UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~July 3, 2021~~April 2, 2022

☐ 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)


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

1000 STANLEY DRIVE

NEW BRITAIN, CT 06053

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE 860 225-5111

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


Title Of Each Class		Trading Symbol	Name Of Each Exchange On Which Registered
Common Stock	$2.50 Par Value per Share	SWK	New York Stock Exchange
Corporate Units		SWT	New York Stock Exchange

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

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

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

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

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

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

~~162,962,070~~150,964,631 shares of the registrant’s common stock were outstanding as of ~~July~~April 22, ~~2021.~~2022.

TABLE OF CONTENTS

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 ~~JULY~~APRIL 2, 2022 AND APRIL 3, 2021 ~~AND JUNE 27, 2020~~

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

Second Quarter Year-to-Date
2021 2020 2021 2020
Net Sales $ 4,300.9 $ 3,147.4 $ 8,498.0 $ 6,276.8
Costs and Expenses
Cost of sales $ 2,757.3 $ 2,134.7 $ 5,390.1 $ 4,241.0
Selling, general and administrative 902.5 713.0 1,749.9 1,450.8
Provision for credit losses (0.9) 19.0 4.6 29.7
Other, net 53.8 86.9 112.8 161.8
Loss on sales of businesses 2.6 0 3.6 0
Restructuring charges 14.0 27.9 16.3 31.8
Interest expense 46.5 57.3 94.0 117.0
Interest income (2.7) (2.5) (5.6) (12.6)
$ 3,773.1 $ 3,036.3 $ 7,365.7 $ 6,019.5
Earnings before income taxes and equity interest 527.8 111.1 1,132.3 257.3
Income taxes 73.7 (117.3) 193.2 (104.4)
Net earnings before equity interest $ 454.1 $ 228.4 $ 939.1 $ 361.7
Share of net earnings of equity method investment 4.4 10.3 6.2 10.1
Net earnings $ 458.5 $ 238.7 $ 945.3 $ 371.8
Less: Net (losses) earnings attributable to non-controlling interests (1.0) 0.3 (1.6) 0.2
Net earnings attributable to Stanley Black & Decker, Inc. $ 459.5 $ 238.4 $ 946.9 $ 371.6
Less: Preferred stock dividends 4.8 4.7 14.2 4.7
Net Earnings Attributable to Common Shareowners $ 454.7 $ 233.7 $ 932.7 $ 366.9
Total Comprehensive Income Attributable to Common Shareowners $ 479.1 $ 336.5 $ 859.4 $ 210.9
Earnings per share of common stock:
Basic $ 2.87 $ 1.52 $ 5.90 $ 2.41
Diluted $ 2.81 $ 1.52 $ 5.80 $ 2.39
Dividends per share of common stock $ 0.70 $ 0.69 $ 1.40 $ 1.38
Weighted-average shares outstanding (in thousands):
Basic 158,644 153,330 158,081 152,011
Diluted 161,571 154,154 160,861 153,290


	Year-to-Date
		2022		2021
Net Sales		$	4,448.0	$	3,720.8
Costs and Expenses
Cost of sales		$	3,142.6	$	2,333.0
Selling, general and administrative		949.2		716.9
Provision for credit losses		11.1		2.2
Other, net		62.0		48.0
Loss on sale of business		—		1.0
Restructuring charges		52.7		1.8
Interest income		(2.8)		(2.9)
Interest expense		54.7		47.5
		$	4,269.5	$	3,147.5
Earnings from continuing operations before income taxes and equity interest		178.5		573.3
Income taxes on continuing operations		22.9		115.5
Net earnings from continuing operations before equity interest		155.6		457.8
Share of net earnings of equity method investment		—		1.8
Net earnings from continuing operations		155.6		459.6
Less: Net earnings (losses) attributable to non-controlling interests		0.1		(0.6)
Net earnings from continuing operations attributable to Stanley Black & Decker, Inc.		$	155.5	$	460.2
Less: Preferred stock dividends and beneficial conversion feature		—		9.4
Net Earnings from Continuing Operations Attributable to Common Shareowners		$	155.5	$	450.8
Add: Contract adjustment payments accretion		0.3		0.2
Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted		$	155.8	$	451.0
Earnings from discontinued operations before income taxes		22.2		31.1
Income taxes on discontinued operations		2.4		3.9
Net earnings from discontinued operations		$	19.8	$	27.2
Net Earnings Attributable to Common Shareowners - Diluted		$	175.6	$	478.2
Net Earnings Attributable to Stanley Black & Decker, Inc.		$	175.3	$	487.4
Total Comprehensive Income Attributable to Common Shareowners		$	147.6	$	380.3
Basic earnings per share of common stock:
Continuing operations		$	1.00	$	2.86
Discontinued operations		$	0.13	$	0.17
Total basic earnings per share of common stock		$	1.13	$	3.04
Diluted earnings per share of common stock:
Continuing operations		$	0.94	$	2.74
Discontinued operations		$	0.12	$	0.17
Total diluted earnings per share of common stock		$	1.06	$	2.91

See Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~JULY 3, 2021~~APRIL 2, 2022 AND JANUARY ~~2, 2021~~1, 2022

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


		July 3, 2021		January 2, 2021			April 2, 2022		January 1, 2022
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	440.4	$	1,381.0	Cash and cash equivalents	$	165.8	$	142.1
Accounts and notes receivable, net	Accounts and notes receivable, net	1,994.7		1,512.2		Accounts and notes receivable, net	1,842.0		1,481.7
Inventories, net	Inventories, net	3,679.5		2,737.4		Inventories, net	6,267.7		5,419.9
Current assets held for sale						Current assets held for sale	864.0		869.6
Prepaid expenses	Prepaid expenses	408.4		370.7		Prepaid expenses	495.3		507.0
Other current assets	Other current assets	32.7		34.7		Other current assets	101.4		106.1
Total Current Assets	Total Current Assets	6,555.7		6,036.0		Total Current Assets	9,736.2		8,526.4
Property, plant and equipment, net	Property, plant and equipment, net	2,038.4		2,053.8		Property, plant and equipment, net	2,365.6		2,336.8
Goodwill	Goodwill	9,989.3		10,038.1		Goodwill	8,597.0		8,590.7
Intangibles, net		3,945.4		4,055.4
Customer Relationships, net						Customer Relationships, net	1,955.2		2,000.0
Trade Names, net						Trade Names, net	2,672.3		2,681.8
Other intangible Assets, net						Other intangible Assets, net	12.8		13.2
Long-term assets held for sale						Long-term assets held for sale	2,628.5		2,635.8
Other assets	Other assets	1,434.1		1,383.0		Other assets	1,391.1		1,395.3
Total Assets	Total Assets	$	23,962.9	$	23,566.3	Total Assets	$	29,358.7	$	28,180.0
LIABILITIES AND SHAREOWNERS' EQUITY	LIABILITIES AND SHAREOWNERS' EQUITY					LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings	Short-term borrowings	$	2.6	$	1.5	Short-term borrowings	$	5,086.4	$	2,241.1
Current maturities of long-term debt						Current maturities of long-term debt	1.2		1.3
Accounts payable	Accounts payable	2,998.7		2,446.4		Accounts payable	3,367.7		3,423.6
Accrued expenses	Accrued expenses	2,401.2		2,110.4		Accrued expenses	2,036.2		2,641.0
Liabilities held for sale						Liabilities held for sale	463.5		460.4
Total Current Liabilities	Total Current Liabilities	5,402.5		4,558.3		Total Current Liabilities	10,955.0		8,767.4
Long-term debt	Long-term debt	4,246.2		4,245.4		Long-term debt	5,355.5		4,353.6
Deferred taxes	Deferred taxes	550.6		568.0		Deferred taxes	662.8		711.2
Post-retirement benefits	Post-retirement benefits	600.5		642.6		Post-retirement benefits	454.9		474.1
Long-term liabilities held for sale						Long-term liabilities held for sale	129.1		137.4
Other liabilities	Other liabilities	2,077.1		2,485.6		Other liabilities	2,446.6		2,143.9
Commitments and Contingencies (Notes R and S)	Commitments and Contingencies (Notes R and S)	0		0		Commitments and Contingencies (Notes R and S)	0		0
Shareowners’ Equity	Shareowners’ Equity					Shareowners’ Equity
Stanley Black & Decker, Inc. Shareowners’ Equity	Stanley Black & Decker, Inc. Shareowners’ Equity					Stanley Black & Decker, Inc. Shareowners’ Equity
Preferred stock, without par value: Authorized 10,000,000 shares in 2021 and 2020 Issued and outstanding 750,000 shares in 2021 and 1,500,000 shares in 2020		750.0		1,500.0
Common stock, par value $2.50 per share: Authorized 300,000,000 shares in 2021 and 2020 Issued 176,902,738 shares in 2021 and 2020		442.3		442.3
Preferred stock, without par value: Authorized 10,000,000 shares in 2022 and 2021 Issued and outstanding 750,000 shares in 2022 and 2021						Preferred stock, without par value: Authorized 10,000,000 shares in 2022 and 2021 Issued and outstanding 750,000 shares in 2022 and 2021	620.3		620.3
Common stock, par value $2.50 per share: Authorized 300,000,000 shares in 2022 and 2021 Issued 176,902,738 shares in 2022 and 2021						Common stock, par value $2.50 per share: Authorized 300,000,000 shares in 2022 and 2021 Issued 176,902,738 shares in 2022 and 2021	442.3		442.3
Retained earnings	Retained earnings	8,258.6		7,547.6		Retained earnings	8,801.4		8,742.4
Additional paid in capital	Additional paid in capital	4,816.6		4,832.7		Additional paid in capital	4,705.5		4,999.2
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,787.0)		(1,713.7)		Accumulated other comprehensive loss	(1,873.3)		(1,845.6)
		12,480.5		12,608.9			12,696.2		12,958.6
Less: cost of common stock in treasury		(1,396.5)		(1,549.3)
Less: cost of common stock in treasury (25,964,890 shares in 2022 and 13,573,962 shares in 2021)						Less: cost of common stock in treasury (25,964,890 shares in 2022 and 13,573,962 shares in 2021)	(3,343.4)		(1,368.1)
Stanley Black & Decker, Inc. Shareowners’ Equity	Stanley Black & Decker, Inc. Shareowners’ Equity	11,084.0		11,059.6		Stanley Black & Decker, Inc. Shareowners’ Equity	9,352.8		11,590.5
Non-controlling interests	Non-controlling interests	2.0		6.8		Non-controlling interests	2.0		1.9
Total Shareowners’ Equity	Total Shareowners’ Equity	11,086.0		11,066.4		Total Shareowners’ Equity	9,354.8		11,592.4
Total Liabilities and Shareowners’ Equity	Total Liabilities and Shareowners’ Equity	$	23,962.9	$	23,566.3	Total Liabilities and Shareowners’ Equity	$	29,358.7	$	28,180.0

See Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE ~~AND SIX~~ MONTHS ENDED ~~JULY~~APRIL 2, 2022 AND APRIL 3, 2021 ~~AND JUNE 27, 2020~~

(Unaudited, Millions of Dollars)


		Second Quarter				Year-to-Date					Year-to-Date
		2021		2020		2021		2020				2022		2021
OPERATING ACTIVITIES	OPERATING ACTIVITIES									OPERATING ACTIVITIES
Net earnings		$	458.5	$	238.7	$	945.3	$	371.8
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Net earnings from continuing operations										Net earnings from continuing operations		$	155.6	$	459.6
Net earnings from discontinued operations										Net earnings from discontinued operations		19.8		27.2
Adjustments to reconcile net earnings to cash used in operating activities:										Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation and amortization of property, plant and equipment	Depreciation and amortization of property, plant and equipment	91.9		94.2		185.4		187.0		Depreciation and amortization of property, plant and equipment		92.0		93.5
Amortization of intangibles	Amortization of intangibles	50.5		50.5		101.0		98.8		Amortization of intangibles		51.7		50.5
Loss on sales of businesses		2.6		0		3.6		0
Loss on sale of business										Loss on sale of business		—		1.0
Share of net earnings of equity method investment	Share of net earnings of equity method investment	(4.4)		(10.3)		(6.2)		(10.1)		Share of net earnings of equity method investment		—		(1.8)
Changes in working capital	Changes in working capital	(196.4)		(206.4)		(916.8)		(719.1)		Changes in working capital		(1,336.1)		(720.4)
Changes in other assets and liabilities	Changes in other assets and liabilities	41.7		161.5		(25.7)		(5.4)		Changes in other assets and liabilities		(224.1)		(67.4)
Cash provided by (used in) operating activities		444.4		328.2		286.6		(77.0)
Cash used in operating activities										Cash used in operating activities		(1,241.1)		(157.8)
INVESTING ACTIVITIES	INVESTING ACTIVITIES									INVESTING ACTIVITIES
Capital and software expenditures	Capital and software expenditures	(105.1)		(64.5)		(193.4)		(147.4)		Capital and software expenditures		(139.8)		(88.3)
Proceeds from sales of assets										Proceeds from sales of assets		9.0		1.3
Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired	(1.3)		0.4		(1.5)		(1,302.0)		Business acquisitions, net of cash acquired		(36.5)		(0.2)
Purchases of investments	Purchases of investments	(4.0)		(7.1)		(11.0)		(13.6)		Purchases of investments		(0.1)		(7.0)
Net investment hedge settlements	Net investment hedge settlements	0		16.6		(52.6)		41.0		Net investment hedge settlements		4.7		(52.6)
Other	Other	1.6		(2.2)		1.8		1.5		Other		(0.7)		(1.1)
Cash used in investing activities	Cash used in investing activities	(108.8)		(56.8)		(256.7)		(1,420.5)		Cash used in investing activities		(163.4)		(147.9)
FINANCING ACTIVITIES	FINANCING ACTIVITIES									FINANCING ACTIVITIES
Proceeds from debt issuances, net of fees	Proceeds from debt issuances, net of fees	0		(3.8)		0		1,482.6		Proceeds from debt issuances, net of fees		994.8		—
Stock purchase contract fees	Stock purchase contract fees	(9.8)		(20.0)		(19.6)		(40.1)		Stock purchase contract fees		(9.8)		(9.8)
Net short-term borrowings (repayments)	Net short-term borrowings (repayments)	1.8		(980.8)		1.1		371.1		Net short-term borrowings (repayments)		2,844.8		(0.7)
Proceeds from issuances of common stock	Proceeds from issuances of common stock	36.3		756.7		100.4		801.3		Proceeds from issuances of common stock		13.7		64.1
Purchases of common stock for treasury	Purchases of common stock for treasury	(2.4)		(0.3)		(17.3)		(9.3)		Purchases of common stock for treasury		(2,313.0)		(14.9)
Redemption and conversion of preferred stock		(750.0)		0		(750.0)		0
Craftsman deferred purchase price		0		0		0		(250.0)
Craftsman contingent consideration	Craftsman contingent consideration	(6.9)		(33.0)		(13.9)		(33.0)		Craftsman contingent consideration		(9.8)		(7.0)
Termination of interest rate swaps	Termination of interest rate swaps	0		0		0		(20.5)		Termination of interest rate swaps		22.7		—
Cash dividends on common stock	Cash dividends on common stock	(111.6)		(105.8)		(221.7)		(211.4)		Cash dividends on common stock		(116.3)		(110.1)
Cash dividends on preferred stock	Cash dividends on preferred stock	(9.5)		0		(18.9)		0		Cash dividends on preferred stock		—		(9.4)
Other	Other	(1.2)		(4.5)		(8.4)		(7.0)		Other		(1.7)		(7.2)
Cash (used in) provided by financing activities		(853.3)		(391.5)		(948.3)		2,083.7
Cash provided by (used in) financing activities										Cash provided by (used in) financing activities		1,425.4		(95.0)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	8.5		(1.6)		(30.4)		(24.2)		Effect of exchange rate changes on cash, cash equivalents and restricted cash		4.8		(38.9)
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	(509.2)		(121.7)		(948.8)		562.0		Change in cash, cash equivalents and restricted cash		25.7		(439.6)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	958.7		998.3		1,398.3		314.6		Cash, cash equivalents and restricted cash, beginning of period		294.8		1,398.3
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	449.5	$	876.6	$	449.5	$	876.6	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD		$	320.5	$	958.7

Table of Contents

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, as shown above:


		July 3, 2021		January 2, 2021			April 2, 2022		January 1, 2022
Cash and cash equivalents	Cash and cash equivalents	$	440.4	$	1,381.0	Cash and cash equivalents	$	165.8	$	142.1
Restricted cash included in Other current assets	Restricted cash included in Other current assets	9.1		17.3		Restricted cash included in Other current assets	3.9		7.6
Cash and cash equivalents included in Current assets held for sale						Cash and cash equivalents included in Current assets held for sale	150.8		145.1
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	449.5	$	1,398.3	Cash, cash equivalents and restricted cash	$	320.5	$	294.8

See Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

THREE ~~AND SIX~~ MONTHS ENDED ~~JULY~~APRIL 2, 2022 AND APRIL 3, 2021 ~~AND JUNE 27, 2020~~

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

Preferred
Stock Common
Stock Additional
Paid In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Non-
Controlling
Interests Shareowners’
Equity
Balance January 2, 2021 $ 1,500.0 $ 442.3 $ 4,832.7 $ 7,547.6 $ (1,713.7) $ (1,549.3) $ 6.8 $ 11,066.4
Net earnings (loss) — — — 487.4 — — (0.6) 486.8
Other comprehensive loss — — — — (97.7) — — (97.7)
Cash dividends declared — $0.70 per common share — — — (110.1) — — — (110.1)
Cash dividends declared —$50.00 per annum per preferred share — — — (9.4) — — — (9.4)
Issuance of common stock (848,275 shares) — — (12.7) — — 76.8 — 64.1
Repurchase of common stock (80,310 shares) — — — — — (14.9) — (14.9)
Non-controlling interest buyout — — (2.8) — — — (3.2) (6.0)
Stock-based compensation related — — 25.6 — — — — 25.6
Balance April 3, 2021 $ 1,500.0 $ 442.3 $ 4,842.8 $ 7,915.5 $ (1,811.4) $ (1,487.4) $ 3.0 $ 11,404.8
Net earnings (loss) — — — 459.5 — — (1.0) 458.5
Other comprehensive income — — — — 24.4 — — 24.4
Cash dividends declared — $0.70 per common share — — — (111.6) — — — (111.6)
Cash dividends declared — $50.00 per annum per preferred share — — — (4.8) — — — (4.8)
Issuance of common stock (305,153 shares) — — 8.1 — — 28.2 — 36.3
Repurchase of common stock (355,751 shares) — — 72.2 — — (74.6) — (2.4)
Redemption and conversion of preferred stock (1,469,055 shares) (750.0) — (137.3) — — 137.3 — (750.0)
Stock-based compensation related — — 30.8 — — — — 30.8
Balance July 3, 2021 $ 750.0 $ 442.3 $ 4,816.6 $ 8,258.6 $ (1,787.0) $ (1,396.5) $ 2.0 $ 11,086.0

~~Table of Contents~~


	Preferred Stock		Common Stock		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non- Controlling Interests		Shareowners’ Equity
Balance January 1, 2022	$	620.3	$	442.3	$	4,999.2	$	8,742.4	$	(1,845.6)	$	(1,368.1)	$	1.9	$	11,592.4
Net earnings	—		—		—		175.3		—		—		0.1		175.4
Other comprehensive loss	—		—		—		—		(27.7)		—		—		(27.7)
Cash dividends declared — $0.79 per common share	—		—		—		(116.3)		—		—		—		(116.3)
Issuance of common stock (338,897 shares)	—		—		(24.0)		—		—		37.7		—		13.7
Repurchase of common stock (12,729,825 shares)	—		—		(300.0)		—		—		(2,013.0)		—		(2,313.0)
Stock-based compensation related	—		—		30.3		—		—		—		—		30.3
Balance April 2, 2022	$	620.3	$	442.3	$	4,705.5	$	8,801.4	$	(1,873.3)	$	(3,343.4)	$	2.0	$	9,354.8

Preferred
Stock Common
Stock Additional
Paid In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss ESOP Treasury
Stock Non-
Controlling
Interests Shareowners’
Equity
Balance December 28, 2019 $ 1,500.0 $ 442.3 $ 4,492.9 $ 6,772.8 $ (1,884.6) $ (2.3) $ (2,184.8) $ 5.9 $ 9,142.2
Net earnings (loss) — — — 133.2 — — — (0.1) 133.1
Other comprehensive loss — — — — (258.8) — — — (258.8)
Cash dividends declared — $0.69 per common share — — — (105.6) — — — — (105.6)
Issuance of common stock (744,339 shares) — — (20.5) — — — 65.1 — 44.6
Repurchase of common stock (125,294 shares) — — 10.0 — — — (19.0) — (9.0)
Preferred stock issuance costs — — (1.2) — — — — — (1.2)
Stock-based compensation related — — 15.4 — — — — — 15.4
ESOP — — — — — 2.3 — — 2.3
Adoption of ASU 2016-13 — — — (3.8) — — — — (3.8)
Balance March 28, 2020 $ 1,500.0 $ 442.3 $ 4,496.6 $ 6,796.6 $ (2,143.4) $ 0 $ (2,138.7) $ 5.8 $ 8,959.2
Net earnings — — — 238.4 — — — 0.3 238.7
Other comprehensive income — — — — 102.8 — — — 102.8
Cash dividends declared — $0.69 per common share — — — (105.8) — — — — (105.8)
Cash dividends declared — $50.00 per annum per preferred share — — — (4.7) — — — — (4.7)
Issuance of common stock (5,538,106 shares) — — 257.6 — — — 499.1 — 756.7
Repurchase of common stock (4,227 shares) — — — — — — (0.3) — (0.3)
Preferred stock issuance costs — — (2.2) — — — — — (2.2)
Stock-based compensation related — — 21.2 — — — — — 21.2
Balance June 27, 2020 $ 1,500.0 $ 442.3 $ 4,773.2 $ 6,924.5 $ (2,040.6) $ 0 $ (1,639.9) $ 6.1 $ 9,965.6


	Preferred Stock		Common Stock		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non- Controlling Interests		Shareowners’ Equity
Balance January 2, 2021	$	1,370.3	$	442.3	$	4,967.8	$	7,542.2	$	(1,713.7)	$	(1,549.3)	$	6.8	$	11,066.4
Net earnings (loss)	—		—		—		487.4		—		—		(0.6)		486.8
Other comprehensive loss	—		—		—		—		(97.7)		—		—		(97.7)
Cash dividends declared — $0.70 per share	—		—		—		(110.1)		—		—		—		(110.1)
Cash dividends declared - $50.00 per annum per preferred share	—		—		—		(9.4)		—		—		—		(9.4)
Issuance of common stock (848,275 shares)	—		—		(12.7)		—		—		76.8		—		64.1
Repurchase of common stock (80,310 shares)	—		—		—		—		—		(14.9)		—		(14.9)
Non-controlling interest buyout	—		—		(2.8)		—		—		—		(3.2)		(6.0)
Stock-based compensation related	—		—		25.6		—		—		—		—		25.6
Balance April 3, 2021	$	1,370.3	$	442.3	$	4,977.9	$	7,910.1	$	(1,811.4)	$	(1,487.4)	$	3.0	$	11,404.8

See Notes to Unaudited Condensed Consolidated Financial Statements.

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~(UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~JULY 3, 2021~~APRIL 2, 2022

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 ~~July 3, 2021~~April 2, 2022 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 January ~~2, 2021,~~1, 2022, and subsequent related filings with the Securities and Exchange Commission ("SEC").

In ~~February 2020,~~December 2021, the Company acquired ~~Consolidated Aerospace Manufacturing, LLC (“CAM”), an industry-leading manufacturer of specialty fasteners and components for~~ the aerospace and defense markets. The CAM acquisition was accounted for as a business combination using the acquisition method of accounting and the results subsequent to the date of acquisition are included in the Company's Industrial segment.

~~In January 2019, the Company acquired a 20~~remaining 80 percent ~~interest~~ownership stake in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of outdoor power equipment. The Company previously acquired a 20 percent interest in 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 optionin January 2019. Prior to ~~acquire~~closing on the remaining 80 percent ~~of MTD beginning on July 1, 2021 and ending on January 2, 2029. In~~ownership stake, 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~~applied the equity method of accounting to the ~~MTD investment.~~20% investment in MTD. In November 2021, the Company acquired Excel Industries ("Excel"), a leading designer and manufacturer of premium commercial and residential turf-care equipment. These acquisitions are being accounted for as business combinations using the acquisition method of accounting and the results subsequent to the dates of acquisition are included in the Company's Tools & Outdoor segment.

In ~~November 2020,~~April 2022, the Company ~~sold~~announced that it had reached a definitive agreement for the sale of its Mechanical Access Solutions ("MAS") business, the automatic doors business. In December 2021, the Company announced it reached a definitive agreement for the sale of its Convergent Security Solutions ("CSS") business comprising of the commercial electronic ~~operations in 5 countries in Europe~~security and ~~emerging markets within~~healthcare businesses. Based on management's commitment to sell these businesses, the assets and liabilities related to MAS and CSS were classified as held for sale on the Company's Condensed Consolidated Balance Sheets as of April 2, 2022 and January 1, 2022.

The MAS and CSS divestitures represent a single plan to exit the Security ~~segment. In October 2020,~~segment and are considered a strategic shift that will have a major effect on the ~~Company sold a product line in Oil & Gas within the Industrial segment.~~Company’s operations and financial results. The operating results of ~~these businesses~~MAS and CSS have been reported as discontinued operations in the consolidated financial ~~statements through the dates~~statements. Amounts previously reported have been reclassified to conform to this presentation in accordance with Accounting Standard Codification ("ASC") 205, Presentation of ~~sale in 2020.~~Financial Statements ("ASC 205"), to allow for meaningful comparison of continuing operations.

Refer to Note F, Acquisitions and Investments, and Note T, Divestitures, for further discussion of these 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.

~~Accounts And Notes Receivable, Net~~

~~Trade receivables are stated at gross invoice~~ Certain amounts less discounts, other allowances and provisions for credit losses. Financing receivables are initially recorded at fair value, less impairments or provisions for credit losses. 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 industriesreported in which its 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.

~~Allowance For Credit Losses~~

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The Company maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of its receivables. The allowance is determined using two methods. First, a specific reserve is established for individual accounts where information indicates the customers may have an inability to meet financial obligations. Second, a reserve is determined for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection rates, write-off experience, and forecasts of future economic conditions. Actual write-offs are charged against the allowance when collection effortsprevious years have been ~~unsuccessful.~~

~~Financial Instruments~~

~~Derivative financial instruments are employed~~reclassified 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,conform to the extent they are included in the assessment of effectiveness, are recorded in 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 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 of 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

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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 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 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 consolidated balance sheet.

~~Refer to~~ ~~Note D, Accounts and Notes Receivable, Net,~~ ~~for further discussion.~~2022 presentation.

B. NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS ADOPTED ~~—In January 2020,~~— In October 2021, the ~~Financial~~FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting ~~Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-01,~~ ~~Investments-Equity Securities (Topic 321), Investments-Equity Method~~for Contract Assets and ~~Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)~~Contract Liabilities from Contracts with Customers. The new standard ~~clarifies~~improves the ~~interaction of~~ accounting for ~~the transition into~~acquired revenue contracts with customers in a business combination by addressing diversity in practice and ~~out of the equity method.~~inconsistency. The new standard ~~also clarifies the accounting for measuring certain purchased options~~requires an entity to recognize and ~~forward contracts to acquire investments.~~measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. The ASU is effective for fiscal years beginning after December 15, ~~2020,~~2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company ~~adopted~~elected to early adopt this ~~guidance~~standard in the first quarter of ~~2021~~2022 and it did not have a material impact on its consolidated financial statements.

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~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740).~~ The new standard simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The new standard also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements.

~~RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED~~ — In May 2021, the FASB issued ASU 2021-04, Earnings per share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Equity (Subtopic 815-40). The new standard clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied prospectively. The Company ~~is currently evaluating~~adopted this ~~guidance to determine~~standard in the ~~impact~~first quarter of 2022 and it ~~may~~did not have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company ~~is currently evaluating~~adopted this ~~guidance~~standard in the first quarter of 2022, using the modified retrospective method, which has no impact to ~~determine~~prior periods. In accordance with the ~~impact it~~standard, the Company increased weighted-average shares outstanding used to calculate diluted earnings per share for the three months ended April 2, 2022 by 4.1 million shares, as required by the use of the if-converted method for convertible instruments that may ~~have on its consolidated financial statements.~~be settled in cash or shares. See

Note C, Earnings Per Share for further discussion.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new standard provides optional expedients and exceptions that companies can apply during a limited time period to account for contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. Companies may elect to apply these optional expedients and exceptions beginning March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), to clarify the scope of Topic 848 and provide explicit guidance to help companies applying optional expedients and exceptions. This ASU is effective immediately for all entities that have applied optional expedients and exceptions. The Company applied certain optional expedients and exceptions as needed to comply with regulatory and tax authorities for the transition to alternative reference rates. The Company's adoption of this standard did not have a material impact on its consolidated financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED — In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The new standard eliminates the recognition and measurement guidance for troubled debt restructurings (TDRs) for creditors that have adopted ASC 326 and requires public entities to present gross write-offs by year of origination in their vintage disclosures. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The standard should be applied prospectively, and it allows for a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company is currently evaluating ~~these standards~~this guidance to determine ~~whether~~the impact it ~~will apply the optional expedients and exceptions.~~may have on its consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. The new standard expands and clarifies the use of the portfolio layer method for fair value hedges of interest rate risk. The new standard allows non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The new guidance on hedging multiple layers in a closed portfolio should be applied prospectively and the guidance on the accounting for fair value basis adjustments should be applied on a modified retrospective basis. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

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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 ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020:~~2021:

Second Quarter Year-to-Date
2021 2020 2021 2020
Numerator (in millions):
Net Earnings Attributable to Common Shareowners $ 454.7 $ 233.7 $ 932.7 $ 366.9
Denominator (in thousands):
Basic weighted-average shares outstanding 158,644 153,330 158,081 152,011
Dilutive effect of stock contracts and awards 2,927 824 2,780 1,279
Diluted weighted-average shares outstanding 161,571 154,154 160,861 153,290
Earnings per share of common stock:
Basic $ 2.87 $ 1.52 $ 5.90 $ 2.41
Diluted $ 2.81 $ 1.52 $ 5.80 $ 2.39


	Year-to-Date
		2022		2021
Numerator (in millions):
Net Earnings from Continuing Operations Attributable to Common Shareowners		$	155.5	$	450.8
Add: Contract adjustment payments accretion		0.3		0.2
Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted		$	155.8	$	451.0
Net earnings from discontinued operations		19.8		27.2
Net Earnings Attributable to Common Shareowners - Diluted		$	175.6	$	478.2


	Year-to-Date
		2022	2021
Denominator (in thousands):
Basic weighted-average shares outstanding		155,433	157,490
Dilutive effect of stock contracts and awards		9,980	6,859
Diluted weighted-average shares outstanding		165,413	164,349


Earnings per share of common stock:
Basic earnings per share of common stock:
Continuing operations	$	1.00	$	2.86
Discontinued operations	$	0.13	$	0.17
Total basic earnings per share of common stock	$	1.13	$	3.04

Diluted earnings per share of common stock:
Continuing operations	$	0.94	$	2.74
Discontinued operations	$	0.12	$	0.17
Total dilutive earnings per share of common stock	$	1.06	$	2.91

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

Second Quarter Year-to-Date
2021 2020 2021 2020
Number of stock options 706 3,837 901 3,390


	Year-to-Date
		2022	2021
Number of stock options		2,545	1,096

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 ~~million.~~million ("2019 Equity Units"). Each unit has a stated amount of $100 and initially consists of ~~750,000~~a three-year forward stock purchase contract (“2022 Purchase Contracts”) for the purchase of a variable number of shares of ~~convertible preferred~~common stock, ("on November 15, 2022, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series D Preferred ~~Stock"~~Stock”) ~~and~~. The shares associated with the forward stock purchase ~~contracts.~~ contracts component of the 2019 Equity Units have been reflected in diluted earnings per share using the if-converted method.

On and after November 15, 2022, the Series D 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 5.2263 shares of common stock per one share of Series D Preferred Stock, which was equivalent to an initial conversion price of approximately $191.34 per share of common stock. As of ~~July 3, 2021,~~April 2, 2022, due to customary anti-dilution provisions, the conversion rate was ~~5.2274,~~5.2362, equivalent to a conversion price of approximately ~~$191.30~~ $190.98

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per share of common stock. ~~The Series D Preferred Stock is excluded from~~Upon the ~~denominator~~adoption of ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), in 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~~first quarter of ~~the convertible preferred stock exceeds its liquidation preference. Therefore, before any redemption or conversion,~~2022, 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,~~Series D Preferred Stock totaling 4.1 million are included in the denominator of diluted earnings per share ~~in periods in which they are dilutive. The shares related to~~using the ~~Series D Preferred Stock were anti-dilutive during January and February of 2021 and during the first six months of 2020.~~if-converted method.

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 ~~million.~~million (“2017 Equity Units”). Each unit had a stated amount of $100 and initially consisted of ~~750,000~~a three-year forward stock purchase contract (“2020 Purchase Contracts”) for the purchase of a variable number of shares of ~~convertible preferred~~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"~~Stock”) ~~and forward stock purchase contracts.~~ .

In May 2020, the Company successfully remarketed the Series C Preferred Stock ~~as described more fully~~(the “Remarketed Series C Preferred Stock”) resulting in~~Note J, Equity Arrangements.~~ ~~The remarketing generated~~ cash proceeds of $750.0 ~~million which were applied to settle~~million. Upon completion of the ~~holders' stock purchase contract obligations, resulting in~~remarketing, the holders of the 2017 Equity Units received 5,463,750 common shares and the Company ~~issuing 5,463,750 common shares.~~issued 750,000 shares of Remarketed Series C Preferred Stock, without par, with a liquidation preference of $1,000 per share. Holders of the ~~remarketed~~Remarketed Series C Preferred Stock were entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share). ~~In addition,~~Beginning on May 15, 2020, the holders had the option to convert the Remarketed Series C Preferred Stock into common stock. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or a combination thereof. In connection with the remarketing described above, the conversion rate was reset to 6.7352 shares of the Company's common stock per one share of Remarketed Series C Preferred Stock, which was equivalent to a conversion price of approximately $148.47 per share of common stock.

OnIn April ~~28,~~ 2021, the Company informed holders that it would redeem all outstanding shares of the Remarketed Series C Preferred Stock on June 3, 2021 (the “Redemption Date”) at $1,002.50 per share in cash (the “Redemption Price”), which was equal to 100% of the liquidation preference of a share of Remarketed Series C Preferred Stock, plus accumulated and unpaid dividends to, but excluding, the Redemption Date. If a holder elected to convert its shares of Remarketed Series C Preferred Stock prior to the Redemption Date, the Company elected a combination settlement with a specified cashcash amount of $1,000 per share. In June 2021, the Company

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redeemed the Remarketed Series C Preferred Stock and settled all conversions, paying $750 million in cash and issuing 1,469,055 common shares. The conversion rate used was 6.7548 (equivalent to a conversion price set at $148.04 per common share). Prior to the Redemption Date, the Remarketed Series C Preferred Stock was excluded from the denominator of the diluted earnings per share calculation on the basis that the ~~convertible preferred stock~~Remarketed Series C Preferred Stock would be settled in cash except to the extent that the conversion value ~~of the convertible preferred stock~~ exceeded 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 were included in the denominator of diluted earnings per share in periods in which they were dilutive.

~~The shares related to the Series C Preferred Stock were anti-dilutive during certain months in 2020.~~

Refer to Note J, Equity Arrangements, for further discussion of the above transactions.

D. ACCOUNTS AND NOTES RECEIVABLE, NET


(Millions of Dollars)	(Millions of Dollars)	July 3, 2021		January 2, 2021		(Millions of Dollars)	April 2, 2022		January 1, 2022
Trade accounts receivable	Trade accounts receivable	$	1,790.1	$	1,345.7	Trade accounts receivable	$	1,773.1	$	1,398.2
Trade notes receivable	Trade notes receivable	160.2		156.1		Trade notes receivable	71.6		75.3
Other accounts receivable	Other accounts receivable	185.6		151.5		Other accounts receivable	105.1		104.1
Gross accounts and notes receivable	Gross accounts and notes receivable	$	2,135.9	$	1,653.3	Gross accounts and notes receivable	$	1,949.8	$	1,577.6
Allowance for credit losses	Allowance for credit losses	(141.2)		(141.1)		Allowance for credit losses	(107.8)		(95.9)
Accounts and notes receivable, net	Accounts and notes receivable, net	$	1,994.7	$	1,512.2	Accounts and notes receivable, net	$	1,842.0	$	1,481.7
Long-term receivables, net		$	142.7	$	139.9

Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. Adequate reserves have been established to cover ~~expected~~anticipated credit losses. Long-term receivables, net, of $142.7 million and $139.9 million at July 3, 2021 and January 2, 2021, respectively, are reported within Other assets in the Condensed Consolidated Balance Sheets. The Company's financing receivables are predominantly related to certain security equipment sales-type leases with commercial businesses. As of July 3, 2021, the current portion of financing receivables within Trade notes receivable approxi~~mated $76.4 million.~~Generally, the Company retains legal title to any equipment under lease and holds the right to repossess such equipment in an event of default. All financing receivables are 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 changes in the allowance for credit losses for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ are as follows:

(Millions of Dollars) Balance
April 3, 2021 Cumulative Effect Adjustment
(a) Charged To Costs and Expenses Charged To Other Accounts
(b) Deductions
(c) Balance
July 3, 2021
Accounts receivable $ 129.5 $ 0 $ (1.3) $ (0.7) $ (1.1) $ 126.4
Notes receivable 14.6 0 0.4 (0.2) 0 14.8
Total $ 144.1 $ 0 $ (0.9) $ (0.9) $ (1.1) $ 141.2

(Millions of Dollars) Balance
January 2, 2021 Cumulative Effect Adjustment
(a) Charged To Costs and Expenses Charged To Other Accounts
(b) Deductions
(c) Balance
July 3, 2021
Accounts receivable $ 126.7 $ 0 $ 4.2 $ 0.8 $ (5.3) $ 126.4
Notes receivable 14.4 0 0.4 0 0 14.8
Total $ 141.1 $ 0 $ 4.6 $ 0.8 $ (5.3) $ 141.2

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(Millions of Dollars) Balance
March 28, 2020 Cumulative Effect Adjustment
(a) Charged To Costs and Expenses Charged To Other Accounts
(b) Deductions
(c) Balance
June 27, 2020
Accounts receivable $ 108.1 $ 0 $ 19.0 $ 0 $ (4.2) $ 122.9
Notes receivable 13.6 0 0 0.1 (0.1) 13.6
Total $ 121.7 $ 0 $ 19.0 $ 0.1 $ (4.3) $ 136.5


(Millions of Dollars)	April 2, 2022		April 3, 2021
Beginning Balance	$	95.9	106.2
Charged To Costs and Expenses	11.1		2.2
Other, including recoveries and deductions (a)	0.8		0.9
Balance end of period	$	107.8	109.3

(Millions of Dollars) Balance
December 28, 2019 Cumulative Effect Adjustment
(a) Charged To Costs and Expenses Charged To Other Accounts
(b) Deductions
(c) Balance
June 27, 2020
Accounts receivable $ 99.3 $ 2.9 $ 29.7 $ (2.8) $ (6.2) $ 122.9
Notes receivable 13.1 0.9 0 (0.1) (0.3) 13.6
Total $ 112.4 $ 3.8 $ 29.7 $ (2.9) $ (6.5) $ 136.5

(a) ~~Represents the cumulative-effect adjustment to opening retained earnings due to the adoption of ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326),~~ ~~in the first quarter of 2020.~~

~~(b)~~ Amounts represent charge-offs less recoveries, the impacts of foreign currency translation, acquisitions and net transfers to/from other accounts.

~~(c) Amounts represent charge-offs~~

The Company's payment terms are generally consistent with the industries in which their businesses operate and typically range from 30-90 days globally. 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 ~~recoveries of accounts previously charged-off.~~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~~At April 2, 2022 and January 1, 2022, the ~~expected timing of receipt of payments~~Industrial segment operating lease receivable was $18.8 million and $21.2 million, respectively, from ~~customers on an undiscounted basis as of July 3, 2021 relating~~leasing equipment to ~~the Company’s lease receivables:~~

(Millions of Dollars) Total Within 1 Year 2 Years 3 Years 4 Years 5 Years Thereafter
Financing receivables $ 207.6 $ 76.4 $ 56.2 $ 38.6 $ 22.4 $ 11.0 $ 3.0
Operating leases $ 19.3 $ 17.6 $ 0.8 $ 0.4 $ 0.1 $ 0.1 $ 0.3

~~The following is a summary of~~customers. Net sales from operating lease revenue were $12.7 million and ~~sales-type lease profit~~$19.6 million for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021, ~~and June 27, 2020:~~

Second Quarter Year-to-Date
(Millions of Dollars) 2021 2020 2021 2020
Sales-type lease revenue $ 31.4 $ 30.8 $ 66.0 $ 53.8
Lease interest revenue 3.7 3.0 6.7 6.1
Operating lease revenue 15.9 35.2 40.1 71.5
Total lease revenue $ 51.0 $ 69.0 $ 112.8 $ 131.4
Sales-type lease profit $ 12.5 $ 12.3 $ 26.3 $ 21.4

respectively.

The Company has an accounts receivable sale program. According to the terms, the Company sells certain of its trade accounts receivables at fair value to a wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS"). The BRS, in turn, can sell such receivables to a third-party financial institution (“Purchaser”) for cash. The Purchaser’s maximum cash investment in the receivables at any time is $110.0 million. The purpose of the program is to provide liquidity to the Company. These transfers qualify as sales under ASC 860, Transfers and Servicing, and receivables are derecognized from the Company’s consolidated balance sheet when the BRS sells those receivables to the Purchaser. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities. At ~~July 3, 2021,~~April 2, 2022, 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 cost of servicing the receivables sold.

At ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, net receivables of approximately $86.4 million and $100.0 million, ~~and $86.8 million of net receivables~~respectively, were ~~derecognized, respectively. For the three and six months ended July 3, 2021, proceeds~~derecognized. Proceeds from transfers of receivables to the Purchaser totaled ~~$119.3~~$82.3 million and ~~$182.7~~$63.4 million for the three months ended April 2, 2022 and April 3, 2021, respectively, and payments to the Purchaser totaled ~~$83.6~~$95.9 million and ~~$169.5~~$85.9 million, respectively. For the three and six months ended June 27, 2020, proceeds from transfers of receivables to the Purchaser totaled $28.9 million and $78.0 million, respectively, and payments to the Purchaser totaled $58.3 million and $152.4 million,

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respectively. The program resulted in a pre-tax loss of $0.4 million and ~~$0.8~~$0.4 million for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021, respectively, which included service fees of $0.2 million ~~and $0.4 million, respectively. The program resulted~~ in ~~a pre-tax loss of $0.3 million and $1.0 million for the three and six months ended June 27, 2020, respectively, which included service fees of $0.1 million and $0.3 million, respectively.~~both periods. All cash flows under the program are reported as a component of changes in ~~working capital~~accounts receivable within operating activities in the Condensed Consolidated Statements of Cash Flows since all the cash from the Purchaser is received upon the initial sale of the receivable.

As of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, the Company's deferred revenue totaled ~~$203.5~~$118.8 million and ~~$207.6~~$117.1 million, respectively, of which ~~$105.7~~$37.3 million and ~~$108.7~~$35.0 million, respectively, was classified as ~~current within Accrued expenses in the Condensed Consolidated Balance Sheets.~~current. Revenue recognized for the ~~six~~three months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ that was previously deferred as of January 1, 2022 and January 2, 2021 ~~and December 28, 2019~~ totaled ~~$77.7~~$5.9 million and ~~$70.8~~$6.8 million, respectively.

~~As of July 3, 2021, approximately~~ ~~$1.138 billion of revenue from long-term contracts primarily in the Security segment was unearned related to customer contracts which were n~~ot completely fulfilled and will be recognized on a decelerating basis over the next five 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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021~~1, 2022 are as follows:


(Millions of Dollars)	(Millions of Dollars)	July 3, 2021		January 2, 2021		(Millions of Dollars)	April 2, 2022		January 1, 2022
Finished products	Finished products	$	2,512.3	$	1,922.5	Finished products	$	4,022.8	$	3,486.2
Work in process	Work in process	299.3		222.3		Work in process	428.9		394.8
Raw materials	Raw materials	867.9		592.6		Raw materials	1,816.0		1,538.9
Total	Total	$	3,679.5	$	2,737.4	Total	$	6,267.7	$	5,419.9

F. ACQUISITIONS AND INVESTMENTS

2021 ACQUISITIONS

~~CAM~~MTD

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On ~~February 24, 2020,~~December 1, 2021, the Company acquired ~~CAM~~the remaining 80 percent ownership stake in MTD, a privately held global manufacturer of outdoor power equipment, for ~~a total estimated purchase price of approximately $1.46~~$1.5 billion, net of cash acquired. The ~~purchase price consisted~~Company previously acquired a 20 percent interest in MTD in January 2019 for $234 million. The Company’s pre-existing 20 percent equity investment in MTD was remeasured at fair value of an initial cash payment of approximately $1.30 billion, net of cash acquired, and future payments up to $200.0 million contingent on The Boeing Company ("Boeing") 737 MAX Airplanes receiving Federal Aviation Administration authorization to return to service and Boeing achieving certain production levels, which were valued at $155.3$295.1 million as of the ~~acquisition date.~~

~~In November 2020,~~transaction date based on the ~~FAA rescinded~~purchase price for the ~~737 MAX grounding order and as~~remaining 80 percent ownership, which was calculated using an EBITDA-based formula. As a result, ~~of the subsequent return to revenue service of the 737 MAX in December 2020,~~ the Company ~~paid $100~~recorded a $68.0 million togain on investment during the ~~former owners~~fourth quarter of ~~CAM. The remaining contingent consideration was remeasured at January 2, 2021~~2021.

MTD designs, manufactures and ~~the Company concluded the achievement of certain production levels based~~distributes lawn tractors, zero turn ride on ~~Boeing’s future forecast was remote~~mowers, walk behind mowers, snow blowers, residential robotic mowers, handheld outdoor power equipment and released the remaining $55.3 million contingent consideration liability to the Consolidated Statements of Operations in Other, net. As of July 3, 2021, the Company continues to consider the achievement of certain production levels based on Boeing’s future forecast as remote.

~~CAM is an industry-leading manufacturer of specialty fasteners~~garden tools for both residential and ~~components for the aerospace~~professional consumers under well-known brands like Cub Cadet® and ~~defense markets. The acquisition further diversified the Company's presence~~Troy-Bilt®. This combination will create a global leader in the ~~industrial markets~~outdoor category, with strong brands and ~~expanded its portfolio of specialty fasteners in the aerospace and defense markets.~~growth opportunities. The results of ~~CAM~~MTD subsequent to the date of acquisition are included in the Company's ~~Industrial~~Tools & Outdoor segment.

The ~~CAM~~MTD acquisition ~~was~~is being accounted for as a business combination using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The following table summarizes the estimated acquisition date value of identifiable net assets acquired and liabilities assumed:

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(Millions of Dollars)
Cash and cash equivalents	$	~~35.8~~111.6
Accounts receivable, net	~~48.3~~276.4
Inventories, net	~~124.3~~900.7
Prepaid expenses and other assets	~~2.6~~97.7
Property, plant and equipment	~~127.9~~222.8
Trade names	~~25.0~~390.0
Customer relationships	~~565.0~~450.0
Other assets	37.8
Accounts payable	~~(25.9)~~(394.4)
Accrued expenses	~~(26.9)~~(258.7)
Deferred revenue	(0.9)
Long-term debt	(110.9)
Deferred taxes	~~(16.3)~~(195.6)
Other liabilities	~~(0.3)~~(68.4)
Total identifiable net assets	$	~~859.5~~1,458.1
Goodwill	~~632.3~~
~~Contingent consideration~~	~~(155.3)~~478.6
Total consideration ~~paid~~	$	~~1,336.5~~1,936.7

The weighted-average useful life assigned to the definite-lived intangible assets ~~was 20~~is 15 years.

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Goodwill ~~was~~is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected cost synergies of the combined business and assembled workforce. It is estimated that ~~$569.8~~$0.6 million of goodwill will be deductible for tax purposes.

The acquisition accounting for ~~CAM~~MTD is ~~complete. The~~preliminary in certain respects. During the measurement period, the Company expects to record adjustments ~~recorded in 2021 did not have a material impact~~relating to the finalization of intangible assets, inventory and property, plant and equipment valuations, working capital accounts, and opening balance sheet contingencies, 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.

Excel

On November 12, 2021, the Company acquired Excel Industries ("Excel") for $373.6 million, net of cash acquired and an estimated working capital adjustment. Excel is a leading designer and manufacturer of premium commercial and residential turf-care equipment under the brands of Hustler Turf Equipment and BigDog Mower Co. The results of Excel subsequent to the date of acquisition are included in the Company's ~~consolidated financial statements.~~Tools & Outdoor segment.

The Company believes this is a strategically important bolt-on acquisition as it builds an outdoor products leader. The Excel acquisition is being accounted for as a business combination, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated value of identifiable net assets acquired, which includes $37.2 million of working capital, $48.7 million of deferred tax liabilities, and $203.5 million of intangible assets, is $200.4 million. The related goodwill is $173.2 million. The amount allocated to intangible assets includes $158.0 million for customer relationships. The weighted-average useful life assigned to the intangible assets 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 and assembled workforce. It is estimated that $0.6 million of goodwill will be deductible for tax purposes.

The acquisition accounting for Excel is preliminary in certain respects. During the measurement period, the Company expects to record adjustments relating to the finalization of intangible and inventory valuations, working capital accounts, and opening balance sheet contingencies, amongst others.

Other ~~2020 Acquisition~~2021 Acquisitions

During ~~2020,~~2021, the Company completed ~~1 smaller acquisition~~two other acquisitions for ~~$27.8~~a total purchase price of $207.7 million, net of cash acquired. The estimated acquisition date value of the identifiable net assets acquired is ~~$13.4~~$51.6 million ~~which includes $14.8 million of customer relationships.~~and working capital is $36.7 million. The related goodwill is ~~$14.4~~$156.1 million. ~~The useful life assigned to the customer relationships is 8 years.~~ The results of ~~this acquisition~~these acquisitions subsequent to the ~~date~~dates of acquisition are included in the Company's ~~Security~~Tools & Outdoor segment.

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 and assembled workforce. It is estimated that $44.7 million of goodwill will be deductible for tax purposes.

The acquisition accounting for ~~this acquisition~~these acquisitions is preliminary in certain respects. During the measurement period, the Company expects to record adjustments relating to working capital accounts, 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 consolidated financial statements.~~

ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISITIONS

Actual Impact from ~~Acquisitions~~Acquisition

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The Company did not complete any ~~material~~ acquisitions in the first ~~half~~quarter of ~~2021.~~2022. As such, there was ~~an immaterial~~no impact from new acquisitions on the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) for the three ~~and six~~ months ended ~~July 3, 2021.~~April 2, 2022.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the ~~2020~~2021 acquisitions had occurred on December ~~30, 2018.~~29, 2019. 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 ~~December 30, 2018.~~the aforementioned date. In addition, the pro-forma consolidated results do not purport to project the future results of the Company.

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(Millions of Dollars, except per share amounts)	(Millions of Dollars, except per share amounts)	Second Quarter 2020		Year-To-Date 2020		(Millions of Dollars, except per share amounts)	First Quarter 2022		First Quarter 2021
Net sales	Net sales	$	3,151.4	$	6,330.8	Net sales	$	4,448.0	$	4,594.8
Net earnings attributable to common shareowners		$	251.3	$	399.2
Diluted earnings per share		$	1.63	$	2.60
Net earnings from continuing operations attributable to common shareowners - Diluted						Net earnings from continuing operations attributable to common shareowners - Diluted	$	242.9	$	475.8
Diluted earnings per share of common stock - Continuing operations						Diluted earnings per share of common stock - Continuing operations	$	1.47	$	2.90

~~2020~~2022 Pro-forma Results

The 2022 pro-forma results were calculated by combining the actual results of Stanley Black & Decker for the three months ended April 2, 2022, inclusive of the results of MTD and Excel, with the following adjustment:

•Because the 2021 acquisitions were assumed to occur on December 29, 2019, there were no acquisition-related costs or inventory step-up charges factored into the 2022 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date.

2021 Pro-forma Results

The ~~2020~~2021 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the ~~2020~~2021 acquisitions for their respective pre-acquisition period. Accordingly, the following ~~adjustments were~~adjustment was 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 acquisition accounting that would have been incurred from ~~December 29, 2019~~January 2, 2021 to ~~the acquisition date of CAM and from December 29, 2019 to June 27, 2020 for the other 2020 acquisition.~~

•~~Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 29, 2019 to the acquisition date of CAM.~~

•Because the 2020 acquisitions were assumed to occur on December 30, 2018, there were no acquisition-related costs or inventory step-up charges factored into the 2020 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date.April 3, 2021.

INVESTMENTS

On January 2, 2019, the Company acquired a 20 percent interest in MTD, a privately held global manufacturer of outdoor power equipment, for $234 million in cash. With annual revenues of approximately $2.6 billion, MTD manufacturesDuring 2022 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 EBITDA, with an equitable sharing arrangement for future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment.

~~During 2021 and 2020,~~ the Company made additional immaterial investments in new and emerging start-up companies focused on innovation, breakthrough products and advanced technologies. These investments, which are included in Other assets in the Condensed Consolidated Balance Sheets, do not qualify for equity method accounting as the Company acquired less than 20 percent interest in each investment and does not have the ability to significantly influence the operating or financial decisions of any of the investees.

G. GOODWILL

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


(Millions of Dollars)	(Millions of Dollars)	Tools & Storage		Industrial		Security		Total		(Millions of Dollars)	Tools & Outdoor		Industrial		Total
Balance January 2, 2021		$	5,247.7	$	2,646.5	$	2,143.9	$	10,038.1
Balance January 1, 2022										Balance January 1, 2022	$	5,973.7	$	2,617.0	$	8,590.7
Acquisitions	Acquisitions	4.4		(0.5)		(0.4)		3.5		Acquisitions	40.1		—		40.1
Foreign currency translation	Foreign currency translation	(12.8)		(14.9)		(24.6)		(52.3)		Foreign currency translation	(25.8)		(8.0)		(33.8)
Balance July 3, 2021		$	5,239.3	$	2,631.1	$	2,118.9	$	9,989.3
Balance April 2, 2022										Balance April 2, 2022	$	5,988.0	$	2,609.0	$	8,597.0

Goodwill totaling $2,073.8 million and $2,088.0 million was reclassified to assets held for sale as of April 2, 2022 and January 1, 2022, respectively.

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H. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-term debt and financing arrangements at ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021~~1, 2022 are as follows:


			July 3, 2021												January 2, 2021				April 2, 2022												January 1, 2022
(Millions of Dollars)	(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 Value		(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 Value
Notes payable due 2025																	Notes payable due 2025	2.30%	$	500.0	$	(0.7)	$	—	$	—	$	(1.2)	$	498.1	$	—
Notes payable due 2026																	Notes payable due 2026	3.40%	500.0		(0.4)		—		—		(1.7)		497.9		497.8
Notes payable due 2026																	Notes payable due 2026	3.42%	25.0		—		—		1.6		—		26.6		24.9
Notes payable due 2026	Notes payable due 2026	3.40%	$	500.0	$	(0.5)	$	—	$	—	$	(2.2)	$	497.3	$	497.2	Notes payable due 2026	1.84%	28.5		—		—		0.8		(0.1)		29.2		28.4
Notes payable due 2028	Notes payable due 2028	7.05%	150.0		0		7.6		7.4		0		165.0		166.1		Notes payable due 2028	7.05%	150.0		—		6.8		6.6		—		163.4		163.9
Notes payable due 2028	Notes payable due 2028	4.25%	500.0		(0.3)		—		—		(3.2)		496.5		496.2		Notes payable due 2028	4.25%	500.0		(0.3)		—		—		(2.9)		496.8		496.8
Notes payable due 2028																	Notes payable due 2028	3.52%	50.0		0				4.3		(0.2)		54.1		49.9
Notes payable due 2030	Notes payable due 2030	2.30%	750.0		(2.1)		—		—		(4.5)		743.4		742.9		Notes payable due 2030	2.30%	750.0		(2.0)		—		—		(4.1)		743.9		743.7
Notes payable due 2032																	Notes payable due 2032	3.00%	500.0		(0.9)		—		—		(2.3)		496.8		—
Notes payable due 2040	Notes payable due 2040	5.20%	400.0		(0.2)		(28.3)		—		(2.6)		368.9		368.1		Notes payable due 2040	5.20%	400.0		(0.2)		(27.2)		—		(2.5)		370.1		369.7
Notes payable due 2048	Notes payable due 2048	4.85%	500.0		(0.5)		—		—		(5.0)		494.5		494.3		Notes payable due 2048	4.85%	500.0		(0.5)		—		—		(4.9)		494.6		494.6
Notes payable due 2050	Notes payable due 2050	2.75%	750.0		(1.9)		—		—		(8.3)		739.8		739.9		Notes payable due 2050	2.75%	750.0		(1.9)		—		—		(8.0)		740.1		740.0
Notes payable due 2060 (junior subordinated)	Notes payable due 2060 (junior subordinated)	4.00%	750.0		0		—		—		(9.2)		740.8		740.7		Notes payable due 2060 (junior subordinated)	4.00%	750.0		—		—		—		(9.0)		741.0		740.9
Long-term debt2			$	4,300.0	$	(5.5)	$	(20.7)	$	7.4	$	(35.0)	$	4,246.2	$	4,245.4
Other, payable in varying amounts 2022 through 2027																	Other, payable in varying amounts 2022 through 2027	3.47%-4.31%	4.3		—		—		—		(0.2)		4.1		4.3
Total Long-term debt, including current maturities																	Total Long-term debt, including current maturities		$	5,407.8	$	(6.9)	$	(20.4)	$	13.3	$	(37.1)	$	5,356.7	$	4,354.9
Less: Current maturities of long-term debt																	Less: Current maturities of long-term debt												(1.2)		(1.3)
Long-term debt																	Long-term debt												$	5,355.5	$	4,353.6

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

2
~~There are no current maturities~~

In February 2022, the Company issued $500.0 million of ~~long-term~~senior unsecured term notes maturing February 24, 2025 ("2025 Term Notes") and $500.0 million of senior unsecured term notes maturing May 15, 2032 (“2032 Term Notes”). The 2025 Term Notes will accrue interest at a fixed rate of 2.3% per annum and the 2032 Term Notes at a fixed rate of 3.0% per annum, with interest payable semi-annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured unsubordinated debt. The Company received total net proceeds from this offering of approximately $994.8 million, net of approximately $5.2 million of 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 indebtedness under the commercial paper facilities.

The Company has a ~~$3.0~~$3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, the Company had 0commercial paper borrowings ~~outstanding.~~outstanding of $2.8 billion and $2.2 billion, respectively.

The Company has a five-year ~~$2.0~~$2.5 billion committed credit facility (the “5-Year Credit Agreement”). Borrowings under the 5-Year Credit Agreement may be made in U.S. Dollars, Euros or Pounds Sterling. A sub-limit amount of ~~$653.3~~$814.3 million is designated for swing line advances which may be drawn in Euros pursuant to the terms of the 5-Year Credit Agreement. Borrowings bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and specific terms of the 5-Year Credit Agreement. The Company must repay all advances under the 5-Year Credit Agreement by the earlier of September ~~12, 2023~~8, 2026 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop for the Company's ~~$3.0~~$3.5 billion U.S. Dollar and Euro commercial paper program. As of ~~July 3, 2021,~~April 2, 2022, and January ~~2, 2021,~~1, 2022, the Company had 0tnot drawn on its five-year committed credit facility.

Company 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 that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.5 billion U.S. Dollar and Euro commercial paper program. As of April 2, 2022, and January 1, 2022, the Company had not drawn on its 364-Day Credit Agreement.

The Company has a second 364-Day $1.0 billion committed credit facility (the "Second 364-Day Credit Agreement"). Borrowings under the Second 364-Day Credit Agreement may be made in U.S. Dollars and Euros and bear interest at a base rate plus an applicable margin determined at the time of borrowing. The Company must repay all advances under the Second 364-Day Credit Agreement by the earlier of November 15, 2022 or upon termination. The Company 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 that the Company, among other things, pays a fee to the administrative agent for the account of each lender. ~~The~~As of April 2, 2022 and January 1, 2022, the Company had not drawn on its Second 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.0 billion U.S. Dollar and Euro commercial paper program. As of July 3, 2021, and January 2, 2021, the Company had 0t drawn on its 364-Day committed credit facility.

In January 2022, the Company executed a third 364-Day $2.5 billion committed credit facility (the "Third 364-Day Credit Agreement"). Borrowings under the Third 364-Day Credit Agreement shall be made in U.S. Dollars and bear interest at a base rate plus an applicable margin determined at the time of the borrowing. The Company ~~has an interest coverage covenant~~must repay all advances under the Third 364-Day Credit Agreement by the earlier of January 25, 2023 or upon termination. The Company may, however, convert all advances outstanding upon termination into a term loan that ~~must~~shall be maintained to permit continued access to its committed credit facilities described above. The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted Interest Expense ("adjusted EBITDA"/"adjusted Interest Expense"). In April 2020,repaid in full no later than the first anniversary of the termination date provided that the Company, entered into an amendment to its 5-Year Credit Agreement to: (a) amend the definition of Adjusted EBITDA to allow for additional adjustment addbacks, which primarily relate to anticipated incremental charges relatedamong other things, pays a fee to the ~~COVID-19 pandemic, for amounts incurred beginning in the second quarter of 2020 through the second quarter of 2021, and (b) lower the minimum interest coverage ratio from 3.5 to 2.5 times~~administrative agent for the ~~period from and including~~account of each lender. As of April 2, 2022, the ~~second quarter of 2020 through the end of fiscal year 2021.~~Company had $2.3 billion outstanding on its Third 364-Day Credit Agreement.

I. FINANCIAL INSTRUMENTS

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

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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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021~~1, 2022 is as follows:

(Millions of Dollars) Balance Sheet
Classification July 3, 2021 January 2, 2021 Balance Sheet
Classification July 3, 2021 January 2, 2021
Derivatives designated as hedging instruments:
Interest Rate Contracts Cash Flow Other current assets $ 0 $ 0 Accrued expenses $ 63.5 $ 90.9
Foreign Exchange Contracts Cash Flow Other current assets 7.4 0 Accrued expenses 8.2 23.7
LT other assets 2.4 0 LT other liabilities 0 0
Net Investment Hedge Other current assets 2.3 3.5 Accrued expenses 0.7 55.1
LT other assets 1.5 0 LT other liabilities 0 5.7
Total designated as hedging $ 13.6 $ 3.5 $ 72.4 $ 175.4
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts Other current assets $ 11.9 $ 10.5 Accrued expenses $ 6.3 $ 15.6
Total $ 25.5 $ 14.0 $ 78.7 $ 191.0


(Millions of Dollars)	Balance Sheet Classification	April 2, 2022		January 1, 2022		Balance Sheet Classification	April 2, 2022		January 1, 2022
Derivatives designated as hedging instruments:
Interest Rate Contracts Cash Flow	Other current assets	$	—	$	1.2	Accrued expenses	$	—	$	1.9
Foreign Exchange Contracts Cash Flow	Other current assets	17.1		18.3		Accrued expenses	1.0		0.8
Net Investment Hedge	Other current assets	2.9		2.5		Accrued expenses	—		—
	LT other assets	—		3.3		LT other liabilities	—		—
Total designated as hedging		$	20.0	$	25.3		$	1.0	$	2.7
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Other current assets	$	9.9	$	7.8	Accrued expenses	$	10.8	$	6.0
Total		$	29.9	$	33.1		$	11.8	$	8.7

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. As of ~~July 3, 2021~~

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April 2, 2022 and January ~~2, 2021,~~1, 2022, there were no assets that had been posted as collateral related to the above mentioned financial instruments.

During the ~~six~~three months ended ~~July~~April 2, 2022 and April 3, 2021, ~~and June 27, 2020,~~ cash flows related to derivatives, including those that are separately discussed below, resulted in net cash ~~paid~~received of ~~$101.7~~$36.6 million and net cash ~~received~~paid of ~~$38.6~~$71.7 million, respectively.

CASH FLOW HEDGES

There were after-tax mark-to-market losses of ~~$65.5~~$30.8 million and ~~$103.0~~$49.8 million as of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, respectively, reported for cash flow hedge effectiveness in Accumulated other comprehensive ~~income (loss).~~loss. An after-tax ~~loss~~gain of ~~$5.2~~$8.6 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 ~~income (loss)~~loss during the periods in which the underlying hedged transactions affected earnings for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020:~~2021:


		Second Quarter 2021								Year-to-Date 2022
(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)									(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	Interest Rate Contracts	$	(25.0)	Interest expense	$	(1.0)	$	0	Interest Rate Contracts	$	23.4	Interest expense	$	(1.2)	$	—
Foreign Exchange Contracts	Foreign Exchange Contracts	$	3.9	Cost of sales	$	(7.6)	$	0	Foreign Exchange Contracts	$	6.5	Cost of sales	$	6.1	$	—


	Year-to-Date 2021
(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	$	52.4	Interest expense	$	(1.1)	$	—
Foreign Exchange Contracts	$	4.3	Cost of sales	$	(3.8)	$	—

1918

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Year-to-Date 2021
(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 $ 27.4 Interest expense $ (2.1) $ 0
Foreign Exchange Contracts $ 8.2 Cost of sales $ (11.4) $ 0

Second Quarter 2020
(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 $ 4.9 Interest expense $ (4.7) $ 0
Foreign Exchange Contracts $ (4.9) Cost of sales $ 4.3 $ 0

Year-to-Date 2020
(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 $ (94.0) Interest expense $ (9.2) $ 0
Foreign Exchange Contracts $ 15.4 Cost of sales $ 6.6 $ 0

A summary of the pre-tax effect of cash flow hedge accounting on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ is as follows:


		Second Quarter 2021				Year-to-Date 2021					Year-to-Date 2022
(Millions of Dollars)	(Millions of Dollars)	Cost of Sales		Interest Expense		Cost of Sales		Interest Expense		(Millions of Dollars)		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		$	2,757.3	$	46.5	$	5,390.1	$	94.0
Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the cash flow hedges are recorded										Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the cash flow hedges are recorded		$	3,142.6	$	54.7
Gain (loss) on cash flow hedging relationships:	Gain (loss) on cash flow hedging relationships:									Gain (loss) on cash flow hedging relationships:
Foreign Exchange Contracts:	Foreign Exchange Contracts:									Foreign Exchange Contracts:
Hedged Items	Hedged Items	$	7.6	$	0	$	11.4	$	0	Hedged Items		$	(6.1)	$	—
Gain (loss) reclassified from OCI into Income	Gain (loss) reclassified from OCI into Income	$	(7.6)	$	0	$	(11.4)	$	0	Gain (loss) reclassified from OCI into Income		$	6.1	$	—
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:									Interest Rate Swap Agreements:
Gain (loss) reclassified from OCI into Income 1	Gain (loss) reclassified from OCI into Income 1	$	0	$	(1.0)	$	0	$	(2.1)	Gain (loss) reclassified from OCI into Income 1		$	—	$	(1.2)


		Second Quarter 2020				Year-to-Date 2020					Year-to-Date 2021
(Millions of Dollars)	(Millions of Dollars)	Cost of Sales		Interest Expense		Cost of Sales		Interest Expense		(Millions of Dollars)		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		$	2,134.7	$	57.3	$	4,241.0	$	117.0
Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the cash flow hedges are recorded										Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the cash flow hedges are recorded		$	2,333.0	$	47.5
Gain (loss) on cash flow hedging relationships:	Gain (loss) on cash flow hedging relationships:									Gain (loss) on cash flow hedging relationships:
Foreign Exchange Contracts:	Foreign Exchange Contracts:									Foreign Exchange Contracts:
Hedged Items	Hedged Items	$	(4.3)	$	0	$	(6.6)	$	0	Hedged Items		$	3.8	$	—
Gain (loss) reclassified from OCI into Income	Gain (loss) reclassified from OCI into Income	$	4.3	$	0	$	6.6	$	0	Gain (loss) reclassified from OCI into Income		$	(3.8)	$	—
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:									Interest Rate Swap Agreements:
Gain (loss) reclassified from OCI into Income 1	Gain (loss) reclassified from OCI into Income 1	$	0	$	(4.7)	$	0	$	(9.2)	Gain (loss) reclassified from OCI into Income 1		$	—	$	(1.1)

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

An after-tax gain of $2.5 million and loss of ~~$5.3~~$2.9 million ~~and $0.3 million was~~were reclassified from Accumulated other comprehensive ~~Income (Loss)~~loss into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) for the three months ended ~~July~~April 2, 2022 and April 3, 2021, ~~and June 27, 2020,~~ respectively. An after-tax loss of $8.2 million and $1.7 million was reclassified from Accumulated other comprehensive Income (Loss) into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) for the six months ended July 3, 2021 and June 27, 2020, respectively, during the periods in which the underlying hedged transactions affected earnings.

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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.

During ~~the first quarter of 2020,~~2021, the Company entered into forward starting interest rate swaps totaling ~~$1.0 billion~~$400.0 million to offset ~~the~~ expected variability on future interest rate payments associated with debt instruments expected to be issued in the future. ~~These~~During 2022, these swaps were terminated ~~during the first quarter of 2020~~ resulting in a ~~loss~~gain of ~~$20.5~~$22.7 million which ~~was~~is recorded in Accumulated other comprehensive ~~income (loss)~~loss and is being 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 financing activities in the Condensed Consolidated Statements of Cash Flows. As

The Company has no outstanding forward starting swaps designated as cash flow hedges as of ~~July 3, 2021~~April 2, 2022, and ~~January 2, 2021, the Company~~ had $400.0 million outstanding in forward starting swaps designated as cash flow ~~hedges.~~hedges as of January 1, 2022.

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 ~~income (loss)~~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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, the notional value of forward currency contracts outstanding was ~~$754.4~~$434.3 million and ~~$595.8~~$512.1 million, respectively, maturing on various dates through 2022.

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~~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. There were no outstanding purchased option contracts as of July 3, 2021 or January 2, 2021.

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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, 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 (Loss) for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ is as follows:


(Millions of Dollars)	(Millions of Dollars)	Second Quarter 2021 Interest Expense		Year-to-Date 2021 Interest Expense		(Millions of Dollars)	Year-to-Date 2022 Interest Expense		Year-to-Date 2021 Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded		$	46.5	$	94.0
Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the fair value hedges are recorded						Total amount in the Consolidated Statements of Operations and Comprehensive Income (Loss) in which the effects of the fair value hedges are recorded	$	54.7	$	47.5
Amortization of gain on terminated swaps	Amortization of gain on terminated swaps	$	(0.1)	$	(0.2)	Amortization of gain on terminated swaps	$	(0.1)	$	(0.1)

(Millions of Dollars) Second Quarter 2020
Interest Expense Year-to-Date 2020
Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded $ 57.3 $ 117.0
Amortization of gain on terminated swaps $ (0.8) $ (1.6)

A summary of the amounts recorded in the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges as of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021~~1, 2022 is as follows:

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	April 2, 2022
(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	$	—
Long-Term Debt	$	533.5	Terminated Swaps	$	(20.4)

July 3, 2021
(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
Long-Term Debt $ 4,246.2 Terminated Swaps $ (20.6)


		January 2, 2021						January 1, 2022
(Millions of Dollars)	(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			(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							Current Maturities of Long-Term Debt	$	—	Terminated Swaps	$	—
Long-Term Debt	Long-Term Debt	$	4,245.4	Terminated Swaps	$	(20.8)	Long-Term Debt	$	533.6	Terminated Swaps	$	(20.4)

(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 ~~income (loss)~~loss were gains of ~~$77.0~~$71.7 million and ~~$72.8~~$71.8 million at ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, respectively.

As of ~~July 3, 2021,~~April 2, 2022 and January 1, 2022, the Company had a foreign exchange contract with a notional value of $75.0 million maturing in ~~2021~~2022 hedging a portion of its Taiwan dollar denominated net ~~investments and~~investments. As of January 1, 2022, the Company had a cross currency swap with a notional value of $100.0 million ~~maturing in 2023~~that was hedging a portion of its Japanese yen denominated net ~~investments. As~~investments and was scheduled to mature in 2023. During 2022, this swap was terminated resulting in a gain of January 2, 2021, the Company had cross currency swaps with a notional value totaling $839.4 million maturing on various dates through 2023 hedging a portion of its Japanese yen, Euro and Swiss franc denominated net investments. The Company had no Euro denominated commercial paper designated as a net investment hedge as of July 3, 2021 and January 2, 2021.$4.0 million.

Maturing foreign exchange contracts resulted in net cash received of $4.7 million and net cash paid of $52.6 million ~~and net cash received of $41.0 million~~ for the ~~six~~three months ended ~~July~~April 2, 2022 and April 3, 2021, ~~and June 27, 2020,~~ respectively.

Gains and losses on net investment hedges remain in Accumulated other comprehensive (loss) income ~~(loss)~~ until disposal of the underlying assets. 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. Gains and losses after a hedge has been de-designated are recorded directly to earnings in Other, net.

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The pre-tax gain or loss from fair value changes for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ was as follows:

Second Quarter 2021
(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 $ (0.6) $ 0 Other, net $ 0.7 $ 0.7
Cross Currency Swap $ 1.2 $ 6.5 Other, net $ 0.8 $ 0.8


		Year-to-Date 2021										Year-to-Date 2022
(Millions of Dollars)	(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		(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	Forward Contracts	$	(1.0)	$	0.8	Other, net	$	0.7	$	0.7	Forward Contracts	$	2.8	$	0.6	Other, net	$	0.5	$	0.5
Cross Currency Swap	Cross Currency Swap	$	9.3	$	13.9	Other, net	$	2.1	$	2.1	Cross Currency Swap	$	(0.8)	$	2.5	Other, net	$	1.5	$	1.5

Non-derivative designated as Net Investment Hedge											Non-derivative designated as Net Investment Hedge	$	(0.1)	$	—	Other, net	$	—	$	—

Second Quarter 2020
(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 $ 0.2 $ 0 Other, net $ 0 $ 0
Cross Currency Swap $ (0.7) $ 16.1 Other, net $ 4.2 $ 4.2
Non-derivative designated as Net Investment Hedge $ (11.0) $ 0 Other, net $ 0 $ 0


		Year-to-Date 2020										Year-to-Date 2021
(Millions of Dollars)	(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		(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	Forward Contracts	$	0.1	$	0	Other, net	$	0	$	0	Forward Contracts	$	(0.4)	$	0.8	Other, net	$	—	$	—
Cross Currency Swap	Cross Currency Swap	$	41.3	$	34.9	Other, net	$	9.6	$	9.6	Cross Currency Swap	$	8.1	$	7.4	Other, net	$	1.3	$	1.3
Non-derivative designated as Net Investment Hedge	Non-derivative designated as Net Investment Hedge	$	4.6	$	0	Other, net	$	0	$	0	Non-derivative designated as Net Investment Hedge	$	—	$	—	Other, net	$	—	$	—

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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021~~1, 2022 was ~~$1.3~~$1.2 billion, maturing on various dates through ~~2021.~~2022. The 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 ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ are as follows:


(Millions of Dollars)	(Millions of Dollars)	Income Statement Classification	Second Quarter 2021		Year-to-Date 2021		Second Quarter 2020		Year-to-Date 2020		(Millions of Dollars)	Income Statement Classification	Year-to-Date 2022		Year-to-Date 2021
Foreign Exchange Contracts	Foreign Exchange Contracts	Other, net	$	(7.4)	$	(23.5)	$	(6.0)	$	6.4	Foreign Exchange Contracts	Other, net	$	0.9	$	(16.1)

J. EQUITY ARRANGEMENTS

In March 2022, the Company executed an accelerated share repurchase ("ASR") with a notional amount of $2.0 billion, which was funded through borrowings under one of its existing 364-Day committed credit facilities. The ASR terms provide for an initial delivery of 85% of the total notional share equivalent at execution, or 10,756,770 shares. The final delivery of the remaining shares under the ASR is expected to be completed by the end of the second quarter of 2022. The total amount of shares to be ultimately delivered will be determined at the end of the calculation period based on the volume weighted average price ("VWAP") of the Company's stock (inclusive of a VWAP discount) during that period. In the event that the Company's stock price increases significantly during the calculation period, the Company may be required to settle the transaction by delivering common shares or may elect to make a cash payment. In February 2022, the Company also executed open market share repurchases for a total of 1,888,601 shares of common stock for $300.0 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, by~~contract. In February 2022, the Company amended the settlement date to April ~~2022,~~2023, 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.

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2019 Equity Units and Capped Call Transactions

In conjunction with the issuance of the 2019 Equity Units in November 2019, as further discussed in Note C, Earnings Per Share, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2019 Equity Units”). Each unit has a stated amount of $100 and initially consists of a three-year forward stock purchase contract (“2022 Purchase Contracts”) for the purchase of a variable number of shares of common stock, on November 15, 2022, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series D Preferred Stock”). The Company received approximately ~~$735.0~~$734.5 million in cash proceeds, ~~from the 2019 Equity Units,~~ net of offering expenses and underwriting costs and ~~commissions, and issued~~commissions. The proceeds were attributed to the issuance of 750,000 shares of Series D Preferred Stock ~~recording $750.0~~for $620.3 million ~~in preferred stock.~~and $114.2 million for the present value of the quarterly payments to holders of the 2022 Purchase Contracts ("Contract

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Adjustment Payments"), as discussed further below. The proceeds were used, together with cash on hand, to redeem ~~the 2052 Junior Subordinated Debentures~~long-term borrowings in December 2019. The Company also used $19.2 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below.

~~Convertible~~The 2019 Equity Units are accounted for as one unit of account based on the economic linkage between the 2022 Purchase Contracts and Series D Preferred Stock, as well as the combination criteria outlined in ASC 815. The 2019 Equity Units represent mandatorily convertible preferred stock.

In November 2019, the Company issued 750,000 shares of Series D 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 D Preferred Stock is pledged as collateral to support holders’ purchase obligations under the 2022 Purchase Contracts and ~~can~~will 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 November 15, 2022, the Series D Preferred Stock may be converted into common stock at the option of the holder. The conversion rate was initially 5.2263 shares of common stock per one share of Series D Preferred Stock, which was equivalent to an initial conversion price of approximately $191.34 per share of common stock. As of July 3, 2021, due to customary anti-dilution provisions, the conversion rate was 5.2274, equivalent to a conversion price of approximately $191.30 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 D Preferred Stock prior to December 22, 2022. At the election of the Company, on or after December 22, 2022, the Company may redeem for cash, all or any portion of the outstanding shares of the Series D 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 D Preferred Stock for redemption, holders may convert their shares immediately preceding the redemption date.

~~2022 Purchase Contracts~~

The 2022 Purchase Contracts obligate the holders to purchase, on November 15, 2022, for a price of $100 ~~per share~~ in cash, a maximum number of 4.7 million shares of the Company’s common stock (subject to customary anti-dilution adjustments). The 2022 Purchase Contract holders may elect to settle their obligation early, in cash. The Series D Preferred Stock is pledged as collateral to guarantee the holders’ obligations to purchase common stock under the terms of the 2022 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 November 15, 2022.

The initial maximum settlement rate of 0.6272 was calculated using an initial reference price of $159.45, equal to the last reported sale price of the Company's common stock on November 7, 2019. As of ~~July 3, 2021,~~April 2, 2022, due to the customary anti-dilution provisions, the maximum settlement rate was ~~0.6273,~~0.6284, equivalent to a reference price of ~~$159.42.~~$159.13. 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 the Company's 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 per share divided by the applicable market value. Upon ~~settlement~~a successful remarketing of the ~~2022 Purchase Contracts,~~Series D Preferred Stock (the "Remarketed Series D Preferred Stock"), the Company will receive additional cash proceeds of $750 ~~million.~~million and issue shares of Remarketed Series D Preferred Stock.

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The Company pays Contract Adjustment Payments to the holders of the 2022 Purchase Contracts ~~quarterly payments (“Contract Adjustment Payments”)~~ at a rate of 5.25% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, which commenced on February 15, 2020. The $114.2 million present value of the Contract Adjustment Payments reduced ~~Shareowners’ Equity~~the Series D Preferred Stock at inception. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between the cash payment and the present value will accrete to interest expense, approximately $1.3 million per year over the three-year term. As of ~~July 3, 2021,~~April 2, 2022, the present value of the Contract Adjustment Payments was ~~$57.3~~$28.8 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.

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Capped Call Transactions

In order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series D 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 3 major financial institutions.

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 D Preferred Stock. Subject to customary anti-dilution adjustments, the capped call had an initial lower strike price of $191.34, which corresponded to the minimum 5.2263 settlement rate of the Series D Preferred Stock, and an upper strike price of $207.29, which was approximately 30% higher than the closing price of the Company's common stock on November 7, 2019. As of ~~July 3, 2021,~~April 2, 2022, due to the customary anti-dilution provisions, the capped call transactions were at an adjusted lower strike price of ~~$191.30~~$190.98 and an adjusted upper strike price of ~~$207.24.~~$206.89.

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 D 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 capped call transactions and 2019 Equity Units, when taken together, result in the economic equivalent of having the conversion price on the 2019 Equity Units at ~~$207.24,~~$206.89, the upper strike price of the capped call as of ~~July 3, 2021.~~April 2, 2022.

The Company paid $19.2 million, or an average of $4.90 per option, to enter into capped call transactions on 3.9 million shares of common stock. The $19.2 million premium paid was recorded as a reduction of Shareowners’ Equity. The aggregate fair value of the options at ~~July 3, 2021~~April 2, 2022 was ~~$33.1~~$3.1 million.

2017 Equity Units and Capped Call Transactions

In conjunction with the issuance of the 2017 Equity Units in May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2017 Equity Units”). Each unit had a stated amount of $100 and initially consisted 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 interestas further discussed in ~~one share of 0% Series~~Note C, ~~Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share (“Series C Preferred Stock”). The~~Earnings Per Share, the Company received approximately ~~$726.0~~$727.5 million in cash proceeds, ~~from the 2017 Equity Units,~~ net of offering expenses and underwriting costs and ~~commissions, and issued~~commissions. The proceeds were attributed to the issuance of 750,000 shares of Series C Preferred Stock ~~recording $750.0~~for $605.0 million, ~~in preferred stock.~~$117.1 million for the present value of the Contract Adjustment Payments, and a beneficial conversion feature of $5.4 million. 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.

~~Table~~The 2017 Equity Units are accounted for as one unit of ~~Contents~~

~~Convertible~~account based on the economic linkage between the 2020 Purchase Contracts and the Series C Preferred Stock, as well as the combination criteria outlined in ASC 815. The 2017 Equity Units represent mandatorily 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 initially did not bear any dividends and the liquidation preference of the convertible preferred stock did not accrete. The convertible preferred stock had no maturity date and remained outstanding unless converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock generally had no voting rights. The Series C Preferred Stock was pledged as collateral to support holders’ purchase obligations under the 2020 Purchase Contracts.

~~In May 2020,~~Table of Contents

As discussed further in Note C, Earnings Per Share, the Company successfully remarketed the Series C Preferred Stock. In connection with the remarketing, the conversion rate was reset to 6.7352 shares of the Company's common stock, which was equivalent to a conversion price of approximately $148.47 per share. Beginning onStock in May ~~15, 2020, the holders had the option to convert the Series C Preferred Stock into common stoc~~k.

2020. Subsequent to the remarketing, holders of the ~~convertible preferred stock~~Remarketed Series C Preferred Stock were entitled to receive, if declared by the Board of Directors, cumulative dividends (i) from, and including May 15, 2020 to, but excluding, May 15, 2023 (the "dividend step-up date") at a fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share) and (ii) from, and including, the dividend step-up date at a fixed rate equal to 10.0% per annum of the $1,000 per share liquidation preference (equivalent to $100.00 per annum per share). Dividends were cumulative on the $1,000 liquidation preference per share and will be payable, if declared by the Board of Directors, quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, beginning on August 15, 2020. Dividends accrued on the Remarketed Series C Preferred Stock ~~reduce~~reduced net earnings for purposes of calculating earnings per share.

The Company did not have the right to redeem the Remarketed Series C Preferred Stock prior to May 15, 2021. On April 28, 2021, the Company informed holders that it would redeem all outstanding shares of the Remarketed Series C Preferred Stock on June 3, 2021 (the “Redemption Date”) at $1,002.50 per share in cash (the “Redemption Price”), which was equal to 100% of the liquidation preference of a share of Remarketed Series C Preferred Stock, plus accumulated and unpaid dividends to, but excluding, the Redemption Date. If a holder elected to convert its shares of Remarketed Series C Preferred Stock prior to the Redemption Date, the Company elected a combination settlement with a specified cashcash amount of $1,000 per share. In June 2021, the Company redeemed the Remarketed Series C Preferred Stock and settled all conversions, paying $750 million in cash and issuing 1,469,055 common shares. The conversion rate used was 6.7548 (equivalent to a conversion price set at $148.04 per

common share).

~~2020 Purchase Contracts~~

The ~~remarketing resulted in~~Company generated cash proceeds of ~~$750.0~~$750.0 million, ~~which were~~ ~~automatically applied to satisfy~~from the successful remarketing of the Series C Preferred Stock. Upon completion of the remarketing in ~~full the related unit holders’ obligations to purchase common shares under their 2020 Purchase Contracts. In~~ May 2020, the ~~Company issued~~holders of the 2017 Equity Units received 5,463,750 common shares ~~settling all 2020 Purchase Contracts~~ using the maximum settlement rate of 0.7285 (equivalent to a reference price of $137.26 per common share)., and the Company issued 750,000 shares of Remarketed Series C Preferred Stock.

The Company paid Contract Adjustment Payments to 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, which commenced August 15, 2017. The $117.1 million initial present value of these Contract Adjustment Payments reduced ~~Shareowners’ Equity~~the Series C Preferred Stock at inception. As each quarterly Contract Adjustment Payment was made, the related liability was reduced and the difference between the cash payments and the present value accreted to interest expense, approximately $1.3 million per year over the three-year term. On May 15, 2020, the Company paid the final contract adjustment payment related to the 2020 Purchase Contracts.

Capped Call Transactions

In May 2017, the Company entered into capped call transactions with 3 major financial institutions (the "counterparties") 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 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 recorded as a reduction of Shareowners’ Equity.

The capped call transactions had a term of approximately three years and were 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 corresponded to the minimum 6.1627 settlement rate of the Series C Preferred Stock at

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inception, and an upper strike price of $179.53, which was approximately 30% higher than the closing price of the Company's common stock on May 11, 2017. In June 2020, the capped call options expired out of the money.

2018 Capped Call Transactions

In February 2020, the Company net-share settled 0.6 million of the 3.2 million capped call options on its common stock and received 61,767 shares using an average reference price of $162.26 per common share.

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On June 9, 2020, the Company amended the 2018 capped call options to align with and offset the potential economic dilution associated with the common shares issuable upon conversion of the ~~remarketed~~Remarketed Series C Preferred Stock, as further discussed above. Subsequent to the amendment, the capped call options, subject to anti-dilution, had an initial lower strike price of $148.34 and an upper strike price of $165.00, which was approximately 30% higher than the closing price of the Company's common stock on June 9, 2020.

During the second quarter of 2021, the Company net-share settled the remaining capped call options on its common stock and received 344,004 shares using an average reference price of $209.80 per common share.

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)	(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		(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 - January 2, 2021		$	(1,235.3)	$	(103.0)	$	72.8	$	(448.2)	$	(1,713.7)
Balance - January 1, 2022												Balance - January 1, 2022	$	(1,543.0)	$	(49.8)	$	71.8	$	(324.6)	$	(1,845.6)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(124.8)		29.3		6.3		1.1		(88.1)		Other comprehensive (loss) income before reclassifications	(55.8)		21.5		(1.6)		6.6		(29.3)
Reclassification adjustments to earnings	Reclassification adjustments to earnings	0		8.2		(2.1)		8.7		14.8		Reclassification adjustments to earnings	—		(2.5)		1.5		2.6		1.6
Net other comprehensive (loss) income	Net other comprehensive (loss) income	(124.8)		37.5		4.2		9.8		(73.3)		Net other comprehensive (loss) income	(55.8)		19.0		(0.1)		9.2		(27.7)
Balance - July 3, 2021		$	(1,360.1)	$	(65.5)	$	77.0	$	(438.4)	$	(1,787.0)
Balance - April 2, 2022												Balance - April 2, 2022	$	(1,598.8)	$	(30.8)	$	71.7	$	(315.4)	$	(1,873.3)


(Millions of Dollars)	(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		(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 28, 2019		$	(1,517.2)	$	(54.2)	$	97.3	$	(410.5)	$	(1,884.6)
Balance - January 2, 2021												Balance - January 2, 2021	$	(1,235.3)	$	(103.0)	$	72.8	$	(448.2)	$	(1,713.7)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(143.4)		(58.8)		34.3		9.7		(158.2)		Other comprehensive (loss) income before reclassifications	(154.2)		43.8		5.9		0.5		(104.0)
Reclassification adjustments to earnings	Reclassification adjustments to earnings	0		1.7		(7.3)		7.8		2.2		Reclassification adjustments to earnings	—		2.9		(1.0)		4.4		6.3
Net other comprehensive (loss) income	Net other comprehensive (loss) income	(143.4)		(57.1)		27.0		17.5		(156.0)		Net other comprehensive (loss) income	(154.2)		46.7		4.9		4.9		(97.7)
Balance - June 27, 2020		$	(1,660.6)	$	(111.3)	$	124.3	$	(393.0)	$	(2,040.6)
Balance -April 3, 2021												Balance -April 3, 2021	$	(1,389.5)	$	(56.3)	$	77.7	$	(443.3)	$	(1,811.4)

The Company uses the portfolio method for releasing the stranded tax effects from Accumulated other comprehensive loss. The reclassifications out of Accumulated other comprehensive loss for the ~~six~~three months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ were as follows:

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(Millions of Dollars)	(Millions of Dollars)	2021		2020		Affected line item in Consolidated Statements of Operations And Comprehensive Income	(Millions of Dollars)	2022		2021		Affected line item in Consolidated Statements of Operations And Comprehensive Income (Loss)
Realized (losses) gains on cash flow hedges		$	(11.4)	$	6.6	Cost of sales
Realized gains (losses) on cash flow hedges							Realized gains (losses) on cash flow hedges	$	6.1	$	(3.8)	Cost of sales
Realized losses on cash flow hedges	Realized losses on cash flow hedges	(2.1)		(9.2)		Interest expense	Realized losses on cash flow hedges	(1.2)		(1.1)		Interest expense
Total before taxes	Total before taxes	$	(13.5)	$	(2.6)		Total before taxes	$	4.9	$	(4.9)
Tax effect	Tax effect	5.3		0.9		Income taxes	Tax effect	(2.4)		2.0		Income taxes
Realized losses on cash flow hedges, net of tax		$	(8.2)	$	(1.7)
Realized gains (losses) on cash flow hedges, net of tax							Realized gains (losses) on cash flow hedges, net of tax	$	2.5	$	(2.9)

Realized gains on net investment hedges		$	2.8	$	9.6	Other, net
Realized (losses) gains on net investment hedges							Realized (losses) gains on net investment hedges	$	(2.0)	$	1.3	Other, net
Tax effect	Tax effect	(0.7)		(2.3)		Income taxes	Tax effect	0.5		(0.3)		Income taxes
Realized gains on net investment hedges, net of tax		$	2.1	$	7.3
Realized (losses) gains on net investment hedges, net of tax							Realized (losses) gains on net investment hedges, net of tax	$	(1.5)	$	1.0

Amortization of defined benefit pension items:	Amortization of defined benefit pension items:						Amortization of defined benefit pension items:
Actuarial losses and prior service costs / credits	Actuarial losses and prior service costs / credits	$	(11.4)	$	(9.6)	Other, net	Actuarial losses and prior service costs / credits	$	(3.5)	$	(5.7)	Other, net
Settlement loss	Settlement loss	(0.1)		0		Other, net	Settlement loss	—		(0.1)		Other, net
Total before taxes	Total before taxes	$	(11.5)	$	(9.6)		Total before taxes	$	(3.5)	$	(5.8)
Tax effect	Tax effect	2.8		1.8		Income taxes	Tax effect	0.9		1.4		Income taxes
Amortization of defined benefit pension items, net of tax	Amortization of defined benefit pension items, net of tax	$	(8.7)	$	(7.8)		Amortization of defined benefit pension items, net of tax	$	(2.6)	$	(4.4)

L. NET PERIODIC BENEFIT COST — DEFINED BENEFIT PLANS

Following are the components of net periodic pension (benefit) expense for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020:~~2021:

Second Quarter
Pension Benefits Other Benefits
U.S. Plans Non-U.S. Plans All Plans
(Millions of Dollars) 2021 2020 2021 2020 2021 2020
Service cost $ 1.6 $ 1.7 $ 4.6 $ 3.9 $ 0 $ 0.2
Interest cost 5.8 8.9 4.3 5.4 0.3 0.4
Expected return on plan assets (13.7) (14.7) (10.2) (9.9) 0 0
Amortization of prior service cost (credit) 0.3 0.2 (0.2) (0.2) (0.1) (0.4)
Amortization of net loss 2.2 2.2 3.5 2.8 0 0.1
Special termination benefit 0 0 0 0 0 16.0
Settlement / curtailment loss 0 0 0 0.2 0 0
Net periodic pension (benefit) expense $ (3.8) $ (1.7) $ 2.0 $ 2.2 $ 0.2 $ 16.3

Year-to-Date
Pension Benefits Other Benefits
U.S. Plans Non-U.S. Plans All Plans
(Millions of Dollars) 2021 2020 2021 2020 2021 2020
Service cost $ 3.2 $ 3.4 $ 9.0 $ 7.9 $ 0.1 $ 0.3
Interest cost 11.5 17.7 8.6 11.0 0.5 0.8
Expected return on plan assets (27.4) (29.4) (20.2) (20.2) 0 0
Amortization of prior service cost (credit) 0.6 0.5 (0.4) (0.4) (0.3) (0.7)
Amortization of net loss 4.5 4.3 7.0 5.7 0 0.2
Special termination benefit 0 0 0 0 0 16.0
Settlement / curtailment loss 0 0 0.1 0.3 0 0
Net periodic pension (benefit) expense $ (7.6) $ (3.5) $ 4.1 $ 4.3 $ 0.3 $ 16.6

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	Year-to-Date
	Pension Benefits								Other Benefits
	U.S. Plans				Non-U.S. Plans				All Plans
(Millions of Dollars)	2022		2021		2022		2021		2022		2021
Service cost	$	1.6	$	1.3	$	3.9	$	4.2	$	0.1	$	0.1
Interest cost	8.0		5.7		6.0		4.2		0.2		0.2
Expected return on plan assets	(15.1)		(13.7)		(10.2)		(9.9)		—		—
Amortization of prior service cost (credit)	0.2		0.3		(0.2)		(0.2)		—		(0.2)
Amortization of net loss (gain)	1.5		2.3		2.1		3.5		(0.1)		—
Settlement / curtailment loss	—		—		—		0.1		—		—
Net periodic pension (benefit) expense	$	(3.8)	$	(4.1)	$	1.6	$	1.9	$	0.2	$	0.1

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.

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.

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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 counterparty.

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)	(Millions of Dollars)	Total Carrying Value		Level 1		Level 2		Level 3		(Millions of Dollars)	Total Carrying Value		Level 1		Level 2		Level 3
July 3, 2021
April 2, 2022										April 2, 2022
Money market fund	Money market fund	$	23.4	$	23.4	$	0	$	0	Money market fund	$	12.7	$	12.7	$	—	$	—
Equity Security										Equity Security	$	7.7	$	7.7	0		$	—
Deferred compensation plan investments										Deferred compensation plan investments	$	23.7	$	23.7	$	—	$	—
Derivative assets	Derivative assets	$	25.5	$	0	$	25.5	$	0	Derivative assets	$	29.9	$	—	$	29.9	$	—
Derivative liabilities	Derivative liabilities	$	78.7	$	0	$	78.7	$	0	Derivative liabilities	$	11.8	$	—	$	11.8	$	—

Contingent consideration liability	Contingent consideration liability	$	198.8	$	0	$	0	$	198.8	Contingent consideration liability	$	289.3	$	—	$	—	$	289.3
January 2, 2021
January 1, 2022										January 1, 2022
Money market fund	Money market fund	$	10.3	$	10.3	$	0	$	0	Money market fund	$	11.0	$	11.0	$	—	$	—
Equity Security										Equity Security	$	13.8	$	13.8	$	—	$	—
Deferred compensation plan investments										Deferred compensation plan investments	$	26.2	$	26.2	$	—	$	—
Derivative assets	Derivative assets	$	14.0	$	0	$	14.0	$	0	Derivative assets	$	33.1	$	—	$	33.1	$	—
Derivative liabilities	Derivative liabilities	$	191.0	$	0	$	191.0	$	0	Derivative liabilities	$	8.7	$	—	$	8.7	$	—
Contingent consideration liability	Contingent consideration liability	$	187.0	$	0	$	0	$	187.0	Contingent consideration liability	$	288.6	$	—	$	—	$	288.6

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


		July 3, 2021				January 2, 2021					April 2, 2022				January 1, 2022
(Millions of Dollars)	(Millions of Dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value		(Millions of Dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Other investments	Other investments	$	11.2	$	11.8	$	13.3	$	13.9	Other investments	$	9.3	$	9.5	$	11.2	$	11.6
Long-term debt	Long-term debt	$	4,246.2	$	4,858.8	$	4,245.4	$	4,934.5	Long-term debt	$	5,356.7	$	5,401.5	$	4,354.9	$	4,850.2

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 equity security is considered a Level 1 instrument and is recorded at its quoted market price. The deferred compensation plan investments are considered Level 1 instruments and are recorded at their quoted market price. 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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021.~~1, 2022. The fair values of the derivative financial instruments in the table above are based on current settlement values.

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As part of the Craftsman® brand acquisition in March 2017, the Company recorded a contingent consideration liability representing the Company's obligation to make ~~future~~ payments to Transform Holdco, LLC, which operates Sears 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. During the ~~six~~three months ended ~~July 3, 2021,~~April 2, 2022, the Company paid approximately ~~$13.9~~$9.8 million for royalties owed. The Company will continue making future payments quarterly through the second quarter of 2032. The estimated fair value of the contingent consideration liability is determined using a discounted cash flow analysis taking into consideration future sales projections, forecasted payments to Transform Holdco, LLC, based on contractual royalty rates, and the related tax impacts. The estimated fair value of the contingent consideration liability was $~~198.8~~289.3 million and ~~$187.0~~$288.6 million as of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, respectively.Adjustments to the contingent consideration liability, with the exception of cash payments, are recorded in SG&A in the Consolidated Statements of Operations and Comprehensive ~~Income.~~Income (Loss). A 100 basis point reduction in the discount rate would result in an increase to the liability of approximately $10.1 million ~~$7.4 million~~ as of ~~July 3, 2021.~~April 2, 2022.

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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 contingent consideration liabilities discussed above, including estimated future sales projections, can materially impact the Company’s results from operations.

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~~three months of ~~2021~~2022 or ~~2020.~~2021.

Refer to Note I, Financial Instruments, for more details regarding derivative financial instruments, Note R, 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 July 3, 2021, Other, net included charges of $0.6 million and $2.1 million, respectively, primarily related to acquisition-related~~Acquisition-related transaction and consulting ~~costs. During~~costs of $1.0 million and $1.6 million, respectively, were included in Other, net during the three ~~and six~~ months ended ~~June 27, 2020, Other, net included charges of $19.8 million~~April 2, 2022 and ~~$38.7 million, respectively, primarily related to acquisition-related transaction costs and a special termination benefit charge associated with the voluntary retirement program.~~

During the second quarter of 2020, the Company recognized a pre-tax charge of approximately $110.0 million related to the comprehensive cost reduction and efficiency program in response to the impact of the COVID-19 pandemic. The charge was primarily related to costs associated with a voluntary retirement program as well as restructuring costs related to headcount actions.April 3, 2021, respectively.

O. RESTRUCTURING CHARGES

A summary of the restructuring reserve activity from January 1, 2022 to April 2, ~~2021 to July 3, 2021~~2022 is as follows:


(Millions of Dollars)	(Millions of Dollars)	January 2, 2021		Net Additions		Usage		Currency		July 3, 2021		(Millions of Dollars)	January 1, 2022		Net Additions		Usage		Currency		April 2, 2022
Severance and related costs	Severance and related costs	$	87.5	$	5.6	$	(36.8)	$	1.2	$	57.5	Severance and related costs	$	28.2	$	51.1	$	(22.8)	$	0.6	$	57.1
Facility closures and asset impairments	Facility closures and asset impairments	2.7		10.7		(9.0)		0		4.4		Facility closures and asset impairments	3.5		1.6		(2.5)		0.1		2.7
Total	Total	$	90.2	$	16.3	$	(45.8)	$	1.2	$	61.9	Total	$	31.7	$	52.7	$	(25.3)	$	0.7	$	59.8

Segments: The $16 million of net restructuring charges for the six months ended July 3, 2021 includes: $8 million pertaining to the Tools & Storage segment; $2 million pertaining to the Industrial segment; $4 million pertaining to the Security segment; and $2 million pertaining to Corporate.

~~The $14~~$53 million of net restructuring charges for the three months ended ~~July 3, 2021~~April 2, 2022 includes: $6$43 million ~~pertaining to~~in the Tools & ~~Storage~~Outdoor segment; $3$8 million ~~pertaining to~~in the Industrial ~~segment; $3 million pertaining to the Security~~ segment; and $2 million ~~pertaining to~~in Corporate.

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P. INCOME TAXES

On March 11, 2021, the American Rescue Plan Act of 2021 (the “ARPA”) was enacted. The ARPA, among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations, provide a 100% COBRA subsidy, temporarily increase the income exclusion for dependent care assistance, and to extend and modify the employee retention credit and the Families First Coronavirus Response Act paid leave credit. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The ARPA and CARES Act did not have a material impact on the Company's consolidated financial statements in the first half of 2021. The Company continues to evaluate the potential impact the ARPA and CARES Act may have on its operations and consolidated financial statements in future periods.

The Company recognized income tax expense of ~~$73.7 million and $193.2~~$22.9 million for the three ~~and six~~ months ended ~~July 3, 2021, respectively,~~April 2, 2022, resulting in an effective tax ~~rates~~rate of ~~14.0% and 17.1%~~12.8%. Excluding the impacts of the acquisition-related and other charges, the effective tax ~~rates were 14.8% and 17.5%~~rate was 13.2% for the three ~~and six~~ months ended ~~July~~April 2, 2022. These effective tax rates differ from the U.S. statutory tax rate primarily due to a benefit associated with the Company’s supply chain reorganization, tax on foreign earnings and the re-measurement of uncertain tax position reserves. The Company recognized income tax expense of $115.5 million for the three months ended April 3, 2021, ~~respectively.~~resulting in effective tax rate of 20.1%. Excluding the impacts of the acquisition-related and other charges, the effective tax rate was 20.3% for the three months ended April 3, 2021. These effective tax rates differ from the U.S. statutory tax rate primarily due to tax on foreign earnings, the re-measurement of uncertain tax position reserves, ~~the re-measurement of the deferred tax assets and liabilities due to foreign corporate income tax rate changes, and the tax benefit of equity-based compensation.~~

The Company recognized income tax benefit of $117.3 million and $104.4 million for the three and six months ended June 27, 2020, respectively, resulting in effective tax rates of (105.6)% and (40.6)%. In the second quarter of 2020, as a result of initiating a supply chain reorganization, the Company recorded a one-time benefit of $118.8 million to reverse a deferred tax liability previously established related to certain unremitted earnings of foreign subsidiaries not permanently reinvested. Excluding the impacts of this one-time benefit and the acquisition-related and other charges, the effective tax rates were 15.0% and 13.9% for the three and six months ended June 27, 2020, respectively. These effective tax rates differ from the U.S. statutory tax rate primarily due to tax on foreign earnings, the re-measurement of uncertain tax position reserves, an intra-entity transfer of certain intellectual property rights, and the tax benefit of equity-based compensation.

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 twelve months. However, based on the uncertainties associated with finalizing audits with the relevant tax authorities including formal legal proceedings, it is not possible to reasonably estimate the impact of any such change.

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Q. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

The ~~Company's~~Company’s operations are classified into 32 reportable business ~~segments, which also represent its operating~~ segments: Tools & ~~Storage, Industrial~~Outdoor and ~~Security.~~

Industrial.

The Tools & ~~Storage~~Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand Tools, Accessories & Storage ("HTAS"), and Outdoor ~~Products Group~~Power Equipment ("~~OPG"~~Outdoor") businesses. The PTG 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, 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 ~~OPG~~Outdoor business primarily sells corded and cordless electric lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, pressure washers and related accessories, and gas powered lawn and garden products, including lawn tractors, zero turn ride on mowers, walk behind mowers, snow blowers, residential robotic mowers, utility terrain vehicles (UTVs), handheld outdoor power equipment, garden tools, and parts and accessories to professionals and consumers under the DEWALT®, CUB CADET®, BLACK+DECKER®, CRAFTSMAN®, TROY-BILT®, and ~~DEWALT®~~HUSTLER® brand names.

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. The Engineered Fastening business primarily sells highly engineered components such as fasteners, fittings and various engineered products, which are designed for specific application across multiple verticals. The product lines include externally threaded fasteners, blind rivets and tools, blind inserts and tools, drawn arc weld studs and systems, engineered plastic and mechanical fasteners, self-piercing

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riveting systems, precision nut running systems, micro fasteners, high-strength structural fasteners, axel swage, latches, heat shields, pins, and couplings. The Infrastructure business consists of the Attachment Tools and Oil & Gas product lines. Attachment Tools sells hydraulic tools and high quality, performance-driven heavy equipment attachment tools for off-highway applications. Oil & Gas 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 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 credit losses (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), loss on sales of businesses, restructuring charges, interest expense, interest income, income taxes and share of net earnings or losses 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 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, right-of-use lease assets and 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) 2021 2020 2021 2020
NET SALES
Tools & Storage $ 3,196.5 $ 2,197.2 $ 6,259.4 $ 4,268.0
Industrial 602.2 517.5 1,259.9 1,108.2
Security 502.2 432.7 978.7 900.6
Total $ 4,300.9 $ 3,147.4 $ 8,498.0 $ 6,276.8
SEGMENT PROFIT
Tools & Storage $ 635.1 $ 345.1 $ 1,286.4 $ 579.9
Industrial 62.4 5.1 163.6 72.9
Security 36.9 9.2 71.5 30.1
Segment profit 734.4 359.4 1,521.5 682.9
Corporate overhead (92.4) (78.7) (168.1) (127.6)
Other, net (53.8) (86.9) (112.8) (161.8)
Loss on sales of businesses (2.6) 0 (3.6) 0
Restructuring charges (14.0) (27.9) (16.3) (31.8)
Interest expense (46.5) (57.3) (94.0) (117.0)
Interest income 2.7 2.5 5.6 12.6
Earnings before income taxes and equity interest $ 527.8 $ 111.1 $ 1,132.3 $ 257.3


	Year-to-Date
(Millions of Dollars)		2022		2021
Net Sales
Tools & Outdoor		$	3,801.2	$	3,062.9
Industrial		646.6		657.7
Other		0.2		0.2
Consolidated		$	4,448.0	$	3,720.8
Segment Profit
Tools & Outdoor		$	378.5	$	644.7
Industrial		41.3		99.8
Segment Profit		419.8		744.5
Corporate Overhead		(74.7)		(75.8)
Other, net		(62.0)		(48.0)
Loss on sale of business		—		(1.0)
Restructuring charges		(52.7)		(1.8)
Interest income		2.8		2.9
Interest expense		(54.7)		(47.5)
Earnings from continuing operations before income taxes and equity interest		$	178.5	$	573.3

Corporate Overhead includes the corporate overhead element of SG&A, which is not allocated to the business segments.

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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 ~~July~~April 2, 2022 and April 3, 2021, ~~and June 27, 2020,~~ 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~~segment for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, 2021 was 5.9% and ~~June 27, 2020:~~5.7%, respectively.

Second Quarter Year-to-Date
2021 2020 2021 2020
Industrial 4.2 % 11.5 % 5.0 % 11.0 %
Security 51.5 % 50.6 % 50.8 % 48.7 %

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The decrease in the Industrial revenue recognized over time relates to volume declines within Oil & Gas, which is the primary product line with revenue recognized over time within the Industrial segment.

The following table is a further disaggregation of the Industrial segment revenue for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020:~~2021:


		Second Quarter				Year-to-Date					Year-to-Date
(Millions of Dollars)	(Millions of Dollars)	2021		2020		2021		2020		(Millions of Dollars)		2022		2021
Engineered Fastening	Engineered Fastening	$	456.5	$	351.7	$	953.3	$	776.4	Engineered Fastening		$	480.1	$	496.8
Infrastructure	Infrastructure	145.7		165.8		306.6		331.8		Infrastructure		166.5		160.9
Industrial	Industrial	$	602.2	$	517.5	$	1,259.9	$	1,108.2	Industrial		$	646.6	$	657.7

The following table is a summary of total assets by segment as of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021:~~1, 2022:


(Millions of Dollars)	(Millions of Dollars)	July 3, 2021		January 2, 2021		(Millions of Dollars)	April 2, 2022		January 1, 2022
Tools & Storage		$	15,497.1	$	14,294.9
Tools & Outdoor						Tools & Outdoor	$	20,522.5	$	19,537.9
Industrial	Industrial	5,667.5		5,621.4		Industrial	5,639.0		5,627.8
Security		3,591.1		3,493.5
		24,755.7		23,409.8			26,161.5		25,165.7
Corporate		(792.8)		156.5
Assets held for sale						Assets held for sale	3,492.5		3,505.4
Corporate assets						Corporate assets	(295.3)		(491.1)
Consolidated	Consolidated	$	23,962.9	$	23,566.3	Consolidated	$	29,358.7	$	28,180.0

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

GEOGRAPHIC AREAS

The following table is a summary of net sales by geographic area for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020:~~2021:


		Second Quarter				Year-to-Date					Year-to-Date
(Millions of Dollars)	(Millions of Dollars)	2021		2020		2021		2020		(Millions of Dollars)		2022		2021
United States	United States	$	2,471.8	$	2,004.0	$	4,850.5	$	3,846.0	United States		$	2,744.5	$	2,132.0
Canada	Canada	202.8		135.8		422.8		285.7		Canada		236.6		186.3
Other Americas	Other Americas	212.0		90.5		411.3		220.2		Other Americas		198.3		197.1
France	France	183.0		105.8		375.2		240.6		France		140.0		135.1
Other Europe	Other Europe	902.3		582.1		1,776.3		1,231.2		Other Europe		773.5		738.1
Asia	Asia	329.0		229.2		661.9		453.1		Asia		355.1		332.2
Consolidated	Consolidated	$	4,300.9	$	3,147.4	$	8,498.0	$	6,276.8	Consolidated		$	4,448.0	$	3,720.8

R. 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.

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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 numerous administrative proceedings for the remediation of various waste sites, including 2829 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. If 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 ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, the Company had reserves of ~~$159.5~~$156.6 million and ~~$174.2~~$159.1 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 ~~2021 amount, $47.0~~2022 amount, $49.6 million is classified as current and ~~$112.5~~$107.0 million as l~~ong-term~~long-term which is expected to be paid over the estimated remediation period. As of ~~July 3, 2021,~~April 2, 2022, the range of environmental remediation costs that is reasonably ~~possibl~~epossible is ~~$93.9~~$92.6 million to ~~$229.7~~$226.0 million which isis 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 the Company's policy.

As of ~~July 3, 2021,~~April 2, 2022, the Company has ~~recorded $16.1~~recorded $16.2 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 ~~July 3, 2021,~~April 2, 2022, the Company's net cash obligation associated with remediation activities, including WCLC assets, is ~~$143.4~~$140.4 million.

The EPA also asserted claims in federal court in Rhode Island against Black & Decker and Emhart related to environmental contamination found at the Centredale Manor Restoration Project Superfund Site ("Centredale"), located in North Providence, Rhode Island. The EPA discovered a variety of contaminants at the site, including but not limited to, dioxins, polychlorinated biphenyls, and pesticides. The EPA alleged that Black & Decker and 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 Emhart then vigorously litigated the issue of their liability for environmental conditions at the Centredale site, including completing trial on Phase 1 of the proceedings in late July 2015 and completing trial on Phase 2 of the proceedings in April 2017. 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 were subject to public comment and Court approval. After a full hearing on March 19, 2019, the Court approved and entered the Consent Decree on April 8, 2019. The settlement resolves outstanding issues relating to Phase 1 and 2 of the litigation with the United States. The Company is complying with the terms of the settlement. The District Court's entry of the Consent Decree was appealed by several PRPs at the site to the United States Court of Appeals for the First Circuit. The District Court's actions were affirmed by the First Circuit

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on February 17, 2021. Phase 3 of the litigation, is addressing the potential allocation of liability to other PRPs who may have

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contributed to contamination of the Centredale site with dioxins, polychlorinated biphenyls and other contaminants of concern. As of ~~July 3, 2021,~~April 2, 2022, the Company has a remaining reserve of ~~$65.0~~$54.5 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 17 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 17 miles of the River. On March 4, 2016, the EPA issued a Record of Decision ("ROD") 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 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 8eight 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 ~~is participating in the allocation process. The allocator selected by the EPA issued a confidential allocation report on December 28, 2020, which is under review by the EPA. The Company~~ asserts that it did not discharge dioxins, furans or polychlorinated biphenyls and should be eligible to be a "funding party" for the lower 8.3 mile remedial action. The Company participated in the allocation process. The allocator selected by the EPA issued a confidential allocation report on December 28, 2020, which was reviewed by the EPA. As a result of the allocation process, on February 11, 2022, the EPA and certain parties (including the Company) reached an agreement in principle, subject to the negotiation and court entry of a consent decree, concerning a cash-out settlement for remediation of the entire 17-mile Lower Passaic River. 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. The remedial design is expected to be substantially completed in the fourth quarter of 2022. 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 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 for OCC's ongoing activities in connection with the River. The Company and other defendants have answered the complaint and currently are engaged in discovery with OCC. On February 24, 2021, the Company and other defendants filed a third party complaint against the Passaic Valley Sewerage Commissioners and NaN municipalities to require those entities to pay their equitable share of response costs. On October 10, 2018, the EPA issued a letter directing the CPG to prepare a streamlined feasibility study for the upper 9 miles of the River based on an iterative approach using adaptive management strategies. The CPG submitted a ~~revised~~revised draft Interim Remedy Feasibility Study to the EPA on December 4, 2020, which identifies various targeted dredge and cap alternatives with costs that range from $420 million to $468 million (net present value). The EPA approved the Interim Remedy Feasibility Study on December 11, ~~2020~~.2020. The EPA issued the Interim Remedy Proposed Plan on April 14, 2021, selecting an alternative that the EPA estimates will cost $441 million (net present value). The CPG continues to conduct work to complete the RI/FS for the entire 17-mile River. The EPA ~~is expected to issue~~issued the Interim Remedy ROD ~~in the third or fourth quarter of~~on September 28, 2021. 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~~OCC litigation is ~~ongoing,~~pending, the ~~ultimate remedial approach and associated cost for the upper portion of the River has not yet been determined,~~EPA settlement process is ongoing 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

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that the EPA had issued a ROD selecting the preferred alternative identified in the Proposed Cleanup Plan. As of ~~July 3, 2021,~~April 2, 2022, the Company has reserved ~~$22.6~~$22.2 million for this site.

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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~~The following 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 purchasesummary of the ~~underlying leased asset. Lease arrangements may also contain renewal options or early termination options. As part of its~~Company's right-of-use-assets and lease ~~liability~~liabilities:


(Millions of Dollars)	April 2, 2022	January 1, 2022
Right-of-use assets	$420.1	$426.0
Lease liabilities	$430.5	$439.1
Weighted-average incremental borrowing rate	3.4%	3.5%
Weighted-average remaining term	6 years	6 years

Right-of-use assets are included within Other assets in the Condensed Consolidated Balance Sheets, while lease liabilities are included within Accrued expenses 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 approximatOther liabilities~~ely 3.6%.~~, as appropriate. The Company ~~determined~~determines its incremental borrowing rate based on interest rates from its debt issuances, ~~and~~ taking into consideration adjustments for collateral, lease terms and foreign currency. As a result of acquiring right-of-use assets from new leases entered into during the six months ended July 3, 2021, the Company's lease liability increased approximately $38.1 million. As of July 3, 2021, the Company recognized a lease liability of approximately $486.3 million and a right-of-use asset of approximately $477.5 million. 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. 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, as permitted by ASC 842,~~ ~~Leases~~.

The Company is a party to leases for 1 of its major distribution centers and 2 of its office buildings in which the periodic rental payments vary based on interest rates (i.e. LIBOR). The leases qualify as operating leases for accounting purposes.

~~The following is a summary of the Company's total lease cost for the three and six months ended July 3, 2021 and June 27, 2020:~~

Second Quarter Year-to-Date
(Millions of Dollars) 2021 2020 2021 2020
Operating lease cost $ 39.7 $ 37.3 $ 77.5 $ 74.9
Short-term lease cost 5.9 6.0 11.5 12.8
Variable lease cost 1.7 1.8 3.3 3.8
Sublease income (0.5) (0.2) (1.0) (0.4)
Total lease cost $ 46.8 $ 44.9 $ 91.3 $ 91.1

~~During the three and six months ended July 3, 2021, the Company paid approximately $37.8 million and $76.6 million,~~ ~~respectively, relating to leases included in the measurement of its lease liability and right-of-use asset. During the three and six months ended June 27, 2020, the Company paid approximately $38.4 million and $79.0 million~~, respectively, relating to leases included in the measurement of its lease liability and right-of-use asset. As of July 3, 2021, the weighted-average remaining term for the Company's leases is approxim~~ately 6 years.~~

~~The following is a summary of the Company's future lease obligations on an undiscounted basis at July 3, 2021:~~

(Millions of Dollars) Total 2021 2022 2023 2024 2025 Thereafter
Lease obligations $ 543.0 $ 71.1 $ 114.4 $ 85.3 $ 71.1 $ 52.4 $ 148.7

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GUARANTEES — The Company’s financial guarantees at ~~July 3, 2021~~April 2, 2022 are as follows:


(Millions of Dollars)	(Millions of Dollars)	Term	Maximum Potential Payment		Carrying Amount of Liability		(Millions of Dollars)	Term	Maximum Potential Payment		Carrying Amount of Liability
Guarantees on the residual values of leased assets	Guarantees on the residual values of leased assets	One to four years	$	89.6	$	0	Guarantees on the residual values of leased assets	One to five years	$	89.6	$	—
Standby letters of credit	Standby letters of credit	Up to three years	167.3		0		Standby letters of credit	Up to three years	165.7		—
Commercial customer financing arrangements	Commercial customer financing arrangements	Up to six years	64.5		7.9		Commercial customer financing arrangements	Up to six years	69.5		8.7
Total	Total		$	321.4	$	7.9	Total		$	324.8	$	8.7

The Company has guaranteed a portion of the residual values of certain leased assets including the previously discussed leases for 1 of its major distribution centers and 2 of its office buildings. The lease guarantees are for an amount up to $89.6 million while the fair value of the underlying assets is estimated at ~~$116.1~~$119.0 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 ~~$167.3~~$165.7 million in standby letters of credit that guarantee future payments which may be required under certain insurance 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 ~~$64.5~~$69.5 million and the ~~$7.9~~$8.7 million carrying value of the guarantees issued is recorded in 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.

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The changes in the carrying amount of product warranties for the ~~six~~three months ended ~~July~~April 2, 2022 and April 3, 2021 ~~and June 27, 2020~~ are as follows:


(Millions of Dollars)	(Millions of Dollars)	2021		2020		(Millions of Dollars)	2022		2021
Balance beginning of period	Balance beginning of period	$	113.8	$	100.1	Balance beginning of period	$	134.5	$	107.9
Warranties and guarantees issued	Warranties and guarantees issued	71.3		58.5		Warranties and guarantees issued	39.6		36.3

Warranty payments and currency	Warranty payments and currency	(78.4)		(57.0)		Warranty payments and currency	(38.0)		(41.3)
Balance end of period	Balance end of period	$	106.7	$	101.6	Balance end of period	$	136.1	$	102.9

Product warranties totaling $5.2 million and $5.7 million were reclassified to held for sale as of April 2, 2022 and April 3, 2021, respectively.

T. �� DIVESTITURES

~~On November 2, 2020,~~PENDING DIVESTITURES

Mechanical Access Solutions business

In April 2022, the Company ~~sold its commercial electronic security businesses in 5 countries in Europe and emerging markets within the Security segment, which resulted in net proceeds of $60.9 million. The Company also sold~~announced that it had reached a product line within Oil & Gas in the Industrial segment during the fourth quarter of 2020. As a result of these sales, the Company recognized a net pre-tax loss of $13.5 million in 2020, consisting of a $17.7 million loss ondefinitive agreement for the sale of ~~a product line within Oil & Gas partially offset by a $4.2~~its remaining Security assets to Allegion plc for $900 million ~~gain~~in cash. The proposed transaction includes the Company's Mechanical Access Solutions ("MAS") business comprising of the automatic doors business. As of April 2, 2022 and January 2, 2022, the assets and liabilities related to MAS were classified as held for sale on the Company's Condensed Consolidated Balance Sheets. The sale is subject to regulatory approval and other customary closing conditions, and is expected to close mid-year.

As part of the purchase and sale agreement, the Company will perform transition services relating to certain administrative functions for Purchaser primarily for a period of two years or less, pending integration of these functions into their pre-existing business processes.

Commercial Electronic Security and Healthcare businesses

In December 2021, the Company announced that it had reached a definitive agreement for the sale of most of its Security assets to Securitas AB ("Purchaser") for approximately $3.2 billion in cash. The proposed transaction includes the Company's Convergent Security Solutions ("CSS") business comprising of the commercial electronic security and healthcare businesses. ~~During the first quarter of 2021, the Company recognized a pre-tax loss of $1.0 million as~~As a result, of the ~~finalization~~assets and liabilities related to CSS were classified as held for sale on the Company's Condensed Consolidated Balance Sheets. The sale is subject to regulatory approvals and other customary closing conditions, and the Company's current expectation is the transaction will close mid-year.

As part of the purchase ~~price~~and sale agreement, the Company will perform transition services relating to certain administrative functions for Purchaser primarily for a period of one year or less, pending integration of these functions into their pre-existing business processes. A portion of the ~~commercial electronic security divestiture.~~$3.2 billion received at closing reimburses the Company for transition service costs expected to be incurred.

The MAS and CSS divestitures represent a single plan to exit the Security segment and are considered a strategic shift that will have a major effect on the Company’s operations and financial results. As such, the operating results of the MAS and CSS are reported as discontinued operations. Amounts previously reported have been reclassified to conform to this presentation to allow for meaningful comparison of continuing operations. These divestitures allow the Company to invest in other areas of the Company that fit into its long-term growth strategy. ~~These disposals do not qualify as~~

Summarized operating results of discontinued operations are presented in the following table for the three months ended April 2, 2022 and April 3, 2021:

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	Year-to-Date
(Millions of Dollars)	2022		2021
Net Sales	$	488.3	$	476.3
Cost of sales	312.6		299.8
Selling, general, and administrative(1)	138.2		133.7
Other, net and restructuring charges	15.3		11.7
Earnings from discontinued operations before income taxes	$	22.2	$	31.1
Income taxes on discontinued operations	2.4		3.9
Net earnings from discontinued operations	$	19.8	$	27.2

(1) Includes provision for credit losses.

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to MAS and CSS that are included in the ~~Company's~~Condensed Consolidated Statements of ~~Operations and Comprehensive Income through the dates of sale in 2020. Pre-tax income~~Cash Flows (in millions) for ~~these businesses totaled $1.5 million and $1.1 million during~~ the three ~~and six~~ months ended ~~June 27, 2020, respectively.~~April 2, 2022 and April 3, 2021:


	Year-to-Date
(Millions of Dollars)	2022		2021
Depreciation and amortization	$	1.3	$	16.6
Capital expenditures	$	4.0	$	4.9
Stock-based compensation	$	9.3	$	2.0

The carrying amounts of the assets and liabilities that were aggregated in assets held for sale and liabilities held for sale as of April 2, 2022 and January 1, 2022 are presented in the following table:


(Millions of Dollars)	April 2, 2022		January 1, 2022
Cash and cash equivalents	$	150.8	$	145.1
Accounts and notes receivable, net	495.7		513.9
Inventories, net	170.5		169.4
Other current assets	47.0		41.2
Property, plant and equipment, net	90.9		84.3
Goodwill and other intangibles, net	2,250.6		2,270.2
Other assets	287.0		281.3
Total assets	$	3,492.5	$	3,505.4

Accounts payable and accrued expenses	$	463.5	$	460.4
Other long-term liabilities	129.1		137.4
Total liabilities	$	592.6	$	597.8

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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~~(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 ~~industrial~~ provider of hand tools, power tools, outdoor products and related accessories, engineered fastening systems and products, and services and equipment for oil & gas and infrastructure ~~applications, commercial electronic security and monitoring systems, healthcare solutions, and automatic doors.~~applications. The Company continues to execute a growth and acquisition strategy ~~over the long-term~~ that involves industry, geographic and customer diversification to foster sustainable revenue, earnings and cash flow growth. The Company remains focused on delivering above-market organic growth with margin expansion by leveraging its proven and long-standing Stanley Black & Decker Operating Model (“SBD Operating Model”) which has continually evolved over the past 15 years as times have changed. At the center of the SBD Operating Model is the concept of the interrelationship between people and technology, which intersect and interact with the other key elements: Performance Resiliency, Extreme Innovation, Operations Excellence and Extraordinary Customer Experience. Each of these elements co-exists synergistically with the others in a systems-based approach. The Company will leverage the SBD Operating Model to continue making strides towards achieving its vision of delivering top-quartile financial performance, becoming known as one of the world’s leading innovators and elevating its commitment to social responsibility.

The Company’s growth and acquisition strategy is interdependent with its social responsibility ~~(ESG)~~ strategy focused on workforce upskilling, product innovation, and environmental preservation including mitigating the impacts of climate change. These are core business issues that ensure the long-term viability of the Company, its customers, suppliers, and communities. The Company has established environmental, social and corporate governance ("ESG") targets embodied in its 2030 ~~Corporate Social Responsibility (“CSR”)~~ESG strategy that include ~~upskilling~~empowering 10 million makers and creators, enhancing 500 million lives through ~~purpose driven~~purpose-driven product innovation, becoming ~~carbon-positive,~~carbon-neutral, landfill-free across its operations, and reducing water use in water stressed and scarce areas. The carbon ~~positive~~neutrality target includes third-party approved science-based targets to reduce absolute scope 1 and 2 greenhouse gas emissions by greater than 100% by 2030, and to reduce supply chain emissions by 35%. The Company’s ~~CSR~~ESG strategy considers all life-cycle stages including material procurement from supply chain partners, product design, manufacturing, distribution and transportation, product use, product service and end-of-life. Refer to section "Human Capital Management" in Item 1 Business of the Company’s Form 10-K for the year ended January ~~2, 2021~~1, 2022 for additional information regarding the Company's commitment to upskilling its employees and improving diversity, equity and inclusion.

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

Share Repurchases And Other Securities

During the first quarter of 2022, the Company repurchased 12,645,371 shares of common stock for approximately $2.3 billion through a combination of an accelerated share repurchase ("ASR") and open market share repurchases. The ASR terms provide for an initial delivery of 85% of the total notional share equivalent at execution, or 10,756,770 shares. The final delivery of the remaining shares under the ASR is expected to be completed by the end of the second quarter of 2022. The Company plans to complete the remaining share repurchases of its planned $4 billion share repurchase program in 2023. Refer to Note J, Equity Arrangements, for further discussion.

In addition, on April 23, 2021, the Board of Directors approved repurchases by the Company of its outstanding securities other than common stock up to an aggregate amount of $3.0 billion. No repurchases have been executed pursuant to this authorization to date.

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Pending Sale of Mechanical Access Solutions ("MAS")

In April 2022, the Company announced that it had reached a definitive agreement for the sale of its automatic doors business to Allegion plc for $900 million in cash. The sale is subject to regulatory approval and other customary closing conditions, and is expected to close mid-year.

Pending Sale of Convergent Security Solutions ("CSS")

In December 2021, the Company announced that it had reached a definitive agreement for the sale of most of its Security assets to Securitas AB for $3.2 billion in cash. The proposed transaction includes the Company's CSS business comprising of commercial electronic security and healthcare businesses. The transaction does not include the Company's automatic doors business. The sale is subject to regulatory approvals and other customary closing conditions, and the Company's current expectation is the transaction will close mid-year.

Net proceeds from the sale of MAS and CSS are expected to be used to fund debt reduction and to contribute to the Company's previously announced share repurchase program. The use of net proceeds towards a planned share repurchase program is consistent with the Company's long-term capital allocation strategy focused on value maximization.

Acquisitions

On December 1, 2021, the Company acquired the remaining 80 percent ownership stake in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of outdoor power equipment. The Company previously acquired a 20 percent interest in MTD in January 2019. With over $2.6 billion of revenue in 2021, MTD designs, manufactures and distributes lawn tractors, zero turn ride on mowers, walk behind mowers, snow blowers, residential robotic mowers, handheld outdoor power equipment and garden tools for both residential and professional consumers under well-known brands like Cub Cadet® and Troy-Bilt®.

On November 12, 2021, the Company acquired Excel Industries ("Excel"). Excel is a leading designer and manufacturer of premium commercial and residential turf-care equipment under the brands of Hustler Turf Equipment® and BigDog Mower Co®. The Company believes this is a strategically important bolt-on acquisition that bolsters the presence in the independent dealer network.

The Company expects the combination of MTD, Excel and its existing outdoor strategic business unit in Tools & Outdoor will create a global leader in the $25 billion and growing outdoor category, with strong brands and growth opportunities. As part of the integration of these businesses, the Company plans to design, develop and manufacture battery and electric-powered solutions for professional and residential users. This will position the combined businesses to be a leader as preferences shift from gas powered equipment toward electrified solutions in outdoor power equipment.

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

COVID-19 Pandemic

The novel coronavirus ~~(COVID-19)~~("COVID-19") outbreak has adversely affected the Company's workforce and operations, as well as the operations of its customers, distributors, suppliers and contractors. The COVID-19 pandemic has also resulted in significant volatility and uncertainty in the markets in which the Company operates. To successfully navigate through this unprecedented period, the Company has remained focused on the following key priorities:

•Ensuring the health and safety of its employees and supply chain partners;

•Maintaining business continuity and financial strength and stability;

•Serving its customers as they provide essential products and services to the world; and

•Doing its part to mitigate the impact of the virus across the globe.

To respond to the volatile and uncertain environment, the Company implemented a comprehensive cost reduction and efficiency program, which delivered approximately $500 million of savings in 2020 and is expected to deliver net savings of

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approximately $125 million in 2021, primarily realized in the first quarter. Cost actions executed under the program included headcount reductions, furloughs, reduced employee work schedules, a voluntary retirement program, and footprint rationalizations. The Company took steps in 2020 to make some of the cost actions permanent while certain employees were returned to full-time status. This ensured the sustainability of the cost reduction program into 2021 while providing more employment stability for the Company's remaining associates.

~~Acquisitions and Investments~~

On February 24, 2020, the Company acquired Consolidated Aerospace Manufacturing, LLC ("CAM"), an industry-leading manufacturer of specialty fasteners and components for the aerospace and defense markets. The acquisition further diversified the Company's presence in the industrial markets and expanded its portfolio of specialty fasteners in the aerospace and defense markets.

On January 2, 2019, the Company acquired a 20 percent interest in 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 greater than $20 billion lawn and garden segment and enables 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.

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

Segments

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

Tools & ~~Storage~~

Outdoor

The Tools & ~~Storage~~Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand Tools, Accessories & Storage ("HTAS"), and Outdoor ~~Products Group~~Power Equipment ("~~OPG"~~Outdoor") businesses. Annual revenues in the Tools & ~~Storage~~Outdoor segment were ~~$10.3~~$12.8 billion in ~~2020,~~2021, representing ~~71%~~82% of the Company’s total revenues.

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The PTG 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, 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 ~~OPG~~Outdoor business primarily sells corded and cordless electric lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, pressure washers and related accessories, and gas powered lawn and garden products, including lawn tractors, zero turn ride on mowers, walk behind mowers, snow blowers, residential robotic mowers, utility terrain vehicles (UTVs), handheld outdoor power equipment, garden tools, and parts and accessories to professionals and consumers under the DEWALT®, CUB CADET®, BLACK+DECKER®, CRAFTSMAN®, TROY-BILT®, and ~~DEWALT®~~HUSTLER® brand names.

Industrial

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. Annual revenues in the Industrial segment were ~~$2.3~~$2.5 billion in ~~2020,~~2021, representing 16% of the Company’s total revenues.

The Engineered Fastening business primarily sells highly engineered components such as fasteners, fittings and various engineered products, which are designed for specific application across multiple verticals. The product lines include externally

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threaded fasteners, 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, high-strength structural fasteners, axel swage, latches, heat shields, pins, and couplings.

The Infrastructure business consists of the Attachment Tools and Oil & Gas product lines. Attachment Tools sells hydraulic tools and high quality, performance-driven heavy equipment attachment tools for off-highway applications. Oil & Gas 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.

~~Security~~

RESULTS OF OPERATIONS

The ~~Security segment is comprised of~~Company’s results represent continuing operations and exclude the ~~Convergent Security Solutions ("CSS")~~commercial electronic security, healthcare, and ~~Mechanical Access Solutions ("MAS") businesses. Annual revenues in~~automatic doors businesses, unless specifically noted. These divestitures represent a single plan to exit the Security segment ~~were $1.9 billion in 2020, representing 13%~~and are considered a strategic shift that will have a major effect on the Company's operations and financial results. Therefore, the operating results of ~~the Company’s total revenues.~~these businesses have been classified as discontinued operations.

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.

Certain Items Impacting Earnings

~~Throughout MD&A, the~~The Company has provided a discussion of its results both inclusive and exclusive of acquisition-related and other charges. Organic growth is also utilized to describe results aside from the impacts of foreign currency fluctuations, acquisitions during their initial 12 months of ownership, and divestitures. The results and measures, including gross profit, selling, general, and administrative ("SG&A"), Other, net, and segment profit, on a basis excluding ~~these amounts~~acquisition-related and other charges, and organic growth are ~~considered~~Non-GAAP financial measures. The Company considers the use of Non-GAAP financial measures relevant to aid analysis and understanding of the Company’s results and business trends aside from the material impact of these ~~items.~~items and ensures appropriate comparability to operating results of prior periods.

The Company’s operating results at the consolidated level as discussed below include and exclude acquisition-related and other charges impacting gross profit, SG&A, and Other, net. The Company’s business segment results as discussed below include and exclude acquisition-related and other charges impacting gross profit and SG&A. These amounts for the ~~second quarter~~first quarters of 2022 and ~~year-to-date periods of~~ 2021 ~~and 2020~~ are as follows:

~~Second~~

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First Quarter ~~and Year-To-Date 2021~~2022


		GAAP		Acquisition- Related Charges & Other		Non-GAAP
	Gross profit	$	1,305.4	$	88.8	$	1,394.2
	Selling, general and administrative1	960.3		(78.9)		881.4
	Operating profit	345.1		167.7		512.8
	Earnings from continuing operations before income taxes and equity interest	178.5		221.4		399.9
	Income taxes on continuing operations	22.9		29.8		52.7
	Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted	155.8		191.6		347.4
	Diluted earnings per share of common stock - Continuing operations	$	0.94	$	1.16	$	2.10
1	Includes provision for credit losses

The ~~Company reported approximately $43 million~~Acquisition-Related Charges and ~~$73 million in pre-tax charges~~Other in the ~~second quarter and year-to-date 2021 periods, respectively, which were comprised of~~table above relate to the following:

•~~$2 million and $7 million for the second quarter and year-to-date 2021 periods, respectively,~~Charges reducing Gross ~~Profit~~profit primarily pertaining to inventory step-up charges and the Russia business closure;

•Charges in SG&A primarily related to a voluntary retirement program, integration-related costs, and the Russia business closure;

•Other charges included in Earnings from continuing operations before income taxes and equity interest consisting of:

◦$1.0 million in Other, net primarily related to deal transaction costs; and

◦$52.7 million of restructuring charges pertaining to severance and related costs;

•Income taxes on continuing operations include the tax effect on the above net charges.

First Quarter 2021


		GAAP		Acquisition- Related Charges & Other		Non-GAAP
	Gross profit	$	1,387.8	$	4.4	$	1,392.2
	Selling, general and administrative1	719.1		(15.0)		704.1
	Operating profit	668.7		19.4		688.1
	Earnings from continuing operations before income taxes and equity interest	573.3		23.8		597.1
	Income taxes on continuing operations	115.5		6.0		121.5
	Share of net earnings of equity method investment	1.8		0.2		2.0
	Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted	451.0		18.0		469.0
	Diluted earnings per share of common stock - Continuing operations	$	2.74	$	0.11	$	2.85
1	Includes provision for credit losses

The Acquisition-Related Charges and Other in the table above relate to the following:

•Charges reducing Gross profit pertaining to facility-related charges;

•~~$24 million and $44 million for the second quarter and year-to-date 2021 periods, respectively,~~Charges in SG&A primarily for functional transformation initiatives;

•Other charges included in Earnings from continuing operations before income taxes and equity interest consisting of:

◦$21.6 million ~~for the year-to-date 2021 period~~ in Other, net primarily related to deal ~~transaction~~transactions costs;

•◦$~~3 million and $4~~1.0 million net loss ~~for the second quarter and year-to-date 2021 periods, respectively,~~ pertaining to a previously divested ~~businesses;~~business; and

•◦$141.8 million ~~and $16 million for the second quarter and year-to-date 2021 periods, respectively, in Restructuring~~of restructuring charges pertaining to severance and facility ~~closures.~~closures;

~~The~~•Income taxes on continuing operations include the tax effect on the above ~~charges during the second quarter and year-to-date periods of 2021 was approximately $11 million and $18 million, respectively. In addition, the Company's share of MTD's~~ net ~~earnings included an after-tax charge during both the second quarter and year-to-date 2021 periods of $11 million related primarily to a one-time retroactive duty on imports of a specific component.~~

The above items resulted in net after-tax charges of approximately $43 million, or $0.27 per diluted share, and $66 million, or $0.41 per diluted share, respectively, for the second quarter and year-to-date 2021 periods.

~~Second Quarter and Year-To-Date 2020~~

~~The Company reported approximately $169 million and $231 million in net pre-tax charges in the second quarter and year-to-date 2020 periods, respectively, which were comprised of the following:~~charges.

•~~$43 million and $52 million for the second quarter and year-to-date 2020 periods, respectively, reducing Gross Profit pertaining to a cost reduction program and inventory step-up charges;~~

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•$79 million and $109 million for the second quarter and year-to-date 2020 periods, respectively, in SG&A primarily for a cost reduction program, Security business transformation and margin resiliency initiatives;

•~~$19 million and $38 million for the second quarter and year-to-date 2020 periods, respectively, in Other, net primarily related to a cost reduction program and deal transaction costs; and~~

•~~$28 million and $32 million for the second quarter and year-to-date 2020 periods, respectively, in Restructuring charges pertaining to severance and facility closures.~~

The tax effect on the above charges during the second quarter and year-to-date periods of 2020 was approximately $40 million and $53 million, respectively. The Company also recorded a one-time tax benefit of $119 million in the second quarter of 2020 associated with a supply chain reorganization. In addition, the Company's share of MTD's net earnings included an after-tax charge during the second quarter and year-to-date 2020 periods of $3 million and $4 million, respectively, related primarily to restructuring charges.

The above items resulted in net after-tax charges of approximately $13 million, or $0.08 per diluted share, and $63 million, or $0.41 per diluted share, respectively, for the second quarter and year-to-date 2020 periods.

~~2021 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 raising its 2021 diluted earnings per share outlook to $10.80 to $11.20, from $10.15 to $10.55, and its diluted earnings per share range, excluding charges, to $11.35 to $11.65 from $10.70 to $11.00. The Company is also reiterating free cash flow to approximate net income. The primary factors for the increased EPS guidance include stronger organic growth and incremental pricing actions, which are expected to be partially offset by higher expedited transit costs in Tools & Storage and an increase in commodity inflation.

The difference between the 2021 diluted earnings per share outlook and the diluted earnings per share range, excluding charges, is $0.45 - $0.55, consisting of acquisition-related and other charges. These forecasted charges primarily relate to facility moves, deal and integration costs and functional transformation initiatives.

~~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.

~~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.Consolidated Results

Net Sales: Net sales were ~~$4.301~~$4.448 billion in the ~~second quarter~~first three months of ~~2021~~2022 compared to ~~$3.147~~$3.721 billion in the ~~second quarter~~first three months of ~~2020,~~2021, representing an increase of ~~37%~~20%, primarily driven by a ~~31%~~23% increase ~~in volume, 2%~~from strategic outdoor power equipment acquisitions and a 5% increase infrom price ~~and favorable foreign currency impacts of 5%,~~realization, partially offset by a ~~1% decline related~~6% and 2% decrease from volume and foreign currency, respectively. Volume was in line with expectations, but constrained by temporary electronic component supply challenges, which have continued to ~~divestitures.~~improve. Tools & ~~Storage~~Outdoor net sales increased ~~46%~~24% compared to the ~~second quarter~~first three months of ~~2020~~2021 due to a ~~38%~~27% increase ~~in volume, favorable currency impacts of 5%~~from the MTD and Excel acquisitions and a ~~3% increase in price. Industrial net sales increased 16% compared to the second quarter of 2020 primarily due to increased volume of 13%, favorable currency impacts of 3% and a 1%~~5% increase in price, partially offset by a 1%6% decline in volume and a 2% decrease from ~~an Oil & Gas product line divestiture. Net~~foreign currency. Industrial net sales ~~in the Security segment increased 16%~~declined 2% compared to the ~~second quarter~~first three months of ~~2020 driven by increased volume of 13%, favorable impacts from foreign currency of 6% and 1% increases from both~~2021 as a 5% increase in price ~~and acquisitions, partially~~was more than offset by a 5% decline ~~from divestitures.~~

~~Net sales were $8.498 billion in the first half of 2021 compared to $6.277 billion in the first half of 2020, representing an increase of 35%, driven by a 30% increase~~ in volume 2% increase in price and favorable foreign currency impacts of 4%, partially offset by a 1% decline related to divestitures. Tools & Storage net sales increased 47% compared to the first half of 2020 due to a 40% increase in volume, favorable foreign currency impacts of 4% and a 3% increase in price. Industrial net sales increased 14% compared to the first half of 2020 primarily due to increased volume of 10%, favorable currency impacts of 3% and a 2% increase related to the CAM acquisition, partially offset by a 1% decrease from an Oil & Gas product line divestiture. Net sales in the Security segment increased 9% compared to the first half of 2020 driven by a 6% increase in volume, favorable impactsimpact from foreign ~~currency of 5% and a 1% increase from both price and acquisitions, partially offset by a 4% decline from divestitures.~~currency.

Gross Profit: Gross profit was ~~$1.544~~$1.305 billion, or ~~35.9%~~29.3% of net sales, in the ~~second quarter~~first three months of ~~2021~~2022 compared to ~~$1.013~~$1.388 billion, or ~~32.2%~~37.3% of net sales, in the ~~second quarter~~first three months of ~~2020.~~2021. Acquisition-related and other charges, which reduced gross profit, were

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~~$2.1~~ $88.8 million for the three months ended ~~July 3, 2021~~April 2, 2022 and ~~$42.6~~$4.4 million for the three months ended ~~June 27, 2020.~~April 3, 2021. Excluding these charges, gross profit was ~~35.9%~~31.3% of net sales for the three months ended ~~July 3, 2021,~~April 2, 2022, compared to ~~33.5%~~37.4% for the three months ended ~~June 27, 2020,~~April 3, 2021, as ~~volume,~~ price ~~productivity and mix benefits from innovation were partially~~realization was more than offset by commodity inflation, higher supply chain costs to serve demand and ~~higher expedited transit costs required to meet strong demand.~~

lower volumes.

Gross profit was $3.108 billion, or 36.6% of net sales, in the first half of 2021 compared to $2.036 billion, or 32.4% of net sales, in the first half of 2020. Acquisition-related and other charges, which reduced gross profit, were $7.3 million for the six months ended July 3, 2021 and $51.7 million for the six months ended June 27, 2020. Excluding these charges, gross profit was 36.7% of net sales for the six months ended July 3, 2021, compared to 33.3% for the six months ended June 27, 2020. The year-over-year change was primarily driven by savings from the 2020 cost reduction program as well as the factors discussed above that impacted the second quarter of 2021.

SG&A Expenses: SG&A, inclusive of the provision for credit losses, was ~~$901.6~~$960.3 million, or ~~21.0%~~21.6% of net sales, in the ~~second quarter~~first three months of ~~2021,~~2022, compared to ~~$732.0~~$719.1 million, or ~~23.3%~~19.3% of net sales, in the ~~second quarter~~first three months of ~~2020.~~2021. Within SG&A, acquisition-related and other charges totaled ~~$23.6~~$78.9 million for the three months ended ~~July 3, 2021~~April 2, 2022 and ~~$79.2~~$15.0 million for the three months ended ~~June 27, 2020.~~April 3, 2021. Excluding these charges, SG&A was ~~20.4%~~19.8% of net sales for the three months ended ~~July 3, 2021,~~April 2, 2022, compared to ~~20.7%~~18.9% for the three months ended ~~June 27, 2020, as strong operating leverage was partially offset by~~April 3, 2021, due to growth investments ~~in growth initiatives~~deployed across the businesses.

SG&A, inclusive of the provision for credit losses, was $1.755 billion, or 20.6% of net sales, in the first half of 2021, compared to $1.481 billion, or 23.6% of net sales, in the first half of 2020. Within SG&A, acquisition-related and other charges totaled $43.6 million for the six months ended July 3, 2021 and $109.0 million for the six months ended June 27, 2020. Excluding these charges, SG&A was 20.1% of net sales for the six months ended July 3, 2021, compared to 21.9% for the six months ended June 27, 2020. The year-over-year change was primarily driven by savings from the 2020 cost reduction program as well as the factors discussed above that impacted the second quarter of 2021.

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 ~~profit~~margins may not be comparable.

~~Corporate Overhead:~~ The corporate overhead element of SG&A, which is not allocated to the business segments, amounted to $92.4 million, or 2.1% of net sales, in 2021 compared to $78.7 million, or 2.5% of net sales, in 2020. Excluding acquisition-related and other charges of $7.5 million for the three months ended July 3, 2021 and $20.3 million for the three months ended June 27, 2020, the corporate overhead element of SG&A was 2.0% and 1.9%, in the second quarter of 2021 and 2020, respectively. The increase in 2021 compared to 2020 was primarily due to higher employee-related costs.

On a year-to-date basis, the corporate overhead element of SG&A amounted to $168.1 million, or 2.0% of net sales, in 2021 compared to $127.6 million, or 2.0% of net sales, in 2020. Excluding acquisition-related and other charges of $19.1 million for the six months ended July 3, 2021 and $31.8 million for the six months ended June 27, 2020, the corporate overhead element of SG&A was 1.8% and 1.5%, in the first half of 2021 and 2020, respectively. The year-over-year change was primarily due to higher employee-related costs.

Other, net: Other, net amounted to ~~$53.8~~$62.0 million and ~~$86.9~~$48.0 million in the ~~second quarter~~first three months of ~~2021~~2022 and ~~2020,~~2021, respectively. Excluding acquisition-related and other charges of ~~$0.6~~$1.0 million, ~~and $19.8 million in the second quarter of 2021 and 2020, respectively,~~ Other, net totaled ~~$53.2~~$61.0 million ~~and $67.1 million, respectively, during these periods.~~

~~Other, net amounted to $112.8 million and $161.8 million in~~for the ~~first half of 2021 and 2020, respectively.~~three months ended April 2, 2022. Excluding acquisition-related and other charges of ~~$2.1~~$1.6 million, ~~and $38.7 million in the first half of 2021 and 2020, respectively,~~ Other, net totaled ~~$110.7~~$46.4 million for the three months ended April 3, 2021. The increase in 2022 compared to 2021 is driven by higher intangible asset amortization due to the MTD and ~~$123.1 million, respectively, during these periods.~~Excel acquisitions.

Loss on Sale of ~~Businesses~~Business: ~~The~~During the first quarter of 2021, the Company reported a pre-tax loss ~~on divestitures~~ of ~~$2.6~~$1.0 million ~~and $3.6 million for the three and six months ended July 3, 2021, respectively.~~related to a previously divested business.

Interest, net: Net interest expense was ~~$43.8~~$51.9 million in the ~~second~~first quarter of ~~2021~~2022 compared to ~~$54.8~~$44.6 million in the ~~second~~first quarter of ~~2020. On a year-to-date basis, net interest expense was $88.4 million in 2021 compared to $104.4 million in 2020.~~2021. The year-over-year ~~decrease~~increase was primarily driven by ~~lower~~higher U.S. interest rates and ~~lower~~higher average balances relating to the Company's commercial paper borrowings, ~~partially offset by lower interest income due to a decline~~as well as the $2.25 billion credit facility and $1.0 billion issuance of debt in ~~rates.~~the first quarter of 2022.

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Income Taxes: The Company recognized income tax expense of ~~$73.7 million and $193.2~~$22.9 million for the three ~~and six~~ months ended ~~July 3, 2021, respectively,~~April 2, 2022, resulting in an effective tax ~~rates~~rate of ~~14.0% and 17.1%~~12.8%. Excluding the impacts of the acquisition-related and other charges, the effective tax ~~rates were 14.8% and 17.5%~~rate was 13.2% for the three ~~and six~~ months ended ~~July~~April 2, 2022. These effective tax rates differ from the U.S. statutory tax rate primarily due to a benefit associated with the Company’s supply chain reorganization, tax on foreign earnings and the re-measurement of uncertain tax position reserves. The Company recognized income tax expense of $115.5 million for the three months ended April 3, 2021, ~~respectively.~~resulting in an effective tax rate of 20.1%. Excluding the impacts of the acquisition-related and other charges, the effective tax rate was 20.3% for the three months ended April 3, 2021. These effective tax rates differ from the U.S. statutory tax rate primarily due to tax on foreign earnings, the re-measurement of uncertain tax position reserves, ~~the re-measurement of the deferred tax assets and liabilities due to foreign corporate income tax rate changes,~~ and the tax benefit of equity-based compensation.

Business Segment Results

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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 credit losses (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), loss on sales of businesses, restructuring charges, interest expense, interest income, income taxes and share of net earnings or losses of equity method investment. Corporate overhead is comprised of world headquarters facility expense, cost for the executive management team and 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.~~

Tools & ~~Storage:~~Outdoor:


		Second Quarter						Year-to-Date							Year-to-Date
(Millions of Dollars)	(Millions of Dollars)	2021			2020			2021			2020			(Millions of Dollars)		2022			2021
Net sales	Net sales	$	3,196.5		$	2,197.2		$	6,259.4		$	4,268.0		Net sales		$	3,801.2		$	3,062.9
Segment profit	Segment profit	$	635.1		$	345.1		$	1,286.4		$	579.9		Segment profit		$	378.5		$	644.7
% of Net sales	% of Net sales	19.9		%	15.7		%	20.6		%	13.6		%	% of Net sales		10.0		%	21.0		%

Tools & ~~Storage~~Outdoor net sales increased ~~$999.3~~$738.3 million, or 46%, in the second quarter of 2021 compared to the second quarter of 2020. Sales volume increased by 38%, while foreign currency and price increased sales by 5% and 3%, respectively. All regions delivered extraordinary organic growth and share gain with organic growth in North America, Europe and emerging markets of 30%, 63% and 85%, respectively. All markets benefited from industry-leading innovation and strong professional demand, coupled with secular shifts related to the consumer reconnection with the home and garden, outdoor product electrification and eCommerce. North America growth reflected stronger retail sales as well as a strong performance in the commercial and industrial channels. Point-of-sale demand remained at robust levels in U.S. retail and channel inventory ended below normalized levels. Europe delivered growth in all regions driven by an expansion in commercial, retail brick and mortar and eCommerce channels. Emerging markets growth was due to higher construction-related demand with all regions contributing.

~~Tools & Storage net sales increased $1,991.4 million, or 47%~~24%, in the first ~~half~~three months of ~~2021~~2022 compared to the first ~~half~~three months of 2020. Sales volume increased by 40%, while foreign currency and price increased sales by 4% and 3%, respectively. All regions saw extraordinary organic growth and share gain with organic growth in North America, Europe and emerging markets of 35%, 55% and 75%, respectively. The year-over-year change was2021, primarily driven by a 27% increase from the ~~same factors that~~MTD and Excel acquisitions and a 5% increase in price, partially offset by lower volume of 6% and 2% from unfavorable currency impacts. Organic growth from pricing improved 60 basis points versus the fourth quarter as the Company implemented new global price increases in response to commodity inflation and higher costs to serve. Regional organic revenue was relatively in line with the anticipated supply-constrained performance with emerging markets at 5% and Europe at 2%, and North America at a 3% decline. Sales from outdoor acquisitions were modestly impacted by a later start to the merchandising season due to colder weather, and are expected to be recovered in the second ~~quarter of 2021, as discussed above.~~and third quarter.

Segment profit for the ~~second quarter~~first three months of ~~2021~~2022 was ~~$635.1~~$378.5 million, or ~~19.9%~~10.0% of net sales, compared to ~~$345.1~~$644.7 million, or ~~15.7%~~21.0% of net sales, in the ~~second quarter~~first three months of ~~2020.~~2021. Excluding acquisition-related and other charges of ~~$9.2~~$153.7 million and ~~$28.4~~$4.2 million for the three months ended April 2, 2022 and April 3, 2021, respectively, segment profit was 14.0% of net sales in the first three months of 2022 and 21.2% in the first three months of 2021, as the initial benefit from price realization was more than offset by inflation, higher supply chain costs, growth investments and lower volume.

Industrial:


	Year-to-Date
(Millions of Dollars)		2022			2021
Net sales		$	646.6		$	657.7
Segment profit		$	41.3		$	99.8
% of Net sales		6.4		%	15.2		%

Industrial net sales decreased $11.1 million, or 2%, in the first three months of 2022 compared to the first three months of 2021, as a 5% increase in price was more than offset by a 5% decline in volume and 2% from unfavorable currency impacts. Engineered Fastening organic revenues were down 1% as general industrial fastener growth was primarily offset by a market driven decline in automotive. Infrastructure organic revenues were up 4%, as 13% growth in Attachment Tools was partially offset by lower pipeline project activity in Oil & Gas.

Industrial segment profit for the first three months of 2022 totaled $41.3 million, or 6.4% of net sales, compared to $99.8 million, or 15.2% of net sales, in the corresponding 2021 period. Excluding acquisition-related and other charges of $3.5 million and $3.6 million for the three months ended April 2, 2022 and April 3, 2021, respectively, segment profit amounted to 6.9% of net sales in the first three months of 2022 compared to 15.7% in the first three months of 2021 as the initial benefit from price realization was more than offset by commodity inflation and lower volume in higher-margin automotive and aerospace fasteners.

Corporate Overhead

Corporate Overhead includes the corporate overhead element of SG&A, which is not allocated to the business segments. Corporate Overhead amounted to $74.7 million in 2022 compared to $75.8 million in 2021. Excluding acquisition-related and other charges of $10.5 million for the three months ended April 2, 2022 and $11.6 million for the three months ended April 3, 2021, the corporate overhead element of SG&A was $64.2 million for the three months ended April 2, 2022 and April 3, 2021.

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the three months ended July 3, 2021 and June 27, 2020, respectively, segment profit was 20.2% of net sales in the second quarter of 2021 and 17.0% in the second quarter of 2020, as volume, price, productivity and benefits from innovation were partially offset by commodity inflation, higher expedited transit costs required to serve strong demand and new growth investments.

Segment profit for the first half of 2021 was $1.286 billion, or 20.6% of net sales, compared to $579.9 million, or 13.6% of net sales, in the first half of 2020. Excluding acquisition-related and other charges of $13.4 million and $31.5 million for the six months ended July 3, 2021 and June 27, 2020, respectively, segment profit was 20.8% of net sales in the first half of 2021 and 14.3% in the first half of 2020. The year-over-year change was primarily driven by benefits from the 2020 cost savings program as well as the factors discussed above that impacted the second quarter of 2021.

~~Industrial:~~

Second Quarter Year-to-Date
(Millions of Dollars) 2021 2020 2021 2020
Net sales $ 602.2 $ 517.5 $ 1,259.9 $ 1,108.2
Segment profit $ 62.4 $ 5.1 $ 163.6 $ 72.9
% of Net sales 10.4 % 1.0 % 13.0 % 6.6 %

Industrial net sales increased $84.7 million, or 16%, in the second quarter of 2021 compared to the second quarter of 2020, as increases of 13% from volume, 3% from favorable currency and 1% from price were partially offset by a 1% decline related to an Oil & Gas product line divestiture. Engineered Fastening organic growth was up 26% as strong automotive and general industrial markets were partially offset by weaker aerospace demand in addition to automotive OEM production impacts from the global semiconductor shortage. Infrastructure organic revenues declined 11% due to dramatically reduced Oil & Gas pipeline project activity, which muted the 16% growth in Attachment Tools.

On a year-to-date basis, Industrial net sales increased $151.7 million, or 14%, in the first half of 2021 compared to the first half of 2020, as increases of 10% from volume, 3% from favorable currency and 2% from acquisitions were partially offset by a 1% decline related to an Oil & Gas product line divestiture. Engineered Fastening organic revenues increased 16% and Infrastructure organic revenues decreased 7% primarily due to the same factors that impacted the second quarter of 2021, as discussed above.

Industrial segment profit for the second quarter of 2021 totaled $62.4 million, or 10.4% of net sales, compared to $5.1 million, or 1.0% of net sales, in the corresponding 2020 period. Excluding acquisition-related and other charges of $3.0 million and $40.6 million for the three months ended July 3, 2021 and June 27, 2020, respectively, segment profit amounted to 10.9% of net sales in the second quarter of 2021 compared to 8.8% in the second quarter of 2020 as the benefits from volume, price and productivity were partially offset by commodity inflation, growth investments and troughing markets in oil & gas and aerospace.

Year-to-date segment profit for the first half of 2021 totaled $163.6 million, or 13.0% of net sales, compared to $72.9 million, or 6.6% of net sales, in the corresponding 2020 period. Excluding acquisition-related and other charges of $6.6 million and $51.0 million for the six months ended July 3, 2021 and June 27, 2020, respectively, segment profit amounted to 13.5% of net sales in the first half of 2021 compared to 11.2% in the first half of 2020. The year-over-year change was primarily driven by benefits from the 2020 cost savings program as well as the factors discussed above that impacted the second quarter of 2021.

~~Security:~~

Second Quarter Year-to-Date
(Millions of Dollars) 2021 2020 2021 2020
Net sales $ 502.2 $ 432.7 $ 978.7 $ 900.6
Segment profit $ 36.9 $ 9.2 $ 71.5 $ 30.1
% of Net sales 7.3 % 2.1 % 7.3 % 3.3 %

Security net sales increased $69.5 million, or 16%, in the second quarter of 2021 compared to the second quarter of 2020, as an increase of 13% from volume, 6% from favorable currency and 1% from both price and acquisitions was partially offset by a 5% decline from divestitures. North America organic growth was 16% driven by strong backlog conversion in commercial electronic security and growth within automatic doors and healthcare. Europe was up 12% organically as new data-driven product solutions supported growth in France and the Nordics.

On a year-to-date basis, net sales increased $78.1 million, or 9%, in the first half of 2021 compared to the first half of 2020, as an increase of 6% from volume, favorable impacts from foreign currency of 5% and a 1% increase from both price and

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acquisitions was partially offset by a 4% decline from divestitures. North America and Europe organic revenues increased 7% and 8%, respectively, primarily due to the same factors that impacted the second quarter of 2021, as discussed above.

Security segment profit for the second quarter of 2021 was $36.9 million, or 7.3% of net sales, compared to $9.2 million, or 2.1% of net sales, in the corresponding 2020 period. Excluding acquisition-related and other charges of $6.0 million and $32.5 million for the three months ended July 3, 2021 and June 27, 2020, respectively, segment profit amounted to 8.5% of net sales in the second quarter of 2021 compared to 9.6% in the second quarter of 2020, as price and volume gains were partially offset by wage inflation, inefficiencies related to pandemic restrictions and the impact from growth investments.

Year-to-date segment profit for the first half of 2021 was $71.5 million, or 7.3% of net sales, compared to $30.1 million, or 3.3% of net sales, in the corresponding 2020 period. Excluding acquisition-related and other charges of $11.8 million and $46.4 million for the six months ended July 3, 2021 and June 27, 2020, respectively, segment profit amounted to 8.5% of net sales in both the first half of 2021 and 2020.

RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from January 1, 2022 to April 2, ~~2021 to July 3, 2021~~2022 is as follows:


(Millions of Dollars)	(Millions of Dollars)	January 2, 2021		Net Additions		Usage		Currency		July 3, 2021		(Millions of Dollars)	January 1, 2022		Net Additions		Usage		Currency		April 2, 2022
Severance and related costs	Severance and related costs	$	87.5	$	5.6	$	(36.8)	$	1.2	$	57.5	Severance and related costs	$	28.2	$	51.1	$	(22.8)	$	0.6	$	57.1
Facility closures and asset impairments	Facility closures and asset impairments	2.7		10.7		(9.0)		—		4.4		Facility closures and asset impairments	3.5		1.6		(2.5)		0.1		2.7
Total	Total	$	90.2	$	16.3	$	(45.8)	$	1.2	$	61.9	Total	$	31.7	$	52.7	$	(25.3)	$	0.7	$	59.8

For the three ~~and six~~ months ended ~~July 3, 2021,~~April 2, 2022, the Company recognized net restructuring charges of ~~$14.0~~$52.7 million, ~~and $16.3 million, respectively,~~ primarily related to severance and ~~facility-related~~related costs. The Company expects to achieve annual net cost savings of approximately ~~$24~~$137 million by the end of 2022 related to the restructuring costs incurred during the ~~six~~three months ended ~~July 3, 2021.~~April 2, 2022. The majority of the ~~$61.9~~$59.8 million of reserves remaining as of ~~July 3, 2021~~April 2, 2022 is expected to be utilized within the next 12 months.

~~The $14~~$53 million of net restructuring charges for the three months ended ~~July 3, 2021~~April 2, 2022 includes: $6$43 million ~~pertaining to~~in the Tools & ~~Storage~~Outdoor segment; $3$8 million ~~pertaining to~~in the Industrial segment; $3and $2 million ~~pertaining to the Security segment; and $2.0 million relating to~~in Corporate.

The anticipated annual net cost savings of approximately ~~$24~~$53 million related to the ~~2021~~2022 restructuring actions include: $7$110 million in the Tools & ~~Storage~~Outdoor segment; ~~$10~~$14 million in the Industrial segment; ~~$6 million in the Security segment;~~ and $1$13 million in Corporate.

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2022 OUTLOOK

This outlook discussion is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. For the full year 2022, the Company projects mid-twenties total revenue growth year-over-year. The Company is revising its 2022 diluted earnings per share outlook to $7.20 - $8.30 on a diluted GAAP basis, from $10.10 to $10.70, and on an adjusted diluted EPS basis to $9.50 to $10.50 from $12.00 to $12.50. Free cash flow is expected to be approximately $1.0 billion to $1.5 billion as the Company focuses on serving its customers while leveraging the SBD Operating Model to drive working capital efficiency. Through the first quarter, $2.3 billion of the planned $4 billion share repurchase was initiated and the Company expects completion of the total program in 2023. The Company remains focused on disciplined capital allocation which aims to balance share repurchase activity with its commitment to dividends and strong investment grade credit ratings.

The Company has changed the following assumptions for 2022 from its prior outlook: MAS divestiture will approximate $0.30 of dilution to earnings per share; Russia business closure will approximate $0.15 of dilution to earnings per share; an incremental $600 million in commodity and transit inflation will approximate $3.50 of incremental dilution to earnings per share; and incremental pricing actions, first quarter out performance and other will approximate $1.70 of incremental accretion per diluted share.

The difference between the 2022 diluted earnings per share outlook and the diluted earnings per share range, excluding charges, is $2.20 - $2.30, consisting of acquisition-related and other charges. These forecasted charges primarily relate to restructuring expenses, a voluntary retirement program, the Russia business closure, integration costs and non-cash inventory step-up charges.

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 flows ~~provided by~~used in operations were ~~$444.4 million~~$1.241 billion in the ~~second~~first quarter of 2021 compared to ~~$328.2~~$157.8 million in the corresponding period of ~~2020. Year-to-date cash flows provided by operations were $286.6 million compared to cash flows used in operations of $77.0 million in the corresponding period of 2020.~~2021. The year-over-year change was mainly attributable to ~~increased earnings, partially offset by~~ higher inventory ~~balances~~levels to ~~support strong~~meet demand inwithin the Tools & Outdoor segment, coupled with longer lead times related to the global supply chain, and ~~Storage segment.~~to a lesser extent, lower earnings.

Free Cash Flow: Free cash flow, as defined in the table below, was ~~$339.3 million~~an outflow of $1.381 billion in the ~~second~~first quarter of ~~2021~~2022 compared to ~~$263.7~~$246.1 million in the corresponding period of ~~2020. On a year-to-date basis,~~2021. The year-over-year decrease in free cash flow was ~~an inflow~~primarily due to increased inventory investments to support the strong demand outlook. This inventory level is planned to decline sequentially [beginning in the back half of ~~$93.2 million in 2021 compared to an outflow of $224.4 million in 2020, an improvement of $317.6 million.~~2022]. 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, and is useful information for investors. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common and preferred stock and business acquisitions, among other items.


		Second Quarter				Year-to-Date					Year-to-Date
(Millions of Dollars)	(Millions of Dollars)	2021		2020		2021		2020		(Millions of Dollars)		2022		2021
Net cash provided by (used in) operating activities		$	444.4	$	328.2	$	286.6	$	(77.0)
Net cash used in operating activities										Net cash used in operating activities		$	(1,241.1)	$	(157.8)
Less: capital and software expenditures	Less: capital and software expenditures	(105.1)		(64.5)		(193.4)		(147.4)		Less: capital and software expenditures		(139.8)		(88.3)
Free cash flow	Free cash flow	$	339.3	$	263.7	$	93.2	$	(224.4)	Free cash flow		$	(1,380.9)	$	(246.1)

Investing Activities: Cash flows used in investing activities totaled ~~$108.8~~$163.4 million ~~and $56.8 million during~~in the ~~second~~first quarter of ~~2021 and 2020, respectively,~~2022 primarily due to capital and software expenditures of ~~$105.1~~$139.8 million and ~~$64.5 million, respectively.~~

~~Year-to-date cash~~purchase price adjustment payments for previously acquired businesses of $36.5 million. Cash flows used in investing activities totaled ~~$256.7~~$147.9 million in the first three months of 2021, primarily due to capital and software expenditures of ~~$193.4~~$88.3 million and net investment hedge settlements of $52.6 million. Cash flows used in investing activities totaled $1.421 billion in the first half of 2020, primarily due to the CAM acquisition of $1.302 billion, net of cash acquired, and capital and software expenditures of $147.4 million.

Financing Activities: Cash flows ~~used in~~provided by financing activities totaled ~~$853.3 million~~$1.425 billion in the ~~second~~first quarter of ~~2021~~2022 primarily driven by ~~the~~ ~~Series C Preferred Stock~~ ~~redemption~~net short-term borrowings of $2.845 billion and ~~conversion for $750.0~~proceeds from debt issuances, net of fees, of $994.8 million, partially offset by share repurchases of $2.313 billion and cash dividend payments on common stock of ~~$111.6~~$116.3 million. Cash flows used in financing activities totaled ~~$391.5~~$95.0 million in the ~~second quarter~~first three months of ~~2020~~2021 primarily driven by ~~net payments on short-term borrowings under the Company's commercial paper program of $980.8 million and~~ cash dividend payments on common stock of ~~$105.8~~$110.1 million, partially offset by proceeds from issuances of common stock of ~~$756.7~~$64.1 million.

~~Year-to-date cash flows used in financing activities totaled $948.3 million in the first half~~Table of ~~2021 primarily driven by the~~ ~~Series C Preferred Stock~~ redemption and conversion for $750.0 million, cash dividend payments on common stock of $221.7 million, partially offset by proceeds from issuances of common stock of $100.4 million. Cash flows provided by financing activities totaled $2.084 billion in the first half of 2020 primarily driven by net proceeds from debt issuances of $1.483 billion, proceeds from issuances of common stock of $801.3 million and net short-term borrowings under the Company's commercial paper program of $371.1 million, partially offset by the Craftsman deferred purchase price payment of $250.0 million and cash dividend payments of $211.4 million.Contents

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~~as well as its commercial paper program (S&P A-1, Fitch F1, Moody's P-2). There were no changes to any of the Company's credit ratings during the first ~~half~~quarter of ~~2021, however, S&P and Fitch have revised their outlook to 'stable' from 'negative' as a result of the Company's strong performance during the COVID-19 pandemic.~~2022. Failure to maintain strong investment grade credit 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.

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Cash and cash equivalents totaled ~~$440~~$165.8 million and $142.1 million as of ~~July 3, 2021, comprised of $206 million~~April 2, 2022 and January 1, 2022, respectively, which was primarily held in the U.S. ~~and $234 million in foreign jurisdictions. As of January 2, 2021, cash and cash equivalents totaled $1.381 billion, comprised of $1.119 billion in the U.S. and $262 million in foreign jurisdictions.~~

As a result of the Tax Cuts and Jobs Act (the “Act”), the Company's tax liability related to the one-time transition tax associated with unremitted foreign earnings and profits totaled ~~$290~~$287 million at ~~July 3, 2021.~~April 2, 2022. 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.

The Company has a ~~$3.0~~$3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021,~~1, 2022, the Company had no borrowings ~~outstanding.~~outstanding of $2.8 billion and $2.2 billion, respectively.

The Company has a five-year ~~$2.0~~$2.5 billion committed credit facility (the “5-Year Credit Agreement”). Borrowings under the 5-Year Credit Agreement may be made in U.S. Dollars, Euros or Pounds Sterling. A sub-limit amount of ~~$653.3~~$814.3 million is designated for swing line advances which may be drawn in Euros pursuant to the terms of the 5-Year Credit Agreement. Borrowings bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and specific terms of the 5-Year Credit Agreement. The Company must repay all advances under the 5-Year Credit Agreement by the earlier of September ~~12, 2023~~8, 2026 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop for the Company's ~~$3.0~~$3.5 billion U.S. Dollar and Euro commercial paper program. As of ~~July 3, 2021,~~April 2, 2022 and January ~~2, 2021~~1, 2022, the Company had not drawn on its five-year committed credit facility.

The Company has a 364-Day $1.0 billion committed credit facility (the "364-Day Credit Agreement"). Borrowings under the 364-Day Credit Agreement may be made in U.S. Dollars or Euros and bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and pursuant to the terms of the 364-Day Credit Agreement. The Company must repay all advances under the 364-Day Credit Agreement by the earlier of September ~~8, 2021~~7, 2022 or upon termination. The Company 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 that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s ~~$3.0~~$3.5 billion U.S. Dollar and Euro commercial paper ~~program previously discussed.~~ program. As of ~~July 3, 2021,~~April 2, 2022 and January ~~2, 2021~~1, 2022, the Company had not drawn on its 364-Day committed credit facility.

The Company has ~~an interest coverage covenant that must be maintained to permit continued access to its~~a second 364-Day $1.0 billion committed credit ~~facilities described above.~~facility (the "Second 364-Day Credit Agreement"). Borrowings under the Second 364-Day Credit Agreement may be made in U.S. Dollars and Euros and bear interest at a base rate plus an applicable margin determined at the time of the borrowing. The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted Interest Expense ("adjusted EBITDA"/"adjusted Interest Expense"). In April 2020,Company must repay all advances under the Second 364-Day Credit Agreement by the earlier of November 15, 2022 or upon termination. The Company 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 that the Company, entered into an amendment to its 5-Year Credit Agreement to: (a) amend the definition of Adjusted EBITDA to allow for additional adjustment addbacks, which primarily relate to anticipated incremental charges relatedamong other things, pays a fee to the ~~COVID-19 pandemic, for amounts incurred beginning in the second quarter of 2020 through the second quarter of 2021, and (b) lower the minimum interest coverage ratio from 3.5 to 2.5 times~~administrative agent for the ~~period from~~account of each lender. As of April 2, 2022 and ~~including~~January 1, 2022, the ~~second quarter of 2020 through the end of fiscal year 2021.~~Company had not drawn on its Second 364-Day Credit Agreement.

In February 2022, the Company issued $500.0 million of senior unsecured term notes maturing February 24, 2025 ("2025 Term Notes") and $500.0 million of senior unsecured term notes maturing May 15, 2032 (“2032 Term Notes”). The 2025 Term Notes will accrue interest at a fixed rate of 2.3% per annum and the 2032 Term Notes at a fixed rate of 3.0% per annum, with interest payable semi-annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured

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unsubordinated debt. The Company received total net proceeds from this offering of approximately $991.9 million, net of approximately $8.1 million of 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 indebtedness under the commercial paper facilities.

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750 million ("2019 Equity Units"). Each unit has a stated amount of $100 and initially ~~consisted~~consists of a three-year forward stock purchase contract ("2022 Purchase Contracts") for the purchase of a variable number of shares of common stock, on November 15, 2022, for a price of $100, and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock, without par, with a liquidation preference of $1,000 per share ("Series D Preferred Stock"). The Company received approximately $735 million in cash proceeds from the 2019 Equity Units, net of offering expenses and underwriting costs and commissions, and issued 750,000 shares of Series D Preferred ~~Stock, recording $750 million in preferred stock.~~Stock. The proceeds were used, together with cash on hand, to redeem the 2052 Junior Subordinated Debentures in December 2019. The Company also used $19 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution. On and after November 15, 2022, the Series D 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 December 22, 2022, the Company may elect to redeem for cash, all or any portion of the outstanding shares of the Series D 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 D Preferred Stock for redemption, holders may convert their shares immediately preceding the redemption date. Upon ~~settlement~~a successful remarketing of the ~~2022 Purchase Contracts,~~Series D Preferred Stock (the "Remarketed Series D Preferred Stock"), the Company will receive additional cash proceeds of $750 ~~million.~~million and issue shares of Remarketed Series D Preferred Stock. The Company pays the holders of the 2022 Purchase Contracts quarterly contract adjustment payments, which commenced February 15, 2020. As of ~~July 3, 2021,~~April 2, 2022, the present value of the contract adjustment payments was approximately ~~$57~~$29 million.

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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 million. In February 2020, the Company net-share settled 0.6 million of the 3.2 million capped call options on its common stock and received 61,767 shares using an average reference price of $162.26 per common share. On June 9, 2020, the Company amended the 2018 capped call options to align with and offset the potential economic dilution associated with the common shares issuable upon conversion of the remarketed Series C Preferred Stock, as further discussed below. Subsequent to the amendment, the capped call options had an initial lower strike price of $148.34 and an upper strike price of $165.00, which was approximately 30% higher than the closing price of the Company's common stock on June 9, 2020. During the second quarter of 2021, the Company net-share settled the remaining capped call options on its common stock and received 344,004 shares using an average reference price of $209.80 per common share.

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750 million ("2017 Equity Units"). Each unit had a stated amount of $100 and initially consisted 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 $726 million in cash proceeds from the 2017 Equity Units, net of offering expenses and underwriting costs and commissions, and issued 750,000 shares of Series C Preferred Stock, recording $750 million in preferred stock. The proceeds were used for general corporate purposes, including repayment of short-term borrowings. The Company also used $25 million of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution.

~~In May 2020, the Company successfully remarketed the Series C Preferred Stock~~. The remarketing generated cash proceeds of $750 million which were applied to settle the holders' stock purchase contract obligations, resulting in the Company issuing 5,463,750 common shares. Holders of the remarketed Series C Preferred Stock are entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share). ~~In connection with the remarketing, the conversion rate was reset to 6.7352 shares of the Company's common stock, which was equivalent to a conversion price of approximately $148.47 per share. On~~ and after May 15, 2020, the Series C Preferred Stock may be converted into common stock at the option of the holder. The Company did not have the right to redeem the Series C Preferred Stock prior to May 15, 2021. On April 28, 2021, the Company informed holders that it would redeem all outstanding shares of the Series C Preferred Stock on June 3, 2021 (the “Redemption Date”) at $1,002.50 per share in cash (the “Redemption Price”), which was equal to 100% of the liquidation preference of a share of Series C Preferred Stock, plus accumulated and unpaid dividends to, but excluding, the Redemption Date. If a holder elected to convert its shares of Series C Preferred Stock prior to the Redemption Date, the Company elected a combination settlement with a specified ca~~sh amount of $1,000 per share. In June 2021, the Company redeemed the Series C Preferred Stock and settled all conversions, paying $750 million in cash and issuing 1,469,055 common shares.~~

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

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OTHER MATTERS

Critical Accounting Estimates: There have been no significant changes in the Company’s critical accounting estimates during the ~~second~~first quarter of ~~2021.~~2022.

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 January ~~2, 2021~~1, 2022 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~~first quarter of ~~2021.~~2022. 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 January ~~2, 2021~~1, 2022 for further discussion.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and its 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 Chief Executive Officer and its President and Chief Financial Officer have concluded that, as of ~~July 3, 2021,~~April 2, 2022, the Company’s disclosure controls and procedures are effective. ~~There~~

Remediation of Material Weakness

To address the previously reported material weakness in internal control over financial reporting described in Part II, Item 9A of the Company's 2021 Form 10-K, the Company enhanced and revised the design of existing controls and procedures to properly account for financial instruments with debt- and equity-like features, including the impact to the calculation of earnings per share. During the first quarter of fiscal 2022, the Company successfully completed the testing necessary to conclude that the material weakness has been remediated.

Changes in Internal Control Over Financial Reporting

Except for the changes related to the Company's remediation efforts described above, there has been no change in the Company’s internal control over financial reporting that occurred during the ~~second~~first quarter of ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the 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 items; any statements of the plans, strategies and 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 others, 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 forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of its forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in the Company's filings with the Securities and Exchange Commission.

Important factors that could cause the Company's actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in its forward-looking statements include, among others, the following: (i) successfully developing, marketing and achieving sales from new products and services and the continued acceptance of current products and services; (ii) macroeconomic factors, including global and regional business conditions (such as Brexit), commodity prices, inflation and deflation, and currency exchange rates; (iii) laws, regulations and governmental policies affecting the Company's activities in the countries where it does business, including those related to tariffs, taxation, data privacy, anti-bribery, anti-corruption, government contracts and trade controls such as section 301 tariffs and section 232 steel and aluminum tariffs; (iv) the economic, political, cultural and legal 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; (vii) availability and price of raw materials, component parts, freight, energy, labor and sourced finished goods; (viii) the impact the tightened credit markets and change to LIBOR and other benchmark rates 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; (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, pandemics, sanctions, political unrest, war, terrorism or natural disasters; (xii) the continued consolidation of customers, particularly in consumer channels and the Company’s continued reliance on significant customers; (xiii) managing franchisee relationships; (xiv) the impact of poor weather conditions and climate change; (xv) maintaining or improving production rates in the Company's manufacturing facilities, responding to significant changes in customer preferences, product demand and fulfilling demand for new and existing products, and learning, adapting and integrating new technologies into products, services and processes; (xvi) changes in the competitive landscape in the Company's markets; (xvii) the 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; (xix) potential adverse developments in new or pending litigation and/or government investigations; (xx) the incurrence of debt and changes in the Company's ability to obtain debt on commercially reasonable terms and at competitive rates; (xxi) substantial pension and other postretirement benefit obligations; (xxii) potential regulatory liabilities, including environmental, privacy, data breach, workers compensation and product liabilities; (xxiii) attracting and retaining key employees, managing a workforce in many jurisdictions, work stoppages or other labor disruptions; (xxiv) the Company's ability to keep abreast with the pace of technological change; (xxv) changes in accounting estimates; (xxvi) the Company’s ability to protect its intellectual property rights and associated reputational impacts; (xxvii) the continued adverse effects of the COVID-19 pandemic and an indeterminate recovery period; (xxviii) the possibility that the Company does not ~~exercise its option to acquire the remaining stake in MTD; and (xxix) if the Company does exercise its option, the possibility that the Company does not~~ achieve the intended financial benefits from the acquisition of ~~MTD.~~MTD; (xxix) the failure to consummate, or a delay in the consummation of, the Security sale transactions for various reasons (including but not limited to failure to receive, or delay in receiving, required regulatory approvals and meet customary closing conditions); (xxx) the failure to undertake or complete, or a delay in the timing of, the share repurchase program; and (xxxi) failure to realize the expected benefits of the Company's capital allocation strategy and share repurchase program.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in the 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 Condensed Consolidated Financial Statements and the related Notes.

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Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date hereof, and forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents. The Company does not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company has identified that certain expenses it incurred in previous years constituted undisclosed perquisites. The Company has voluntarily disclosed this information to the U.S. Securities and Exchange Commission ("SEC") and is cooperating with the SEC’s investigation of this matter.

For the named executive officers in fiscal year 2021, the Company has calculated the amount of the undisclosed perquisites to be approximately $204,000 in 2020 and approximately $335,000 in 2019. These amounts relate principally to use of corporate aircraft and have been included in the Company’s proxy statement for its 2022 annual shareholders meeting.

The Company is committed to upholding the highest standards of corporate governance and is continuously focused on ensuring the effectiveness of its policies, procedures, and controls. The Company is in the process, with the assistance of professional advisors, of reviewing and further enhancing relevant policies, procedures, and controls.

Currently the Company does not believe that this matter will have a material impact on its financial condition or results of operations, although it is possible that a loss related to this matter may be incurred. Given the ongoing nature of this matter, management cannot predict the duration, scope, or outcome of the SEC’s investigation or estimate the potential magnitude of any such loss or range of loss, or the cost of the ongoing SEC investigation. Any determination that the Company’s expense and perquisite reporting practices were not in compliance with existing laws or regulations could result in the imposition of fines, civil or criminal penalties, equitable remedies, including disgorgement, injunctive relief, or other sanctions against the Company. The Company also may become a party to litigation or other legal proceedings over these matters.

In the normal course of business, the Company is involved in various lawsuits and claims, including product liability, environmental, intellectual property, contract and commercial, advertising, employment and distributor claims, and administrative proceedings. The Company does not expect that the resolution of these matters will have a materially adverse effect on the Company’s consolidated financial position, results of 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 January ~~2, 2021~~1, 2022 filed with the Securities and Exchange Commission on February ~~18, 2021.~~22, 2022.

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 months ended ~~July 3, 2021:~~April 2, 2022:

2021 Total
Number Of
Shares
Purchased
(a) Average Price
Paid Per
Share
Total Number
Of Shares
Purchased As
Part Of A Publicly
Announced Plan Or Program Maximum Number
Of Shares That
May Yet Be
Purchased Under
The Program
(b)
April 4 - May 8 8,322 $ 202.96 — 20,000,000
May 9 - June 5 — — — 20,000,000
June 6 - July 3 3,414 206.20 — 20,000,000
Total 11,736 $ 203.90 — 20,000,000


2022	Total Number Of Shares Purchased (a)	Average Price Paid Per Share		Total Number Of Shares Purchased As Part Of A Publicly Announced Plan Or Program	(In Millions) Maximum Number Of Shares That May Yet Be Purchased Under The Program (b)
January 2 - February 5	—	$	—	—	20
February 6 - March 5	12,681,866	154.82		10,756,770	7
March 6 - April 2	47,851	145.10		—	7
Total	12,729,717	$	154.79	10,756,770	7

(a)~~The shares~~Shares of common stock in this column totaling 36,495 and 47,851 for the months ended March 5, 2022 and April 2, 2022, respectively, 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. Shares in this column totaling 1,888,601 for the month ended March 5, 2022 were open market share repurchases.

(b)On ~~April 23, 2021,~~February 16, 2022, the Board of Directors terminated the previous repurchase program (the "April 2021 Program") and approved a new repurchase program of up to the greater of (i) 20.0 million shares of the ~~Company's~~Company’s common stock; and (ii) the number of shares of the Company’s common stock ~~and~~in the aggregate that can be purchased for an amount up to $2.5 billion (the "February 2022 Program"). On April 21, 2022, the Board terminated the ~~previously~~February 2022 Program and approved ~~repurchase program. As of July 3, 2021, the authorized shares available for repurchase under the~~a new ~~program totaled 20.0 million shares. The~~share repurchase program of up to 20 million shares of the Company’s common stock (the “April 2022

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Program”). The April 2022 Program does not have an expiration date. InThe Company may repurchase shares under the ~~second quarter~~April 2022 Program through open market purchases, privately negotiated transactions or share repurchase programs, including one or more accelerated share repurchase programs (under which an initial payment for the entire repurchase amount may be made at the inception of ~~2021,~~the program). Such repurchases may be funded from cash on hand, short-term borrowings or other sources of cash at the Company’s discretion, and the Company ~~net-share settled capped call options and received 344,004 shares. This transaction was completed~~is under no obligation to repurchase any shares pursuant to the ~~previously approved~~ repurchase program. The currently authorized shares available for repurchase under the April 2022 Program do not include (i) approximately 3.6 million shares reserved and authorized for purchase under the Company’s ~~previously~~ approved repurchase program in place prior to the April 2022 Program relating to a forward share purchase contract entered into in March ~~2015.~~2015; or (ii) the shares reserved and authorized for repurchase under the February 2022 Program relating to the remaining shares to be delivered pursuant to the ASR (defined below) in the second quarter of 2022. In March 2022, the Company executed an accelerated share repurchase ("ASR") with a notional amount of $2.0 billion, which was funded through borrowings under one of its existing 364-Day committed credit facilities. The ASR terms provide for an initial delivery of 85% of the total notional share equivalent at execution, or approximately 10.8 million shares. The final delivery of the remaining shares under the ASR is expected to be completed by the end of the second quarter of 2022. The total amount of shares to be ultimately delivered will be determined at the end of the calculation period based on the volume weighted average price ("VWAP") of the Company's stock (inclusive of a VWAP discount) during that period. In the event that the Company's stock price increases significantly during the calculation period, the Company may be required to settle the transaction by delivering common shares or may elect to make a cash payment. Refer to Note J, Equity Arrangements, of the Notes to ~~Unaudited~~(Unaudited) Condensed Consolidated Financial Statements in Part I, Item 1 for further discussion.

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ITEM 6. EXHIBITS


(4.1)			Tenth Supplemental Indenture, dated as of February 24, 2022, between Stanley Black & Decker, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 2.300% Notes due 2025 and the 3.000% Notes due 2032 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on February 24, 2022).

(4.2)			Form of Stanley Black & Decker, Inc.’s 2.300% Notes due 2025 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on February 24, 2022).

(4.3)			Form of Stanley Black & Decker, Inc.’s 3.000% Notes due 2032 (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on February 24, 2022).

(10.1)			364-Day Credit Agreement, made as of January 26, 2022 among Stanley Black & Decker, Inc., the initial lenders named therein and Citibank, N.A. as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 on the Company’s Current Report on Form 8-K filed on January 28,2022).

(10.2)			Underwriting Agreement, dated as of February 22, 2022, between Stanley Black & Decker, Inc. and BofA Securities, Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC. (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on February 24, 2022).

(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~~(Unaudited) Condensed Consolidated Financial Statements set forth in this Quarterly Report on Form 10-Q).

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

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

(32)(i)			Certification by 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 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 ~~July 3, 2021,~~April 2, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income (Loss) for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020;~~2021; (ii) Condensed Consolidated Balance Sheets at ~~July 3, 2021~~April 2, 2022 and January ~~2, 2021;~~1, 2022; (iii) Condensed Consolidated Statements of Cash Flows for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020;~~2021; (iv) Consolidated Statements of Changes in Shareowners' Equity for the three ~~and six~~ months ended ~~July~~April 2, 2022 and April 3, ~~2021 and June 27, 2020;~~2021; and (v) Notes to ~~Unaudited~~(Unaudited) Condensed Consolidated Financial Statements**.

(104)			The cover page of Stanley Black & Decker Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~July 3, 2021,~~April 2, 2022, formatted in iXBRL (included within Exhibit 101 attachments).


**			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.

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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 27, 2021~~April 28, 2022

By:

/s/ DONALD ALLAN, JR.

Donald Allan, Jr.

President and Chief Financial Officer

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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			3836
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			4946
ITEM 4. CONTROLS AND PROCEDURES			4946
PART II — OTHER INFORMATION			5149
ITEM 1. LEGAL PROCEEDINGS			5149
ITEM 1A. RISK FACTORS			5149
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5149
ITEM 6. EXHIBITS			5251
SIGNATURE			5352



(Millions of Dollars)	Balance April 3, 2021		Cumulative Effect Adjustment (a)		Charged To Costs and Expenses		Charged To Other Accounts (b)		Deductions (c)		Balance July 3, 2021
Accounts receivable	$	129.5	$	0	$	(1.3)	$	(0.7)	$	(1.1)	$	126.4
Notes receivable	14.6		0		0.4		(0.2)		0		14.8
Total	$	144.1	$	0	$	(0.9)	$	(0.9)	$	(1.1)	$	141.2


(Millions of Dollars)	Balance January 2, 2021		Cumulative Effect Adjustment (a)		Charged To Costs and Expenses		Charged To Other Accounts (b)		Deductions (c)		Balance July 3, 2021
Accounts receivable	$	126.7	$	0	$	4.2	$	0.8	$	(5.3)	$	126.4
Notes receivable	14.4		0		0.4		0		0		14.8
Total	$	141.1	$	0	$	4.6	$	0.8	$	(5.3)	$	141.2


(Millions of Dollars)	Balance March 28, 2020		Cumulative Effect Adjustment (a)		Charged To Costs and Expenses		Charged To Other Accounts (b)		Deductions (c)		Balance June 27, 2020
Accounts receivable	$	108.1	$	0	$	19.0	$	0	$	(4.2)	$	122.9
Notes receivable	13.6		0		0		0.1		(0.1)		13.6
Total	$	121.7	$	0	$	19.0	$	0.1	$	(4.3)	$	136.5


(Millions of Dollars)	Balance December 28, 2019		Cumulative Effect Adjustment (a)		Charged To Costs and Expenses		Charged To Other Accounts (b)		Deductions (c)		Balance June 27, 2020
Accounts receivable	$	99.3	$	2.9	$	29.7	$	(2.8)	$	(6.2)	$	122.9
Notes receivable	13.1		0.9		0		(0.1)		(0.3)		13.6
Total	$	112.4	$	3.8	$	29.7	$	(2.9)	$	(6.5)	$	136.5


(Millions of Dollars)	Total		Within 1 Year		2 Years		3 Years		4 Years		5 Years		Thereafter
Financing receivables	$	207.6	$	76.4	$	56.2	$	38.6	$	22.4	$	11.0	$	3.0
Operating leases	$	19.3	$	17.6	$	0.8	$	0.4	$	0.1	$	0.1	$	0.3


(Millions of Dollars)	Second Quarter 2020 Interest Expense		Year-to-Date 2020 Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive Income in which the effects of the fair value hedges are recorded	$	57.3	$	117.0
Amortization of gain on terminated swaps	$	(0.8)	$	(1.6)