			(17.2		)	0.8
Restructuring charges	13.4			8.0			36.3			23.8			8.5			13.4			17.2			36.3
Interest expense	69.0			56.0			132.2			107.3			72.4			69.0			146.8			132.2
Interest income	(15.6		)	(9.7		)	(31.4		)	(18.3		)	(12.1		)	(15.6		)	(28.7		)	(31.4		)
	$	3,349.2		$	2,928.4		$	6,306.7		$	5,311.3		$	3,357.6		$	3,349.2		$	6,496.4		$	6,306.7
Earnings before income taxes	294.4			358.3			546.2			831.7
Earnings before income taxes and equity interest													403.7			294.4			598.5			546.2
Income taxes	1.0			80.7			82.7			160.4			51.6			1.0			76.3			82.7
Net earnings before equity interest													$	352.1		$	293.4		$	522.2		$	463.5
Share of net earnings of equity method investment													5.3			—			5.6			—
Net earnings	$	293.4		$	277.6		$	463.5		$	671.3		$	357.4		$	293.4		$	527.8		$	463.5
Less: Net loss attributable to non-controlling interests	(0.2		)	—			(0.7		)	—
Less: Net gain (loss) attributable to non-controlling interests													1.1			(0.2		)	1.6			(0.7		)
Net Earnings Attributable to Common Shareowners	$	293.6		$	277.6		$	464.2		$	671.3		$	356.3		$	293.6		$	526.2		$	464.2
Total Comprehensive Income Attributable to Common Shareowners	$	14.5		$	360.1		$	280.9		$	867.3		$	355.6		$	14.5		$	526.5		$	280.9
Earnings per share of common stock:
Basic	$	1.96		$	1.86		$	3.09		$	4.49		$	2.41		$	1.96		$	3.56		$	3.09
Diluted	$	1.93		$	1.82		$	3.03		$	4.42		$	2.37		$	1.93		$	3.50		$	3.03
Dividends per share of common stock	$	0.63		$	0.58		$	1.26		$	1.16		$	0.66		$	0.63		$	1.32		$	1.26
Weighted-average shares outstanding (in thousands):
Basic	149,748			149,514			150,101			149,353			148,099			149,748			147,982			150,101
Diluted	152,494			152,226			153,124			151,862			150,358			152,494			150,139			153,124

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE ~~30,~~29, 2019 AND DECEMBER 29, 2018 ~~AND~~ ~~DECEMBER 30, 2017~~

(Unaudited, Millions of Dollars, Except Per Share Amounts)



	June 29, 2019			December 29, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	310.7		$	288.7
Accounts and notes receivable, net	1,823.9			1,607.8
Inventories, net	2,863.2			2,373.5
Other current assets	347.4			299.4
Total Current Assets	5,345.2			4,569.4
Property, plant and equipment, net	1,933.3			1,915.2
Goodwill	9,244.0			8,956.7
Intangibles, net	3,710.9			3,484.4
Other assets	1,290.2			482.3
Total Assets	$	21,523.6		$	19,408.0
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Short-term borrowings	$	1,461.6		$	376.1
Current maturities of long-term debt	3.1			2.5
Accounts payable	2,323.8			2,233.2
Accrued expenses	1,864.6			1,389.8
Total Current Liabilities	5,653.1			4,001.6
Long-term debt	3,909.1			3,819.8
Deferred taxes	730.5			705.3
Post-retirement benefits	575.4			595.4
Other liabilities	2,422.2			2,446.0
Commitments and Contingencies (Notes R and S)
Shareowners’ Equity
Stanley Black & Decker, Inc. Shareowners’ Equity
Preferred stock, without par value: Authorized 10,000,000 shares in 2019 and 2018 Issued and outstanding 750,000 shares in 2019 and 2018	750.0			750.0
Common stock, par value $2.50 per share: Authorized 300,000,000 shares in 2019 and 2018 Issued 176,902,738 shares in 2019 and 2018	442.3			442.3
Retained earnings	6,549.9			6,219.0
Additional paid in capital	4,641.1			4,621.0
Accumulated other comprehensive loss	(1,814.0		)	(1,814.3		)
ESOP	(3.4		)	(10.5		)
	10,565.9			10,207.5
Less: cost of common stock in treasury	(2,337.9		)	(2,371.3		)
Stanley Black & Decker, Inc. Shareowners’ Equity	8,228.0			7,836.2
Non-controlling interests	5.3			3.7
Total Shareowners’ Equity	8,233.3			7,839.9
Total Liabilities and Shareowners’ Equity	$	21,523.6		$	19,408.0

June 30,
2018 December 30,
2017
ASSETS
Current Assets
Cash and cash equivalents $ 385.8
$ 637.5
Accounts and notes receivable, net 2,151.4
1,628.7
Inventories, net 2,444.2
2,018.4
Other current assets 341.2
274.4
Total Current Assets 5,322.6
4,559.0
Property, plant and equipment, net 1,817.1
1,742.5
Goodwill 8,947.7
8,776.1
Intangibles, net 3,596.7
3,507.4
Other assets 495.5
512.7
Total Assets $ 20,179.6
$ 19,097.7
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,101.5
$ 5.3
Current maturities of long-term debt 978.9
977.5
Accounts payable 2,288.5
2,021.0
Accrued expenses 1,270.0
1,387.7
Total Current Liabilities 5,638.9
4,391.5
Long-term debt 2,831.2
2,828.2
Deferred taxes 467.0
436.1
Post-retirement benefits 603.7
629.9
Other liabilities 2,451.0
2,507.0
Commitments and Contingencies (Note R)

Shareowners’ Equity
Stanley Black & Decker, Inc. Shareowners’ Equity
Preferred stock, without par value:
Authorized 10,000,000 shares in 2018 and 2017
Issued and outstanding 750,000 shares in 2018 and 2017 750.0
750.0
Common stock, par value $2.50 per share:
Authorized 300,000,000 shares in 2018 and 2017
Issued 176,902,738 shares in 2018 and 2017 442.3
442.3
Retained earnings 6,273.9
5,998.7
Additional paid in capital 4,606.4
4,643.2
Accumulated other comprehensive loss (1,772.4 ) (1,589.1 )
ESOP (14.4 ) (18.8 )
10,285.8
10,226.3
Less: cost of common stock in treasury (2,100.4 ) (1,924.1 )
Stanley Black & Decker, Inc. Shareowners’ Equity 8,185.4
8,302.2
Non-controlling interests 2.4
2.8
Total Shareowners’ Equity 8,187.8
8,305.0
Total Liabilities and Shareowners’ Equity $ 20,179.6
$ 19,097.7

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE AND SIX MONTHS ENDED JUNE 29, 2019 AND JUNE 30, 2018 ~~AND~~ ~~JULY 1, 2017~~

(Unaudited, Millions of Dollars)


	Second Quarter						Year-to-Date						Second Quarter						Year-to-Date
	2018			2017			2018			2017			2019			2018			2019			2018
OPERATING ACTIVITIES
Net earnings	$	293.4		$	277.6		$	463.5		$	671.3		$	357.4		$	293.4		$	527.8		$	463.5
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment	83.2			73.7			164.5			141.5			93.7			83.2			187.7			164.5
Amortization of intangibles	44.5			42.1			86.8			75.8			48.0			44.5			91.8			86.8
Loss (gain) on sales of businesses	0.8			0.9			0.8			(268.3		)
(Gain) loss on sales of businesses													(17.2		)	0.8			(17.2		)	0.8
Share of net earnings of equity method investment													(5.3		)	—			(5.6		)	—
Changes in working capital	(185.0		)	(263.7		)	(729.3		)	(797.0		)	35.9			(185.0		)	(580.9		)	(729.3		)
Changes in other assets and liabilities	(38.9		)	21.2			(137.7		)	14.4			(11.5		)	(38.9		)	(133.9		)	(137.7		)
Cash provided by (used in) operating activities	198.0			151.8			(151.4		)	(162.3		)	501.0			198.0			69.7			(151.4		)
INVESTING ACTIVITIES
Capital and software expenditures	(111.7		)	(122.2		)	(218.0		)	(186.9		)	(97.2		)	(111.7		)	(186.8		)	(218.0		)
Proceeds (payments) from sales of businesses, net of cash sold													76.7			(1.7		)	76.7			(1.9		)
Business acquisitions, net of cash acquired	(505.6		)	5.3			(506.8		)	(2,430.1		)	0.2			(505.6		)	(676.0		)	(506.8		)
Proceeds from sales of assets	6.6			3.2			7.9			22.5
(Payments) proceeds from sales of businesses, net of cash sold	(1.7		)	0.5			(1.9		)	745.3
Proceeds (payments) from net investment hedge settlements	37.8			(24.4		)	20.3			(3.7		)
Proceeds from deferred purchase price receivable	—			104.7			—			227.8
Purchase of investments													(8.3		)	(6.3		)	(253.7		)	(10.3		)
Net investment hedge settlements													—			37.8			3.9			20.3
Other	(12.9		)	(13.5		)	(15.3		)	(17.3		)	(3.6		)	—			(3.6		)	2.9
Cash used in investing activities	(587.5		)	(46.4		)	(713.8		)	(1,642.4		)	(32.2		)	(587.5		)	(1,039.5		)	(713.8		)
FINANCING ACTIVITIES
Payment on long-term debt													—			—			(400.0		)	—
Proceeds from debt issuance, net of fees													(0.7		)	—			496.2			—
Stock purchase contract fees	(10.1		)	—			(20.2		)	—			(10.1		)	(10.1		)	(20.2		)	(20.2		)
Net short-term borrowings (repayments)	753.6			(593.1		)	1,135.6			563.6
Net short-term (repayments) borrowings													(330.6		)	753.6			1,089.3			1,135.6
Premium paid on equity option													—			—			—			(57.3		)
Proceeds from issuances of common stock													14.4			9.5			24.6			22.6
Purchases of common stock for treasury													(1.1		)	(201.3		)	(9.2		)	(212.7		)
Cash dividends on common stock	(94.2		)	(86.5		)	(189.1		)	(173.2		)	(97.7		)	(94.2		)	(195.3		)	(189.1		)
Proceeds from issuances of common stock	9.5			15.6			22.6			32.9
Proceeds from issuance of preferred stock	—			727.5			—			727.5
Premium paid on equity option	—			(25.1		)	(57.3		)	(25.1		)
Purchases of common stock for treasury	(201.3		)	(2.1		)	(212.7		)	(15.6		)
Other	—			(1.3		)	(5.5		)	(2.3		)	(4.1		)	—			(7.1		)	(5.5		)
Cash provided by financing activities	457.5			35.0			673.4			1,107.8
Cash (used in) provided by financing activities													(429.9		)	457.5			978.3			673.4
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(87.8		)	21.1			(59.9		)	59.2			0.2			(87.8		)	5.0			(59.9		)
Change in cash, cash equivalents and restricted cash	(19.8		)	161.5			(251.7		)	(637.7		)	39.1			(19.8		)	13.5			(251.7		)
Cash, cash equivalents and restricted cash, beginning of period	423.2			378.0			655.1			1,177.2			285.8			423.2			311.4			655.1
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	403.4		$	539.5		$	403.4		$	539.5		$	324.9		$	403.4		$	324.9		$	403.4

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, as shown above:


	June 30, 2018		December 30, 2017		June 29, 2019		December 29, 2018
Cash and cash equivalents	$	385.8	$	637.5	$	310.7	$	288.7
Restricted cash included in Other current assets	17.6		17.6		14.2		22.7
Cash, cash equivalents and restricted cash	$	403.4	$	655.1	$	324.9	$	311.4

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

THREE AND SIX MONTHS ENDED JUNE 29, 2019 AND JUNE 30, 2018

(Unaudited, Millions of Dollars, Except Per Share Amounts)



	Preferred Stock		Common Stock		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			ESOP			Treasury Stock			Non- Controlling Interests		Shareowners’ Equity
Balance December 29, 2018	$	750.0	$	442.3	$	4,621.0		$	6,219.0		$	(1,814.3	)	$	(10.5	)	$	(2,371.3	)	$	3.7	$	7,839.9
Net earnings	—		—		—			169.9			—			—			—			0.5		170.4
Other comprehensive income	—		—		—			—			1.0			—			—			—		1.0
Cash dividends declared — $0.66 per share	—		—		—			(97.6		)	—			—			—			—		(97.6		)
Issuance of common stock (284,438)	—		—		(15.2		)	—			—			—			25.4			—		10.2
Repurchase of common stock (61,663 shares)	—		—		—			—			—			—			(8.1		)	—		(8.1		)
Stock-based compensation related	—		—		16.7			—			—			—			—			—		16.7
ESOP	—		—		—			—			—			4.2			—			—		4.2
Balance March 30, 2019	$	750.0	$	442.3	$	4,622.5		$	6,291.3		$	(1,813.3	)	$	(6.3	)	$	(2,354.0	)	$	4.2	$	7,936.7
Net earnings	—		—		—			356.3			—			—			—			1.1		357.4
Other comprehensive loss	—		—		—			—			(0.7		)	—			—			—		(0.7		)
Cash dividends declared — $0.66 per share	—		—		—			(97.7		)	—			—			—			—		(97.7		)
Issuance of common stock (191,538)	—		—		(2.8		)	—			—			—			17.2			—		14.4
Repurchase of common stock (7,461 shares)	—		—		—			—			—			—			(1.1		)	—		(1.1		)
Stock-based compensation related	—		—		21.4			—			—			—			—			—		21.4
ESOP	—		—		—			—			—			2.9			—			—		2.9
Balance June 29, 2019	$	750.0	$	442.3	$	4,641.1		$	6,549.9		$	(1,814.0	)	$	(3.4	)	$	(2,337.9	)	$	5.3	$	8,233.3



	Preferred Stock		Common Stock		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			ESOP			Treasury Stock			Non- Controlling Interests			Shareowners’ Equity
Balance December 30, 2017	$	750.0	$	442.3	$	4,643.2		$	5,998.7		$	(1,589.1	)	$	(18.8	)	$	(1,924.1	)	$	2.8		$	8,305.0
Net earnings	—		—		—			170.6			—			—			—			(0.5		)	170.1
Other comprehensive income	—		—		—			—			95.8			—			—			—			95.8
Cash dividends declared — $0.63 per share	—		—		—			(94.8		)	—			—			—			—			(94.8		)
Issuance of common stock (325,214)	—		—		(13.0		)	—			—			—			26.1			—			13.1
Repurchase of common stock (69,880 shares)	—		—		—			—			—			—			(11.4		)	—			(11.4		)
Premium paid on equity option	—		—		(57.3		)	—			—			—			—			—			(57.3		)
Non-controlling interest dissolution	—		—		—			—			—			—			—			0.3			0.3
Stock-based compensation related	—		—		17.7			—			—			—			—			—			17.7
ESOP	—		—		—			—			—			3.3			—			—			3.3
Balance March 31, 2018	$	750.0	$	442.3	$	4,590.6		$	6,074.5		$	(1,493.3	)	$	(15.5	)	$	(1,909.4	)	$	2.6		$	8,441.8
Net earnings	—		—		—			293.6			—			—			—			(0.2		)	293.4
Other comprehensive income	—		—		—			—			(279.1		)	—			—			—			(279.1		)
Cash dividends declared — $0.63 per share	—		—		—			(94.2		)	—			—			—			—			(94.2		)
Issuance of common stock (123,154)	—		—		(0.8		)	—			—			—			10.3			—			9.5
Repurchase of common stock (1,408,563 shares)	—		—		—			—			—			—			(201.3		)	—			(201.3		)
Stock-based compensation related	—		—		16.6			—			—			—			—			—			16.6
ESOP	—		—		—			—			—			1.1			—			—			1.1
Balance June 30, 2018	$	750.0	$	442.3	$	4,606.4		$	6,273.9		$	(1,772.4	)	$	(14.4	)	$	(2,100.4	)	$	2.4		$	8,187.8

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE ~~30, 2018~~29, 2019


A.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereinafter referred to as “generally accepted accounting principles”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the interim periods have been included and are of a normal, recurring nature. Operating results for the three and six months ended June ~~30, 2018~~29, 2019 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes included in Stanley Black & Decker, Inc.’s (the “Company”) Form 10-K for the year ended December ~~30, 2017~~29, 2018, and subsequent related filings with the Securities and Exchange ~~Commission.~~Commission ("SEC").

In May 2019, the Company sold its Sargent & Greenleaf mechanical locks business within the Security segment. The results of this business have been reported in the Condensed Consolidated Financial Statements through the date of sale in 2019.

In March 2019, the Company acquired the International Equipment Solutions Attachments businesses, Paladin and Pengo, ("IES Attachments"), a manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The IES Attachments acquisition is being accounted for as a business combination using the acquisition method of accounting. The results of IES Attachments subsequent to the date of acquisition are included in the Company's Industrial segment.

In January 2019, the Company acquired a 20 percent interest in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of outdoor power equipment. MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with an equitable sharing arrangement for future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment.

In April 2018, the Company acquired the industrial business of Nelson Fastener Systems ("Nelson") from the Doncasters Group, which ~~is being~~excluded Nelson's automotive stud welding business. The acquisition was accounted for as a business ~~combination. The~~combination using the acquisition method of accounting and the results ~~of this acquisition~~ are ~~being consolidated into~~included in the Company's Industrial ~~segment. In March 2017,~~segment for all periods subsequent to the ~~Company acquired the Tools business~~date of Newell Brands ("Newell Tools") and the Craftsman® brand, which were both accounted for as business combinations. The results of these acquisitions have been consolidated into the Company's Tools & Storage segment. acquisition.

Refer to Note F, Acquisitions and Investments, for further discussion ~~on these acquisitions.~~

In February 2017, the Company sold the majority of its mechanical security businesses within the Security segment, which included the commercial hardware brands of Best Access, phi Precision and GMT. The Company also sold two small businesses within the Tools & Storage segment in the first and fourth quarters of 2017, and one small business in the Industrial segment in the third quarter of 2017. The operating results of these ~~businesses have been reported within continuing operations in the Condensed Consolidated Financial Statements through their respective dates of sale in 2017. Refer to~~ ~~Note T, Divestitures,~~ ~~for further discussion.~~transactions.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. Certain amounts reported in the previous year have been ~~recast as a result of~~reclassified to conform to the ~~retrospective adoption of new accounting standards in the first quarter of 2018. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~2019 presentation.

Financial Instruments

Derivative financial instruments are employed to manage risks, including foreign currency, interest rate exposures and commodity prices and are not used for trading or speculative purposes. As part of the Company’s risk management program, a variety of financial instruments such as interest rate swaps, currency swaps, purchased currency options, foreign exchange contracts and commodity contracts, may be used to mitigate interest rate exposure, foreign currency exposure and commodity price exposure. The Company recognizes all derivative instruments in the balance sheet at fair value.

Changes in the fair value of derivatives are recognized periodically either in earnings or in shareowners’ equity as a component of other comprehensive income (loss) ("OCI"), depending on whether the derivative financial instrument is undesignated or qualifies for hedge accounting and, if so, whether it represents a fair value, cash flow, or net investment hedge. Changes in the

fair value of derivatives accounted for as fair value hedges are recorded in earnings in the same caption as the changes in the fair value of the hedged items. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in the assessment of effectiveness, are recorded in ~~other comprehensive income (loss)~~OCI and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not occur, the derivative would be terminated and the amount in accumulated other comprehensive income (loss) would be recognized in earnings. Changes in the fair value of derivatives that are designated and qualify as a hedge of the net investment in foreign operations, to the extent they are included in the assessment of effectiveness, are reported in ~~other comprehensive income (loss)~~OCI and are deferred until disposal of the underlying assets. Gains and losses representing components excluded from the assessment of effectiveness for cash flow and fair value hedges are recognized in earnings on a

straight-line basis in the same caption as the hedged item over the term of the hedge. Gains and losses representing components excluded from the assessment of effectiveness for net investment hedges are recognized in earnings on a straight-line basis in Other, net over the term of the hedge.

The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments to interest expense over the remaining period of the debt originally covered by the terminated swap.

Changes in the fair value of derivatives not designated as hedges are reported in Other, net in the ~~Consolidated Statements~~consolidated statements of ~~Operations and Comprehensive Income.~~operations. Refer to Note I, Financial Instruments, for further discussion.

Revenue Recognition

The Company’s revenues result from the sale of goods or services and reflect the consideration to which the Company expects to be entitled. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"). For its customer contracts, the Company identifies the performance obligations (goods or services), determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the performance obligation is transferred to the customer. A good or service is transferred when (or as) the customer obtains control of that good or service. The majority of the Company’s revenues are recorded at a point in time from the sale of tangible products.

A portion of the Company’s revenues within the Security and Infrastructure businesses is generated from equipment leased to customers. Customer arrangements are identified as leases if they include transfer of a tangible asset which is provided to the customer in exchange for payments typically at fixed rates payable monthly, quarterly or annually. Customer leases may include terms to allow for extension of leases for a short period of time, but typically do not provide for customer termination prior to the initial term. Some customer leases include terms to allow the customer to purchase the underlying asset, which occurs occasionally, and virtually no customer leases include residual value guarantee clauses. Within the Security business, the underlying asset typically has no value at termination of the customer lease, so no residual value asset is recorded in the financial statements. For Infrastructure business leases, underlying assets are assessed for functionality at termination of the lease and, if necessary, an impairment to the leased asset value is recorded.

Provisions for customer volume rebates, product returns, discounts and allowances are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded. Such provisions are calculated using historical averages adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a reduction of revenue except to the extent that there is a distinct good or service and evidence of the fair value of the advertising, in which case the expense is classified as selling, general, and administrative expense.

The Company’s revenues can be generated from contracts with multiple performance obligations. When a sales agreement involves multiple performance obligations, each obligation is separately identified (including equipment lease obligations) and the transaction price is allocated based on the amount of consideration the Company expects to be entitled to in exchange for transferring the promised good or service to the customer.

Sales of security monitoring systems may have multiple performance obligations, including equipment, installation and monitoring or maintenance services. In most instances, the Company allocates the appropriate amount of consideration to each performance obligation based on the standalone selling price ("SSP") of the distinct goods or services performance obligation. In circumstances where SSP is not observable, the Company allocates the consideration for the performance obligations by utilizing one of the following methods: expected cost plus margin, the residual approach, or a mix of these estimation methods.

For performance obligations that the Company satisfies over time, revenue is recognized by consistently applying a method of measuring progress toward complete satisfaction of that performance obligation. The Company utilizes the method that most accurately depicts the progress toward completion of the performance obligation.

The Company’s contract sales for the installation of security intruder systems and other construction-related projects are generally recorded under the input method. The input method recognizes revenue on the basis of the Company’s efforts or inputs to the satisfaction of a performance obligation relative to the total inputs expected to satisfy that performance obligation. Revenue recognized on security contracts in process are based upon the allocated contract price and related total inputs of the project at completion. The extent of progress toward completion is generally measured using input methods based on labor metrics. Revisions to these estimates as contracts progress have the effect of increasing or decreasing profits each period. Provisions for anticipated losses are made in the period in which they become determinable. The revenues for monitoring and monitoring-related services are recognized as services are rendered over the contractual period.

The Company utilizes the output method for contract sales in the Oil & Gas ~~business.~~product line. The output method recognizes revenue based on direct measurements of the customer value of the goods or services transferred to date relative to the remaining goods or services promised under the contract. The output method includes methods such as surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced or units delivered.

Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the

measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability.

Incremental costs of obtaining or fulfilling a contract with a customer that are expected to be recovered are recognized and classified in Other current assets or Other assets, as appropriate, in the ~~Condensed Consolidated Balance Sheets~~consolidated balance sheet and are typically amortized over the contract period. The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if the amortization period of the asset is one year or less.

Customer billings for services not yet rendered are deferred and recognized as revenue as the services are rendered. The associated deferred revenue is included in Accrued expenses or Other liabilities, as appropriate, in the ~~Condensed Consolidated Balance Sheets.~~consolidated balance sheet.

Refer to Note D, Accounts and Notes Receivable, for further discussion.

B. NEW ACCOUNTING STANDARDS

~~Adoption of New Accounting Standards~~

NEW ACCOUNTING STANDARDS ADOPTED — In ~~March 2017,~~February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2017-07,~~ ~~Compensation-Retirement Benefits (Topic 715)~~ (“new pension standard”). The new pension standard improves the presentation of net periodic pension cost and net periodic postretirement benefit cost. The Company adopted this standard in the first quarter of 2018 utilizing the full retrospective method. As a result of the adoption, all components other than service cost were reclassified from Cost of sales and Selling, general and administrative to Other, net in the Consolidated Statements of Operations and Comprehensive Income.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~. The objective of this update is to provide additional guidance and reduce diversity in practice when classifying certain transactions within the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, ~~Statement of Cash Flows (Topic 230): Restricted Cash~~. This new standard requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted these standards in the first quarter of 2018 utilizing the retrospective transition method. The impacts of the new standards relate to the presentation of restricted cash as well as certain cash flows related to the Company's accounts receivable sale program. Refer to ~~Note D, Accounts and Notes Receivable,~~ ~~for further discussion.~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606~~) (“new revenue standard”). The new revenue standard outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new model provides a five-step analysis in determining when and how revenue is recognized. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard allows for initial application to be performed retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. During 2016, the FASB clarified the implementation guidance on principal versus agent, identifying performance obligations, licensing, collectability and made technical corrections on various topics.

The Company adopted the new revenue recognition standard in the first quarter of 2018 using the full retrospective method. Accordingly, certain prior period amounts have been recast to reflect the financial results of the Company in accordance with the new standard. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings for the earliest balance sheet period presented.

As a result of the adoption of the new revenue standard, outbound freight is recorded as a component of cost of sales as opposed to a reduction of net sales. The new revenue standard also requires companies to record an asset for anticipated customer return of inventory and a sales return reserve at the gross amount of the initial sale, rather than at the net margin amount. Additionally, certain sales to distributors subject to a guarantee with a third-party financier that were previously deferred are now recognized upon shipment in accordance with the new revenue standard and the associated short-term and long-term accounts receivable and short-term and long-term debt balances have been recast. Lastly, for certain product warranties provided to customers that meet the criteria of a service-type warranty, a portion of consideration paid by customers must now be deferred and recognized as revenue over the anticipated service warranty period.

As a result of the adoption of the new revenue and pension standards, certain amounts in the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended July 1, 2017 have been recast, as follows:

(Millions of Dollars, except per share amounts)
Three months ended July 1, 2017¹
Adoption of ASU 2014-09 Adoption of ASU 2017-07 Three months ended July 1, 2017
Net Sales $ 3,229.5
$ 57.2
$ —
$ 3,286.7
Cost of sales $ 2,017.3
$ 55.8
$ 0.3
$ 2,073.4
Selling, general and administrative $ 733.9
$ —
$ 4.7
$ 738.6
Provision for doubtful accounts $ 4.8
$ 0.8
$ —
$ 5.6
Other, net $ 60.3
$ —
$ (5.0 ) $ 55.3
Earnings before income taxes $ 357.7
$ 0.6
$ —
$ 358.3
Income taxes $ 80.5
$ 0.2
$ —
$ 80.7
Net earnings attributable to common shareowners $ 277.2
$ 0.4
$ —
$ 277.6
Diluted earnings per share of common stock $ 1.82
$ —
$ —
$ 1.82

¹~~As previously reported in the Company's Form 10-Q for the quarterly period ended July 1, 2017.~~

(Millions of Dollars, except per share amounts)
Six months ended July 1, 2017¹
Adoption of ASU 2014-09 Adoption of ASU 2017-07 Six months ended July 1, 2017
Net Sales $ 6,035.1
$ 107.9
$ —
$ 6,143.0
Cost of sales $ 3,757.6
$ 105.6
$ 0.5
$ 3,863.7
Selling, general and administrative $ 1,410.4
$ —
$ 10.2
$ 1,420.6
Provision for doubtful accounts $ 13.0
$ 0.9
$ —
$ 13.9
Other, net $ 166.5
$ —
$ (10.7 ) $ 155.8
Earnings before income taxes $ 830.3
$ 1.4
$ —
$ 831.7
Income taxes $ 160.0
$ 0.4
$ —
$ 160.4
Net earnings attributable to common shareowners $ 670.3
$ 1.0
$ —
$ 671.3
Diluted earnings per share of common stock $ 4.41
$ 0.01
$ —
$ 4.42

¹~~As previously reported in the Company's Form 10-Q for the year-to-date period ended July 1, 2017.~~

~~As a result of the adoption of the new revenue standard, certain balances as of December 30, 2017 in the Condensed Consolidated Balance Sheets have been recast, as follows:~~

(Millions of Dollars)
Balance at December 30, 2017¹
Adoption of ASU 2014-09 Balance at December 30, 2017
ASSETS
Accounts and notes receivable, net $ 1,635.9
$ (7.2 ) $ 1,628.7
Other assets $ 487.8
$ 24.9
$ 512.7

LIABILITIES AND SHAREOWNERS' EQUITY
Current maturities of long-term debt $ 983.4
$ (5.9 ) $ 977.5
Accrued expenses $ 1,352.1
$ 35.6
$ 1,387.7
Long-term debt $ 2,843.0
$ (14.8 ) $ 2,828.2
Deferred taxes $ 434.2
$ 1.9
$ 436.1
Other liabilities $ 2,511.1
$ (4.1 ) $ 2,507.0
Retained earnings²
$ 5,990.4
$ 8.3
$ 5,998.7
Accumulated other comprehensive loss $ (1,585.9 ) $ (3.2 ) $ (1,589.1 )

¹~~As previously reported in the Company's Form 10-K for the year ended December 30, 2017.~~

²~~Adjustment includes the cumulative effect of the adoption of $4.3 million for periods prior to fiscal year 2016.~~

As a result of the adoption of the new revenue and cash flows standards, certain amounts for the three and six months ended July 1, 2017 in the Condensed Consolidated Statements of Cash Flows have been recast, as follows:

(Millions of Dollars)
Three months ended July 1, 2017¹
Adoption of ASU 2014-09 Adoption of ASU 2016-15 & 2016-18 Three months ended July 1, 2017
OPERATING ACTIVITIES
Net earnings $ 277.2
$ 0.4
$ —
$ 277.6
Changes in working capital $ (159.1 ) $ 0.1
$ (104.7 ) $ (263.7 )
Changes in other assets and liabilities $ 21.7
$ (0.5 ) $ —
$ 21.2
Cash provided by (used in) operating activities $ 256.5
$ —
$ (104.7 ) $ 151.8
INVESTING ACTIVITIES
Proceeds from deferred purchase price receivable $ —
$ —
$ 104.7
$ 104.7
Cash used in investing activities $ (151.1 ) $ —
$ 104.7
$ (46.4 )

Change in cash, cash equivalents and restricted cash $ 161.5
$ —
$ —
$ 161.5
Cash, cash equivalents and restricted cash, beginning of period $ 378.0
$ —
$ —
$ 378.0
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 539.5
$ —
$ —
$ 539.5

¹~~As previously reported in the Company's Form 10-Q for the quarterly period ended July 1, 2017.~~

(Millions of Dollars)
Six months ended July 1, 2017¹
Adoption of ASU 2014-09 Adoption of ASU 2016-15 & 2016-18 Six months ended July 1, 2017
OPERATING ACTIVITIES
Net earnings $ 670.3
$ 1.0
$ —
$ 671.3
Changes in working capital $ (569.3 ) $ 0.1
$ (227.8 ) $ (797.0 )
Changes in other assets and liabilities $ 60.9
$ (1.1 ) $ (45.4 ) $ 14.4
Cash provided by (used in) operating activities $ 110.9
$ —
$ (273.2 ) $ (162.3 )
INVESTING ACTIVITIES
Proceeds from deferred purchase price receivable $ —
$ —
$ 227.8
$ 227.8
Cash used in investing activities $ (1,870.2 ) $ —
$ 227.8
$ (1,642.4 )

Change in cash, cash equivalents and restricted cash $ (592.3 ) $ —
$ (45.4 ) $ (637.7 )
Cash, cash equivalents and restricted cash, beginning of period 1,131.8
$ —
$ 45.4
$ 1,177.2
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 539.5
$ —
$ —
$ 539.5

¹~~As previously reported in the Company's Form 10-Q for the year-to-date period ended July 1, 2017.~~

In December 2017, the U.S. Securities and Exchange Commission ("SEC") staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “Act”). SAB 118 provides a measurement period that should not extend beyond one year from the Act enactment date for companies to complete the accounting under ASC 740, ~~Income Taxes,~~ (the "measurement period"). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it can determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately before the enactment of the Act. The measurement period for accounting for the Act begins in the period of enactment and ends when an entity has obtained, prepared and analyzed the information necessary to complete the accounting requirements under ASC 740, but in no event can the measurement period extend beyond one year. Any provisional amount or adjustment to a provisional amount included in a company’s financial statements during the measurement period should be included in income from continuing operations as an adjustment to tax expense or benefit in the reporting period the amounts are determined. Refer to ~~Note P, Income Taxes, for further discussion.~~

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives And Hedging (Topic 815):Targeted Improvements to Accounting for Hedge Activities~~. The new standard amends the hedge accounting recognition and presentation requirements in ASC 815. As permitted by ASU 2017-12, the Company early adopted this standard in the first quarter of 2018 on a prospective basis. Refer to ~~Note A, Significant Accounting Policies,~~ ~~for the updated financial instruments policy related to the adoption of this standard.~~

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610).~~ The new standard provides guidance for recognizing gains and losses of nonfinancial assets in contracts with non-customers. The Company adopted this standard in the first quarter of 2018 and it did not have an impact on its consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business.~~ ~~The new standard narrows the definition of a business and provides a framework for evaluation. The Company adopted this standard prospectively in the first quarter of 2018.~~

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~. The new standard eliminates the exception to the principle in ASC 740, for all intra-entity sales of assets other than inventory, to be deferred, until the transferred asset is sold to a third party or otherwise recovered through use. The Company adopted this standard in the first quarter of 2018 and it did not have a material impact on its consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~. The main objective of this update is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The new guidance addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ~~The Company adopted this standard in the first quarter 2018 and it did not have a material impact on its consolidated financial statements.~~

~~Recently Issued Accounting Standards Not Yet Adopted~~

~~In July 2018, the FASB issued ASU 2018-09,~~ ~~Codification Improvements~~. This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately while others provide for a transition period to adopt as part of the next fiscal year beginning after December 15, 2018. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

~~In February 2018, the FASB issued ASU~~ 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220)~~: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. The new guidance permits, but does not require, companies to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Act”) on items within accumulated other comprehensive income to retained earnings. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of 2019 and did not elect to reclassify the stranded tax effects of the Act on items within accumulated other comprehensive income to retained earnings. The Company uses the portfolio method for releasing the stranded tax effects from accumulated other comprehensive income.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("new lease standard"). The objective of the new lease standard is to increase transparency and comparability among organizations by requiring recognition of all lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, Leases (Topic 842), and in July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Targeted Improvements, Leases (Topic 842). In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. These ASUs provide clarification on how to apply certain aspects of the new lease standard and allow entities to initially apply the standards from the adoption date. The Company adopted these standards in the first quarter of 2019 utilizing the new transition method to apply the standards from the adoption date. The Company recorded lease liabilities and a right-of-use asset in its consolidated balance sheet upon adoption. The standards did not impact the Company's consolidated statements of operations or retained earnings. Refer to Note D, Accounts and Notes Receivable, and Note S, Commitments and Guarantees, for further discussion.

RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED — In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adopting the new guidance as well as the impact it may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20). The standard modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The standard modifies disclosure requirements of fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adopting the new guidance as well as the impact it may have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350)~~: Simplifying the Test for Goodwill Impairment.~~. The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. This ASU will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the timing of its adoption of this standard.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ ("new lease standard"). The objective of the new lease standard is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU 2018-10, ~~Codification Improvements to Topic 842 (Leases), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard. Both standards are effective for fiscal years beginning after December 15, 2018, including interim~~

periods within those annual periods and are to be applied utilizing a modified retrospective approach. The Company is currently evaluating these standards to determine the impact they may have on its consolidated financial statements.


C.	EARNINGS PER SHARE

The following table reconciles net earnings attributable to common shareowners and the weighted-average shares outstanding used to calculate basic and diluted earnings per share for the three and six months ended June 29, 2019 and June 30, ~~2018~~ ~~and July 1, 2017:~~2018:



	Second Quarter				Year-to-Date
	2019		2018		2019		2018
Numerator (in millions):
Net Earnings Attributable to Common Shareowners	$	356.3	$	293.6	$	526.2	$	464.2

Denominator (in thousands):
Basic weighted-average shares outstanding	148,099		149,748		147,982		150,101
Dilutive effect of stock contracts and awards	2,259		2,746		2,157		3,023
Diluted weighted-average shares outstanding	150,358		152,494		150,139		153,124
Earnings per share of common stock:
Basic	$	2.41	$	1.96	$	3.56	$	3.09
Diluted	$	2.37	$	1.93	$	3.50	$	3.03

Second Quarter Year-to-Date
2018 2017 2018 2017
Numerator (in millions):
Net earnings attributable to common shareowners¹
$ 293.6
$ 277.6
$ 464.2
$ 671.3

Denominator (in thousands):
Basic weighted-average shares 149,748
149,514
150,101
149,353
Dilutive effect of stock contracts and awards 2,746
2,712
3,023
2,509
Diluted weighted-average shares 152,494
152,226
153,124
151,862
Earnings per share of common stock¹:

Basic $ 1.96
$ 1.86
$ 3.09
$ 4.49
Diluted $ 1.93
$ 1.82
$ 3.03
$ 4.42

¹~~Prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

The following weighted-average stock options were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive (in thousands):



	Second Quarter		Year-to-Date
	2019	2018	2019	2018
Number of stock options	2,274	1,161	2,300	1,162

Second Quarter Year-to-Date
2018 2017 2018 2017
Number of stock options 1,161
—
1,162
1,163

As described in detail in Note J, Equity Arrangements, the Company issued ~~$750 million~~7,500,000 Equity Units in May 2017 ~~comprised~~with a total notional value of $750.0 ~~million~~million. Each unit initially consists of 750,000 shares of convertible preferred stock and forward stock

purchase contracts. On and after May 15, 2020, the convertible preferred stock may be converted into common stock at the option of the holder. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or a combination thereof. The conversion rate was initially 6.1627 shares of common stock per one share of convertible preferred stock, which iswas equivalent to an initial conversion price of approximately $162.27 per share of common stock. As of June ~~30, 2018,~~29, 2019, due to the customary anti-dilution provisions, the conversion rate was ~~6.1709,~~6.1859, equivalent to a conversion price of approximately ~~$162.05~~$161.66 per share of common stock. The convertible preferred stock is excluded from the denominator of the diluted earnings per share calculation on the basis that the convertible preferred stock will be settled in cash except to the extent that the conversion value of the convertible preferred stock exceeds its liquidation preference. Therefore, before any redemption or conversion, the common shares that would be required to settle the applicable conversion value in excess of the liquidation preference, if the Company elects to settle such excess in common shares, are included in the denominator of diluted earnings per share in periods in which they are dilutive. The shares related to the convertible preferred stock ~~have been~~were anti-dilutive during 2019 and most of 2018.

D. ACCOUNTS AND NOTES RECEIVABLE


(Millions of Dollars)	June 30, 2018			December 30, 2017¹			June 29, 2019			December 29, 2018
Trade accounts receivable	$	1,952.6		$	1,388.1		$	1,636.8		$	1,437.1
Trade notes receivable	145.4			158.7			147.8			150.0
Other accounts receivable	143.7			162.3			159.9			122.7
Gross accounts and notes receivable	$	2,241.7		$	1,709.1		$	1,944.5		$	1,709.8
Allowance for doubtful accounts	(90.3		)	(80.4		)	(120.6		)	(102.0		)
Accounts and notes receivable, net	$	2,151.4		$	1,628.7		$	1,823.9		$	1,607.8
Long-term receivables, net	$	168.5		$	176.9		$	150.6		$	153.7

¹~~Certain prior year amounts have been recast as a result of the adoption of new accounting standards. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. Adequate reserves have been established to cover anticipated credit losses. Long-term receivables, net of ~~$168.5~~$150.6 million and ~~$176.9~~$153.7 million at June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, respectively, are reported within Other assets in the Condensed Consolidated Balance Sheets. The Company's financing receivables are predominantly related to certain security equipment leases with commercial businesses. As of June 29, 2019, the current portion of finance receivables within Trade notes receivable approximated $78.6 million.Generally, the Company retains legal title to any equipment under lease and ~~bears~~holds the right to repossess such equipment in an event of default. All financing receivables are ~~interest bearing~~interest-bearing and the Company has not classified any financing receivables as held-for-sale. Interest income earned from financing receivables that are not delinquent is recorded on the effective interest method.

The Company considers any financing receivable that has not been collected within 90 days of original billing date as past-due or delinquent. The Company’s payment terms are generally consistent with the industries in which their businesses operate and typically range from 30-90 days globally. Additionally, the Company considers the credit quality of all past-due or delinquent financing receivables as nonperforming. The Company does not adjust the promised amount of consideration for the effects of a significant financing component when the period between transfer of the product and receipt of payment is less than one year. Any significant financing components for contracts greater than one year are included in revenue over time.

The following is a summary of the expected timing of receipt of payments from customers on an undiscounted basis as of June 29, 2019 relating to the Company’s finance receivables and operating leases:



(Millions of Dollars)	Total		Within 1 Year		2 Years		3 Years		4 Years		5 Years		Thereafter
Finance receivables	$	214.9	$	78.6	$	64.0	$	41.9	$	21.2	$	8.9	$	0.3
Operating leases	$	53.2	$	50.6	$	1.8	$	0.6	$	0.2	$	—	$	—

~~Prior to January~~The following is a summary of lease revenue and sales-type lease profit for the three and six months ended June 29, 2019:



(Millions of Dollars)	Second Quarter 2019		Year-to-Date 2019
Sales-type lease revenue	$	19.6	$	41.5
Lease interest revenue	3.3		6.5
Operating lease revenue	37.2		73.9
Total lease revenue	$	60.1	$	121.9
Sales-type lease profit	$	7.8	$	16.5

In October 2018, the Company ~~had an~~entered into a new accounts receivable sale program. According to the terms, ~~of that program,~~ the Company ~~was required to sell~~sells certain of its trade accounts receivables at fair value to a ~~wholly-owned,~~wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“~~BRS”~~BRS"). The BRS, in turn, ~~was required to~~can sell such receivables to a third-party financial institution (“Purchaser”) for ~~cash and a deferred purchase price receivable.~~cash. The Purchaser’s maximum cash investment in the receivables at any time ~~was $100.0~~is $110.0 million. The purpose of the program ~~was~~is to provide liquidity to the Company. ~~The Company accounted for these~~These transfers qualify as sales under ASC 860, Transfers and Servicing~~. Receivables were~~, and receivables are derecognized from the Company’s consolidated balance sheet when the BRS ~~sold~~sells those receivables to the Purchaser. The Company ~~had~~has no retained interests in the transferred receivables, other than collection and administrative ~~responsibilities~~responsibilities. At June 29, 2019, the Company did not record a servicing asset or liability related to its retained responsibility based on its assessment of the servicing fee, market values for similar transactions and its ~~right to~~cost of servicing the deferred purchase price receivable. In January 2018, the Company signed an amendment that changed the structure of this program which eliminated the deferred purchase price receivable from the Purchaser and resulted in the BRS retaining ownership of the trade accounts receivables. This program was then terminated on February 1, 2018.receivables sold.

At June 29, 2019 and December ~~30, 2017, $100.8~~29, 2018, approximately $79.0 million and $100.1 million of net receivables were ~~derecognized.~~derecognized, respectively. Proceeds from transfers of receivables to the Purchaser totaled $129.0 million and $222.5 million and payments to the Purchaser totaled $75.9 million and $243.6 million, respectively, for the three and six months ended June 29, 2019. Gross receivables sold to the BRS amounted to ~~$549.3~~$474.0 million ($~~464.0~~351.1 million, net) and ~~$1,003.1~~$860.1 million ($~~852.9~~660.3 million, net) for the three and six months ended ~~July 1, 2017,~~June 29, 2019, respectively. ~~These sales~~The program resulted in a pre-tax loss of ~~$1.9~~$0.6 million and $3.3 million, respectively, and included servicing fees of $0.4 million and $0.6 million, respectively, for the three and six months ended July 1, 2017. Proceeds from transfers of receivables to the Purchaser totaled $444.1 million and $781.1$2.0 million for the three and six months ended ~~July 1, 2017,~~June 29, 2019, respectively, which included service fees of $0.2 million and $0.5 million, respectively. ~~Collections~~All cash flows under the program are reported as a component of ~~previously sold receivables, including deferred purchase price receivables, and~~changes in working capital within operating activities in the Condensed Consolidated Statements of Cash Flows since all ~~fees, which are settled one month in arrears, resulted in payments to~~the cash from the Purchaser ~~of $408.7 million and $781.1 million for~~is received upon the ~~three and six months ended July 1, 2017, respectively.~~

~~The Company’s risk of loss following the~~initial sale of the receivables is limited to the deferred purchase price receivable, which was $106.9 million at December 30, 2017. The deferred purchase price receivable settled in full in January 2018, and historically was repaid in cash as receivables were collected, generally within 30 days. As such the carrying value of the receivable recorded at December 30, 2017 approximated fair value. There were no delinquencies or credit losses for the three and six months ended July 1, 2017. Cash inflows related to the deferred purchase price receivable totaled $104.7 million and $227.8 million for the three and six months ended July 1, 2017, respectively. In accordance with the adoption of the new cash flowsreceivable.

~~standards described in~~ ~~Note B, New Accounting Standards, the proceeds related to the deferred purchase price receivable are classified as investing activities.~~

As of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, the Company's deferred revenue totaled ~~$188.2~~$207.7 million and ~~$117.0~~$202.0 million, respectively, of which ~~$93.3~~$104.8 million and ~~$95.6~~$98.6 million, respectively, was classified as current.

Revenue recognized for the three months ended June 30, 2018 and July 1, 2017 that was previously deferred as of December 30, 2017 and December 31, 2016 totaled $18.9 million and $15.2 million, respectively. Revenue recognized for the six months ended June 29, 2019 and June 30, 2018 ~~and July 1, 2017~~ that was previously deferred as of December 29, 2018 and December 30, 2017 ~~and December 31, 2016~~ totaled ~~$93.5~~$65.9 million and ~~$81.4~~$66.2 million, respectively.

As of June ~~30, 2018,~~29, 2019, approximately ~~$1.155~~$1.144 billion of revenue from long-term contracts primarily in the Security segment was unearned related to customer contracts which were not completely fulfilled and will be recognized on a decelerating basis over the next 5 years. This amount excludes any of the Company's contracts with an original expected duration of one year or less.


E.	INVENTORIES

The components of Inventories, net at June ~~30,~~29, 2019 and December 29, 2018 ~~and~~ ~~December 30, 2017~~ are as follows:



(Millions of Dollars)	June 29, 2019		December 29, 2018
Finished products	$	2,068.0	$	1,707.4
Work in process	183.9		150.8
Raw materials	611.3		515.3
Total	$	2,863.2	$	2,373.5

(Millions of Dollars) June 30, 2018 December 30, 2017
Finished products $ 1,734.8
$ 1,461.4
Work in process 197.3
155.5
Raw materials 512.1
401.5
Total $ 2,444.2
$ 2,018.4

~~F. ACQUISITIONS~~

~~2018 ACQUISITIONS~~

~~Nelson Fasteners Systems~~

~~On April 2, 2018,~~As part of the IES Attachments acquisition in the first quarter of 2019, the Company acquired net inventory with an estimated fair value of $75.0 million. Refer to Note F, Acquisitions and Investments, for further discussion of the ~~industrial business~~IES Attachments acquisition.

F. ACQUISITIONS AND INVESTMENTS

2019 INVESTMENTS

On January 2, 2019, the Company acquired a 20 percent interest in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of ~~Nelson Fastener Systems ("Nelson") from~~outdoor power equipment, for $234 million in cash. With annual revenue of approximately $2.4 billion, MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the ~~Doncasters Group,~~terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 EBITDA, with an equitable sharing arrangement for ~~$430.4~~future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment.

During 2019, the Company made additional immaterial investments that are not accounted for under the equity method. The Company acquired less than a 20 percent interest in each investment and does not have the ability to significantly influence any of the investees.

2019 ACQUISITIONS

IES Attachments

On March 8, 2019, the Company acquired IES Attachments for $653.0 million, net of cash acquired and an estimated working capital adjustment. ~~Nelson~~IES Attachments is ~~complementary~~a manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The Company expects the acquisition to further diversify the Company's ~~product offerings, enhances its~~ presence in the ~~general~~ industrial ~~end~~ markets, ~~expands~~expand its portfolio of ~~highly-engineered fastening~~attachment solutions and ~~will deliver cost synergies.~~provide a meaningful platform for continued growth. The results of ~~Nelson~~IES Attachments subsequent to the date of acquisition are ~~being consolidated into~~included in the Company's Industrial segment.

The ~~Nelson~~IES Attachments acquisition is being accounted for as a business combination using the acquisition method of accounting, which requires, among other things, ~~the~~certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated ~~fair~~acquisition date value of identifiable net assets acquired, which includes ~~$67.5~~$81.7 million of working capital, $87.1 million of deferred tax liabilities, and ~~$174.0~~$328.0 million of intangible assets, is ~~$227.0~~$342.4 million. The related goodwill is ~~$203.4~~$310.6 million. The amount allocated to intangible assets includes ~~$150.0~~$304.0 million for customer relationships. The weighted-average useful ~~lives~~life assigned to the intangible assets ~~range from 12 to 15~~is 14 years.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected cost synergies of the combined business, assembled workforce, and the going concern nature of ~~Nelson. Goodwill~~IES Attachments. It is ~~not expected~~estimated that $2.4 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes.

The ~~purchase price allocation~~acquisition accounting for ~~Nelson~~IES Attachments is preliminary in ~~all~~certain respects. During the measurement period, the Company expects to record adjustments relating to the finalization of intangible assets ~~inventory and~~valuations, property, plant and equipment valuations, working capital accounts, the accounting for leases, ~~pension liabilities,~~ various opening balance sheet contingencies, ~~including environmental remediation,~~ and various income tax matters, amongst others.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from operations. The Company will complete its ~~purchase price allocation~~acquisition accounting as soon as reasonably possible within the measurement period.

Other ~~2018~~2019 Acquisitions

During ~~the second quarter of 2018,~~2019, the Company completed ~~four~~two smaller acquisitions for ~~a total purchase price of $84.3~~$24.6 million, net of cash acquired. The estimated ~~fair~~acquisition date value of the identifiable net assets acquired, which includes ~~$13.9~~$5.3 million of working capital and ~~$36.8~~$0.7 million ~~of intangible assets,~~for customer relationships, is ~~$30.6~~$10.8 million. The related goodwill is ~~$53.7~~$13.8 million. The ~~amount allocated to intangible assets includes $24.4 million for customer relationships. The~~ useful ~~lives~~life assigned to ~~intangible assets ranges from~~the customer relationships is 10 years. The results of these acquisitions subsequent to the dates of acquisition are included in the Company's Industrial and ~~12 years.~~Security segments.

The ~~purchase price allocation~~acquisition accounting for these acquisitions is preliminary in ~~all~~certain respects. During the measurement period, the Company expects to record adjustments relating to ~~the finalization of valuations for intangible assets,~~ working capital accounts, ~~and~~ various opening balance sheet contingencies and

various income tax matters, amongst others. These adjustments are not expected to have a material impact on the Company’s ~~condensed~~ consolidated financial statements.

~~2017~~2018 ACQUISITIONS

~~Newell Tools~~

Nelson Fasteners Systems

On ~~March 9, 2017,~~April 2, 2018, the Company acquired ~~Newell Tools~~Nelson for ~~approximately $1.86 billion,~~$428.8 million, net of cash ~~acquired. The Newell Tools results have been consolidated into~~acquired and a working capital adjustment. Nelson is complementary to the Company's ~~Tools & Storage~~product offerings, enhances its presence in the general industrial end markets, expands its portfolio of highly-engineered fastening solutions, and will deliver cost synergies. The results of Nelson are included in the Industrial segment.

The ~~Newell Tools~~Nelson acquisition was accounted for as a business ~~combination.~~combination using the acquisition method of accounting. The ~~purchase price allocation for Newell Tools was completed during the first quarter~~acquisition date value of 2018. The measurement period adjustments recorded in the first quarter of 2018 did not have a material impact to the Company's condensed consolidated financial statements. The following table summarizes the estimated fair values of majoridentifiable net assets acquired, which included $64.5 million of working capital and ~~liabilities assumed:~~

(Millions of Dollars)
Cash and cash equivalents $ 20.0
Accounts and notes receivable, net 19.7
Inventories, net 195.5
Prepaid expenses and other current assets 27.1
Property, plant and equipment, net 112.4
Trade names 283.0
Customer relationships 548.0
Other assets 8.8
Accounts payable (70.3 )
Accrued expenses (40.7 )
Deferred taxes (269.4 )
Other liabilities (7.9 )
Total identifiable net assets $ 826.2
Goodwill 1,031.8
Total consideration paid $ 1,858.0

$167.0 million of intangible assets, was $212.0 million. The ~~trade names were determined~~related goodwill was $216.8 million. The amount allocated to ~~have indefinite lives.~~intangible assets included $149.0 million for customer relationships. The ~~weighted-average~~ useful ~~life~~lives assigned to the ~~customer relationships is~~intangible assets ranged from 12 to 15 years.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the expected ~~revenue and~~ cost synergies of the combined business, assembled workforce, and the going concern nature of ~~Newell Tools. It~~Nelson. Goodwill is ~~estimated that $15.7 million of goodwill, relating~~not expected to ~~the pre-acquisition historical tax basis of goodwill, will~~ be deductible for tax purposes.

~~Refer to~~ ~~Note E, Acquisitions,~~ ~~of the Company's Form 10-K~~The acquisition accounting for ~~the year ended December 30, 2017 for further discussion.~~

~~Craftsman Brand~~

On March 8, 2017, the Company purchased the Craftsman® brand from Sears Holdings Corporation ("Sears Holdings") for a total estimated cash purchase price of $916.2 million on a discounted basis, which consists of an initial cash payment of $568.2 million, a cash payment due in March 2020 with an estimated present value at acquisition date of $234.0 million, and future payments to Sears Holdings of between 2.5% and 3.5% on sales of Craftsman products in new Stanley Black & Decker channels through March 2032, which was valued at $114.0 million at the acquisition date based on estimated future sales projections. Refer to ~~Note M, Fair Value Measurements,~~ for additional details. In addition, as part of the acquisition the Company also granted a perpetual license to Sears Holdings to continue selling Craftsman®-branded products in Sears Holdings-related channels. The perpetual license will be royalty-free until March 2032, which represents an estimated value of approximately $293.0 million, and 3% thereafter. The Craftsman results have been consolidated into the Company's Tools & Storage segment.

~~The Craftsman® brand acquisition was accounted for as a business combination. The purchase price allocation for Craftsman was completed during the first quarter of 2018.~~Nelson is complete. The measurement period adjustments recorded in ~~the first quarter of 2018~~2019 did not have a material impact onto the Company's condensed consolidated financial statements. The estimated fair value of identifiable net assets acquired, which includes $40.2 million of working capital and $418.0 million of intangible assets, is $482.6 million. The related goodwill is $726.6 million. The amount allocated to intangible assets includes $396.0 million of an indefinite-lived trade name. The useful life assigned to the customer relationships is 17 years.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business and the going concern nature of the Craftsman® brand. It is estimated that $442.7 million of goodwill will be deductible for tax purposes.

~~Refer to~~ ~~Note E, Acquisitions,~~ ~~of the Company's Form 10-K for the year ended December 30, 2017 for further discussion.~~Condensed Consolidated Financial Statements.

Other ~~2017~~2018 Acquisitions

During ~~2017,~~2018, the Company completed ~~four~~six smaller acquisitions for a total purchase price of ~~$182.9~~$105.1 million, net of cash ~~acquired, which are being consolidated into the Company's Tools & Storage and Security segments.~~acquired. The estimated ~~fair~~acquisition date value of the identifiable net assets acquired, which includes ~~$38.2~~$13.4 million of working capital and ~~$54.4~~$35.5 million of intangible assets, is ~~$89.4~~$38.1 million. The related goodwill is ~~$93.5~~$67.0 million. The amount allocated to intangible assets includes ~~$51.4~~$32.0 million for customer relationships. The useful lives assigned to ~~the customer relationships~~intangible assets range ~~between~~from 10 ~~and 15~~to 14 years.

The ~~purchase price allocation~~acquisition accounting for these acquisitions is substantially ~~complete. The Company~~complete with the exception of certain minor items and will ~~complete its purchase price allocation in~~be completed within the ~~third quarter of 2018. Any~~ measurement ~~period~~period. These adjustments ~~resulting from the finalization of the Company's purchase accounting assessment~~ are not expected to ~~be material.~~have a material impact on the Company’s consolidated financial statements.

ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISTIONS

Actual Impact from Acquisitions

The net sales and net ~~losses~~earnings (loss) from ~~2018~~2019 acquisitions included in the Company's Consolidated Statements of Operations and Comprehensive Income ~~are $66.1 million and $11.3 million, respectively,~~ for ~~both~~ the three and six months ended June ~~30, 2018. These amounts include~~29, 2019 are shown in the table below. The net earnings (loss) includes amortization relating to ~~inventory step-up and~~ intangible assets recorded upon acquisition, inventory step-up charges, transaction costs, and other integration-related costs.



(Millions of Dollars)	Second Quarter 2019		Year-to-Date 2019
Net sales	$	102.9	$	129.2
Net earnings (loss) attributable to common shareowners	$	0.4	$	(8.0	)

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the 2019 acquisitions had occurred on December 31, 2017 and the 2018 acquisitions had occurred on January 1, 2017. The pro-forma consolidated results are not necessarily indicative of what the Company’s consolidated net sales and net earnings would have been had the Company completed the acquisitions on ~~January 1, 2017.~~the aforementioned dates. In addition, the pro-forma consolidated results do not purport to project the future results of the Company.


	Second Quarter				Year-to-Date				Second Quarter				Year-to-Date
(Millions of Dollars, except per share amounts)	2018		2017		2018		2017		2019		2018		2019		2018
Net sales	$	3,651.4	$	3,394.1	$	6,930.2	$	6,505.4	$	3,761.3	$	3,748.0	$	7,171.0	$	7,123.4
Net earnings attributable to common shareowners	$	306.6	$	276.9	$	480.4	$	667.7	$	363.0	$	307.6	$	545.4	$	470.2
Diluted earnings per share	$	2.01	$	1.82	$	3.14	$	4.40	$	2.41	$	2.02	$	3.63	$	3.07

~~2018~~2019 Pro-forma Results

The ~~2018~~2019 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the ~~2018~~2019 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:

Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December ~~31, 2017~~30, 2018 to the acquisition date of ~~Nelson.~~IES Attachments.

Because the ~~2018~~2019 acquisitions were assumed to occur on ~~January 1,~~December 31, 2017, there were no ~~deal~~acquisition-related costs or inventory step-up ~~amortization~~charges factored into the ~~2018~~2019 pro-forma ~~year,~~period, as such expenses would have occurred in the first year following the ~~acquisition.~~assumed acquisition date.

~~2017~~2018 Pro-forma Results

The ~~2017~~2018 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the ~~2017~~2018 and ~~2018~~2019 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:

Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the ~~purchase price allocation~~acquisition accounting that would have been incurred from ~~January 1,~~December 31, 2017 to the acquisition dates ~~of Newell Tools and Craftsman~~for the 2018 acquisitions and from ~~January 1,~~December 31, 2017 to ~~July 1, 2017~~June 30, 2018 for the ~~remaining 2017 and 2018~~2019 acquisitions.

~~Additional depreciation~~Depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from ~~January 1,~~December 31, 2017 to the acquisition date of ~~Newell Tools~~Nelson and from ~~January 1,~~December 31, 2017 to ~~July 1, 2017~~June 30, 2018 for ~~Nelson.~~IES Attachments.

Additional expense for ~~deal~~acquisition-related costs and inventory step-up ~~which~~charges relating to the 2019 acquisitions, as such expenses would have been ~~amortized~~incurred from December 31, 2017 to June 30, 2018.

Because the 2018 acquisitions were assumed to occur on January 1, 2017, there were no acquisition-related costs or inventory step-up charges factored into the 2018 pro-forma period, as such expenses would have occurred in the ~~corresponding inventory was sold.~~first year following the assumed acquisition date.

G. GOODWILL

Changes in the carrying amount of goodwill by segment are as follows:



(Millions of Dollars)	Tools & Storage			Industrial		Security			Total
Balance December 29, 2018	$	5,154.3		$	1,679.7	$	2,122.7		$	8,956.7
Acquisition adjustments	(0.7		)	320.9		1.4			321.6
Foreign currency translation and other	3.9			2.6		(40.8		)	(34.3		)
Balance June 29, 2019	$	5,157.5		$	2,003.2	$	2,083.3		$	9,244.0

(Millions of Dollars) Tools & Storage Industrial Security Total
Balance December 30, 2017 $ 5,189.7
$ 1,454.4
$ 2,132.0
$ 8,776.1
Acquisition adjustments 40.8
203.9
44.0
288.7
Foreign currency translation (61.4 ) (3.8 ) (51.9 ) (117.1 )
Balance June 30, 2018 $ 5,169.1
$ 1,654.5
$ 2,124.1
$ 8,947.7

In accordance with ASC 350, Intangibles - Goodwill and Other, a portion of the goodwill associated with the Security segment was allocated to the aforementioned Sargent & Greenleaf divestiture based on the relative fair value of the business disposed of and the portion of the reporting unit that was retained. Accordingly, goodwill for the Security segment was reduced by

$33.8 million and included in the gain on sale of Sargent & Greenleaf in the second quarter of 2019. Refer to Note T, Divestitures, for further discussion.

H. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-term debt and financing arrangements at June ~~30, 2018~~29, 2019 and December ~~30, 2017~~29, 2018 are as follows:



		June 29, 2019																December 29, 2018
(Millions of Dollars)	Interest Rate	Original Notional		Unamortized Discount			Unamortized Gain/(Loss) Terminated Swaps ¹			Purchase Accounting FV Adjustment		Deferred Financing Fees			Carrying Value			Carrying Value²
Notes payable due 2021	3.40%	$	400.0	$	(0.1	)	$	8.4		$	—	$	(0.8	)	$	407.5		$	409.1
Notes payable due 2022	2.90%	754.3		(0.2		)	—			—		(2.1		)	752.0			751.6
Notes payable due 2026	3.40%	500.0		(0.7		)	—			—		(3.1		)	496.2			—
Notes payable due 2028	7.05%	150.0		—			9.8			9.6		—			169.4			170.4
Notes payable due 2028	4.25%	500.0		(0.3		)	—			—		(4.2		)	495.5			495.7
Notes payable due 2040	5.20%	400.0		(0.2		)	(31.2		)	—		(2.9		)	365.7			364.9
Notes payable due 2048	4.85%	500.0		(0.5		)	—			—		(5.5		)	494.0			494.4
Notes payable due 2052 (junior subordinated)	5.75%	750.0		—			—			—		(18.1		)	731.9			731.6
Notes payable due 2053 (junior subordinated)	7.08%	—		—			—			—		—			—			396.7
Other, payable in varying amounts through 2022	0.00% - 4.50%	—		—			—			—		—			—			7.9
Total long-term debt, including current maturities		$	3,954.3	$	(2.0	)	$	(13.0	)	$	9.6	$	(36.7	)	$	3,912.2		$	3,822.3
Less: Current maturities of long-term debt															(3.1		)	(2.5		)
Long-term debt															$	3,909.1		$	3,819.8

June 30, 2018 December 30, 2017
(Millions of Dollars) Interest Rate Original Notional Unamortized Discount
Unamortized Gain/(Loss) Terminated Swaps ¹
Purchase Accounting FV Adjustment Deferred Financing Fees Carrying Value
Carrying Value²
Notes payable due 2018 2.45% $ 632.5
$ —
$ —
$ —
$ (0.7 ) $ 631.8
$ 630.9
Notes payable due 2018 1.62% 345.0
—
—
—
(0.4 ) 344.6
344.1
Notes payable due 2021 3.40% 400.0
(0.1 ) 11.8
—
(1.1 ) 410.6
412.1
Notes payable due 2022 2.90% 754.3
(0.3 ) —
—
(2.7 ) 751.3
750.9
Notes payable due 2028 7.05% 150.0
—
10.9
10.6
—
171.5
172.6
Notes payable due 2040 5.20% 400.0
(0.2 ) (32.7 ) —
(3.0 ) 364.1
363.3
Notes payable due 2052 (junior subordinated) 5.75% 750.0
—
—
—
(18.7 ) 731.3
731.0
Notes payable due 2053 (junior subordinated) 5.75% 400.0
—
4.7
—
(8.0 ) 396.7
396.6
Other, payable in varying amounts through 2022 0.00% - 4.50% 8.2
—
—
—
—
8.2
4.2
Total long-term debt, including current maturities $ 3,840.0
$ (0.6 ) $ (5.3 ) $ 10.6
$ (34.6 ) $ 3,810.1
$ 3,805.7
Less: Current maturities of long-term debt (978.9 ) (977.5 )
Long-term debt $ 2,831.2
$ 2,828.2

¹Unamortized gain/(loss) associated with interest rate swaps are more fully discussed in Note I, Financial Instruments.

²~~Certain prior year amounts~~Finance lease balances as of December 29, 2018 have been ~~recast as a result of~~reclassified to lease liabilities in accordance with the adoption of the new ~~revenue standard.~~lease standard in the first quarter of 2019. Refer to Note B, New Accounting Standards~~, for further discussion.~~.

In ~~January 2017,~~March 2019, the Company ~~amended its~~issued $500.0 million of senior unsecured notes, maturing on March 1, 2026 ("2026 Term Notes"). The 2026 Term Notes will accrue interest at a fixed rate of 3.40% per annum with interest payable semi-annually in arrears. The 2026 Term Notes rank equally in right of payment with all of the Company's existing ~~$2.0~~and future unsecured and unsubordinated debt. The Company received net cash proceeds of $496.2 million which reflects the notional amount offset by a discount, underwriting expenses, and other fees associated with the transaction. The Company used the net proceeds from the offering for general corporate purposes, including repayment of other borrowings.

In February 2019, the Company redeemed all of the outstanding 2053 Junior Subordinated Debentures for $405.7 million representing 100% of the principal amount plus accrued and unpaid interest. The Company recognized a net pre-tax loss of $3.2 million from the redemption, which was comprised of a $7.8 million loss related to the write-off of deferred financing fees partially offset by a $4.6 million gain relating to an unamortized terminated interest rate swap as described in more detail in Note I, Financial Instruments.

The Company has a $3.0 billion commercial paper program ~~to increase the maximum amount of notes authorized to be issued to $3.0 billion and to include~~which includes Euro denominated borrowings in addition to U.S. Dollars. As of June ~~30, 2018,~~29, 2019, the Company had ~~$1.1 billion~~$1,454.2 million of borrowings outstanding, ~~against the Company’s $3.0 billion commercial paper program,~~ of which approximately ~~$924.5~~$909.5 million in Euro denominated commercial paper was designated as a Net Investment ~~Hedge~~Hedge. As of December 29, 2018, the Company had $373.0 million of borrowings outstanding, of which approximately $228.9 million in Euro denominated commercial paper was designated as ~~described in more detail in~~ a Net Investment Hedge. Refer to Note I, Financial Instruments,~~. As of December 30, 2017, the Company had no commercial paper borrowings outstanding.~~ for further discussion.

The Company has a five-year ~~$1.75~~$2.0 billion committed credit facility (the ~~“Credit~~“5 Year Credit Agreement”). Borrowings under the 5 Year Credit Agreement may ~~include~~be made in U.S. Dollars, upEuros or Pounds Sterling. A sub-limit amount of $653.3 million is designated for swing line advances which may be drawn in Euros pursuant to the ~~$1.75 billion commitment or in Euro or Pounds Sterling subject to a foreign currency sub-limit~~terms of ~~$400.0 million and~~the 5 Year Credit Agreement. Borrowings bear interest at a floating rate plus an applicable margin dependent upon the denomination of the ~~borrowing. Repayments~~borrowing and specific terms of the 5 Year Credit Agreement. The Company must ~~be made on December 18, 2020~~repay all advances under the 5 Year Credit Agreement by the earlier of September 12, 2023 or upon ~~an earlier termination date of the Credit Agreement, at the election of the Company.~~termination. The 5 Year Credit Agreement is designated to be a liquidity back-stop for

the Company's $3.0 billion U.S. Dollar and Euro commercial paper program. As of June ~~30, 2018~~29, 2019, and December ~~30, 2017,~~29, 2018, the Company had not drawn on its ~~existing~~ five-year ~~$1.75 billion~~ committed credit facility.

The Company ~~also~~ has a ~~364-day $1.25~~364-Day $1.0 billion committed credit facility (the ~~"2017~~“364 Day Credit ~~Agreement"~~Agreement”) executed in December 2017. The 2017 Credit Agreement consists of a $1.25 billion revolving credit loan and a sub-limit of an amount equal to the Euro equivalent of $400 million for swing line advances.. Borrowings under the ~~2017~~364 Day Credit Agreement may be made in U.S. Dollars or Euros ~~pursuant to the terms of the agreement,~~ and bear interest at a floating rate plus an applicable margin dependent onupon the denomination of the ~~borrowing. Repayments~~borrowing and pursuant to the terms of the 364 Day Credit Agreement. The Company must ~~be made~~repay all advances under the 364 Day Credit Agreement by ~~December 19, 2018~~the earlier of September 11, 2019 or upon ~~an earlier termination of the 2017 Credit Agreement at the election of the Company.~~termination. The Company ~~also has the option at the termination date to~~may, however, convert all advances outstanding upon termination into a term loan that shall be repaid in full no later than the first anniversary of the termination date provided ~~certain requirements are met.~~that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The ~~2017~~364 Day Credit Agreement serves as a liquidity back-stop for the Company’s $3.0 billion U.S. Dollar and Euro commercial paper program. As of June ~~30, 2018~~29, 2019, and December ~~30, 2017,~~29, 2018, the Company had not drawn on ~~this commitment.~~

~~In January 2017, the Company executed a 364-day $1.25 billion~~its 364-Day committed credit facility which consisted of a $1.25 billion revolving credit loan and a sub-limit of an amount equal to the Euro equivalent of $400 million for swing line advances. Borrowings under this credit agreement were made in U.S. Dollars or Euros, pursuant to the terms of the agreement, and bore interest at a floating rate dependent on the denomination of the borrowing. This credit agreement was terminated in December 2017 at the election of the Company..

I. FINANCIAL INSTRUMENTS

~~In the first quarter of 2018, the Company elected to early adopt ASU 2017-12,~~ ~~Derivatives And Hedging (Topic 815):Targeted Improvements to Accounting for Hedge Activities~~, which amends the hedge accounting recognition and presentation requirements of ASC 815. ASU 2017-12 requires the presentation and disclosure requirements to be applied prospectively and as a result, certain disclosures for the three and six month periods ending July 1, 2017 conform to the presentation and disclosure requirements prior to the adoption.

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and commodity prices. As part of the Company’s risk management program, a variety of financial instruments such as interest rate swaps, currency swaps, purchased currency options, foreign exchange contracts and commodity contracts, may be used to mitigate interest rate exposure, foreign currency exposure and commodity price exposure.

If the Company elects to do so and if the instrument meets the criteria specified in ASC 815, Derivatives and Hedging, management designates its derivative instruments as cash flow hedges, fair value hedges or net investment hedges. Generally, commodity price exposures are not hedged with derivative financial instruments and instead are actively managed through customer pricing initiatives, procurement-driven cost reduction initiatives and other productivity improvement projects. Financial instruments are not utilized for speculative purposes.

A summary of the fair values of the Company’s derivatives recorded in the Condensed Consolidated Balance Sheets at June ~~30, 2018~~29, 2019 and December ~~30, 2017~~29, 2018 is as follows:



(Millions of Dollars)	Balance Sheet Classification	June 29, 2019		December 29, 2018		Balance Sheet Classification	June 29, 2019		December 29, 2018
Derivatives designated as hedging instruments:
Interest Rate Contracts Cash Flow	LT other assets	$	—	$	—	LT other liabilities	$	28.4	$	—
Foreign Exchange Contracts Cash Flow	Other current assets	10.5		18.1		Accrued expenses	1.4		0.6
	LT other assets	0.8		—		LT other liabilities	0.6		—
Net Investment Hedge	Other current assets	34.0		5.7		Accrued expenses	8.1		1.5
	LT other assets	—		—		LT other liabilities	12.4		13.8
Non-derivative designated as hedging instrument:
Net Investment Hedge		—		—		Short-term borrowings	909.5		228.9
Total designated as hedging		$	45.3	$	23.8		$	960.4	$	244.8
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Other current assets	$	6.7	$	9.1	Accrued expenses	$	8.0	$	5.4
Total		$	52.0	$	32.9		$	968.4	$	250.2

(Millions of Dollars) Balance Sheet
Classification June 30, 2018 December 30, 2017 Balance Sheet
Classification June 30, 2018 December 30, 2017
Derivatives designated as hedging instruments:
Interest Rate Contracts Cash Flow Other current assets $ —
$ —
Accrued expenses $ 33.9
$ 55.7
Foreign Exchange Contracts Cash Flow Other current assets 7.3
4.1
Accrued expenses 5.4
33.4
LT other assets 1.8
—
LT other liabilities 1.0
5.2
Net Investment Hedge Other current assets 10.2
6.6
Accrued expenses 1.5
7.0
LT other assets —
—
LT other liabilities 15.8
5.8
Non-derivative designated as hedging instrument:
Net Investment Hedge —
—
Short-term borrowings 924.5
—
Total designated as hedging $ 19.3
$ 10.7
$ 982.1
$ 107.1
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts Other current assets $ 17.6
$ 7.3
Accrued expenses $ 21.3
$ 6.9
Total $ 36.9
$ 18.0
$ 1,003.4
$ 114.0

The counterparties to all of the above mentioned financial instruments are major international financial institutions. The Company is exposed to credit risk for net exchanges under these agreements, but not for the notional amounts. The credit risk is limited to the asset amounts noted above. The Company limits its exposure and concentration of risk by contracting with diverse financial institutions and does not anticipate non-performance by any of its counterparties. Further, as more fully discussed in Note M, Fair Value Measurements, the Company considers non-performance risk of its counterparties at each reporting period and adjusts the carrying value of these assets accordingly. The risk of default is considered remote.

During the six months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ cash flows related to derivatives, including those that are separately discussed below, resulted in net cash received of ~~$23.5~~$22.3 million and ~~$22.8~~$23.5 million, respectively.

CASH FLOW HEDGES

There were after-tax mark-to-market losses of ~~$57.3~~$44.8 million and ~~$112.6~~$26.8 million as of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, respectively, reported for cash flow hedge effectiveness in Accumulated other comprehensive loss. An after-tax loss of ~~$29.8~~$1.5 million is expected to be reclassified to earnings as the hedged transactions occur or as amounts are amortized within the next twelve months. The ultimate amount recognized will vary based on fluctuations of the hedged currencies and interest rates through the maturity dates.

The tables below detail pre-tax amounts of derivatives designated as cash flow hedges in Accumulated other comprehensive loss ~~for active derivatives~~ during the periods in which the underlying hedged transactions affected earnings for the three and six months ended June 29, 2019 and June 30, ~~2018 and July 1, 2017:~~

2018:


	Second Quarter 2018								Second Quarter 2019
(Millions of dollars)	Gain (Loss) Recorded in OCI		Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing		Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	3.8	Interest expense	$	—		$	—	$	(17.5	)	Interest expense	$	(4.1	)	$	—
Foreign Exchange Contracts	$	29.7	Cost of sales	$	(9.2	)	$	—	$	(2.5	)	Cost of sales	$	2.7		$	—



	Year-to-Date 2019
(Millions of Dollars)	Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	(28.4	)	Interest expense	$	(8.1	)	$	—
Foreign Exchange Contracts	$	4.5		Cost of sales	$	2.5		$	—



	Second Quarter 2018
(Millions of dollars)	Gain (Loss) Recorded in OCI		Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income (Effective Portion)			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	3.8	Interest expense	$	(3.8	)	$	—
Foreign Exchange Contracts	$	29.7	Cost of sales	$	(9.2	)	$	—


	Year-to-Date 2018								Year-to-Date 2018
(Millions of dollars)	Gain (Loss) Recorded in OCI		Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
(Millions of Dollars)									Gain (Loss) Recorded in OCI		Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	21.8	Interest expense	$	—		$	—	$	21.8	Interest expense	$	(7.6	)	$	—
Foreign Exchange Contracts	$	23.0	Cost of sales	$	(12.0	)	$	—	$	23.0	Cost of sales	$	(12.0	)	$	—

Second Quarter 2017
(Millions of dollars) Gain (Loss)
Recorded in OCI Classification of
Gain (Loss)
Reclassified from
OCI to Income Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion) Gain (Loss)
Recognized in
Income
(Ineffective Portion*)
Interest Rate Contracts $ (11.0 ) Interest expense $ —
$ —
Foreign Exchange Contracts $ (29.9 ) Cost of sales $ 5.2
$ —

Year-to-Date 2017
(Millions of dollars) Gain (Loss)
Recorded in OCI Classification of
Gain (Loss)
Reclassified from
OCI to Income Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion) Gain (Loss) Recognized in Income (Ineffective Portion*)
Interest Rate Contracts $ (7.2 ) Interest expense $ —
$ —
Foreign Exchange Contracts $ (38.6 ) Cost of sales $ 9.7
$ —

* Includes ineffective portion and amount excluded from effectiveness testing on derivatives.

A summary of the pre-tax effect of cash flow hedge accounting on the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 29, 2019 and June 30, 2018 is as follows:



	Second Quarter 2019						Year-to-Date 2019
(Millions of Dollars)	Cost of Sales			Interest Expense			Cost of Sales			Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the cash flow hedges are recorded	$	2,461.5		$	72.4		$	4,689.5		$	146.8
Gain (loss) on cash flow hedging relationships:
Foreign Exchange Contracts:
Hedged Items	$	(2.7	)	$	—		$	(2.5	)	$	—
Gain (loss) reclassified from OCI into Income	$	2.7		$	—		$	2.5		$	—
Interest Rate Swap Agreements:
Gain (loss) reclassified from OCI into Income ¹	$	—		$	(4.1	)	$	—		$	(8.1	)


	Second Quarter 2018						Year-to-Date 2018						Second Quarter 2018						Year-to-Date 2018
(Millions of dollars)	Cost of Sales			Interest Expense			Cost of Sales			Interest Expense
(Millions of Dollars)													Cost of Sales			Interest Expense			Cost of Sales			Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the cash flow hedges are recorded	$	2,356.5		$	69.0		$	4,400.1		$	132.2		$	2,356.5		$	69.0		$	4,400.1		$	132.2
Gain (loss) on cash flow hedging relationships:
Foreign Exchange Contracts:
Hedged Items	$	9.2		$	—		$	12.0		$	—		$	9.2		$	—		$	12.0		$	—
Gain (loss) reclassified from OCI into Income	$	(9.2	)	$	—		$	(12.0	)	$	—		$	(9.2	)	$	—		$	(12.0	)	$	—
Interest Rate Swap Agreements:
Gain (loss) reclassified from OCI into Income ¹	$	—		$	(3.8	)	$	—		$	(7.6	)	$	—		$	(3.8	)	$	—		$	(7.6	)

¹Inclusive of the gain/loss amortization on terminated derivative financial instruments.

For the three and six months ended July 1, 2017, the hedged items’ impact to the Consolidated Statements of Operations and Comprehensive Income was a loss of $5.2 million and $9.7 million, respectively in Cost of sales. There was no impact related to the interest rate contracts' hedged items for all periods presented.

An after-tax loss of ~~$7.1~~$1.1 million and ~~an after-tax gain of $1.0~~$7.1 million was reclassified from Accumulated other comprehensive loss into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) for the three months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively. An after-tax loss of ~~$11.7~~$3.2 million and ~~an after-tax gain of $1.4~~$11.7 million was reclassified from Accumulated other comprehensive loss into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) for the six months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively, during the periods in which the underlying hedged transactions affected earnings.

Interest Rate Contracts: The Company enters into interest rate swap agreements in order to obtain the lowest cost source of funds within a targeted range of variable to fixed-debt proportions. AtDuring the six months ended June ~~30, 2018 and December 30, 2017,~~29, 2019, the Company ~~had~~entered into forward starting interest rate swaps ~~on $400~~totaling $650.0 million ~~of future debt issuances which were executed in 2014. The objective of the hedges is~~ to offset the expected variability on future interest rate payments associated with ~~the interest rate on~~ debt instruments expected to be issued in ~~2018. Gains or losses on~~ the future. During the six months ended June 29, 2019, swaps ~~are~~with a notional amount of $250.0 million matured resulting in a loss of $1.0 million, which was recorded in Accumulated other comprehensive loss and will be ~~subsequently reclassified into~~amortized to earnings as interest expense over future periods. The cash flows stemming from the maturity of such interest rate swaps designated as cash flow hedges are presented within other financing activities in the ~~future interest expense on debt is recognized in earnings.~~Condensed Consolidated Statements of Cash Flows. As of June 29, 2019, the Company had $400.0 million of forward starting swaps outstanding. As of December 29, 2018, there were no active forward starting swaps designated as cash flow hedges.

Foreign Currency Contracts

Forward Contracts: Through its global businesses, the Company enters into transactions and makes investments denominated in multiple currencies that give rise to foreign currency risk. The Company and its subsidiaries regularly purchase inventory from subsidiaries with functional currencies different than their own, which creates currency-related volatility in the Company’s results of operations. The Company utilizes forward contracts to hedge these forecasted purchases and sales of inventory. Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Cost of sales as the hedged item affects earnings. There are no components excluded from the assessment of effectiveness for these contracts. At June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, the notional value of forward currency contracts outstanding was ~~$264.1~~$618.3 million ~~and $559.9 million, respectively,~~ maturing on various dates through ~~2018.~~2020 and $240.0 million maturing on various dates through 2019, respectively.

Purchased Option Contracts: The Company and its subsidiaries have entered into various intercompany transactions whereby the notional values are denominated in currencies other than the functional currencies of the party executing the trade. In order to better match the cash flows of its intercompany obligations with cash flows from operations, the Company enters into purchased option contracts. Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Cost of sales as the hedged item affects earnings. There are no components excluded from the assessment of effectiveness for these contracts. As of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, the notional value of purchased option contracts was ~~$375.5~~$166.0 million ~~and $400.0 million, respectively,~~ maturing on various dates through ~~2019.~~

2020 and $370.0 million maturing on various dates through 2019, respectively.

FAIR VALUE HEDGES

Interest Rate Risk: In an effort to optimize the mix of fixed versus floating rate debt in the Company’s capital structure, the Company enters into interest rate swaps. In prior years, the Company entered into interest rate swaps related to certain of its notes payable which were subsequently terminated. Amortization of the gain/loss on previously terminated swaps is reported as a reduction of interest expense. Prior to termination, the changes in the fair value of the swaps and the offsetting changes in fair value related to the underlying notes were recognized in earnings. As of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, the Company did not have any active fair value interest rate swaps.

A summary of the pre-tax effect of fair value hedge accounting on the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June ~~30, 2018~~29, 2019 is as follows:

(Millions of dollars)
Second Quarter 2018 Interest Expense Year-to-Date 2018
Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded $ 69.0
$ 132.2
Amortization of gain/loss on terminated swaps $ 0.8
$ 1.6



(Millions of Dollars)	Second Quarter 2019 Interest Expense			Year-to-Date 2019 Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded	$	72.4		$	146.8
Amortization of gain on terminated swaps	$	(0.7	)	$	(6.1	)

~~Amortization~~



(Millions of Dollars)	Second Quarter 2018 Interest Expense			Year-to-Date 2018 Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded	$	69.0		$	132.2
Amortization of gain on terminated swaps	$	(0.8	)	$	(1.6	)

In February 2019, the Company redeemed all of the ~~gain/loss~~outstanding 2053 Junior Subordinated Debentures as discussed in Note H, Long-Term Debt and Financing Arrangements. As a result, the Company recorded a pre-tax gain of $4.6 million relating to the remaining unamortized gain on ~~terminated swaps of $0.8 million and $1.6 million is reported as a reduction of interest expense for the three and six months ended July 1, 2017, respectively.~~swap termination related to this debt.

A summary of the amounts recorded onin the ~~balance sheet~~Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges ~~for the six months ended~~as of June ~~30,~~29, 2019 and December 29, 2018 is as follows:


	Year-to-Date 2018						June 29, 2019
(Millions of dollars)	Carrying Amount of Hedged Liability		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(Millions of Dollars)							Carrying Amount of Hedged Liability ⁽¹⁾		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
Current Maturities of Long-Term Debt	$	—	Terminated Swaps	$	3.2		$	3.1	Terminated Swaps	$	3.1
Long-Term Debt	$	—	Terminated Swaps	$	(8.4	)	$	3,909.1	Terminated Swaps	$	(16.0	)



	December 29, 2018
(Millions of Dollars)	Carrying Amount of Hedged Liability ⁽¹⁾		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
Current Maturities of Long-Term Debt	$	2.5	Terminated Swaps	$	2.1
Long-Term Debt	$	3,819.8	Terminated Swaps	$	(10.0	)

⁽¹⁾^{Represents hedged items no longer designated in qualifying fair value hedging relationships.}

NET INVESTMENT HEDGES

The Company utilizes net investment hedges to offset the translation adjustment arising from re-measurement of its investment in the assets and liabilities of its foreign subsidiaries. The total after-tax amounts in Accumulated other comprehensive loss were ~~a gain~~gains of ~~$46.8~~$72.2 million and ~~$3.4~~$63.3 million at June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, respectively.

As of June ~~30, 2018,~~29, 2019, the Company had foreign exchange forward contracts maturing on various dates in ~~2018~~2019 with notional values totaling ~~$701.4~~$326.1 million outstanding hedging a portion of its British pound sterling, Swedish krona, and Euro denominated net investments; cross currency swaps with notional values totaling $1.5 billion maturing on various dates through 2023 hedging a portion of its Japanese yen, Euro, Swedish krona and ~~Canadian dollar~~Swiss franc denominated net investments; an option contract with a notional value totaling $35.1 million maturing in 2019 hedging a portion of its Mexican peso denominated net investment; and Euro denominated commercial paper with a value of $909.5 million maturing in 2019 hedging a portion of its Euro denominated net investments. As of December 29, 2018, the Company had foreign exchange contracts maturing on various dates through 2019 with notional values totaling $262.4 million outstanding hedging a portion of its British pound sterling, Swedish krona and Euro denominated net investments; a cross currency swap with a notional value totaling $250.0 million maturing in 2023 hedging a portion of its Japanese yen denominated net investment; an option contract with a notional value totaling ~~$36.2~~$35.1 million maturing in ~~2018~~2019 hedging a portion of its Mexican peso denominated net investment; and Euro denominated commercial paper with a value of ~~$924.5~~$228.9 million maturing in ~~2018~~2019 hedging a portion of its Euro denominated net investments. As of December 30, 2017, the Company had foreign exchange contracts maturing on various dates through 2018 with notional values totaling $751.2 million outstanding hedging a portion of its British pound sterling, Mexican peso, Swedish krona, Euro and Canadian dollar denominated net investments, and a cross currency swap with a notional value totaling $250.0 million maturing in 2023 hedging a portion of its Japanese yen denominated net investment.

Maturing foreign exchange contracts resulted in net cash received of ~~$20.3~~$3.9 million and ~~net cash paid of $3.7~~$20.3 million for the six months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively.

Gains and losses on net investment hedges remain in Accumulated other comprehensive income (loss) until disposal of the underlying assets. ~~Upon adoption of ASU 2017-12, gains~~Gains and losses representing components excluded from the assessment of effectiveness are recognized in earnings in Other, net on a straight-line basis over the term of the hedge. ~~Prior to the adoption of ASU 2017-12, no components were excluded from the assessment of effectiveness. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

The pre-tax gain or loss from fair value changes for the three and six months ended June 29, 2019 and June 30, 2018 ~~and July 1, 2017~~ was as follows:



	Second Quarter 2019
(Millions of Dollars)	Total Gain (Loss) Recorded in OCI			Excluded Component Recorded in OCI		Income Statement Classification	Total Gain (Loss) Reclassified from OCI to Income		Excluded Component Amortized from OCI to Income
Forward Contracts	$	7.4		$	—	Other, net	$	1.3	$	1.3
Cross Currency Swap	$	(2.4	)	$	10.6	Other, net	$	6.8	$	6.8
Option Contracts	$	(1.1	)	$	—	Other, net	$	—	$	—
Non-derivative designated as Net Investment Hedge	$	(11.4	)	$	—	Other, net	$	—	$	—



	Year-to-Date 2019
(Millions of Dollars)	Total Gain (Loss) Recorded in OCI			Excluded Component Recorded in OCI		Income Statement Classification	Total Gain (Loss) Reclassified from OCI to Income		Excluded Component Amortized from OCI to Income
Forward Contracts	$	6.2		$	4.2	Other, net	$	2.3	$	2.3
Cross Currency Swap	$	23.5		$	24.0	Other, net	$	14.5	$	14.5
Option Contracts	$	(2.1	)	$	—	Other, net	$	—	$	—
Non-derivative designated as Net Investment Hedge	$	4.2		$	—	Other, net	$	—	$	—



	Second Quarter 2018
(Millions of Dollars)	Total Gain (Loss) Recorded in OCI		Excluded Component Recorded in OCI		Income Statement Classification	Total Gain (Loss) Reclassified from OCI to Income		Excluded Component Amortized from OCI to Income
Forward Contracts	$	48.7	$	2.3	Other, net	$	2.3	$	2.3
Cross Currency Swap	$	1.4	$	1.4	Other, net	$	1.7	$	1.7
Option Contracts	$	2.6	$	—	Other, net	$	—	$	—
Non-derivative designated as Net Investment Hedge	$	51.5	$	—	Other, net	$	—	$	—

Second Quarter 2018
(Millions of Dollars) Total Gain (Loss) Recorded in OCI Excluded Component Recorded in OCI Income Statement Classification Total Gain (Loss) Reclassified from OCI to Income Excluded Component Amortized from OCI to Income
Forward Contracts $ 48.7
$ 2.3
Other, net $ 2.3
$ 2.3
Cross Currency Swap $ 1.4
$ 1.4
Other, net $ 1.7
$ 1.7
Option Contracts $ 2.6
$ —
Other, net $ —
$ —
Non-derivative designated as Net Investment Hedge $ 51.5
$ —
Other, net $ —
$ —



	Year-to-Date 2018
(Millions of Dollars)	Total Gain (Loss) Recorded in OCI			Excluded Component Recorded in OCI		Income Statement Classification	Total Gain (Loss) Reclassified from OCI to Income		Excluded Component Amortized from OCI to Income
Forward Contracts	$	22.2		$	6.2	Other, net	$	4.1	$	4.1
Cross Currency Swap	$	2.9		$	8.3	Other, net	$	3.4	$	3.4
Option Contracts	$	(0.9	)	$	—	Other, net	$	—	$	—
Non-derivative designated as Net Investment Hedge	$	38.9		$	—	Other, net	$	—	$	—

Year-to-Date 2018
(Millions of Dollars) Total Gain (Loss) Recorded in OCI Excluded Component Recorded in OCI Income Statement Classification Total Gain (Loss) Reclassified from OCI to Income Excluded Component Amortized from OCI to Income
Forward Contracts $ 22.2
$ 6.2
Other, net $ 4.1
$ 4.1
Cross Currency Swap $ 2.9
$ 8.3
Other, net $ 3.4
$ 3.4
Option Contracts $ (0.9 ) $ —
Other, net $ —
$ —
Non-derivative designated as Net Investment Hedge $ 38.9
$ —
Other, net $ —
$ —

Second Quarter 2017 Year-to-Date 2017
(Millions of Dollars) Amount
Recorded in OCI
Gain (Loss) Effective Portion
Recorded in
Income
Statement Ineffective
Portion*
Recorded in Income
Statement Amount
Recorded in OCI
Gain (Loss) Effective Portion
Recorded in
Income
Statement Ineffective
Portion*
Recorded in Income
Statement
Other, net $ (73.3 ) $ —
$ —
$ (89.0 ) $ —
$ —

*Includes ineffective portion and amount excluded from effectiveness testing.

UNDESIGNATED HEDGES

Foreign Exchange Contracts: Foreign exchange forward contracts are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities (such as affiliate loans, payables and receivables). The objective is to minimize the impact of foreign currency fluctuations on operating results. The total notional amount of the forward contracts outstanding at June ~~30, 2018~~29, 2019 was ~~$1.4~~$1.0 billion, maturing on various dates through ~~2018.~~2019. The total notional amount of the forward contracts outstanding at December ~~30, 2017~~29, 2018 was $1.0 billion, maturing on various dates through ~~2018.~~2019. The ~~impacts of~~gain (loss)

recorded in income from changes in the fair value related to derivatives not designated as hedging instruments under ASC 815 for the three and six months ended June 29, 2019 and June 30, 2018 ~~and July 1, 2017~~ are as follows:



(Millions of Dollars)	Income Statement Classification	Second Quarter 2019			Year-to-Date 2019			Second Quarter 2018			Year-to-Date 2018
Foreign Exchange Contracts	Other, net	$	(3.6	)	$	(1.3	)	$	(2.2	)	$	14.9

(Millions of Dollars) Income Statement
Classification Second Quarter 2018
Amount of Gain (Loss)
Recorded in Income on
Derivative Year-to-Date 2018
Amount of Gain (Loss)
Recorded in Income on
Derivative
Foreign Exchange Contracts Other, net $ (2.2 ) $ 14.9

(Millions of Dollars) Income Statement
Classification Second Quarter 2017
Amount of Gain (Loss)
Recorded in Income on
Derivative Year-to-Date 2017
Amount of Gain (Loss)
Recorded in Income on
Derivative
Foreign Exchange Contracts Other, net $ 1.1
$ 29.7

J. EQUITY ARRANGEMENTS

In April 2018, the Company repurchased 1,399,732 shares of common stock for approximately $200.0 million. In July 2018, the Company repurchased 2,086,792 shares of common stock for approximately $300.0 million.

In March 2018, the Company purchased from a financial institution “at-the-money” capped call options with an approximate term of three years, on 3.2 million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate premium of $57.3 million, or an average of $17.96 per share. The premium paid was recorded as a reduction of Shareowners’ equity. The purpose of the capped call options is to hedge the risk of stock price appreciation between the lower and upper strike prices of the capped call options for a future share repurchase.

The capped call ~~has~~had an initial lower strike price of $156.86 and an upper strike price of $203.92, which iswas approximately 30% higher than the closing price of the Company's common stock on March 13, 2018. As of June ~~30, 2018, there has been no change~~29, 2019, due to the ~~upper and~~customary anti-dilution provisions, the capped call transactions had an adjusted lower strike ~~prices.~~price of $156.72 and an adjusted upper strike price of $203.74. The aggregate fair value of the options at June ~~30, 2018~~29, 2019 was ~~$34.8~~$35.5 million.

In March 2015, the Company entered into a forward share purchase contract with a financial counterparty for 3,645,510 shares of common stock. The contract obligates the Company to pay $350.0 million, plus an additional amount related to the forward component of the contract. In June 2018, the Company amended the settlement date to April 2021, or earlier at the Company's option. The reduction of common shares outstanding was recorded at the inception of the forward share purchase contract in March 2015 and factored into the calculation of weighted-average shares outstanding at that time.

$750 Million Equity Units and Capped Call Transactions

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“$750 million Equity Units”). Each unit has a stated amount of $100 and initially consists of a three-year forward stock purchase contract (“2020 Purchase Contracts”) for the purchase of a variable number of shares of common stock, on May 15, 2020, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series C Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series C Preferred Stock”). The Company received approximately ~~$727.5~~$726.0 million in net cash proceeds from the $750 million Equity Units net of offering expenses and underwriting costs and commissions, ~~before offering expenses,~~ and issued 750,000 shares of Series C Preferred Stock, recording $750.0 million in preferred stock. The proceeds were used for general corporate purposes, including repayment of short-term borrowings. The Company also used $25.1 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below.

Convertible Preferred Stock

In May 2017, the Company issued 750,000 shares of Series C Preferred Stock, without par, with a liquidation preference of $1,000 per share. The convertible preferred stock will initially not bear any dividends and the liquidation preference of the convertible preferred stock will not accrete. The convertible preferred stock has no maturity date, and will remain outstanding unless converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock will generally have no voting rights.

The Series C Preferred Stock is pledged as collateral to support holders’ purchase obligations under the 2020 Purchase Contracts and can be remarketed. In connection with any successful remarketing, the Company may (but is not required to) modify certain terms of the convertible preferred stock, including the dividend rate, the conversion rate, and the earliest redemption date. After any successful remarketing in connection with which the dividend rate on the convertible preferred stock is increased, the Company will pay cumulative dividends on the convertible preferred stock, if declared by the board of directors, quarterly in arrears from the applicable remarketing settlement date.

On and after May 15, 2020, the Series C Preferred Stock may be converted into common stock at the option of the holder. The initial conversion rate was 6.1627 shares of common stock per one share of Series C Preferred Stock, which iswas equivalent to an initial conversion price of approximately $162.27 per share of common stock. As of June ~~30, 2018,~~29, 2019, due to the customary anti-dilution provisions, the conversion rate was ~~6.1709,~~6.1859, equivalent to a conversion price of approximately ~~$162.05~~$161.66 per share of common stock. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or a combination thereof.

The Company may not redeem the Series C Preferred Stock prior to June 22, 2020. At the election of the Company, on or after June 22, 2020, the Company may redeem for cash, all or any portion of the outstanding shares of the Series C Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid dividends. If the Company calls the Series C Preferred Stock for redemption, holders may convert their shares immediately preceding the redemption date.

2020 Purchase Contracts

The 2020 Purchase Contracts obligate the holders to purchase, on May 15, 2020, for a price of $100 in cash, a maximum number of ~~5.4~~5.5 million shares of the Company’s common stock (subject to customary anti-dilution adjustments). The 2020 Purchase Contract holders may elect to settle their obligation early, in cash. The Series C Preferred Stock is pledged as collateral to guarantee the holders’ obligations to purchase common stock under the terms of the 2020 Purchase Contracts. The initial settlement rate determining the number of shares that each holder must purchase will not exceed the maximum settlement rate, and is determined over a market value averaging period immediately preceding May 15, 2020.

The initial maximum settlement rate of 0.7241 was calculated using an initial reference price of $138.10, equal to the last reported sale price of the Company's common stock on May 11, 2017. As of June ~~30, 2018,~~29, 2019, due to the customary anti-dilution provisions, the maximum settlement rate was ~~0.7251,~~0.7268, equivalent to a reference price of ~~$137.92.~~$137.59. If the applicable market value of the Company's common stock is less than or equal to the reference price, the settlement rate will be the maximum settlement rate; and if the applicable market value of common stock is greater than the reference price, the settlement rate will be a number of shares of the Company's common stock equal to $100 divided by the applicable market value. Upon settlement of the 2020 Purchase Contracts, the Company will receive additional cash proceeds of $750 million.

The Company will ~~make quarterly payments ("Contracts Adjustment Payments") to~~pay the holders of the 2020 Purchase Contracts quarterly payments ("Contracts Adjustment Payments") at a rate of 5.375% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, ~~commencing~~which commenced August 15, 2017. The $117.1 million present value of the Contract Adjustment Payments reduced Shareowners’ Equity at inception. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between the cash payments and the present value will accrete to interest expense, approximately $1.3 million per year over the three-year term. As of June ~~30, 2018,~~29, 2019, the present value of the Contract Adjustment Payments was ~~$78.3~~$39.2 million.

The holders can settle the purchase contracts early, for cash, subject to certain exceptions and conditions in the prospectus supplement. Upon early settlement of any purchase contracts, the Company will deliver the number of shares of its common stock equal to 85% of the number of shares of common stock that would have otherwise been deliverable.

~~2017~~ Capped Call Transactions

In order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series C Preferred Stock, to the extent that the conversion value of the convertible preferred stock exceeds its liquidation preference, the Company entered into capped call transactions with three major financial ~~institutions.~~institutions (the "counterparties").

The capped call transactions have a term of approximately three years and are intended to cover the number of shares issuable upon conversion of the Series C Preferred Stock. Subject to customary anti-dilution adjustments, the capped call had an initial lower strike price of $162.27, which corresponds to the minimum 6.1627 settlement rate of the Series C Preferred Stock, and an upper strike price of $179.53, which is approximately 30% higher than the closing price of the Company's common stock on May 11, 2017. As of June ~~30, 2018,~~29, 2019, due to the customary anti-dilution provisions, the capped call transactions had an adjusted lower strike price of ~~$162.05~~$161.66 and an adjusted upper strike price of ~~$179.29.~~$178.85.

The capped call transactions may be settled by net share settlement (the default settlement method) or, at the Company’s option and subject to certain conditions, cash settlement, physical settlement or modified physical settlement. The number of shares the Company will receive will be determined by the terms of the contracts using a volume-weighted-average price calculation for the market value of the Company's common stock, over an averaging period. The market value determined will then be measured against the applicable strike price of the capped call transactions. The Company expects the capped call transactions to offset the potential dilution upon conversion of the Series C Preferred Stock if the calculated market value is greater than the lower strike price but less than or equal to the upper strike price of the capped call transactions. Should the calculated market value exceed the upper strike price of the capped call transactions, the dilution mitigation will be limited based on such capped value as determined under the terms of the contracts.

With respect to the impact on the Company, the ~~2017~~ capped call transactions and $750 million Equity Units, when taken together, result in the economic equivalent of having the conversion price on $750 million Equity Units at ~~$179.29,~~$178.85, the upper strike price of the capped call as of June ~~30, 2018.~~29, 2019.

~~In May 2017, the~~The Company paid $25.1 million, or an average of $5.43 per option, to enter into capped call transactions on 4.6 million shares of common stock. The $25.1 million premium paid was a reduction of Shareowners’ Equity. The aggregate fair value of the options at June ~~30, 2018~~29, 2019 was ~~$16.2~~$19.5 million.

K. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables summarize the changes in the balances for each component of Accumulated other comprehensive loss:



(Millions of Dollars)	Currency translation adjustment and other			Unrealized (losses) gains on cash flow hedges, net of tax			Unrealized gains (losses) on net investment hedges, net of tax			Pension (losses) gains, net of tax			Total
Balance - December 29, 2018	$	(1,481.2	)	$	(26.8	)	$	63.3		$	(369.6	)	$	(1,814.3	)
Other comprehensive income (loss) before reclassifications	2.8			(21.2		)	21.6			0.8			4.0
Reclassification adjustments to earnings	—			3.2			(12.7		)	5.8			(3.7		)
Net other comprehensive income (loss)	2.8			(18.0		)	8.9			6.6			0.3
Balance - June 29, 2019	$	(1,478.4	)	$	(44.8	)	$	72.2		$	(363.0	)	$	(1,814.0	)

(Millions of Dollars)
Currency translation adjustment and other¹
Unrealized gains (losses) on cash flow hedges, net of tax Unrealized gains (losses) on net investment hedges, net of tax Pension gains (losses), net of tax Total
Balance - December 30, 2017 $ (1,108.2 ) $ (112.6 ) $ 3.4
$ (371.7 ) $ (1,589.1 )
Other comprehensive (loss) income before reclassifications (294.9 ) 43.6
49.3
7.1
(194.9 )
Reclassification adjustments to earnings —
11.7
(5.9 ) 5.8
11.6
Net other comprehensive (loss) income (294.9 ) 55.3
43.4
12.9
(183.3 )
Balance - June 30, 2018 $ (1,403.1 ) $ (57.3 ) $ 46.8
$ (358.8 ) $ (1,772.4 )

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~



(Millions of Dollars)	Currency translation adjustment and other			Unrealized (losses) gains on cash flow hedges, net of tax			Unrealized gains (losses) on net investment hedges, net of tax			Pension (losses) gains, net of tax			Total
Balance - December 30, 2017	$	(1,108.2	)	$	(112.6	)	$	3.4		$	(371.7	)	$	(1,589.1	)
Other comprehensive (loss) income before reclassifications	(294.9		)	43.6			49.3			7.1			(194.9		)
Reclassification adjustments to earnings	—			11.7			(5.9		)	5.8			11.6
Net other comprehensive (loss) income	(294.9		)	55.3			43.4			12.9			(183.3		)
Balance - June 30, 2018	$	(1,403.1	)	$	(57.3	)	$	46.8		$	(358.8	)	$	(1,772.4	)

(Millions of Dollars)
Currency translation adjustment and other¹
Unrealized gains (losses) on cash flow hedges, net of tax Unrealized gains (losses) on net investment hedges, net of tax Pension gains (losses), net of tax Total
Balance - December 31, 2016 $ (1,586.7 ) $ (46.3 ) $ 88.6
$ (377.2 ) $ (1,921.6 )
Other comprehensive income (loss) before reclassifications 298.0
(44.7 ) (57.8 ) (20.3 ) 175.2
Adjustments related to sales of businesses 4.7
—
—
2.6
7.3
Reclassification adjustments to earnings —
(1.4 ) —
14.9
13.5
Net other comprehensive income (loss) 302.7
(46.1 ) (57.8 ) (2.8 ) 196.0
Balance - July 1, 2017 $ (1,284.0 ) $ (92.4 ) $ 30.8
$ (380.0 ) $ (1,725.6 )

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

The reclassifications out of Accumulated other comprehensive loss for the six months ended June 29, 2019 and June 30, 2018 ~~and July 1, 2017~~ were as follows:



(Millions of Dollars)	2019			2018			Affected line item in Consolidated Statements of Operations And Comprehensive Income
Realized gains (losses) on cash flow hedges	$	2.5		$	(12.0	)	Cost of sales
Realized losses on cash flow hedges	(8.1		)	(7.6		)	Interest expense
Total before taxes	$	(5.6	)	$	(19.6	)
Tax effect	2.4			7.9			Income taxes
Realized losses on cash flow hedges, net of tax	$	(3.2	)	$	(11.7	)

Realized gains on net investment hedges	$	16.8		$	7.5		Other, net
Tax effect	(4.1		)	(1.6		)	Income taxes
Realized gains on net investment hedges, net of tax	$	12.7		$	5.9

Amortization of defined benefit pension items:
Actuarial losses and prior service costs / credits	$	(7.7	)	$	(7.8	)	Other, net
Tax effect	1.9			2.0			Income taxes
Amortization of defined benefit pension items, net of tax	$	(5.8	)	$	(5.8	)

(Millions of Dollars) 2018 2017 Affected line item in Consolidated Statements of Operations And Comprehensive Income
Realized gains (losses) on cash flow hedges $ (12.0 ) $ 9.7
Cost of sales
Realized gains (losses) on cash flow hedges (7.6 ) (7.6 ) Interest expense
Total before taxes $ (19.6 ) $ 2.1

Tax effect 7.9
(0.7 ) Income taxes
Realized gains (losses) on cash flow hedges, net of tax $ (11.7 ) $ 1.4

Realized gains (losses) on net investment hedges $ 7.5
$ —
Other, net
Tax effect (1.6 ) —
Income taxes
Realized gains (losses) on net investment hedges, net of tax $ 5.9
$ —

Amortization of defined benefit pension items:
Actuarial losses and prior service costs / credits $ (7.8 ) $ (8.0 ) Other, net
Settlement loss —
(12.8 ) Other, net
Total before taxes $ (7.8 ) $ (20.8 )
Tax effect 2.0
5.9
Income taxes
Amortization of defined benefit pension items, net of tax $ (5.8 ) $ (14.9 )

L. NET PERIODIC BENEFIT COST — DEFINED BENEFIT PLANS

Following are the components of net periodic pension expense (benefit) ~~expense~~ for the three and six months ended June 29, 2019 and June 30, 2018 ~~and~~ ~~July 1, 2017~~:


	Second Quarter																		Second Quarter
	Pension Benefits												Other Benefits						Pension Benefits												Other Benefits
	U.S. Plans						Non-U.S. Plans						All Plans						U.S. Plans						Non-U.S. Plans						All Plans
(Millions of Dollars)	2018			2017			2018			2017			2018			2017			2019			2018			2019			2018			2019			2018
Service cost	$	2.0		$	2.1		$	3.8		$	3.3		$	0.2		$	0.2		$	3.2		$	2.0		$	3.7		$	3.8		$	—		$	0.2
Interest cost	11.0			10.9			7.2			7.1			0.4			0.3			11.7			11.0			7.6			7.2			0.4			0.4
Expected return on plan assets	(17.5		)	(16.1		)	(11.8		)	(11.2		)	—			—			(15.5		)	(17.5		)	(11.4		)	(11.8		)	—			—
Amortization of prior service cost (credit)	0.3			0.2			(0.2		)	(0.3		)	(0.4		)	(0.4		)	0.3			0.3			(0.2		)	(0.2		)	(0.4		)	(0.4		)
Amortization of net loss	2.0			2.3			2.3			2.3			—			—			2.0			2.0			2.2			2.3			—			—
Settlement / curtailment loss	—			—			0.1			0.3			—			—			—			—			0.1			0.1			—			—
Net periodic pension (benefit) expense	$	(2.2	)	$	(0.6	)	$	1.4		$	1.5		$	0.2		$	0.1
Net periodic pension expense (benefit)																			$	1.7		$	(2.2	)	$	2.0		$	1.4		$	—		$	0.2


	Year-to-Date																		Year-to-Date
	Pension Benefits												Other Benefits						Pension Benefits												Other Benefits
	U.S. Plans						Non-U.S. Plans						All Plans						U.S. Plans						Non-U.S. Plans						All Plans
(Millions of Dollars)	2018			2017			2018			2017			2018			2017			2019			2018			2019			2018			2019			2018
Service cost	$	3.8		$	4.4		$	7.7		$	6.6		$	0.3		$	0.3		$	6.2		$	3.8		$	7.4		$	7.7		$	0.1		$	0.3
Interest cost	21.4			21.6			14.7			14.1			0.8			0.7			23.5			21.4			15.3			14.7			0.8			0.8
Expected return on plan assets	(34.3		)	(32.2		)	(24.0		)	(22.2		)	—			—			(30.9		)	(34.3		)	(23.0		)	(24.0		)	—			—
Amortization of prior service cost (credit)	0.5			0.5			(0.6		)	(0.6		)	(0.7		)	(0.7		)	0.5			0.5			(0.4		)	(0.6		)	(0.7		)	(0.7		)
Amortization of net loss	3.9			4.2			4.7			4.6			—			—
Amortization of net loss (gain)																			4.0			3.9			4.4			4.7			(0.1		)	—
Settlement / curtailment loss	—			—			0.2			12.8			—			—			—			—			0.2			0.2			—			—
Net periodic pension (benefit) expense	$	(4.7	)	$	(1.5	)	$	2.7		$	15.3		$	0.4		$	0.3
Net periodic pension expense (benefit)																			$	3.3		$	(4.7	)	$	3.9		$	2.7		$	0.1		$	0.4

~~In accordance with the adoption of ASU 2017-07, the~~The components of net periodic benefit cost other than the service cost component are included in Other, net in the Consolidated Statements of Operations and Comprehensive Income.

For the three and six months ended July 1, 2017, the Company recorded pre-tax charges of approximately $0.3 million and $12.8 million, respectively, reflecting losses previously reported in Accumulated other comprehensive loss related to a non-U.S. pension plan for which the Company settled its obligation by purchasing an annuity and making lump sum payments to participants.

M. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement,defines, establishes a consistent framework for measuring, and expands disclosure requirements about fair value. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs and significant value drivers are observable.

Level 3 — Instruments that are valued using unobservable inputs.

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and commodity prices. The Company holds various financial instruments to manage these risks. These financial instruments are carried at fair value and are included within the scope of ASC 820. The Company determines the fair value of these financial

instruments through the use of matrix or model pricing, which utilizes observable inputs such as market interest and currency rates. When determining fair value for which Level 1 evidence does not exist, the Company considers various factors including the following: exchange or market price quotations of similar instruments, time value and volatility factors, the Company’s own credit rating and the credit rating of the counter-party.

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis for each of the hierarchy levels:



(Millions of Dollars)	Total Carrying Value		Level 1		Level 2		Level 3
June 29, 2019
Money market fund	$	6.1	$	6.1	$	—	$	—
Derivative assets	$	52.0	$	—	$	52.0	$	—
Derivative liabilities	$	58.9	$	—	$	58.9	$	—
Non-derivative hedging instrument	$	909.5	$	—	$	909.5	$	—
Contingent consideration liability	$	180.2	$	—	$	—	$	180.2
December 29, 2018
Money market fund	$	4.8	$	4.8	$	—	$	—
Derivative assets	$	32.9	$	—	$	32.9	$	—
Derivative liabilities	$	21.3	$	—	$	21.3	$	—
Non-derivative hedging instrument	$	228.9	$	—	$	228.9	$	—
Contingent consideration liability	$	169.2	$	—	$	—	$	169.2

(Millions of Dollars) Total Carrying Value Level 1 Level 2 Level 3
June 30, 2018
Money market fund $ 10.8
$ 10.8
$ —
$ —
Derivative assets $ 36.9
$ —
$ 36.9
$ —
Derivative liabilities $ 78.9
$ —
$ 78.9
$ —
Non-derivative hedging instrument $ —
$ —
$ 924.5
$ —
Contingent consideration liability $ 115.0
$ —
$ —
$ 115.0
December 30, 2017
Money market fund $ 11.6
$ 11.6
$ —
$ —
Derivative assets $ 18.0
$ —
$ 18.0
$ —
Derivative liabilities $ 114.0
$ —
$ 114.0
$ —
Contingent consideration liability $ 114.0
$ —
$ —
$ 114.0

The following table provides information about the Company's financial assets and liabilities not carried at fair ~~value.~~value:


	June 30, 2018				December 30, 2017¹				June 29, 2019				December 29, 2018
(Millions of Dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Other investments	$	7.6	$	7.8	$	7.6	$	7.9	$	6.4	$	6.7	$	7.6	$	7.7
Long-term debt, including current portion	$	3,810.1	$	3,925.6	$	3,805.7	$	3,991.0	$	3,912.2	$	4,279.3	$	3,822.3	$	3,905.4

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

The money market fund and other investments related to the West Coast Loading Corporation ("WCLC") trust are considered Level 1 instruments within the fair value hierarchy. The long-term debt instruments are considered Level 2 instruments and are measured using a discounted cash flow analysis based on the Company’s marginal borrowing rates. The differences between the carrying values and fair values of long-term debt are attributable to the stated interest rates differing from the Company's marginal borrowing rates. The fair values of the Company's variable rate short-term borrowings approximate their carrying values at June ~~30, 2018~~29, 2019 and December ~~30, 2017.~~29, 2018. The fair values of the derivative financial instruments in the table above are based on current settlement values.

As ~~discussed~~part of the Craftsman® brand acquisition in ~~Note F, Acquisitions,~~March 2017, the Company recorded a contingent consideration liability ~~relating to the Craftsman® brand acquisition~~ representing the Company's obligation to make future payments to Transform Holdco, LLC, which operates Sears ~~Holdings~~and Kmart retail locations, of between 2.5% and 3.5% on sales of Craftsman products in new Stanley Black & Decker channels through March 2032, which was valued at ~~$114.0~~$134.5 million as of the acquisition date. The first payment is due the ~~first~~second quarter of 2020 relating to royalties owed for the previous ~~eleven~~twelve quarters, and future payments will be due quarterly through the first quarter of 2032. The estimated fair value ~~was~~of the contingent consideration liability is determined using a discounted cash flow analysis ~~based on~~taking into consideration future sales projections, ~~and~~forecasted payments to Transform Holdco, LLC, based on contractual royalty ~~rates.~~rates, and the related tax impacts. The estimated fair value of the contingent consideration liability was $180.2 million and $169.2 million as of June 29, 2019 and December 29, 2018, respectively. A 100 basis point reduction in the discount rate would ~~have resulted~~result in an increase to the liability of approximately $8 million as of the acquisition date. The liability may fluctuate in the future if there are changes to sales projections or the discount rate as a result of actual sales levels or changes in market conditions. There was no significant change in the fair value of the contingent consideration as of June ~~30, 2018.~~29, 2019.

The Company had no significant non-recurring fair value measurements, nor any other financial assets or liabilities measured using Level 3 inputs, during the first six months of ~~2018~~2019 or ~~2017.~~2018.

~~As discussed in~~ ~~Note D, Accounts And Notes Receivable~~, the Company had a deferred purchase price receivable related to sales of trade receivables. The deferred purchase price receivable was settled in full in January 2018, and historically was repaid in cash as receivables were collected, generally within 30 days. The carrying value of the receivable as of December 30, 2017 approximated fair value.

Refer to Note I, Financial Instruments, for more details regarding derivative financial instruments, Note R, ~~Commitments and~~ Contingencies, for more details regarding the other investments related to the WCLC trust, and Note H, Long-Term Debt and Financing Arrangements, for more information regarding the carrying values of the long-term debt.

N. OTHER COSTS AND EXPENSES

Other, net is primarily comprised of intangible asset amortization expense, currency-related gains or losses, environmental remediation expense, acquisition-related transaction and consulting costs, and certain pension gains or losses. During the three and six months ended June 29, 2019, Other, net included $4.5 million and $20.6 million in acquisition-related transaction and consulting costs, respectively. During the three and six months ended June 30, 2018, Other, net included $9.4 million and $15.3 million inof acquisition-related transaction and consulting costs, respectively, and a $77.7 million environmental remediation charge related to a ~~recently announced~~ settlement with the Environmental Protection Agency ("EPA"). Refer to Note R, ~~Commitments and~~ Contingencies, for further discussion of the EPA settlement. ~~During the three and six months ended July 1, 2017, Other, net included $5.6 million and $45.6 million of acquisition-related transaction and consulting costs, respectively.~~

O. RESTRUCTURING CHARGES

A summary of the restructuring reserve activity from December ~~30, 2017~~29, 2018 to June ~~30, 2018~~29, 2019 is as follows:



(Millions of Dollars)	December 29, 2018		Net Additions		Usage			Currency			June 29, 2019
Severance and related costs	$	105.7	$	11.2	$	(45.8	)	$	(0.1	)	$	71.0
Facility closures and asset impairments	3.1		6.0		(6.3		)	—			2.8
Total	$	108.8	$	17.2	$	(52.1	)	$	(0.1	)	$	73.8

(Millions of Dollars) December 30,
2017 Net Additions Usage Currency June 30,
2018
Severance and related costs $ 20.0
$ 32.8
$ (22.9 ) $ (0.9 ) $ 29.0
Facility closures and asset impairments 3.2
3.5
(5.0 ) —
1.7
Total $ 23.2
$ 36.3

$ (27.9 ) $ (0.9 ) $ 30.7

For the six months ended June ~~30, 2018,~~29, 2019, the Company recognized net restructuring charges of ~~$36.3~~$17.2 million. This amount reflects ~~$32.8~~$11.2 million of net severance charges associated with the reduction of approximately ~~1,000~~543 employees and ~~$3.5~~$6.0 million of facility closure and other restructuring costs.

For the three months ended June ~~30, 2018,~~29, 2019, the Company recognized net restructuring charges of ~~$13.4~~$8.5 million. This amount reflects ~~$10.5~~$4.0 million of net severance charges associated with the reduction of approximately ~~594 employees. The Company also had $2.9~~284 employees and $4.5 million of facility closure and other restructuring costs.

The majority of the ~~$30.7~~$73.8 million of reserves remaining as of June ~~30, 2018~~29, 2019 is expected to be utilized within the next 12 months.

Segments: The ~~$36~~$17 million of net restructuring charges for the six months ended June ~~30, 2018~~29, 2019 includes: ~~$15~~$3 million pertaining to the Tools & Storage segment; $5$6 million pertaining to the Industrial segment; ~~$12~~$4 million pertaining to the Security segment; and $4 million pertaining to Corporate.

The ~~$13~~$9 million of net restructuring charges for the three months ended June ~~30, 2018~~29, 2019 includes: $7$4 million pertaining to the Tools & Storage segment; $2$4 million pertaining to the Industrial segment; ~~$3 million pertaining to the Security segment~~ and $1 million pertaining to Corporate.


P.	~~INCOME TAXES~~

P. INCOME TAXES

The Company recognized income tax expense of $51.6 million and $76.3 million for the three and six months ended June 29, 2019, resulting in an effective tax rate of 12.8% for both periods. Excluding the impacts of the acquisition-related and other

charges and the aforementioned Sargent & Greenleaf divestiture in the second quarter of 2019, the effective tax rates were 11.6% and 12.8% for the three and six months ended June 29, 2019, respectively. These effective tax rates differ from the U.S. statutory tax rate primarily due to tax on foreign earnings, the effective settlements of income tax audits, statute expirations and the re-measurement of uncertain tax position reserves.

The Company recognized income tax expense of $1.0 million and $82.7 million for the three and six months ended June 30, 2018, respectively, resulting in effective tax rates of 0.3% and 15.1%~~, respectively.~~. Excluding the impacts of the ~~aforementioned~~ EPA settlement charge in the second quarter of 2018, the tax charge recorded in the first quarter of 2018 related to the ~~recently enacted~~enactment of new U.S. tax legislation, and the acquisition-related charges, the effective tax rates were 7.0% and 13.4% for the three and six months ended June 30, 2018, respectively. These effective tax rates ~~differ~~differed from the U.S. statutory tax rate ~~during these periods~~ primarily due to tax on foreign earnings and the effective settlements of income tax audits.

The Company recognized income tax expense of $80.7 million and $160.4 million for the three and six months ended July 1, 2017, respectively, resulting in effective tax rates of 22.5% and 19.3%, respectively. The effective tax rates differed from the U.S. statutory tax rate during these periods primarily due to a portion of the Company’s earnings being realized in lower-taxed foreign jurisdictions, the utilization of U.S. tax attributes during the first quarter of 2017 due to the divestiture of the mechanical security businesses and the favorable settlement of certain income tax audits during the second quarter of 2017. Non-deductible transaction costs and other acquisition-related restructuring items partially offset the net tax benefits mentioned above for the three and six months ended July 1, 2017. Excluding the tax impact of the divestitures and acquisition-related charges for the three and six months ended July 1, 2017, the effective tax rates were 23.5% and 24.1%, respectively.

The Company is subject to examinations by taxing authorities in U.S. federal, state, and foreign jurisdictions. The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next 12 months. However, based on the uncertainties associated with litigation and the status of examinations, including the protocols of finalizing audits by the relevant tax authorities which could include formal legal proceedings, it is not possible to reasonably estimate the impact of any such change.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. As of June 30, 2018, the Company has not completed its accounting for the tax effects of the enactment of the Act; however, in certain cases (as described below), the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. In other cases, the Company has not been able to make a reasonable estimate and continues to account for those items based on its existing accounting under ASC 740, ~~Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment.~~

During the first quarter of 2018, the Company recorded a provisional charge of $23.1 million as an adjustment to the provisional amounts recorded at December 30, 2017 related to the re-measurement of deferred tax assets and liabilities, and liabilities for unrecognized tax benefits. The provisional charges were included as a component of income taxes on the Consolidated Statements of Operations and Comprehensive Income.

The Company operates in many countries throughout the world through numerous subsidiaries. In order to complete the accounting associated with the Act, the Company will continue to accumulate the relevant data, refine computational elements, monitor and analyze U.S. federal and state guidance if and when issued, and adjust its provisional estimates accordingly within the measurement period prescribed by SAB 118. Any adjustments could be material to income tax expense.

~~Provisional amounts~~

Deferred tax assets and liabilities: The Company remeasured certain deferred tax assets and liabilities based on the U.S. tax rates at which they are expected to become realized in the future. The provisional amount recorded in 2017 related to the re-measurement of its deferred tax balance resulted in a decrease to tax expense of approximately $252.5 million as of December 30, 2017. Upon further analysis of certain aspects of the Act and refinement of the calculations during the first quarter of 2018, the Company adjusted the provisional amount by $17.4 million as an increase to tax expense, which is included as a component of income taxes on the Consolidated Statements of Operations and Comprehensive Income. The Company is still analyzing certain aspects of the Act and refining its estimate, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

International provision tax effects: As of December 30, 2017, the Company recorded a provisional amount for the one-time transition tax on undistributed foreign earnings, resulting in an increase to income tax expense of $276.1 million comprised of an accrued provisional income tax payable of approximately $460.7 million, partially offset by the reversal of the deferred tax liability of approximately $184.6 million associated with certain legacy Black & Decker unremitted foreign earnings and profits which were previously designated as not being indefinitely reinvested. The remaining deferred tax liability on unremitted foreign earnings of $4.9 million represents withholding taxes which will become payable upon distribution. The Company is still analyzing certain aspects of the Act and refining its estimate, which may be adjusted, possibly materially, due to changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Act.

Q. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

The Company's operations are classified into three reportable business segments, which also represent its operating segments: Tools & Storage, Industrial and Security.

The Tools & Storage segment is comprised of the Power Tools & Equipment ("PTE") and Hand Tools, Accessories & Storage ("HTAS") businesses. The PTE business includes both professional and consumer products. Professional products include professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers and sanders, as well as pneumatic tools and fasteners including nail guns, nails, staplers and staples, concrete and masonry anchors. Consumer products include corded and cordless electric power tools sold primarily under the BLACK+DECKER brand, lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, edgers and related accessories, and home products such as hand-held vacuums, paint tools and cleaning appliances. The HTAS business

sells hand tools, power tool accessories and storage products. Hand tools include measuring, leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels and industrial and automotive tools. Power tool accessories include drill bits, screwdriver bits, router bits, abrasives, saw blades and threading products. Storage products include tool boxes, sawhorses, medical cabinets and engineered storage solution products.

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. The Engineered Fastening business primarily sells engineered fastening products and systems designed for specific applications. The product lines include blind rivets and tools, blind inserts and tools, drawn arc weld studs and systems, engineered plastic and mechanical fasteners, self-piercing riveting systems, precision nut running systems, micro fasteners, and high-strength structural fasteners. The Infrastructure business consists of the Oil & Gas and ~~Hydraulics businesses. The~~Attachment Tools product lines. Oil & Gas ~~business~~ sells and rents custom pipe handling, joint welding and coating equipment used in the construction of large and small diameter pipelines, and provides pipeline inspection services. ~~The Hydraulics business~~Attachment Tools sells hydraulic tools, attachments and accessories.

The Security segment is comprised of the Convergent Security Solutions ("CSS") and Mechanical Access Solutions ("MAS") businesses. The CSS business designs, supplies and installs commercial electronic security systems and provides electronic security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the time of initial equipment installation. The business also sells healthcare solutions, which include asset tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The MAS business primarily sells automatic doors.

The Company utilizes segment profit, which is defined as net sales minus cost of sales and SG&A inclusive of the provision for doubtful accounts (aside from corporate overhead expense), and segment profit as a percentage of net sales to assess the profitability of each segment. Segment profit excludes the corporate overhead expense element of SG&A, other, net (inclusive of intangible asset amortization expense), gain or loss on sales of businesses, ~~pension settlement,~~ restructuring charges, interest expense, interest income, income taxes and ~~income taxes.~~share of net earnings of equity method investment. Refer to Note O, Restructuring Charges, for the amount of net restructuring charges by segment. Corporate overhead is comprised of world headquarters facility expense, cost

for the executive management team and ~~cost for~~expenses pertaining to certain centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and corporate finance functions. Transactions between segments are not material. Segment assets primarily include cash, accounts receivable, inventory, other current assets, property, plant and equipment, ~~intangible assets~~ and ~~other miscellaneous~~intangible assets. Net sales and long-lived assets are attributed to the geographic regions based on the geographic locations of the end customer and the Company subsidiary, respectively.



	Second Quarter						Year-to-Date
(Millions of Dollars)	2019			2018			2019			2018
NET SALES
Tools & Storage	$	2,626.0		$	2,567.8		$	4,918.3		$	4,783.6
Industrial	649.9			573.1			1,204.9			1,077.3
Security	485.4			502.7			971.7			992.0
Total	$	3,761.3		$	3,643.6		$	7,094.9		$	6,852.9
SEGMENT PROFIT
Tools & Storage	$	440.0		$	398.6		$	705.8		$	700.0
Industrial	95.1			85.5			166.1			166.0
Security	38.0			48.1			77.5			93.6
Segment profit	573.1			532.2			949.4			959.6
Corporate overhead	(55.6		)	(50.9		)	(105.2		)	(98.2		)
Other, net	(62.2		)	(119.3		)	(127.6		)	(177.3		)
Gain (loss) on sales of businesses	17.2			(0.8		)	17.2			(0.8		)
Restructuring charges	(8.5		)	(13.4		)	(17.2		)	(36.3		)
Interest expense	(72.4		)	(69.0		)	(146.8		)	(132.2		)
Interest income	12.1			15.6			28.7			31.4
Earnings before income taxes and equity interest	$	403.7		$	294.4		$	598.5		$	546.2

Second Quarter Year-to-Date
(Millions of Dollars) 2018
2017¹
2018
2017¹
NET SALES

Tools & Storage $ 2,567.8
$ 2,307.4
$ 4,783.6
$ 4,202.3
Industrial 573.1
503.4
1,077.3
983.1
Security 502.7
475.9
992.0
957.6
Total $ 3,643.6
$ 3,286.7
$ 6,852.9
$ 6,143.0
SEGMENT PROFIT

Tools & Storage $ 398.6
$ 371.9
$ 700.0
$ 656.4
Industrial 85.5
94.7
166.0
179.8
Security 48.1
51.8
93.6
102.5
Segment profit 532.2
518.4
959.6
938.7
Corporate overhead (50.9 ) (49.3 ) (98.2 ) (93.9 )
Other, net 119.3
55.3
177.3
155.8
Loss (gain) on sales of businesses 0.8
0.9
0.8
(268.3 )
Pension settlement —
0.3
—
12.8
Restructuring charges 13.4
8.0
36.3
23.8
Interest expense 69.0
56.0
132.2
107.3
Interest income (15.6 ) (9.7 ) (31.4 ) (18.3 )
Earnings before income taxes $ 294.4
$ 358.3
$ 546.2
$ 831.7

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue and pension standards. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

As described in Note A, Significant Accounting Policies, the Company recognizes revenue at a point in time from the sale of tangible products or over time depending on when the performance obligation is satisfied. For the three and six months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ the majority of the Company’s revenue was recognized at the time of sale. The following table provides the percent of total segment revenue recognized over time for the Industrial and Security segments for the three and six months ended June 29, 2019 and June 30, ~~2018 and July 1, 2017:~~2018:


	Second Quarter				Year-to-Date				Second Quarter				Year-to-Date
(Millions of Dollars)	2018		2017		2018		2017
									2019		2018		2019		2018
Industrial	10.3	%	14.5	%	10.6	%	12.9	%	9.6	%	10.3	%	10.0	%	10.6	%
Security	43.9	%	49.6	%	46.1	%	47.8	%	44.9	%	43.9	%	45.2	%	46.1	%

The following table is a further disaggregation of the Industrial segment revenue for the three and six months ended June 29, 2019 and June 30, ~~2018 and July 1, 2017:~~2018:


	Second Quarter				Year-to-Date				Second Quarter				Year-to-Date
(Millions of Dollars)	2018		2017		2018		2017		2019		2018		2019		2018
Engineered Fastening	$	468.2	$	388.8	$	880.0	$	778.8	$	441.9	$	468.2	$	876.2	$	880.0
Infrastructure	104.9		114.6		197.3		204.3		208.0		104.9		328.7		197.3
Industrial	$	573.1	$	503.4	$	1,077.3	$	983.1	$	649.9	$	573.1	$	1,204.9	$	1,077.3

The following table is a summary of total assets by segment as of June ~~30,~~29, 2019 and December 29, 2018 ~~and~~ ~~December 30, 2017~~:



(Millions of Dollars)	June 29, 2019			December 29, 2018
Tools & Storage	$	14,081.0		$	13,122.6
Industrial	4,537.7			3,620.5
Security	3,440.0			3,413.6
	22,058.7			20,156.7
Corporate assets	(535.1		)	(748.7		)
Consolidated	$	21,523.6		$	19,408.0

(Millions of Dollars) June 30,
2018
December 30, 2017¹
Tools & Storage $ 13,367.5
$ 12,817.5
Industrial 3,896.7
3,413.3
Security 3,453.0
3,406.9
20,717.2
19,637.7
Corporate assets (537.6 ) (540.0 )
Consolidated $ 20,179.6
$ 19,097.7

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

Corporate assets primarily consist of cash, deferred taxes and property, plant and equipment. Based on the nature of the Company's cash pooling arrangements, the corporate-related cash accounts will be in a net liability position at times.

GEOGRAPHIC AREAS

The following table is a summary of net sales by geographic area for the three and six months ended June 29, 2019 and June 30, ~~2018 and July 1, 2017:~~

2018:



	Second Quarter				Year-to-Date
(Millions of Dollars)	2019		2018		2019		2018
United States	$	2,216.7	$	2,004.9	$	4,108.5	$	3,673.8
Canada	160.9		165.5		304.8		309.7
Other Americas	184.0		206.9		349.0		392.2
France	152.6		160.4		306.2		323.2
Other Europe	754.8		785.4		1,454.6		1,540.7
Asia	292.3		320.5		571.8		613.3
Consolidated	$	3,761.3	$	3,643.6	$	7,094.9	$	6,852.9

Second Quarter Year-to-Date
(Millions of Dollars) 2018
2017¹
2018
2017¹
United States $ 2,004.9
$ 1,807.5
$ 3,673.8
$ 3,347.4
Canada 165.5
143.1
309.7
275.9
Other Americas 206.9
199.0
392.2
357.0
France 160.4
153.0
323.2
302.1
Other Europe 785.4
701.6
1,540.7
1,321.5
Asia 320.5
282.5
613.3
539.1
Consolidated $ 3,643.6
$ 3,286.7
$ 6,852.9
$ 6,143.0

¹~~Certain prior year amounts have been recast as a result of the adoption of the new revenue standard. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~


R.	~~COMMITMENTS AND~~ CONTINGENCIES

The Company is involved in various legal proceedings relating to environmental issues, employment, product liability, workers’ compensation claims and other matters. The Company periodically reviews the status of these proceedings with both inside and outside counsel, as well as an actuary for risk insurance. Management believes that the ultimate disposition of these matters will not have a material adverse effect on operations or financial condition taken as a whole.

On January 25, 2019, IPS Worldwide, LLC ("IPS"), a third-party provider of freight payment processing services for the Company, filed for Chapter 11 bankruptcy protection and listed the Company as an unsecured creditor. As of December 29, 2018, there were outstanding obligations of approximately $50.8 million owed to certain of the Company's freight carriers. Such amounts had previously been remitted to IPS through a third-party financing program for ultimate payment to these freight carriers. However, due to nonperformance of IPS with respect to processing these payments and the Company's obligation to its freight carriers, an incremental $50.8 million charge was recorded in the fourth quarter of 2018. This charge did not include any amounts that the Company will attempt to recover from insurance and/or through the bankruptcy proceedings, which could ultimately reduce the loss exposure recorded.

In the normal course of business, the Company is a party to administrative proceedings and litigation, before federal and state regulatory agencies, relating to environmental remediation with respect to claims involving the discharge of hazardous substances into the environment, generally at current and former manufacturing facilities. In addition, some of these claims assert that the Company is responsible for damages and liability, for remedial investigation and clean-up costs, with respect to sites that have never been owned or operated by the Company, but the Company has been identified as a potentially responsible party ("PRP").

In connection with the 2010 merger with Black & Decker, the Company assumed certain commitments and contingent liabilities. Black & Decker is a party to litigation and administrative proceedings with respect to claims involving the discharge of hazardous substances into the environment at current and former manufacturing facilities and has also been named as a PRP in certain administrative proceedings.

The Company, along with many other companies, has been named as a PRP in a number of administrative proceedings for the remediation of various waste sites, including 2628 active Superfund sites. Current laws potentially impose joint and several liabilities upon each PRP. In assessing its potential liability at these sites, the Company has considered the following: whether responsibility is being disputed, the terms of existing agreements, experience at similar sites, and the Company’s volumetric contribution at these sites.

The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In the event that no amount in the range of probable loss is considered most likely, the minimum loss in the range is accrued. The amount of liability recorded is based on an evaluation of currently available facts with respect to each individual site and includes such factors as existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities recorded do not take into account any claims for recoveries from insurance or third parties. As assessments and remediation progress at individual sites, the amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available. As of June ~~30, 2018~~29, 2019 and December ~~30, 2017,~~29, 2018, the Company had reserves of ~~$250.7~~$236.8 million and ~~$176.1~~$246.6 million, respectively, for remediation activities associated with Company-owned properties, as well as for Superfund sites, for losses that are probable and estimable. Of the ~~2018~~2019 amount, ~~$28.7~~$57.0 million is classified as current and ~~$222.0~~$179.8 million as long-term which is expected to be paid over the estimated remediation period. The range of environmental remediation costs that is reasonably possible is ~~$218.1~~$204.1 million to ~~$351.6~~$336.0 million which is subject to change in the near term. The Company may be liable for environmental remediation of sites it no longer owns. Liabilities have been recorded on those sites in accordance with policy.

As of June ~~30, 2018,~~29, 2019, the Company has recorded ~~$12.2~~$12.5 million in other assets related to funding received by the Environmental Protection Agency (“EPA”) and placed in a trust in accordance with the final settlement with the EPA, embodied in a Consent Decree approved by the United States District Court for the Central District of California on July 3, 2013. Per the Consent Decree, Emhart Industries, Inc. (a dissolved and liquidated former indirectly wholly-owned subsidiary of The Black & Decker Corporation) (“Emhart”) has agreed to be responsible for an interim remedy at a site located in Rialto, California and formerly operated by West Coast Loading Corporation (“WCLC”), a defunct company for which Emhart was alleged to be liable as a successor. The remedy will be funded by (i) the amounts received from the EPA as gathered from multiple parties, and, to the extent necessary, (ii) Emhart's affiliate. The interim remedy requires the construction of a water treatment facility and the filtering of ground water at or around the site for a period of approximately 30 years or more. As of June ~~30, 2018,~~29, 2019, the Company's net cash obligation associated with remediation activities, including WCLC assets, is ~~$238.5~~$224.3 million.

The EPA ~~has~~ also asserted claims in federal court in Rhode Island against ~~certain current and former affiliates of~~ Black & Decker and Emhart related to environmental contamination found at the Centredale Manor Restoration Project Superfund Site ("Centredale") ~~site,~~, located in North Providence, Rhode Island. The EPA ~~has~~ discovered a variety of contaminants at the site, including but not limited to, dioxins, polychlorinated biphenyls, and pesticides. The EPA ~~alleges~~alleged that Black & Decker and ~~certain of its current and former affiliates~~Emhart are liable for site clean-up costs under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") as successors to the liability of Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the EPA’s costs related to this site. Black & Decker and ~~certain of its current and former affiliates contest~~Emhart contested the EPA's allegation that they are responsible for the contamination, and ~~have~~ asserted contribution claims, counterclaims and cross-claims against a number of other PRPs, including the federal government as well as insurance carriers. The EPA released its Record of Decision ("ROD") in September 2012, which identified and described the EPA's selected remedial alternative for the site. Black & Decker and ~~certain of its current and former affiliates~~Emhart contested the EPA's selection of the remedial alternative

set forth in the ROD on the grounds that the EPA's actions were arbitrary and capricious and otherwise not in accordance with law, and ~~have~~ proposed other equally-protective, more cost-effective alternatives. On June 10, 2014, the EPA issued an Administrative Order under Sec. 106 of CERCLA, instructing ~~Emhart Industries, Inc. and~~ Black & Decker and Emhart to perform the remediation of Centredale pursuant to the ROD. Black & Decker and Emhart ~~Industries, Inc.~~ disputed the factual, legal and scientific bases cited by the EPA for such an administrative order and ~~have~~ provided the EPA with numerous good-faith bases for ~~Black & Decker’s and Emhart Industries, Inc.’s~~their declination to comply with the administrative ~~order at this time.~~order. Black & Decker and Emhart ~~Industries, Inc. continue to~~then vigorously ~~litigate~~litigated the issue of their liability for environmental conditions at the Centredale site, including ~~the completion~~completing trial on Phase 1 of the ~~Phase 1 trial~~proceedings in late July 2015 and ~~the completion~~completing trial on Phase 2 of the ~~Phase 2 trial~~proceedings in April 2017. ~~The~~Following the Phase I trial, the Court ~~in Phase 1 of the trial~~ found that dioxin contamination at the Centredale site was not ~~"divisible,"~~"divisible" and that Black & Decker and Emhart ~~was~~were jointly and severally liable for dioxin contamination at the site. ~~In its~~Following the Phase 2 ~~Findings of Fact and Conclusions of Law, entered on August 17, 2017,~~trial, the Court found that certain components of the EPA's selected remedy were arbitrary and capricious, and remanded the matter to the EPA while retaining jurisdiction over the ongoing remedy selection and implementation process. The Court also held in Phase 2 that Black & Decker and ~~Decker~~Emhart had sufficient cause for ~~its~~their declination to comply with the EPA's June 10, 2014 administrative order and that no associated civil penalties or fines were warranted. The United States filed a Motion for Reconsideration concerning the Court's Phase 2 rulings and appealed the ruling to the United States Court of Appeals for the First Circuit. Black & Decker and Emhart's Motion to Dismiss the Appeal was denied without prejudice for consideration with the merits. On July 9, 2018, a Consent Decree was lodged with the United States District Court documenting the terms of a settlement between the Company and the United States for reimbursement of

EPA's past costs and remediation of environmental contamination found at the Centredale site. The terms of the Consent Decree ~~are~~were subject to public comment and Court approval. ~~Once~~After a full hearing on March 19, 2019, the Court approved and entered the Consent Decree on April 8, 2019. The settlement ~~will resolve~~resolves outstanding issues relating to Phase 1 and 2 of the litigation with the United States. The ~~3rd Phase~~Company is complying with the terms of the settlement while several PRP's at the site have appealed the District Court's entry of the Consent Decree to the United States Court of Appeals for the First Circuit. Phase 3 of the litigation, ~~and trial,~~ which is in its relatively early stages, will address the potential allocation of liability to other PRPs who may have contributed to contamination of the Centredale site with dioxins, polychlorinated biphenyls and other contaminants of concern. Based on the Company's estimated remediation and response cost obligations arising out of the ~~Settlement~~settlement reached with the United States (including the EPA’s past costs as well as costs of additional investigation, remediation, and related costs such as EPA’s oversight costs), the Company has increased its reserve for this ~~site by $77.7 million to $145.8 million.~~site. Accordingly, in ~~June~~the second quarter of 2018, ~~the~~a $77.7 million increase was recorded in Other, net in the ~~Consolidated Statements~~consolidated statements of ~~Operations and Comprehensive Income.~~operations. As of June 29, 2019, the Company has reserved $136.0 million for this site.

The Company and approximately 47 other companies comprise the Lower Passaic Cooperating Parties Group (the “CPG”). The CPG members and other companies are parties to a May 2007 Administrative Settlement Agreement and Order on Consent (“AOC”) with the EPA to perform a remedial investigation/feasibility study (“RI/FS”) of the lower seventeen miles of the Lower Passaic River in New Jersey (the “River”). The Company’s potential liability stems from former operations in Newark, New Jersey. As an interim step related to the 2007 AOC, on June 18, 2012,the CPG members voluntarily entered into an AOC with the EPA for remediation actions focused solely at mile 10.9 of the River. The Company’s estimated costs related to the RI/FS and focused remediation action at mile 10.9, based on an interim allocation, are included in its environmental reserves. On April 11, 2014, the EPA issued a Focused Feasibility Study (“FFS”) and proposed plan which addressed various early action remediation alternatives for the lower 8.3 miles of the River. The EPA received public comment on the FFS and proposed plan (including comments from the CPG and other entities asserting that the FFS and proposed plan do not comply with CERCLA) which public comment period ended on August 20, 2014. The CPG submitted to the EPA a draft RI report in February 2015 and draft FS report in April 2015 for the entire lower seventeen miles of the River. On March 4, 2016, the EPA issued a Record of Decision selecting the remedy for the lower 8.3 miles of the River. The cleanup plan adopted by the EPA is now considered a final action for the lower 8.3 miles of the River and will include the removal of 3.5 million cubic yards of sediment, placement of a cap over the entire lower 8.3 miles of the River, and, according to the EPA, will cost approximately $1.4 billion and take 6 years to implement after the remedial design is completed. (The EPA estimates that the remedial design will take four years to complete.) The Company and 105 other parties received a letter dated March 31, 2016 from the EPA notifying such parties of potential liability for the costs of the cleanup of the lower 8.3 miles of the River and a letter dated March 30, 2017 stating that the EPA had offered 20 of the parties (not including the Company) an early cash out settlement. In a letter dated May 17, 2017, the EPA stated that these 20 parties did not discharge any of the eight hazardous substances identified as the contaminants of concern in the lower 8.3 mile ROD. In the March 30, 2017 letter, the EPA stated that other parties who did not discharge dioxins, furans or polychlorinated biphenyls (which are considered the contaminants of concern posing the greatest risk to human health or the environment) may also be eligible for cash out settlement, but expects those parties' allocation to be determined through a complex settlement analysis using a third-party allocator. The EPA subsequently clarified this statement to say that such parties would be eligible to be "funding parties" for the lower 8.3 mile remedial action with each party's share of the costs determined by the EPA based on the allocation process and the remaining parties would be "work parties" for the remedial action. The Company currently is participating in the allocation process that is expected to be completed in late 2020. The Company asserts that it did not discharge dioxins, furans or polychlorinated biphenyls and should be eligible to be a "funding party" for ~~a cash out settlement.~~the lower 8.3 mile remedial action. On September 30, 2016, Occidental Chemical Corporation ("OCC") entered into an agreement with the EPA to perform the remedial design for the cleanup plan for the lower 8.3 miles of the River. On June 30, 2018, OCC filed a complaint in the United States District Court for the District of New Jersey against over 100 companies, including the Company, seeking CERCLA cost recovery or contribution for past costs relating to various investigations and cleanups OCC has conducted or is conducting in connection with the River. According to the complaint, OCC has incurred or is incurring costs which ~~includes~~include the estimated cost ($165 million) to complete the remedial design for the cleanup plan for the lower 8.3 miles of the River. OCC also seeks a declaratory judgment

to hold the defendants liable for their proper shares of future response costs ~~including~~for OCC's ongoing activities in connection with the ~~remedial action~~River. As of November 30, 2018, the Company's joint defense group's motion to dismiss OCC's complaint on various grounds and OCC's opposition brief were filed with the court. A decision on the motion to dismiss is expected in 2019. On October 10, 2018, the EPA issued a letter directing the CPG to prepare a streamlined feasibility study for the ~~lower 8.3~~upper 9 miles of the ~~River. There has been no determination as~~River based on an iterative approach using adaptive management strategies. The CPG is working cooperatively with the EPA on the streamlined feasibility study, which is anticipated to ~~how the RI/FS will~~ be ~~modified~~completed in ~~light of the EPA's decision to implement a final action for the lower 8.3 miles of the River.~~late 2019. At this time, the Company cannot reasonably estimate its liability related to the litigation and remediation efforts, excluding the RI/FS and remediation actions at mile 10.9, as the RI/FS is ongoing, the ultimate remedial approach and associated cost for the upper portion of the River has not yet been determined, and the parties that will participate in funding the remediation and their respective allocations are not yet known.

Per the terms of a Final Order and Judgment approved by the United States District Court for the Middle District of Florida on January 22, 1991, Emhart is responsible for a percentage of remedial costs arising out of the Kerr McGee Chemical Corporation Superfund Site located in Jacksonville, Florida. On March 15, 2017, the Company received formal notification from the EPA that the EPA had issued a ROD selecting the preferred alternative identified in the Proposed Cleanup Plan. The cleanup adopted by the EPA is estimated to cost approximately $68.7 million. ~~Accordingly, in the first quarter~~As of ~~2017,~~June 29, 2019, the Company ~~increased its reserve by $17.1~~has reserved $27.1 million ~~which was recorded in Other, net in the Consolidated Statements of Operations and Comprehensive Income.~~for this site.

The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating future contingent liability costs, the Company does not expect that any sum it may have to pay in connection with these matters in excess of the amounts recorded will have a materially adverse effect on its financial position, results of operations or liquidity.

S. COMMITMENTS AND GUARANTEES

COMMITMENTS — The Company has numerous assets, predominantly real estate, vehicles and equipment, under various lease arrangements. At inception of arrangements with vendors, the Company determines whether the contract is or contains a lease based on each party’s rights and obligations under the arrangement. If the lease arrangement also contains non-lease components, the lease and non-lease elements are separately accounted for in accordance with the appropriate accounting guidance for each item. From time to time, lease arrangements allow for, and the Company executes, the purchase of the underlying leased asset at the end of a lease term. The Company routinely exercises lease renewal options or early termination options. As part of its lease liability and right-of-use-asset calculation, consideration is given to the likelihood of exercising any extension or termination options. The present value of the Company’s lease liability was calculated using a weighted-average incremental borrowing rate of 3.75%. The Company determined its incremental borrowing rate based on interest rates from recent debt issuances and taking into consideration adjustments for collateral, lease terms and foreign currency. As of June 29, 2019, the Company recognized a lease liability and right-of-use asset of approximately $491 million. The Company's lease liability increased approximately $78 million as a result of acquiring right-of-use assets from new leases entered into during the six months ended June 29, 2019. The right-of-use asset is included within Other assets in the Condensed Consolidated Balance Sheets, while the lease liability is included within Accrued expenses and Other liabilities, as appropriate. As permitted by ASC 842, leases with expected durations of less than 12 months from inception (i.e. short-term leases) were excluded from the Company’s calculation of its lease liability and right-of-use asset. Furthermore, as permitted by ASC 842, the Company elected to apply the package of practical expedients upon transition, which allowed companies not to reassess: (a) whether its expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases, and (c) initial direct costs for any existing leases.

The Company is a party to leases for one of its major distribution centers and two of its office buildings. The leases qualify as operating leases for accounting purposes and under the terms of the leases, the periodic rental payments vary based on interest rates (i.e. LIBOR) for that period.

The following is a summary of the Company's total lease cost for the three and six months ended June 29, 2019:



(Millions of Dollars)	Second Quarter 2019			Year-to-Date 2019
Operating lease cost	$	38.7		$	76.3
Short-term lease cost	6.6			13.4
Variable lease cost	2.2			4.3
Sublease income	(0.9		)	(1.5		)
Total lease cost	$	46.6		$	92.5

During the three and six months ended June 29, 2019, the Company paid approximately $36.6 million and $74.8 million, respectively, relating to leases included in the measurement of its lease liability and right-of-use asset. The weighted-average remaining term for the Company's leases is approximately 6 years.

The following is a summary of the Company's future lease obligations on an undiscounted basis at June 29, 2019:



(Millions of Dollars)	Total		2019		2020		2021		2022		2023		Thereafter
Lease obligations	$	551.7	$	72.2	$	122.0	$	92.1	$	67.9	$	48.7	$	148.8

GUARANTEES —The Company’s financial guarantees at June ~~30, 2018~~29, 2019 are as follows:



(Millions of Dollars)	Term	Maximum Potential Payment		Carrying Amount of Liability
Guarantees on the residual values of leased assets	One to four years	$	98.1	$	—
Standby letters of credit	Up to three years	154.5		—
Commercial customer financing arrangements	Up to six years	64.8		6.5
Total		$	317.4	$	6.5

(Millions of Dollars) Term Maximum
Potential
Payment Carrying
Amount of
Liability
Guarantees on the residual values of leased assets One to four years $ 100.4
$ —
Standby letters of credit Up to three years 74.3
—
Commercial customer financing arrangements Up to six years 71.0
7.3
Total $ 245.7
$ 7.3

The Company has guaranteed a portion of the residual values of leased assets ~~arising from~~relating to the previously discussed leases for one of its ~~synthetic lease program.~~major distribution centers and two of its office buildings. The lease guarantees are for an amount up to ~~$100.4~~$98.1 million while the fair value of the underlying assets is estimated at ~~$118.9~~$117.2 million. The related assets would be available to satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these guarantees.

The Company has issued ~~$74.3~~$154.5 million in standby letters of credit that guarantee future payments which may be required under certain insurance ~~programs.~~programs and in relation to certain environmental remediation activities described more fully in Note R, Contingencies.

The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and Canadian Mac Tool distributors and franchisees for their initial purchase of the inventory and trucks necessary to function as a distributor and franchisee. In addition, the Company provides limited and full recourse guarantees to financial institutions that extend credit to certain end retail customers of its U.S. Mac Tool distributors and franchisees. The gross amount guaranteed in these arrangements is ~~$71.0~~$64.8 million and the ~~$7.3~~$6.5 million carrying value of the guarantees issued is recorded in ~~other~~Other liabilities in the Condensed Consolidated Balance Sheets.

The Company provides warranties on certain products across its businesses. The types of product warranties offered generally range from one year to limited lifetime. There are also certain products with no warranty. Further, the Company sometimes incurs discretionary costs to service its products in connection with product performance issues. Historical warranty and service claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available.

The changes in the carrying amount of product warranties for the six months ended June 29, 2019 and June 30, 2018 ~~and July 1, 2017~~ are as follows:



(Millions of Dollars)	2019			2018
Balance beginning of period	$	102.1		$	108.5
Warranties and guarantees issued	62.4			53.9
Warranty payments and currency	(61.3		)	(58.3		)
Balance end of period	$	103.2		$	104.1

(Millions of Dollars) 2018 2017
Balance beginning of period¹
$ 108.5
$ 103.4
Warranties and guarantees issued 53.9
50.4
Warranty payments and currency (58.3 ) (47.1 )
Balance end of period $ 104.1
$ 106.7

¹ ~~2018 beginning of period balance has been recast as a result of the adoption of new accounting standards. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~

T. DIVESTITURES

On ~~January 3, 2017,~~May 30, 2019, the Company sold aits Sargent & Greenleaf mechanical locks business ~~within the Tools & Storage segment for approximately $26 million. On February 22, 2017, the Company sold the majority of its mechanical security businesses~~ within the Security segment ~~which includes the commercial hardware brands of Best Access, phi Precision and GMT,~~ for net proceeds of ~~approximately $717~~$79.1 million. As a result of ~~these sales,~~the sale, the Company recognized ~~a pre-tax~~an after-tax gain of ~~$268.3~~$3.7 million in ~~the first half of 2017, primarily related to the sale of the mechanical security businesses. Pre-tax income for these businesses totaled $0.6 million during the first quarter of 2017.~~

The Company also sold a small business in the Industrial segment during the third quarter of 2017 and a small business in the Tools & Storage segment during the fourth quarter of 2017 for total proceeds of approximately $14 million. During the second quarter of ~~2018,~~2019. The divestiture allows the Company ~~recognized a $0.8 million charge as a result~~to invest in other areas of the ~~finalization of the purchase price for the Tools & Storage business sold during the fourth quarter of 2017.~~Company that fit into its long-term growth strategy.

~~The above disposals did~~This disposal does not qualify as discontinued operations in accordance with ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,and therefore, the ~~operating~~related results ~~of these businesses~~ are included in the Company's continuing operations through ~~their respective dates~~the date of sale in ~~2017.~~2019 and for the three and six months ended June 30, 2018.

Following is the pre-tax income for this business for the three and six months ended June 29, 2019 and June 30, 2018:



	Second Quarter				Year-to-Date
(Millions of Dollars)	2019		2018		2019		2018
Pre-tax income	$	1.5	$	3.3	$	4.6	$	5.6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains statements reflecting the Company's views about its future performance that constitute “forward-looking statements” under the Private Securities Litigation Act of 1995. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Please read the information under the caption entitled “Cautionary Statement under the Private Securities Litigation Reform Act of 1995."

Throughout this Management's Discussion and Analysis (“MD&A”), references to Notes refer to the "Notes To (Unaudited) Condensed Consolidated Financial Statements" in Part 1, Item 1 of this Form 10-Q, unless otherwise indicated.

BUSINESS OVERVIEW

Strategy

The Company is a diversified global provider of hand tools, power tools and related accessories, engineered fastening systems and products, services and equipment for oil & gas and infrastructure applications, commercial electronic security and monitoring systems, healthcare solutions, and ~~mechanical access solutions (primarily~~ automatic ~~doors).~~doors. The Company continues to ~~pursue~~execute a growth and acquisition strategy that involves industry, geographic and customer diversification to foster sustainable revenue, earnings and cash flow growth. The Company remains focused on organic growth with margin expansion, including increasing its presence in emerging markets, and leveraging the Stanley Fulfillment System ("SFS 2.0"), which focuses on digital excellence, commercial excellence, breakthrough innovation, core SFS operating principles and functional transformation. In addition, the Company continues to make strides towards achieving its 22/22 Vision, ~~of reaching $22 billion in revenue by 2022 while expanding the margin rate,~~ by becoming known as one of the world’s leading innovators, ~~delivering~~continuing to deliver top-quartile financial performance and elevating its commitment to social responsibility.

In April 2018, the Company acquired the industrial business of Nelson Fastener Systems ("Nelson"), which enhances its presence in the general industrial end markets and expands its portfolio of highly-engineered fastening solutions.

In March 2017, the Company acquired the Tools business of Newell Brands ("Newell Tools"), which has strengthened its presence in the global tools industry, and the Craftsman® brand, which granted the Company the rights to develop, manufacture and sell Craftsman®-branded products in non-Sears Holdings channels. Furthermore, in February 2017, the Company sold the majority of its mechanical security businesses, which allowed the Company to deploy capital in a more accretive and growth-oriented manner.

In terms of capital allocation, the Company remains committed, over time, to returning approximately 50% of free cash flow to shareholders through a strong and growing dividend as well as opportunistically repurchasing shares. The remaining free cash flow (approximately 50%) will be deployed towards acquisitions.

Share Repurchases

In April 2018, the Company repurchased 1,399,732 shares of common stock for approximately $200 million. In July 2018, the Company repurchased 2,086,792 shares of common stock for approximately $300 million.

Acquisitions and Investment

On March 8, 2019, the Company acquired the International Equipment Solutions Attachments businesses, Paladin and Pengo, ("IES Attachments"), a manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The Company expects the acquisition to further diversify the Company's presence in the industrial markets, expand its portfolio of attachment solutions and provide a meaningful platform for continued growth.

On January 2, 2019, the Company acquired a 20 percent interest in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of outdoor power equipment. MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with an equitable sharing arrangement for future EBITDA growth. The investment in MTD increases the Company's presence in the $20 billion global lawn and garden segment and will allow the two companies to work together to pursue revenue and cost opportunities, improve operational efficiency, and introduce new and innovative products for professional and residential outdoor equipment customers, utilizing each company's respective portfolios of strong brands.

On April 2, 2018, the Company acquired the industrial business of Nelson Fastener Systems ("Nelson") from the Doncasters Group, which excluded Nelson's automotive stud welding business. This acquisition, which has been integrated into the Engineered Fastening business, is complementary to the Company's product offerings, enhances its presence in the general industrial end markets, expands its portfolio of highly-engineered fastening solutions, and will deliver cost synergies.

Refer to Note F, Acquisitions and Investments, for further discussion.

Divestiture

On May 30, 2019, the ~~“Strategic Objectives”~~ ~~section~~Company sold its Sargent and Greenleaf mechanical locks business within the Security segment. The divestiture allows the Company to invest in other areas of ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~ in the ~~Company's Form 10-K~~ Company that fit into its long-term growth strategy. Refer to Note T, Divestitures,for ~~the year ended December 30, 2017 for additional strategic discussions.~~further discussion.

Segments

The Company's operations are classified into three reportable business segments, which also represent its operating segments: Tools & Storage, Industrial and Security.

Tools & Storage

The Tools & Storage segment is comprised of the Power Tools & Equipment ("PTE") and Hand Tools, Accessories & Storage ("HTAS") businesses. Annual revenues in the Tools & Storage segment were ~~$9.0~~$9.8 billion in ~~2017,~~2018, representing 70% of the Company’s total revenues.

The PTE business includes both professional and consumer products. Professional products include professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers and sanders, as well as pneumatic tools and fasteners including nail guns, nails, staplers and staples, concrete and masonry anchors. Consumer products include corded and cordless electric power tools sold primarily under the BLACK+DECKER® brand, lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, edgers and related accessories, and home products such as hand-held vacuums, paint tools and cleaning appliances.

The HTAS business sells hand tools, power tool accessories and storage products. Hand tools include measuring, leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels and industrial and automotive tools. Power tool accessories include drill bits, screwdriver bits, router bits, abrasives, saw blades and threading products. Storage products include tool boxes, sawhorses, medical cabinets and engineered storage solution products.

Industrial

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. Annual revenues in the Industrial segment were ~~$2.0~~$2.2 billion in ~~2017,~~2018, representing ~~15%~~16% of the Company’s total revenues.

The Engineered Fastening business primarily sells engineered fastening products and systems designed for specific applications. The product lines include blind rivets and tools, blind inserts and tools, drawn arc weld studs and systems, engineered plastic and mechanical fasteners, self-piercing riveting systems, precision nut running systems, micro fasteners, and high-strength structural fasteners.

The Infrastructure business consists of the Oil & Gas and ~~Hydraulics businesses. The~~Attachment Tools product lines. Oil & Gas ~~business~~ sells and rents custom pipe handling, joint welding and coating equipment used in the construction of large and small diameter pipelines, and provides pipeline inspection services. ~~The Hydraulics business~~Attachment Tools sells hydraulic tools, attachments and accessories.

Security

The Security segment is comprised of the Convergent Security Solutions ("CSS") and Mechanical Access Solutions ("MAS") businesses. Annual revenues in the Security segment were ~~$1.9~~$2.0 billion in ~~2017,~~2018, representing ~~15%~~14% of the Company’s total revenues.

The CSS business designs, supplies and installs commercial electronic security systems and provides electronic security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the time of initial equipment installation. The business also sells healthcare solutions, which include asset tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The MAS business primarily sells automatic doors.

~~Acquisitions~~

On April 2, 2018, the Company acquired Nelson from the Doncasters Group, which is being integrated into the Engineered Fastening business. This acquisition is complementary to the Company's product offerings, enhances its presence in the general industrial end markets, expands its portfolio of highly-engineered fastening solutions, and will deliver cost synergies.

On March 9, 2017, the Company acquired Newell Tools, which included the highly attractive industrial cutting, hand tool and power tool accessory brands Irwin® and Lenox®. The acquisition enhanced the Company’s position within the global tools & storage industry and broadened the Company’s product offerings and solutions to customers and end-users, particularly within power tool accessories.

On March 8, 2017, the Company purchased the Craftsman® brand from Sears Holdings, which provided the Company with the rights to develop, manufacture and sell Craftsman®-branded products in non-Sears Holdings channels. The Company plans to significantly increase the availability of Craftsman®-branded products to consumers in previously underpenetrated channels, enhance innovation, and add manufacturing jobs in the U.S. to support growth.

~~Refer to~~ ~~Note F, Acquisitions, for further discussion.~~

~~Divestitures~~

On February 22, 2017, the Company sold the majority of its mechanical security businesses, which included the commercial hardware brands of Best Access, phi Precision and GMT. The sale allowed the Company to deploy capital in a more accretive and growth-oriented manner.

~~Refer to~~ ~~Note T, Divestitures, for further discussion.~~

Certain Items Impacting Earnings

Throughout MD&A, the Company has provided a discussion of the outlook and results both inclusive and exclusive of acquisition-related ~~charges, gain or loss on sales of businesses, environmental settlement charge,~~ and ~~tax charge related to the recently enacted U.S. tax legislation.~~other charges. The results and measures, including gross profit and segment profit, on a basis excluding these amounts are considered relevant to aid analysis and understanding of the Company’s results and business trends aside from the material impact of these items. These amounts for the second quarters and year-to-date periods of 2019 and 2018 are as follows:

Second Quarter and Year-To-Date 2019

The Company reported approximately $33 million and $86 million in net pre-tax charges in the second quarter and year-to-date 2019 periods, respectively, which were comprised of the following:

$11 million and $17 million for the second quarter and year-to-date 2019 periods, respectively, reducing Gross Profit pertaining to facility-related and inventory step-up charges;

$27 million and $50 million for the second quarter and year-to-date 2019 periods, respectively, in SG&A primarily for integration-related costs and Security business transformation and margin enhancement initiatives;

$4 million and $21 million for the second quarter and year-to-date 2019 periods, respectively, in Other, net primarily related to deal transaction costs;

$17 million gain for the second quarter and year-to-date 2019 periods related to the sale of its Sargent & Greenleaf business; and

$8 million and $15 million for the second quarter and year-to-date 2019 periods, respectively, in Restructuring charges pertaining to facility closures and severance.

The tax effect on the above net charges during the second quarter and year-to-date periods of 2019 was approximately $1 million and $12 million, respectively. In addition, the Company's share of MTD's net earnings included an after-tax charge related to an inventory step-up fair value adjustment during the second quarter and year-to-date periods of 2019 of approximately $10 million and $14 million, respectively.

The above items resulted in net after-tax charges of $44 million, or $0.29 per diluted share, and $88 million, or $0.59 per diluted share, respectively, for the second quarter and year-to-date 2019 periods.

Second Quarter and Year-To-Date 2018

The Company reported $127 million and $152 million in pre-tax charges during the second quarter and year-to-date 2018 periods, respectively, which were comprised of the following:

$9 million and $11 million for the second quarter and year-to-date 2018 periods, respectively, reducing Gross Profit primarily pertaining to amortization of the inventory step-up adjustment for the Nelson acquisition in the second quarter of 2018 and facility-related charges;

$26 million and $42 million for the second quarter and year-to-date 2018 periods, respectively, in SG&A primarily for integration-related costs and consulting fees;

$87 million and $93 million for the second quarter and year-to-date 2018 periods, respectively, in Other, net primarily related to the ~~recently announced~~ settlement with the Environmental Protection Agency ("EPA") and deal transaction costs;

$1 million for the second quarter and year-to-date 2018 periods related to a previously divested business; and

$4 million and $5 million for the second quarter and year-to-date 2018 periods, respectively, in Restructuring charges pertaining to facility closures and employee severance.

The tax effect on the above charges during the second quarter of 2018 was $29 million, resulting in after-tax charges of $98 million, or $0.64 per diluted share.

On a year-to-date basis, the tax effect on the above charges was $34 million. The Company also recorded a $23 million tax charge in the first quarter of 2018 related to the ~~recently enacted~~enactment of new U.S. tax legislation. The above charges, as well as the tax charge relating to the ~~recently enacted~~enactment of new U.S. tax legislation, resulted in net after-tax charges of $141 million, or $0.92 per diluted share, in the first half of 2018.

~~Second Quarter and Year-To-Date 2017~~

The Company reported $42 million in pre-tax charges during the second quarter of 2017 and a $168 million pre-tax gain during the first half of 2017, respectively, which were comprised of the following:

$26 million and $33 million for the second quarter and year-to-date 2017 periods, respectively, reducing Gross Profit pertaining to amortization of the inventory step-up adjustments for the Newell Tools and Craftsman® brand acquisitions;

~~$8 million and $19 million for the second quarter and year-to-date 2017 periods, respectively, in SG&A primarily for integration-related costs and consulting fees;~~

~~$6 million and $46 million for the second quarter and year-to-date 2017 periods, respectively, in Other, net primarily for deal transaction costs;~~

~~$268 million gain relating to the sales of the majority of the mechanical security businesses and a small business in the Tools & Storage segment in the first quarter of 2017; and~~

~~$2 million for the second quarter and year-to-date 2017 periods in Restructuring charges pertaining to employee severance.~~

The tax effect on the above charges during the second quarter of 2017 was $13 million, resulting in after-tax charges of $29 million, or $0.19 per diluted share. On a year-to-date basis, the above amounts resulted in a net after-tax gain of $168 million, or $1.10 per diluted share.

~~2018~~2019 Outlook

This outlook discussion is intended to provide broad insight into the Company’s near-term earnings and cash flow generation prospects. The Company is ~~revising~~reiterating its ~~2018~~2019 diluted earnings per share outlook of $7.50 to ~~$7.00 to $7.20, from $7.40 to $7.60, reflecting the recently announced settlement with the EPA regarding the remediation of the Centredale Superfund site. The Company is reiterating~~$7.70 and its diluted earnings per share range, excluding ~~acquisition-related~~ charges, ~~the aforementioned~~

~~environmental settlement, and tax charges related~~of $8.50 to ~~the recently enacted U.S. tax legislation,~~$8.70. The Company is also reiterating its estimate of ~~$8.30 to $8.50, and its~~ free cash flow conversion, ~~estimate,~~

defined as free cash flow divided by net income, of approximately ~~100%~~85% to 90%. The Company has changed the following assumptions for ~~2018~~2019 from its prior outlook: an incremental ~~price, cost and productivity actions will approximate $0.48~~$50 million in external headwinds primarily due to the increase of ~~accretion per diluted share, higher~~'List 3' China tariffs to 25 percent net of somewhat lower commodity inflation expectations; a modestly reduced expectation for organic volume ~~expectations will approximate $0.12 of~~growth which reflects a slower market outlook for industrial and emerging markets due to global macro conditions; and offsetting impacts from incremental ~~accretion per diluted share,~~pricing actions, benefits from the ~~$200 million share repurchase executed in~~margin resiliency initiatives and the ~~second quarter of 2018 will approximate $0.10 of accretion per diluted share, foreign currency impacts from the strengthening of the U.S. dollar~~strong operational out-performance during the second ~~quarter of 2018 will result in approximately $0.40 of incremental dilution to~~quarter.

The difference between the 2019 diluted earnings per share outlook and ~~higher commodity inflation expectations, including~~ the ~~impact from the initial $34 billion of section 301 tariffs, will result in approximately $0.30 of incremental dilution to~~diluted earnings per ~~share.~~share range, excluding charges, is $1.00, consisting of acquisition-related and other charges. These forecasted charges primarily relate to deal and integration costs, restructuring, Security business transformation and margin enhancement initiatives, and inventory step-up amortization.

RESULTS OF OPERATIONS

Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of business segment performance. ~~Certain amounts reported in the previous year have been recast as a result of the retrospective adoption of new accounting standards in the first quarter of 2018. Refer to~~ ~~Note B, New Accounting Standards,~~ ~~for further discussion.~~

Terminology: The term “organic” is utilized to describe results aside from the impacts of foreign currency fluctuations, acquisitions during their initial 12 months of ownership, and divestitures. This ensures appropriate comparability to operating results of prior periods.

Net Sales: Net sales were $3.761 billion in the second quarter of 2019 compared to $3.644 billion in the second quarter of 2018, ~~compared to $3.287 billion in the second quarter of 2017,~~ representing an increase of ~~11% fueled~~3% driven by ~~strong~~ organic growth of 7%3%, ~~which includes~~including a ~~one point contribution from price.~~2% increase in price and a 1% increase in volume. Acquisitions, primarily ~~Nelson, and foreign currency~~IES Attachments, increased sales by 3% while foreign currency decreased sales by 3% ~~and 1%, respectively.~~. Tools & Storage net sales increased ~~11%~~2% compared to the second quarter of ~~2017~~2018 due to strong ~~volume~~organic growth of 9%5%, driven by increases of 3% in volume and 2% in price, ~~of 1% from initial actions in response~~partially offset by a 3% decrease due to ~~commodity inflation and currency pressure, and favorable~~ foreign ~~currency of 1%.~~currency. Industrial net sales increased ~~14%~~13% compared to the second quarter of ~~2017~~2018 primarily due to acquisition growth of ~~11%~~18% partially offset by decreases of 3% from lower volumes and ~~favorable~~2% from foreign currency. Net sales in the Security segment declined 3% compared to the second quarter of 2018 as a 2% increase in small bolt-on commercial electronic security acquisitions and a 1% increase in price were more than offset by a 3% decrease due to foreign currency, a 2% decline in volume, and a 1% decrease from the sale of the Sargent & Greenleaf business.

Net sales were $7.095 billion in the first half of 2019 compared to $6.853 billion in the first half of 2018, representing an increase of 4% with strong organic growth of 4%. Acquisitions, primarily IES Attachments and Nelson, volume, and price increased sales by 3%, 2% and 2%, respectively, while foreign currency decreased sales by 3%. Tools & Storage net sales increased 3% compared to the first half of 2018 due to strong organic growth of 6%, fueled by solid growth in North America and Europe, partially offset by unfavorable foreign currency impacts of 3%. Industrial net sales increased 12% compared to the first half of 2018 primarily due to growth from acquisitions of 18%, partially offset by unfavorable currency impacts of 3% and lower volumes of 3%. Net sales in the Security segment increased 6% compared to the second quarter of 2017 driven by bolt-on commercial electronic security acquisitions of 4%, favorable foreign currency of 3% and price of 1%, partially offset by lower volume ofdecreased 2%.

Net sales were $6.853 billion in the first half of 2018 compared to $6.143 billion in the first half of 2017, representing an increase of 12% with strong organic growth of 6%. Acquisitions, primarily Newell Tools and Nelson, and foreign currency increased sales by 4% and 3%, respectively, while the impact of businesses sold decreased sales by 1%. Tools & Storage net sales increased 14% compared to the first half of ~~2017 due to strong organic growth of 8%, fueled by solid growth across all regions, acquisition growth of 4% and favorable foreign currency of~~2018 as a 2%. Industrial net sales increased 10% compared to the first half of 2017 primarily due to acquisition growth of 6% and favorable foreign currency of 5%, partially offset by a 1% decrease due to a business sold in the third quarter of 2017. Net sales in the Security segment increased 4% compared to the first half of 2017 due to a 1% increase in ~~price and a 4% increase in both foreign currency and~~ small bolt-on commercial electronic security acquisitions ~~which~~and a 1% increase in price were more than offset ~~declines of~~by a 3% decrease due to foreign currency, a 1% decline in volume, and a 1% decrease from the sale of the ~~majority of the mechanical security businesses and 2% from lower volumes.~~Sargent & Greenleaf business.

Gross Profit: Gross profit was $1.3 billion, or 34.6% of net sales, in the second quarter of 2019 compared to $1.287 billion, or 35.3% of net sales, in the second quarter of ~~2018 compared to $1.213 billion, or 36.9% of net sales, in the second quarter of 2017.~~2018. Acquisition-related and other charges, which reduced gross profit, were $10.7 million for the three months ended June 29, 2019 and $8.8 million for the three months ended June 30, ~~2018 and $26.1 million for the three months ended July 1, 2017.~~2018. Excluding these charges, gross profit was ~~35.6%~~34.8% of net sales for the three months ended June ~~30, 2018,~~29, 2019, compared to ~~37.7% of net sales~~35.6% for the three months ended ~~July 1, 2017,~~June 30, 2018, as volume leverage, productivity and price were more than offset by ~~an anticipated $50 million of~~ commodity inflation, foreign exchange and ~~$20 million of foreign currency pressure, which emerged during the last 8 weeks of the second quarter of 2018.~~tariffs.

Gross profit was $2.405 billion, or 33.9% of net sales, in the first half of 2019 compared to $2.453 billion, or 35.8% of net sales, in the first half of ~~2018 compared to $2.279 billion, or 37.1% of net sales, in the first half of 2017.~~2018. Acquisition-related and other charges, which reduced gross profit, were $17.1 million for the six months ended June 29, 2019 and $10.5 million for the six months ended June 30, ~~2018 and $32.9 million~~2018. Excluding these charges, gross profit was 34.1% of net sales for the six months ended ~~July 1, 2017. Excluding these charges, gross profit was~~June 29, 2019, compared to 35.9% of net sales for the six months ended June 30, ~~2018, compared to 37.6% of net sales for the six months ended July 1, 2017.~~2018. The year-over-year ~~decrease in~~change was primarily driven by the ~~profit rate was attributable to commodity inflation~~same factors that impacted the second quarter of ~~approximately $100 million and foreign currency pressure, which more than offset volume leverage, productivity and price.~~2019, as discussed above.

SG&A Expenses:SG&A, inclusive of the provision for doubtful accounts, was $782.3 million, or 20.8% of net sales, in the second quarter of 2019, compared to $805.8 million, or 22.1% of net sales, in the second quarter of ~~2018, compared to $744.2 million, or 22.6% of net sales, in the second quarter of 2017.~~2018. Within SG&A,

acquisition-related and other charges totaled ~~$25.5~~$26.6 million for the three months ended June ~~30, 2018~~29, 2019 and ~~$8.7~~$25.5 million for the

three months ended ~~July 1, 2017.~~June 30, 2018. Excluding these charges, SG&A was ~~21.4%~~20.1% of net sales for the three months ended June ~~30, 2018,~~29, 2019, compared to ~~22.4%~~21.4% for the three months ended ~~July 1, 2017, as tight~~June 30, 2018, reflecting continued disciplined cost management, ~~and volume leverage was partially offset by SFS 2.0 growth investments.~~including savings from the fourth quarter 2018 cost reduction program.

On a year-to-date basis, SG&A, inclusive of the provision for doubtful accounts, was ~~$1,591.4 million,~~$1.561 billion, or 22.0% of net sales, in the first half of 2019, compared to $1.591 billion, or 23.2% of net sales, in ~~2018, compared to $1,434.5 million, or 23.4%~~the first half of ~~net sales, in 2017.~~2018. Within SG&A, acquisition-related and other charges totaled $49.6 million for the six months ended June 29, 2019 and $41.9 million for the six months ended June 30, ~~2018 and $19.4 million for the six months ended July 1, 2017.~~2018. Excluding these charges, SG&A was ~~22.6%~~21.3% of net sales for the six months ended June ~~30, 2018,~~29, 2019, compared to ~~23.0%~~22.6% for the six months ended ~~July 1, 2017,~~June 30, 2018. The year-over-year change was primarily driven by the same factors that impacted the second quarter of 2019, as ~~tight cost management was partially offset by SFS 2.0 growth investments.~~discussed above.

Distribution center costs (i.e. warehousing and fulfillment facility and associated labor costs) are classified within SG&A. This classification may differ from other companies who may report such expenses within cost of sales. Due to diversity in practice, to the extent the classification of these distribution costs differs from other companies, the Company’s gross margins may not be comparable.

Corporate Overhead: The corporate overhead element of SG&A, which is not allocated to the business segments, amounted to

~~$50.9~~ $55.6 million and $50.9 million in the second quarter of 2019 and 2018, respectively, or 1.5% and 1.4% of net sales in ~~the second quarter of 2018 compared to $49.3 million, or 1.5% of net sales, in the corresponding period of 2017.~~each period. On a year-to-date basis, the corporate overhead element of SG&A, amounted to $105.2 million, or 1.5% of net sales, in 2019 compared to $98.2 million, or 1.4% of net sales, in ~~2018 compared to $93.9 million, or 1.5% of net sales, in 2017.~~2018.

Other, net: Other, net amounted to $62.2 million and $119.3 million in the second quarter of 2019 and ~~$55.3~~2018, respectively. Excluding acquisition-related charges of $4.5 million in the second quarter of 2019 and acquisition-related charges of $9.4 million and an EPA settlement charge of $77.7 million in the second quarter of 2018, Other, net totaled $57.7 million and ~~2017, respectively.~~$32.2 million, respectively, during these periods. The year-over-year increase was primarily driven by a ~~$77.7 million environmental remediation charge related to the recently announced EPA settlement regarding the cleanup~~favorable resolution of ~~the Centredale Superfund site. Excluding this charge and acquisition-related charges of $9.4 million and $5.6 million~~a prior claim in the second quarter of 2018.

Other, net amounted to $127.6 million and $177.3 million in the first half of 2019 and 2018, respectively. Excluding acquisition-related and ~~2017,~~other charges of $20.6 million and $93.0 million in the first half of 2019 and 2018, respectively, Other, net totaled ~~$32.2~~$107.0 million and ~~$49.7~~$84.3 million, ~~in the second quarter of 2018 and 2017, respectively.~~respectively, during these periods. The year-over-year ~~decrease reflects~~increase was primarily driven by a favorable resolution of a prior claim ~~among other items.~~ in the second quarter of 2018.

~~Other, net amounted to $177.3 million and $155.8~~Interest, net: Net interest expense was $60.3 million in the first half of 2018 and 2017, respectively. Excluding the aforementioned EPA settlement charge and acquisition-related charges of $93.0 million in the first half of 2018 and acquisition-related charges of $45.6 million in the first half of 2017, Other, net totaled $84.3 million and $110.2 million, respectively, during these periods. The year-over-year decrease was driven by an environmental remediation charge of $17 million in the firstsecond quarter of ~~2017 relating~~2019 compared to ~~a legacy Black & Decker site and a favorable resolution of a prior claim, partially offset by higher intangible amortization expense.~~

~~Refer to~~ ~~Note R, Commitments and Contingencies,~~ ~~for additional information regarding the EPA settlement discussed above.~~

~~Loss (Gain) on Sales of Businesses:~~ For the three and six months ended June 30, 2018, the Company reported a $0.8 million loss relating to a previously divested business. In the first half of 2017, the Company reported a $268.3 million pre-tax gain primarily relating to the sale of the majority of the Company's mechanical security businesses, as previously discussed.

~~Pension settlement:~~ Pension settlement of $12.8 million in the first half of 2017 reflects losses previously reported in Accumulated other comprehensive loss related to a non-U.S. pension plan for which the Company settled its obligation by purchasing an annuity and making lump sum payments to participants.

~~Interest, net:~~ ~~Net interest expense was~~ $53.4 million in the second quarter of ~~2018 compared to $46.3 million in the second quarter of 2017.~~2018. On a year-to-date basis, net interest expense was $118.1 million in 2019 compared to $100.8 million in ~~2018 compared to $89.0 million in 2017.~~2018. The year-over-year increase during both periods was primarily due to higher interest rates onand higher average balances relating to the Company's U.S. commercial paper borrowings ~~partially offset by higher~~due to recent acquisition activity and lower interest income.

Income Taxes:The Company recognized income tax expense of $51.6 million and $76.3 million for the three and six months ended June 29, 2019, respectively, resulting in an effective tax rate of 12.8% for both periods. Excluding the impacts of the acquisition-related and other charges and the aforementioned Sargent & Greenleaf business divestiture in the second quarter of 2019, the effective tax rates were 11.6% and 12.8% for the three and six months ended June 29, 2019, respectively. These effective tax rates differ from the U.S. statutory tax rate primarily due to tax on foreign earnings, the effective settlements of income tax audits, statute expirations and the re-measurement of uncertain tax position reserves.

The Company recognized income tax expense of $1.0 million and $82.7 million for the three and six months ended June 30, 2018, respectively, resulting in effective tax rates of 0.3% and 15.1%~~, respectively.~~. Excluding the impacts of the ~~aforementioned~~ EPA settlement charge in the second quarter of 2018, the tax charge recorded in the first quarter of 2018 related to the ~~recently enacted~~enactment of new U.S. tax legislation, and the acquisition-related charges, the effective tax rates were 7.0% and 13.4% for the three and six months ended June 30, 2018, respectively. These effective tax rates ~~differ~~differed from the U.S. statutory tax rate during these periods primarily due to tax on foreign earnings and the effective settlements of income tax audits.

U.S. statutory tax rate during these periods primarily due to a portion of the Company’s earnings being realized in lower-taxed foreign jurisdictions, the utilization of U.S. tax attributes during the first quarter of 2017 due to the divestiture of the mechanical security businesses and the favorable settlement of certain income tax audits during the second quarter of 2017. Non-deductible transaction costs and other acquisition-related restructuring items partially offset the net tax benefits mentioned above for the three and six months ended July 1, 2017. Excluding the tax impact of the divestitures and acquisition-related charges, the effective tax rates were 23.5% and 24.1% for the three and six months ended July 1, 2017, respectively.

Business Segment Results

The Company’s reportable segments are aggregations of businesses that have similar products, services and end markets, among other factors. The Company utilizes segment profit, which is defined as net sales minus cost of sales and SG&A inclusive of the provision for doubtful accounts (aside from corporate overhead expense), and segment profit as a percentage of net sales to assess the profitability of each segment. Segment profit excludes the corporate overhead expense element of SG&A, other, net (inclusive of intangible asset amortization expense), gain or loss ~~(gain)~~ on sales of businesses, ~~pension settlement,~~ restructuring charges, interest expense, interest income, income taxes and ~~income taxes.~~share of net earnings of equity method investment. Corporate overhead is

comprised of world headquarters facility expense, cost for the executive management team and ~~the expense~~expenses pertaining to certain centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and corporate finance functions. Refer to Note O, Restructuring Charges, for the amount of restructuring charges attributable to each segment.

The Company's operations are classified into three reportable business segments, which also represent its operating segments: Tools & Storage, Industrial and Security.

Tools & Storage:


	Second Quarter						Year-to-Date						Second Quarter						Year-to-Date
(Millions of Dollars)	2018			2017			2018			2017			2019			2018			2019			2018
Net sales	$	2,567.8		$	2,307.4		$	4,783.6		$	4,202.3		$	2,626.0		$	2,567.8		$	4,918.3		$	4,783.6
Segment profit	$	398.6		$	371.9		$	700.0		$	656.4		$	440.0		$	398.6		$	705.8		$	700.0
% of Net sales	15.5		%	16.1		%	14.6		%	15.6		%	16.8		%	15.5		%	14.4		%	14.6		%

Tools & Storage net sales increased ~~$260.4~~$58.2 million, or ~~11%~~2%, in the second quarter of ~~2018~~2019 compared to the second quarter of ~~2017.~~2018. Sales volume ~~increased 9% with all regions contributing,~~and price ~~contributed 1% and foreign currency~~ increased sales by 1%3% and 2%, respectively, while foreign currency decreased sales by 3%. ~~Organic~~The 5% organic growth was driven by organic growth of 7% in North America and 5% in Europe, partially offset by a 2% decline in emerging markets was 17%, North America was 10%, and Europe was 5%. Emerging markets growth was largely due to mid-price-point product releases, higher e-commerce volumes, continued benefits from the Russia & Turkey go-to-market model changes, and positive price.markets. North America organic growth ~~accelerated as~~was driven by the rollout of the Craftsman brand, new product innovation, including the ~~FLEXVOLT®~~continued expansion of the DEWALT cordless power tool system, ~~the initial rollout of Craftsman brand,~~and price realization which was partially offset by a ~~recovery~~modest decline in ~~outdoor products and pricing actions all~~industrial-focused businesses. Europe delivered ~~growth on top of a continued healthy U.S. tool market. Share~~share gains ~~continued within Europe with growth~~ supported by ~~new products and~~continued successful commercial ~~actions.~~actions and new product introductions. Emerging markets realized the benefits from price, new product launches and e-commerce expansion, which were more than offset by a three-point impact from market contractions in Argentina, Mexico and Turkey.

~~On a year-to-date basis, net~~Net sales increased ~~$581.3~~$134.7 million, or ~~14%~~3%, in the first half of ~~2018~~2019 compared to the first half of ~~2017.~~2018. Sales volume and price increased 4% and 2%, respectively, partially offset by a 3% decrease due to foreign currency. Organic ~~sales increased 8% driven by organic~~ growth ~~of 16% in emerging markets, 7%~~was 9% in North America and 6%4% in Europe. ~~Acquisition sales, primarily from Newell Tools, contributed 4% to overall sales growth in the first half of 2018 and favorable foreign currency increased sales by 2%.~~

Segment profit for the second quarter of ~~2018~~2019 was $440.0 million, or 16.8% of net sales, compared to $398.6 million, or 15.5% of net sales, ~~compared to $371.9 million, or 16.1% of net sales,~~ in the corresponding ~~2017~~2018 period. Excluding acquisition-related and other charges of ~~$17.8~~$7.5 million and ~~$34.1~~$17.8 million for the three months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively, segment profit amounted to 17.0% of net sales in the second quarter of 2019 compared to 16.2% in the second quarter of 2018, ~~compared to 17.6% in~~as the ~~second quarter of 2017, as~~ benefits from volume leverage, pricing ~~productivity~~and cost control more than offset the impacts from currency, commodity inflation and tariffs.

Segment profit for the first half of 2019 was $705.8 million, or 14.4% of net sales, compared to $700.0 million, or 14.6% of net sales, in the corresponding 2018 period. Excluding acquisition-related and other charges of $20.1 million and $32.5 million for the six months ended June 29, 2019 and June 30, 2018, respectively, segment profit amounted to 14.8% of net sales in the first half of 2019 compared to 15.3% in the first half of 2018, as the benefits from volume leverage, pricing and cost control were more than offset by the ~~impact~~impacts from currency, commodity inflation and ~~currency.~~tariffs.

Year-to-date segment profit for the second quarter of 2018 was $700.0 million, or 14.6% of net sales, compared to $656.4 million, or 15.6% of net sales, in the corresponding 2017 period. Excluding acquisition-related charges of $32.5 million and $51.4 million for the six months ended June 30, 2018 and July 1, 2017, respectively, segment profit amounted to 15.3% in the first half of 2018 compared to 16.8% in the first half of 2017. The year-over-year change was primarily driven by the same factors that impacted the second quarter of 2018, as discussed above.

Industrial:


	Second Quarter						Year-to-Date						Second Quarter						Year-to-Date
(Millions of Dollars)	2018			2017			2018			2017			2019			2018			2019			2018
Net sales	$	573.1		$	503.4		$	1,077.3		$	983.1		$	649.9		$	573.1		$	1,204.9		$	1,077.3
Segment profit	$	85.5		$	94.7		$	166.0		$	179.8		$	95.1		$	85.5		$	166.1		$	166.0
% of Net sales	14.9		%	18.8		%	15.4		%	18.3		%	14.6		%	14.9		%	13.8		%	15.4		%

Industrial net sales increased ~~$69.7~~$76.8 million, or ~~14%~~13%, in the second quarter of ~~2018~~2019 compared to the second quarter of ~~2017,~~2018, due to acquisition growth of ~~11%~~18%, primarily related to IES Attachments, partially offset by decreases of 3% from lower volumes and ~~favorable~~2% from foreign ~~currency of 3%.~~currency. Engineered Fastening organic revenues ~~increased 3%~~were down 4% as ~~significant~~ automotive and industrial ~~fastener penetration gains~~market declines were partially offset by ~~the anticipated impact from lower automotive system shipments.~~continued fastener penetration gains. Infrastructure organic revenues were ~~down 10% as higher volumes in the Hydraulics business were offset by expected lower~~up 2% primarily due to stronger onshore pipeline project and inspection activity in ~~the~~ Oil & Gas, ~~business.~~partially offset by lower Hydraulics volumes which were impacted by a difficult scrap steel market.

On a year-to-date basis, net sales increased ~~$94.2~~$127.6 million, or ~~10%~~12%, in the first half of ~~2018~~2019 compared to the first half of ~~2017,~~2018, due to acquisition growth of ~~6% and favorable foreign currency of 5%~~18%, partially offset by ~~a 1% decline due to a sale of a business~~3% declines in ~~the third quarter of 2017.~~both volume and foreign currency. Engineered Fastening organic revenues ~~increased 1%~~decreased 4% and Infrastructure organic revenues ~~were down 6%~~increased 3% primarily due to the same factors that impacted the second quarter of ~~2018,~~2019, as discussed above.

Industrial segment profit for the second quarter of ~~2018 was~~2019 totaled $95.1 million, or 14.6% of net sales, compared to $85.5 million, or 14.9% of net sales, ~~compared to $94.7 million, or 18.8% of net sales,~~ in the corresponding ~~2017~~2018 period. Excluding acquisition-related and other charges of $11.3 million and $10.9 million for the three months ended June 29, 2019 and June 30, 2018, respectively, segment profit amounted to 16.4% of net sales in the second quarter of 2019 compared to 16.8% in the second quarter of 2018, ~~compared to 18.8% in the second quarter of 2017,~~ as productivity gains and cost control were more than offset by the impact offrom lower Engineered Fastening volume and commodity ~~inflation, growth investments and the modestly dilutive impact from the Nelson acquisition.~~inflation.

Year-to-date segment profit for the Industrial segment was $166.1 million, or 13.8% of net sales, in 2019 compared to $166.0 million, or 15.4% of net sales, in ~~2018 compared to $179.8 million, or 18.3% of net sales, in~~ the corresponding ~~2017~~2018 period. Excluding acquisition-related and other charges of $17.3 million and $12.9 million for the six months ended June 29, 2019 and June 30, 2018, respectively, segment profit amounted to 15.2% of net sales in the first half of 2019 compared to 16.6% in the first half of ~~2018 compared to 18.3% in the first half of 2017.~~2018. The year-over-year change in the segment profit rate was primarily due to the same factors that impacted the second quarter of ~~2018,~~2019, as discussed above.

Security:


	Second Quarter						Year-to-Date						Second Quarter						Year-to-Date
(Millions of Dollars)	2018			2017			2018			2017			2019			2018			2019			2018
Net sales	$	502.7		$	475.9		$	992.0		$	957.6		$	485.4		$	502.7		$	971.7		$	992.0
Segment profit	$	48.1		$	51.8		$	93.6		$	102.5		$	38.0		$	48.1		$	77.5		$	93.6
% of Net sales	9.6		%	10.9		%	9.4		%	10.7		%	7.8		%	9.6		%	8.0		%	9.4		%

Security net sales ~~increased $26.8~~decreased $17.3 million, or 6%3%, in the second quarter of ~~2018~~2019 compared to the second quarter of ~~2017, primarily due to small~~2018, as increases of 2% from bolt-on commercial electronic security acquisitions and 1% from price were more than offset by a decrease of ~~4%, favorable~~3% from foreign currency, ~~of 3%,~~2% from lower volume, and ~~price of~~ 1%~~, partially offset by lower volumes of 2%.~~ from the Sargent & Greenleaf divestiture. North America ~~declined 2% organically~~organic growth was flat as higher volumes within ~~automatic doors and Healthcare~~healthcare were offset by lower ~~volume and a difficult comparable in commercial electronic security.~~automatic doors installations. Europe ~~was flat~~decreased 2% organically as ~~strength~~growth within ~~the Nordics~~France was offset by ~~anticipated weakness~~adverse market conditions in ~~France.~~Sweden and the U.K.

On a year-to-date basis, net sales ~~increased $34.4~~decreased $20.3 million, or 4%2%, in the first half of ~~2018~~2019 compared to the first half of ~~2017, primarily due to a 1% increase in price and a 4% increase in both foreign currency and small~~2018, as increases of 2% from bolt-on commercial electronic security acquisitions ~~which~~and 1% from price were more than offset ~~declines~~by a decrease of 3% from ~~the sale of the majority of the mechanical security businesses and 2%~~foreign currency, 1% from lower ~~volumes.~~volume, and 1% from the Sargent & Greenleaf divestiture. Organic sales ~~for both~~increased 1% in North America and ~~Europe~~ decreased 1%2% in Europe primarily due to the same factors that impacted the second quarter, as discussed above.

Security segment profit for the second quarter of ~~2018~~2019 was $38.0 million, or 7.8% of net sales, compared to $48.1 million, or 9.6% of net sales, ~~compared to $51.8 million, or 10.9% of net sales,~~ in the corresponding ~~2017~~2018 period. Excluding acquisition-related and other charges of ~~$2.0~~$16.3 million and ~~$0.7~~$2.0 million for the three months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively, segment profit amounted to 11.2% of net sales in the second quarter of 2019 compared to 10.0% in the second quarter of 2018, ~~compared to 11.0% in the second quarter of 2017, reflecting~~as a focus on cost containment was partially offset by investments to support the business transformation in commercial electronic ~~security partially offset by a continued focus on cost containment.~~security.

Year-to-date segment profit was $77.5 million, or 8.0% of net sales, in 2019 compared to $93.6 million, or 9.4% of net sales, in ~~2018 compared to $102.5 million, or 10.7% of net sales, in~~ the corresponding ~~2017~~2018 period. Excluding acquisition-related and other charges of ~~$3.3~~$27.1 million and ~~$0.9~~$3.3 million for the six months ended June 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ respectively, segment profit amounted to 10.8% of net sales in the first half of 2019 compared to 9.8% in the first half of 2018, ~~compared~~due to the same factors that impacted the second quarter of 2019, as discussed above.

10.8% in the first half of 2017. The year-over-year change in the segment profit rate reflects investments to support business transformation in commercial electronic security and the impact from the sale of the majority of the mechanical security business, partially offset by a continued focus on cost containment.

RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from December ~~30, 2017~~29, 2018 to June ~~30, 2018~~29, 2019 is as follows:


(Millions of Dollars)	December 30, 2017		Net Additions		Usage			Currency			June 30, 2018		December 29, 2018		Net Additions		Usage			Currency			June 29, 2019
Severance and related costs	$	20.0	$	32.8	$	(22.9	)	$	(0.9	)	$	29.0	$	105.7	$	11.2	$	(45.8	)	$	(0.1	)	$	71.0
Facility closures and asset impairments	3.2		3.5		(5.0		)	—			1.7		3.1		6.0		(6.3		)	—			2.8
Total	$	23.2	$	36.3	$	(27.9	)	$	(0.9	)	$	30.7	$	108.8	$	17.2	$	(52.1	)	$	(0.1	)	$	73.8

For the three months ended June ~~30, 2018,~~29, 2019, the Company recognized net restructuring charges of ~~$13.4~~$8.5 million. This amount reflects ~~$10.5~~$4.0 million of net severance charges associated with the reduction of approximately ~~594~~284 employees and ~~$2.9~~$4.5 million of facility closure and other restructuring costs.

The Company expects these restructuring actions to result in annual net cost savings of approximately ~~$40~~$21 million by the end of ~~2019.~~2020.

The majority of the ~~$30.7~~$73.8 million of reserves remaining as of June ~~30, 2018~~29, 2019 is expected to be utilized within the next 12 months.

The anticipated annual net cost savings of approximately ~~$40~~$21 million by the end of ~~2019~~2020 includes: ~~$13~~$6 million in the Tools and Storage segment; $3$5 million in the Industrial segment; ~~$19~~$8 million in the Security segment; and $5$2 million in Corporate.

FINANCIAL CONDITION

Liquidity, Sources and Uses of Capital: The Company’s primary sources of liquidity are cash flows generated from operations and available lines of credit under various credit facilities.

Operating Activities: ~~Cash~~Cash flows provided by operations were ~~$198.0~~$501.0 million in the second quarter of ~~2018~~2019 compared to ~~$151.8~~$198.0 million in the corresponding period of ~~2017. Cash outflows from~~2018. Year-to-date cash flows provided by operations were $69.7 million in the first half of 2019 compared to cash flows used in operations of $151.4 million in the corresponding period of 2018. The year-over-year increase in both periods was mainly attributable to higher earnings and improved working capital (accounts receivable, inventory, accounts payable and deferred revenue) ~~in both periods were~~. The year-over-year working capital improvement was primarily driven by ~~higher~~lower accounts receivables, ~~and~~partially offset by continued inventory ~~purchases~~build in the Tools & Storage segment ~~as a result of strong organic growth and~~ to support anticipated demand from new product launches, including ~~Craftsman.~~the Craftsman and other brand transitions.

Year-to-date cash flows used in operations were $151.4 million in the first half of 2018 compared to $162.3 million in the corresponding period of 2017. Cash outflows from working capital were primarily driven by the same factors that impacted the second quarter, as discussed above.

Free Cash Flow: Free cash flow, as defined in the table below, was $403.8 million in the second quarter of 2019 and $86.3 million in the second quarter of ~~2018, compared to $29.6 million in the second quarter 2017. Free~~2018. On a year-to-date basis, free cash flow, ~~on a year-to-date basis~~in line with normal seasonality, was an outflow of $117.1 million in 2019 and $369.4 million in 2018 compared to $349.2 million in 2017. The decrease in year-to-date free cash flow in 2018 was primarily due to higher planned capital expenditures to support growth in the Company's supply chain and investments related to SFS 2.0 initiatives.2018. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and

provide dividends to shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items.

Second Quarter Year-to-Date
(Millions of Dollars) 2018 2017 2018 2017
Net cash used in operating activities¹
$ 198.0
$ 151.8
$ (151.4 ) $ (162.3 )
Less: capital and software expenditures (111.7 ) (122.2 ) (218.0 ) (186.9 )
Free cash flow $ 86.3
$ 29.6
$ (369.4 ) $ (349.2 )

¹~~Certain prior year amounts within operating activities have been recast as a result of the adoption of new accounting standards. Refer to~~ ~~Note B, New Accounting Standards, for further discussion.~~



	Second Quarter						Year-to-Date
(Millions of Dollars)	2019			2018			2019			2018
Net cash provided by (used) in operating activities	$	501.0		$	198.0		$	69.7		$	(151.4	)
Less: capital and software expenditures	(97.2		)	(111.7		)	(186.8		)	(218.0		)
Free cash flow	$	403.8		$	86.3		$	(117.1	)	$	(369.4	)

Based on its potential to generate cash flow from operations on an annual basis and its credit position at June ~~30, 2018~~29, 2019, the Company continues to believe over the long-term it has the financial flexibility to deploy capital to its shareowners’ ~~advantage~~ through a combination of acquisitions, dividends and potential future share repurchases.

Investing Activities: Cash flows used in investing activities totaled $32.2 million in the second quarter of 2019, primarily due to capital and software expenditures of $97.2 million, partially offset by $76.7 million of net proceeds primarily from the sale of the Company's Sargent & Greenleaf business. Cash flows used in investing activities totaled $587.5 million in the second quarter of 2018 driven by business acquisitions of $505.6 million, primarily related to Nelson, and capital and software expenditures of $111.7 million, partially offset by net investment hedge settlements of $37.8 million. Cash flows used in investing activities totaled $46.4 million in the second quarter of 2017, which mainly consisted of capital and software expenditures of $122.2 million, partially offset by proceeds of $104.7 million from the deferred purchase price receivable related to the Company's accounts receivable sales program, which was terminated in February 2018.

Year-to-date cash flows used in investing activities totaled $1.040 billion in 2019 driven by business acquisitions of $676.0 million, primarily related to IES Attachments, purchases of long-term investments of $253.7 million, which mainly related to the 20 percent investment in MTD Holdings Inc., and capital and software expenditures of $186.8 million. Cash flows used in investing activities totaled $713.8 million in the first half of 2018, ~~primarily due to~~which mainly consisted of business acquisitions of $506.8 million, primarily related to Nelson, and capital and software expenditures of $218.0 million.

Financing Activities: Cash flows used in ~~investing~~financing activities totaled ~~$1.642 billion~~$429.9 million in the ~~first half~~second quarter of ~~2017, which mainly consisted~~2019 primarily driven by payments on short-term borrowings of ~~business acquisitions of $2.430 billion and capital and software expenditures of $186.9~~$330.6 million ~~partially offset by net cash proceeds from sales of businesses of $745.3 million and $227.8 million of proceeds from the deferred purchase price receivable related to~~under the Company's ~~accounts receivable sales~~commercial paper program ~~which was terminated in February 2018.~~

~~Financing Activities:~~ and cash dividend payments of $97.7 million. Cash flows provided by financing activities totaled $457.5 million in the second quarter of 2018 primarily due to $753.6 million of net proceeds from short-term borrowings under the Company's commercial paper program, partially offset by the repurchase of common shares for $201.3 million and cash dividend payments of $94.2 million. Cash flows provided by financing activities in the second quarter of 2017 were $35.0 million mainly due to $727.5 million in proceeds from the issuance of equity units, partially offset by $593.1 million of net repayments of short-term borrowings and $86.5 million of cash dividend payments.

Year-to-date cash flows provided by financing activities totaled $978.3 million in 2019 primarily due to $1.089 billion of net proceeds from short-term borrowings under the Company's commercial paper program due to recent acquisition activity, partially offset by cash dividend payments of $195.3 million. Cash flows provided by financing activities were $673.4 million in the first half of 2018 ~~primarily~~mainly due to $1.136 billion of net proceeds from short-term borrowings under the Company's commercial paper program, partially offset by the repurchase of common shares for $212.7 million and cash dividend payments of $189.1 million. Cash flows provided by financing activities in 2017 were $1.108 billion mainly due to proceeds of $727.5 million from the issuance of equity units and $563.6 million from net short-term borrowings under the Company's commercial paper program primarily to fund acquisitions, partially offset by $173.2 million of cash dividend payments.

Credit Ratings & Liquidity:

The Company maintains strong investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt (S&P A, Fitch A-, Moody's Baa1), and its commercial paper program (S&P A-1, Fitch F2, Moody's P-2). There have been no changes to any of the ratings during the second quarter of ~~2018.~~2019. Failure to maintain strong investment grade rating levels could adversely affect the Company’s cost of funds, liquidity and access to capital markets, but would not have an adverse effect on the Company’s ability to access its existing committed credit facilities.

Cash and cash equivalents totaled ~~$386~~$311 million as of June ~~30, 2018,~~29, 2019, comprised of ~~$37~~$66 million in the U.S. and ~~$349~~$245 million in foreign jurisdictions. As of December ~~30, 2017,~~29, 2018, cash and cash equivalents totaled ~~$638~~$289 million, comprised of ~~$54~~$60 million in the U.S. and ~~$584~~$229 million in foreign jurisdictions.

As a result of the Tax Cuts and Jobs Act ~~signed into law on December 22, 2017~~ (the ~~"Act"~~“Act”), the ~~Company recorded a provisional~~Company's tax liability ~~of $466 million as of December 30, 2017 for~~related to the one-time transition tax associated with unremitted foreign earnings and profits ~~which included $5~~totaled $351 million ~~of foreign withholding taxes that will become payable upon~~

distribution. The Company is still analyzing certain aspects of the Act and refining its estimate, which may change materially due to changes in interpretations and assumptions the Company has made, new guidance that may be issued in the future, and actions the Company may take as a result of the new legislation.at June 29, 2019. The Act permits a U.S. company to elect to pay the net tax liability interest-free over a period of up to eight years. The Company has considered the implications of paying the required one-time transition tax and believes it will not have a material impact on its liquidity. ~~Refer to~~ ~~Note P, Income Taxes,~~ ~~for further discussion~~

In March 2019, the Company issued $500.0 million of senior unsecured notes, maturing on March 1, 2026 ("2026 Term Notes"). The 2026 Term Notes will accrue interest at a fixed rate of 3.40% per annum with interest payable semi-annually in arrears. The 2026 Term Notes rank equally in right of payment with all of the ~~impacts~~Company's existing and future unsecured and unsubordinated debt. The Company received net cash proceeds of $496.2 million which reflects the notional amount offset by a discount, underwriting expenses, and other fees associated with the transaction. The Company used the net proceeds from the offering for general corporate purposes, including repayment of other borrowings.

In February 2019, the Company redeemed all of the ~~Act.~~outstanding 2053 Junior Subordinated Debentures for $405.7 million, which represented 100% of the principal amount plus accrued and unpaid interest.

~~In January 2017, the~~The Company ~~amended its existing $2.0~~has a $3.0 billion commercial paper program ~~to increase the maximum amount of notes authorized to be issued to $3.0 billion and to include~~which includes Euro denominated borrowings in addition to U.S. Dollars. As of June ~~30, 2018,~~29, 2019, the Company had ~~$1.1 billion~~approximately $1,454.2 million of borrowings outstanding ~~against the Company’s $3.0 billion commercial paper program,~~ of which ~~$925~~ $909.5

million in Euro denominated commercial paper was designated as a Net Investment ~~Hedge~~Hedge. As of December 29, 2018, the Company had $373.0 million of borrowings outstanding, of which $228.9 million in Euro denominated commercial paper was designated as ~~described in more detail in~~ a Net Investment Hedge. Refer to Note I, Financial Instruments,~~. At December 30, 2017, the Company had no commercial paper borrowings outstanding.~~ for further discussion.

The Company ~~also~~ has a ~~364-day $1.25~~364-Day $1.0 billion committed credit facility (the ~~"2017~~“364 Day Credit ~~Agreement"~~Agreement”) executed in December 2017. The 2017 Credit Agreement consists of a $1.25 billion revolving credit loan and a sub-limit of an amount equal to the Euro equivalent of $400 million for swing line advances.. Borrowings under the ~~2017~~364 Day Credit Agreement may be made in U.S. Dollars or Euros ~~pursuant to the terms of the agreement,~~ and bear interest at a floating rate plus an applicable margin dependent onupon the denomination of the ~~borrowing. Repayments~~borrowing and pursuant to the terms of the 364 Day Credit Agreement. The Company must ~~be made~~repay all advances under the 364 Day Credit Agreement by ~~December 19, 2018~~the earlier of September 11, 2019 or upon ~~an earlier termination of the 2017 Credit Agreement at the election of the Company.~~termination. The Company ~~also has the option at the termination date to~~may, however, convert all advances outstanding upon termination, into a term loan that shall be repaid in full no later than the first anniversary of the termination date, provided ~~certain requirements are met.~~that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The ~~2017~~364 Day Credit Agreement serves as a liquidity back-stop for the Company’s $3.0 billion U.S. Dollar and Euro commercial paper program. As of June ~~30, 2018~~29, 2019, and December ~~30, 2017,~~29, 2018, the Company had not drawn on ~~this commitment.~~

~~In January 2017, the Company executed a 364-day $1.25 billion~~its 364-Day committed credit facility which consisted of a $1.25 billion revolving credit loan and a sub-limit of an amount equal to the Euro equivalent of $400 million for swing line advances. Borrowings under this credit agreement could be made in U.S. Dollars or Euros, pursuant to the terms of the agreement, and bore interest at a floating rate dependent on the denomination of the borrowing. This credit agreement was terminated in December 2017 at the election of the Company..

In March 2018, the Company purchased from a financial institution “at-the-money” capped call options with an approximate term of three years, on 3.2 million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate premium of $57.3 million. ~~The~~As of June 29, 2019, the capped call has a lower strike price of ~~$156.86~~$156.72 and an adjusted upper strike price of ~~$203.92.~~$203.74. The purpose of the capped call options is to hedge the risk of stock price appreciation between the lower and upper strike prices of the capped call options for a future share repurchase. Refer to Note J, Equity Arrangements, for further discussion.

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million ("$750 million Equity Units"). Each unit has a stated amount of $100 and initially consists of a three-year forward stock purchase contract ("2020 Purchase Contracts") for the purchase of a variable number of shares of common stock, on May 15, 2020, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series C Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share ("Series C Preferred Stock"). The Company received approximately ~~$727.5~~$726.0 million in net cash proceeds from the $750 million Equity Units net of offering expenses and underwriting costs and commissions, ~~before offering expenses,~~ and issued 750,000 shares of Series C Preferred Stock, recording $750.0 million in preferred stock. The proceeds were used for general corporate purposes, including repayment of short-term borrowings. The Company also used $25.1 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution. On and after May 15, 2020, the Series C Preferred Stock may be converted into common stock at the option of the holder. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or a combination thereof. On or after June 22, 2020, the Company may elect to redeem for cash, all or any portion of the outstanding shares of the Series C Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid dividends. If the Company calls the Series C Preferred Stock for redemption, holders may convert their shares immediately preceding the redemption date. Upon settlement of the 2020 Purchase Contracts, the Company will receive additional cash proceeds of $750.0 million. The Company will pay the holders of the 2020 Purchase Contracts quarterly contract adjustment payments, which commenced in August 2017. As of June 29, 2019, the present value of the Contract Adjustment Payments was $39.2 million.

In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty for 3,645,510 shares of common stock. The contract obligates the Company to pay $350.0 million, plus an additional amount related to the forward component of the contract. In June 2018, the Company amended the settlement date to April 2021, or earlier at the Company's option.

Refer to Note H, Long-Term Debt and Financing Arrangements, and Note J, Equity Arrangements, for further discussion of the Company's financing arrangements.

OTHER MATTERS

Critical Accounting Estimates: There have been no significant changes in the Company’s critical accounting estimates during the second quarter of ~~2018.~~2019. Refer to the “Other Matters” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K for the year ended December ~~30, 2017~~29, 2018 for a discussion of the Company’s critical accounting estimates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the Company’s exposure to market risk during the second quarter of ~~2018.~~2019. Refer to the Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K for the year ended December ~~30, 2017~~29, 2018 for further discussion.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including the Company’s President and Chief Executive Officer and its Executive Vice President and Chief Financial Officer, the Company has, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s President and Chief Executive Officer and its Executive Vice President and Chief Financial Officer have concluded that, as of June ~~30, 2018,~~29, 2019, the Company’s disclosure controls and procedures are effective. There has been no change in the Company’s internal control over financial reporting that occurred during the second quarter of ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. In March 2019, the Company acquired IES Attachments for approximately $653 million. Management's assessment of, and conclusion on, the effectiveness of internal control over financial reporting excludes the internal controls of IES Attachments. As part of the ongoing integration activities, the Company will complete an assessment of existing controls and incorporate its controls and procedures into IES Attachments.

CAUTIONARY STATEMENT

Under the Private Securities Litigation Reform Act of 1995

~~Statements in this Quarterly Report on Form 10-Q that are not historical, including but not limited to those regarding~~This document contains “forward-looking statements” within the ~~Company’s ability to: (i) achieve its vision~~meaning of ~~doubling the size~~Section 27A of the ~~Company to $22 billion in revenue by 2022 while expanding its margin rate, by becoming known~~Securities Act of 1933, as ~~one~~amended, and Section 21E of the ~~world’s leading innovators, delivering top-quartile~~Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections or guidance of earnings, revenue or other financial ~~performance~~items; any statements of the plans, strategies and ~~elevating~~objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include, among other, the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “anticipate” or any other similar words.

Although the Company believes that the expectations reflected in any of its ~~commitment to social responsibility; (ii) achieve full year 2018 diluted EPS~~forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of ~~approximately $7.00-$7.20 ($8.30-$8.50 excluding acquisition-related charges, the recently announced settlement with the EPA regarding the Centredale Superfund site,~~its forward-looking statements. The Company's future financial condition and ~~tax charges relating to the recently enacted U.S. tax legislation); (iii) achieve free cash flow conversion, defined as free cash flow divided by net income,~~results of ~~approximately 100% for 2018; and (iv) over time, return approximately 50% of free cash flow to shareholders through a strong and growing dividend,~~operations, as well as ~~opportunistically repurchasing its shares, with the remaining free cash flow (approximately 50%) deployed toward acquisitions, (collectively, the “Results”)~~any forward-looking statements, are ~~“forward-looking statements” and~~ subject to ~~risk~~change and ~~uncertainty.~~

~~The Company’s ability~~ to ~~deliver the Results as described above is based on current expectations and involves~~ inherent risks and uncertainties, ~~including factors listed below and other factors that could delay, divert,~~such as those disclosed or change any of them, and could cause actual outcomes and results to differ materially from current expectations. In addition to the risks, uncertainties and other factors discussed in this Quarterly Report, the risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or impliedincorporated by reference in the forward-looking statements include, without limitation, those set forth under Item 1A Risk Factors of the Company’s Annual Report on Form 10-K and any material changes thereto set forth in any subsequent Quarterly Reports on Form 10-Q, or those contained in the Company’s otherCompany's filings with the Securities and Exchange ~~Commission,~~Commission.

Important factors that could cause the Company's actual results, performance and ~~those set forth below.~~

~~The Company’s ability~~achievements, or industry results to ~~deliver~~differ materially from estimates or projections contained in its forward-looking statements include, among others, the ~~Results is dependent, or based, upon:~~following: (i) successfully developing, marketing and achieving sales from new products and services and the ~~Company’s ability to invest in product, brand~~continued acceptance of current products and ~~commercialization of~~services; (ii) macroeconomic factors, including global and regional business conditions (such as Brexit), commodity prices, inflation, and currency exchange rates; (iii) laws, regulations and governmental policies affecting the ~~Craftsman® brand (including successful brand launch~~Company's activities in the ~~second half of 2018); (ii) the Company’s ability~~countries where it does business, including those related to ~~successfully integrate Newell Tools while remaining focused on being one of the world’s leading innovators, continuing to deliver top-quartile financial performance~~tariffs, taxation, and elevating our commitment to social responsibility; (iii) the Company’s ability to deliver overall organic growth of approximately 7% in 2018; (iv) the Company’s ability to limit the impact from: commodity inflation of approximately $205 million; foreign currency headwinds of approximately $80 million; and the first $34 billion oftrade controls, including section 301 tariffs and section 232 steel and aluminum ~~tariffs of approximately $35 million; (v)~~net impact from: closed acquisitions, cost and price actions and improved productivity being approximately +$1.53 to $1.63 EPS in 2018; and share repurchase executed in second quarter being approximately +$0.10; (vi) core (non M&A) restructuring charges being approximately $50 million in 2018; (vii) 2018 core tax rate being approximately 18%; (viii) the successful identification, completion and integration of, and realization of cost and revenue synergies associated with, acquisitions, as well as integration of existing businesses and formation of new business platforms; (ix) the continued acceptance of technologies used in the Company’s products and services (including DEWALT FLEXVOLT™ product); (x) the Company’s ability to manage existing Sonitrol franchisee and Mac Tools relationships; (xi) the Company’s ability to minimize costs associated with any sale or discontinuance of a business or product line, including any severance, restructuring, legal or other costs; (xii) the proceeds realized with respect to any business or product line disposals; (xiii) the extent of any asset impairments with respect to any businesses or product lines that are sold or discontinued; (xiv) the success of the Company’s efforts to manage freight costs, steel and other commodity costs as well as capital expenditures; (xv) the Company’s ability to sustain or increase prices in order to, among other things, offset or mitigate the impact of steel, aluminum, freight, energy, non-ferrous commodity and other commodity costs and any inflation increases and/or currency impacts; (xvi) the Company’s ability to generate free cash flow and maintain a strong debt to capital ratio; (xvii) the Company’s ability to identify and effectively execute productivity improvements and cost reductions, while minimizing any associated restructuring charges; (xviii) the Company’s ability to obtain favorable settlement of tax audits; (xix) the ability of the Company to generate earnings sufficient to realize future income tax benefits during periods when temporary differences become deductible, including realizing tax credit carry forward amounts within the allowable carry forward periods; (xx) the continued ability of the Company to access credit markets under satisfactory terms; (xxi) the Company’s ability to negotiate satisfactory price and payment terms under which the Company buys and sells goods, services, materials and products; (xxii) the Company’s ability to successfully develop, market and achieve sales from new products and services; (xxiii) the availability of cash to repurchase shares when conditions are right; (xxiv) adjustments to the provisional estimates recorded in 2017 for the enacted U.S. Tax Cuts and Jobs Act based on legislative developments and refined calculations; and (xxv) the ability of the Company to proactively manage the impact of the legislative changes brought about by the U.S. Tax Cuts and Jobs Act.

The Company’s ability to deliver the Results is also dependent upon: (i) the success of the Company’s marketing and sales efforts, including the ability to develop and market new and innovative products at the right price points in both existing and new markets; (ii) the ability of the Company to maintain or improve production rates in the Company’s manufacturing facilities, respond to significant changes in product demand and fulfill demand for new and existing products; (iii) the Company’s ability to continue improvements in working capital through effective management of accounts receivable and inventory levels;tariffs; (iv) the ability to continue successfully managing and defending claims and litigation; (v) the success of the Company’s efforts to mitigate any adverse earnings impact resulting from significant Chinese Renminbi, Canadian Dollar, Euro, British Pound, Brazilian Real, or other currency fluctuations; (vi) the geographic distribution of the Company’s earnings; (vii) the commitment to and success of the Stanley Fulfillment System; and (viii) successful implementation with expected results of cost reduction programs.

The Company’s ability to achieve the Results will also be affected by external factors. These external factors include: challenging global geopolitical and macroeconomic environment, possibly including impact from "Brexit" or other similar actions by other EU member states as well as the impact of any U.S. tariffs on imported goods; the economic environment of emerging markets, particularly Latin America, Russia, China and Turkey; (v) realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures; (vi) pricing pressure and other changes within competitive markets; ~~the continued consolidation~~(vii) availability and price of ~~customers particularly in consumer channels; inventory management pressures on the Company’s customers;~~raw materials, component parts, freight, energy, labor and sourced finished goods; (viii) the impact the tightened credit markets may have on the Company or its customers or suppliers; (ix) the extent to which the Company has to write off accounts receivable or assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers; ~~increasing competition; changes~~(x) the Company's ability to identify and effectively execute productivity improvements and cost reductions; (xi) potential business and distribution disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (xii) the continued consolidation of customers, particularly in ~~laws, regulations and policies that affect the Company, including, but not limited to trade, monetary, tax and fiscal policies and laws; the timing and extent of any inflation or deflation;~~consumer channels; (xiii) managing franchisee relationships; (xiv) the impact of poor weather ~~conditions on sales; currency exchange fluctuations;~~conditions; (xv) maintaining or improving production rates in the ~~impact of dollar/foreign currency exchange~~Company's manufacturing facilities, responding to significant changes in product demand and ~~interest rates on~~fulfilling demand for new and existing products; (xvi) changes in the ~~competitiveness of products and~~competitive landscape in the ~~Company’s debt program;~~Company's markets; (xvii) the ~~strength of the U.S. and European economies;~~Company's non-U.S. operations, including sales to non-U.S. customers; (xviii) the impact from demand changes within world-wide markets associated with homebuilding and remodeling; ~~the impact of events that cause~~(xix) potential adverse developments in new or ~~may cause disruption~~pending litigation and/or government investigations; (xx) changes in the ~~Company’s supply, manufacturing, distribution~~Company's ability to obtain debt on commercially reasonable terms and ~~sales networks such as war, terrorist activities,~~at competitive rates; (xxi) substantial pension and ~~political unrest including, hostilities on the Korean Peninsula;~~other postretirement benefit obligations; (xxii) potential environmental liabilities; (xxiii) work stoppages or other labor disruptions; and ~~recessionary or expansive trends~~(xxiv) changes in accounting estimates.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in the ~~economies~~Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q, including under the heading “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Consolidated Financial Statements and the related Notes.

Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the ~~world~~date hereof, and forward-looking statements in ~~which~~documents attached that are incorporated by reference speak only as of the ~~Company operates.~~date of those documents. The Company ~~undertakes no~~does not undertake any obligation to ~~publicly~~ update or ~~revise~~release any revisions to any forward-looking ~~statements~~statement or to ~~reflect~~report any events or circumstances ~~that may arise~~ after the date ~~hereof.~~hereof or to reflect the occurrence of unanticipated events, except as required by law.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company is involved in various lawsuits and claims, including product liability, environmental and distributor claims, and administrative proceedings. The Company ~~has reached~~does not expect that the resolution of these matters will have a ~~settlement with~~materially adverse effect on the ~~Environmental Protection Agency (“EPA”) for reimbursement~~Company’s consolidated financial position, results of EPA’s past costs and remediation of environmental contamination found at the Centredale Manor Restoration Project Superfund (“Centredale”) site located in North Providence, Rhode Island. The EPA had alleged that Black & Decker and certain of its current and former affiliates are liable for site clean-up costs under the Comprehensive Environmental Response, Compensation, and Liability Act as successors to the liability of Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the EPA’s costs related to this site. Black & Decker and certain of its current and former affiliates contested the EPA’s allegation that they are responsible for the contamination, and have asserted contribution claims, counterclaims and cross-claims against a number of other potentially responsible parties ("PRPs"), including the federal government as well as insurance carriers. Although the settlement with the EPA resolves EPA's claims against the Company, the litigation against other PRPs to recover costs associated with this clean-up continues.operations or liquidity.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors as disclosed in the Company’s Form 10-K for the year ended December ~~30, 2017~~29, 2018 filed with the Securities and Exchange Commission on February ~~27, 2018.~~26, 2019.

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

Issuer Purchases of Equity Securities

The following table provides information about the Company’s purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the ~~three~~six months ended June ~~30, 2018:~~29, 2019:

2018
(a)
Total
Number Of
Shares
Purchased

Average Price
Paid Per
Share

Total Number
Of Shares
Purchased As
Part Of A Publicly
Announced Plan Or Program

(b) Maximum Number
Of Shares That
May Yet Be
Purchased Under
The Program
April 1 - May 5 8,671
$ 142.91
1,399,732
13,600,000
May 6 - June 2 —
—
—
13,600,000
June 3 - June 30 —
—
—
13,600,000
Total 8,671
$ 142.91
1,399,732
13,600,000



2019	(a) Total Number Of Shares Purchased	Average Price Paid Per Share		Total Number Of Shares Purchased As Part Of A Publicly Announced Plan Or Program	(b) Maximum Number Of Shares That May Yet Be Purchased Under The Program
March 31 - May 4	7,281	$	145.34	—	11,500,000
May 5 - June 1	—	—		—	11,500,000
June 2 - June 29	180	128.13		—	11,500,000
Total	7,461	$	144.93	—	11,500,000


(a)	The shares of common stock in this column were deemed surrendered to the Company by participants in various benefit plans of the Company to satisfy the participants’ taxes related to vesting or delivery of time-vesting restricted share units under those plans.

(b)

On July 20, 2017, the Board of Directors approved a new repurchase program for up to 15.0 million shares of the Company’s common stock and terminated its previously approved repurchase program. As of June ~~30, 2018,~~29, 2019, the authorized shares available for repurchase under the new repurchase program totaled ~~13.6~~11.5 million shares. The currently authorized shares available for repurchase do not include approximately 3.6 million shares reserved and authorized for purchase under the Company’s previously approved repurchase program relating to a forward share purchase contract entered into in March 2015. Refer to Note J, Equity Arrangements, of the Notes to (Unaudited) Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further discussion.

ITEM 6. EXHIBITS



~~(3)~~	~~Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 on the Company’s Current Report on Form 8-K filed on July 18, 2018).~~

~~(10.1)~~	~~The Stanley Black & Decker 2018 Omnibus Award Plan.~~

~~(10.2)~~	~~Form of stock option certificate for grants to executive officers pursuant to the Company’s 2018 Omnibus Award Plan.~~

~~(10.3)~~	~~Form of restricted stock unit award certificate for grants to executive officers pursuant to the Company’s 2018 Omnibus Award Plan.~~

~~(10.4)~~	~~Form of restricted stock unit retention award certificate for grants to executive officers pursuant to the Company’s 2018 Omnibus Award Plan.~~

(11)	Statement re-computation of per share earnings (the information required to be presented in this exhibit appears in Note C to the Company’s (Unaudited) Condensed Consolidated Financial Statements set forth in this Quarterly Report on Form 10-Q).

(31)(i)(a)	Certification by President and Chief Executive Officer pursuant to Rule 13a-14(a).

(i)(b)	Certification by Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a).

(32)(i)	Certification by President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(ii)	Certification by Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(101)	The following materials from Stanley Black & Decker Inc.'s Quarterly Report on Form 10-Q for the quarter ended June ~~30, 2018,~~29, 2019, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 29, 2019 and June 30, ~~2018 and July 1, 2017;~~2018; (ii) Condensed Consolidated Balance Sheets at June ~~30, 2018~~29, 2019 and December ~~30, 2017;~~29, 2018; (iii) Condensed Consolidated Statements of Cash Flows for the three and six months ended June 29, 2019 and June 30, ~~2018~~2018; (iv) Consolidated Statements of Changes in Shareowners' Equity for the three and ~~July 1, 2017;~~six months ended June 29, 2019 and ~~(iv)~~June 30, 2018; and (v) Notes to (Unaudited) Condensed Consolidated Financial Statements**.



**	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 of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURE

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



		STANLEY BLACK & DECKER, INC.

Date:	July ~~20, 2018~~23, 2019	By:	/s/ DONALD ALLAN, JR.
			Donald Allan, Jr.
			Executive Vice President and Chief Financial Officer

5150




PART I — FINANCIAL INFORMATION	3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3736
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4746
ITEM 4. CONTROLS AND PROCEDURES	4746
PART II — OTHER INFORMATION	4948
ITEM 1. LEGAL PROCEEDINGS	4948
ITEM 1A. RISK FACTORS	4948
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	48
ITEM 6. EXHIBITS	49
~~ITEM 6. EXHIBITS~~SIGNATURE	50
~~SIGNATURE~~	51



(Millions of Dollars, except per share amounts)	Three months ended July 1, 2017¹		Adoption of ASU 2014-09		Adoption of ASU 2017-07			Three months ended July 1, 2017
Net Sales	$	3,229.5	$	57.2	$	—		$	3,286.7
Cost of sales	$	2,017.3	$	55.8	$	0.3		$	2,073.4
Selling, general and administrative	$	733.9	$	—	$	4.7		$	738.6
Provision for doubtful accounts	$	4.8	$	0.8	$	—		$	5.6
Other, net	$	60.3	$	—	$	(5.0	)	$	55.3
Earnings before income taxes	$	357.7	$	0.6	$	—		$	358.3
Income taxes	$	80.5	$	0.2	$	—		$	80.7
Net earnings attributable to common shareowners	$	277.2	$	0.4	$	—		$	277.6
Diluted earnings per share of common stock	$	1.82	$	—	$	—		$	1.82



(Millions of Dollars, except per share amounts)	Six months ended July 1, 2017¹		Adoption of ASU 2014-09		Adoption of ASU 2017-07			Six months ended July 1, 2017
Net Sales	$	6,035.1	$	107.9	$	—		$	6,143.0
Cost of sales	$	3,757.6	$	105.6	$	0.5		$	3,863.7
Selling, general and administrative	$	1,410.4	$	—	$	10.2		$	1,420.6
Provision for doubtful accounts	$	13.0	$	0.9	$	—		$	13.9
Other, net	$	166.5	$	—	$	(10.7	)	$	155.8
Earnings before income taxes	$	830.3	$	1.4	$	—		$	831.7
Income taxes	$	160.0	$	0.4	$	—		$	160.4
Net earnings attributable to common shareowners	$	670.3	$	1.0	$	—		$	671.3
Diluted earnings per share of common stock	$	4.41	$	0.01	$	—		$	4.42



(Millions of Dollars)	Balance at December 30, 2017¹			Adoption of ASU 2014-09			Balance at December 30, 2017
ASSETS
Accounts and notes receivable, net	$	1,635.9		$	(7.2	)	$	1,628.7
Other assets	$	487.8		$	24.9		$	512.7

LIABILITIES AND SHAREOWNERS' EQUITY
Current maturities of long-term debt	$	983.4		$	(5.9	)	$	977.5
Accrued expenses	$	1,352.1		$	35.6		$	1,387.7
Long-term debt	$	2,843.0		$	(14.8	)	$	2,828.2
Deferred taxes	$	434.2		$	1.9		$	436.1
Other liabilities	$	2,511.1		$	(4.1	)	$	2,507.0
Retained earnings²	$	5,990.4		$	8.3		$	5,998.7
Accumulated other comprehensive loss	$	(1,585.9	)	$	(3.2	)	$	(1,589.1	)



	Second Quarter 2017
(Millions of dollars)	Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income (Effective Portion)		Gain (Loss) Recognized in Income (Ineffective Portion*)
Interest Rate Contracts	$	(11.0	)	Interest expense	$	—	$	—
Foreign Exchange Contracts	$	(29.9	)	Cost of sales	$	5.2	$	—



	Year-to-Date 2017
(Millions of dollars)	Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income (Effective Portion)		Gain (Loss) Recognized in Income (Ineffective Portion*)
Interest Rate Contracts	$	(7.2	)	Interest expense	$	—	$	—
Foreign Exchange Contracts	$	(38.6	)	Cost of sales	$	9.7	$	—



(Millions of Dollars)	Income Statement Classification	Second Quarter 2018 Amount of Gain (Loss) Recorded in Income on Derivative			Year-to-Date 2018 Amount of Gain (Loss) Recorded in Income on Derivative
Foreign Exchange Contracts	Other, net	$	(2.2	)	$	14.9



(Millions of Dollars)	Income Statement Classification	Second Quarter 2017 Amount of Gain (Loss) Recorded in Income on Derivative		Year-to-Date 2017 Amount of Gain (Loss) Recorded in Income on Derivative
Foreign Exchange Contracts	Other, net	$	1.1	$	29.7



(Millions of Dollars)	Currency translation adjustment and other¹			Unrealized gains (losses) on cash flow hedges, net of tax			Unrealized gains (losses) on net investment hedges, net of tax			Pension gains (losses), net of tax			Total
Balance - December 30, 2017	$	(1,108.2	)	$	(112.6	)	$	3.4		$	(371.7	)	$	(1,589.1	)
Other comprehensive (loss) income before reclassifications	(294.9		)	43.6			49.3			7.1			(194.9		)
Reclassification adjustments to earnings	—			11.7			(5.9		)	5.8			11.6
Net other comprehensive (loss) income	(294.9		)	55.3			43.4			12.9			(183.3		)
Balance - June 30, 2018	$	(1,403.1	)	$	(57.3	)	$	46.8		$	(358.8	)	$	(1,772.4	)

Title Of Each Class

Trading Symbol

Name Of Each Exchange On Which Registered

~~(860) 225-5111~~Common Stock

- $2.50 Par Value per Share

New York Stock Exchange