What changed in this filing

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Item 1A. Risk Factors

2024-02-27 compared with 2023-02-23 · 84 added, 127 removed, 271 unchanged (44% of the section changed)

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As part of the Company's strategy, it may acquire businesses or assets, divest businesses or assets, enter into strategic alliances and joint ventures, and make investments to further its business (collectively, “business combinations and investment transactions”), and also handle any post-closing issues, such as integration and transition services.

For example, in 2022, the Company completed the divestitures of its Security and Oil & Gas businesses.

The Company may make additional divestitures or pursue acquisitions in the future .

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• the acquired businesses may lose market acceptance or profitability;

• difficulties in retaining existing or attracting new business and operational relationships, including with customers, suppliers and other counterparties;

• the impact of divestitures on the Company's revenue growth may be larger than projected, as the Company may experience greater dis-synergies than expected;

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• continued financial involvement in a divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations;

• the loss of key personnel, distributors, clients or customers of acquired companies.

• increased volatility and market vulnerability as a result of a more focused portfolio following completion of business combinations and investment transactions;

• the loss of key personnel, distributors, clients or customers of acquired companies and difficulty in maintaining employee morale.

In addition, the current and the proposed changes to the U.S.

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Lead times for these items vary significantly and may be further impacted by global shortages of critical components.

Global supply chain constraints in the wake of the COVID-19 pandemic limited the Company's visibility into availability and lead times for products and their component parts and raw materials but such constraints have softened in the second half of 2022.

In addition, the Company’s ability to import these items in a timely and cost-effective manner may be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as fluctuations in freight costs, port and shipping capacity, labor disputes and shortages, severe weather due to climate change or increased homeland security requirements in the U.S.

Global supply chain constraints in the wake of geopolitical tensions and conflicts have, and could again, adversely impact the availability and lead times for products, component parts and raw materials and thus negatively impact the Company’s results of operations.

Specifically, the Company sources materials from South Korea, China and Taiwan, and any future tensions or conflicts in such regions could cause material disruptions in the Company's supply chain which could, in turn, cause product shortages, delays in delivery and/or increases in the Company's cost incurred to produce and deliver products to its customers.

Other potential consequences arising from the further escalation of conflicts and global geopolitical tensions cannot be predicted.

In addition, the Company’s ability to import these items in a timely and cost-effective manner may be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as fluctuations in freight costs, port and shipping capacity, labor disputes and shortages, severe weather, including severe weather due to climate change, or increased homeland security requirements in the U.S.

and other countries.

In 2022 and 2021, the Company experienced significantly higher freight costs compared to freight costs incurred in 2020.

These issues have delayed, and could delay in the future, importation of products or require the Company to

locate alternative ports or warehousing providers to avoid disruption to customers.

These issues have delayed, and could delay in the future, importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers.

These alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on the Company’s business and financial condition.

The Company also relies on its ability to maintain inventory levels appropriate to meet consumer and customer demand.

During the second half of 2020 and during 2021, the Company experienced higher than historical customer demand and increased supply chain constraints, resulting in historically high inventory levels.

As consumer and DIY demand softened in the second quarter of 2022, the Company’s inventory levels peaked in the first half of the year.

The Company is actively addressing this dynamic through the Global Cost Reduction Program implemented in the third quarter of 2022, which includes an initiative to reduce inventory levels by curtailing production and by reducing complexity through SKU rationalization.

This initiative resulted in $775 million of inventory reduction in the second half of 2022.

However, any failure to achieve SKU rationalization efforts in an efficient manner or reduce inventory levels, or otherwise maintain appropriate inventory levels to meet consumer and customer demand, may expose the Company to risks of excess inventory and less marketable or obsolete inventory and could require the Company to sell excess or obsolete inventory at a discount, which could result in inventory write-offs that would negatively impact the Company’s revenues and profit margin.

The Company is focused on optimizing inventory levels via improved supply chain conditions and strategic inventory management through the Global Cost Reduction Program implemented in mid-2022, which includes an initiative to reduce inventory levels by reducing complexity through SKU rationalization.

Any failure to achieve SKU rationalization efforts in an efficient manner or reduce inventory levels in general, or otherwise maintain appropriate inventory levels to meet consumer and customer demand, may expose the Company to risks of excess inventory and less marketable or obsolete inventory and could require the Company to sell excess or obsolete inventory at a discount, which could result in inventory write-offs that would negatively impact the Company’s revenues and profit margin.

Substantially all of the Company's import operations are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements, bilateral actions or, in some cases unilateral action.

In addition, the countries in which the Company’s products and materials are manufactured or imported from (including importation into the United States of the Company's products manufactured overseas) may from time to time impose additional quotas, duties, tariffs or other restrictions on its imports (including restrictions on manufacturing operations) or adversely modify existing restrictions.

In recent years, changes in U.S.

In addition, the countries in which the Company’s products and materials are manufactured or imported from (including importation into the U.S.

of the Company's products manufactured overseas) may from time to time impose additional quotas, duties, tariffs or other restrictions on its imports (including restrictions on manufacturing operations) or adversely modify existing restrictions.

Changes in U.S.

policy regarding international trade, including import and export regulation and international trade agreements, have negatively impacted the Company’s business.

For example, in 2018 the United States imposed tariffs on steel and aluminum as well as on goods imported from China and certain other countries, which resulted in retaliatory tariffs by China and other countries.

For example, in 2018 the U.S.

imposed tariffs on steel and aluminum as well as on goods imported from China and certain other countries, which resulted in retaliatory tariffs by China and other countries.

actions and any corresponding retaliatory efforts, could result in an increase in supply chain costs that the Company may not be able to offset or otherwise adversely impact the Company’s results of operations.

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Although these trade agreements generally have positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also impose requirements that adversely affect the Company’s business, such as setting quotas on products that may be imported from a particular country into key markets including the U.S.

or the European Union ("EU"), or making it easier for other companies to compete, by eliminating restrictions on products from countries where the Company’s competitors source products.

In addition, the Company has a number of key suppliers in South Korea, China and Taiwan.

Any future tensions or conflicts in such regions could cause material disruptions in the Company's supply chain which could, in turn, cause product shortages, delays in delivery and/or increases in the Company's cost incurred to produce and deliver products to its customers.

or the European Union ("EU"), or making it easier for other

companies to compete, by eliminating restrictions on products from countries where the Company’s competitors source products.

The Company also relies on its suppliers to provide high quality products and to comply with applicable laws.

The Company’s ability to find qualified suppliers who meet its standards, including a majority having carbon emission reduction targets, and supply products in a timely, cost-effective and efficient manner is a significant challenge with the increasing demand from customers, especially with respect to goods sourced from outside the U.S.

The Company’s ability to find qualified suppliers who meet its standards, including a majority of suppliers by spend having carbon emission reduction targets, and supply products in a timely, cost-effective and efficient manner is a significant challenge with the increasing demand from customers, especially with respect to goods sourced from outside the U.S.

For certain products, the Company may rely on one or very few suppliers.

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Poor quality or an insecure supply chain, may also adversely affect the reliability and reputation of the Company.

The effects of climate change, such as extreme weather conditions, could also place capacity constraints on the Company’s supply chain.

For example, steel and copper are critical to the design of the Company's products and some countries, including Chile and Australia, where steel and copper are sourced from have experienced and are expected to continue to experience severe weather due to climate change.

The effects of extreme weather conditions, including as a result of climate change, could also place capacity constraints on the Company’s supply chain.

For example, steel and copper are critical to the design of the Company's products and some countries, including Chile and Australia from which steel and copper are sourced, have experienced and are expected to continue to experience severe weather.

A severe weather event in these countries could cause disruptions in the Company's supply chain which could, in turn, cause product shortages, delays in delivery and/or increases in the Company's cost incurred to produce and deliver products to its customers.

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Any failure to attract and retain employees at the Company’s manufacturing facilities or in other parts of the Company’s operations may adversely affect its business and ability to meet customer demand, which in turn could adversely affect the Company’s liquidity and results of operations.

The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on its sales and profit margins.

Operations Excellence, one element of the SBD Operating Model, is a continuous operational improvement process applied to many aspects of the Company’s business such as procurement, quality in manufacturing, maximizing customer fill rates, integrating acquisitions and other key business processes.

In the event the Company is not successful in effectively applying the Operations Excellence principles to its key business processes, including those of acquired businesses, its ability to compete and future earnings could be adversely affected.

The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on its sales and profits.

Operational Excellence, one element of the supply chain transformation, is a continuous operational improvement process applied to many aspects of the Company’s business such as procurement, quality in manufacturing, maximizing customer fill rates, integrating acquisitions and other key business processes.

In the event the Company is not successful in effectively applying the Operational Excellence principles to its key business processes, including those of acquired businesses, its ability to compete and future earnings could be adversely affected.

In addition, the Company may have to reduce prices on its products and services, or make other concessions, to stay competitive.

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The failure of the Company's technologies or products to gain market acceptance due to more attractive offerings by its competitors or the failure to address any of the above factors could negatively impact revenues and adversely affect its competitive standing and prospects.

The Company has significant operations outside of the United States, which are subject to political, legal, economic and other risks arising from operating outside of the United States.

The Company generates a significant portion of its total revenue outside of the United States.

Business operations outside of the United States are subject to political, economic and other risks inherent in operating in certain countries, such as:

The Company has significant operations outside of the U.S., which are subject to political, legal, economic and other risks arising from operating outside of the U.S.

The Company has significant operations outside of the U.S.

Such business operations are subject to political, legal, economic and other risks inherent in operating in certain countries, such as:

• the difficulty of enforcing agreements and protecting assets through legal systems outside the U.S.

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to the same extent as under U.S.

• managing widespread operations and enforcing internal policies and procedures such as compliance with U.S.

and foreign anti-bribery, anti-corruption, and sanctions regulations;

• trade protection measures and import or export licensing requirements including those related to the U.S.'s relationship with China;

• the application of certain labor regulations outside of the United States;

• managing widespread operations and enforcing internal controls, policies and procedures designed to deter prohibited practices under U.S.

and foreign anti-bribery, anti-corruption, and anti-money laundering regulations and sanctions, such as the U.S.

Foreign Corrupt Practices Act of 1977 ("FCPA") and the UK Bribery Act of 2010;

• trade protection measures and import or export licensing requirements including those related to the U.S.'s relationship with China and economic and trade sanctions administered by the Office of Foreign Assets Control;

• the application of certain labor regulations outside of the U.S.;

• compliance with a wide variety of non-U.S.

laws and regulations;

• instability or changes in the general political and economic conditions in the countries where the Company operates (such as the conflict between Russia and Ukraine);

• instability or changes in the general political and economic conditions in the countries where the Company operates (such as the conflicts between Russia and Ukraine, and Israel and Hamas and tensions in South Korea, China and Taiwan);

• the threat of nationalization and expropriation;

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• exposure to wage, price and capital controls.

Changes in the political or economic environments in the countries in which the Company operates could have a material adverse effect on its financial condition, results of operations or cash flows.

Additionally, the Company is subject to complex U.S., foreign and other local laws and regulations that are applicable to its operations abroad, such as the Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010 and other anti-bribery and anti-corruption laws.

Although the Company has implemented internal controls, policies and procedures and employee training and compliance programs to deter prohibited practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regulations.

Any determination that the Company has violated anti-bribery or anti-corruption laws or sanctions regulations could have a material adverse effect on the Company’s business, operating results and financial condition.

Compliance with international and U.S.

Changes in the political or economic environments in the countries in which the Company operates or violations or perceived violations of the laws and regulations of such countries could have a material adverse effect on its financial condition, results of operations or cash flows.

Additionally, compliance with international and U.S.

laws and regulations that apply to the Company’s international operations increases the cost of doing business in foreign jurisdictions.

Violations of such laws and regulations may result in severe fines and penalties, criminal sanctions, administrative remedies or restrictions on business conduct, and could have a material adverse effect on the Company’s reputation, its ability to attract and retain employees, its business, operating results and financial condition.

The continuing adverse effects of the COVID-19 pandemic, including new variants, could have a materially negative impact on the Company’s business, operations, financial condition, results of operations, and liquidity.

The COVID-19 pandemic, including new variants, and the responses of governments, consumers and other businesses have adversely affected, and may continue to adversely affect, the Company’s business, financial condition, workforce and operations and the operations of its customers, distributors, suppliers and contractors.

The impacts of the COVID-19 pandemic include, but are not limited to:

• restrictions on the Company's access to its manufacturing facilities and on its support operations or workforce, and similar limitations for its distributors and suppliers;

• shifts and volatility in consumer spending and purchasing behaviors (such as the higher than usual customer demand for the Company’s products that occurred during the second half of 2020 and during 2021) that may hinder its ability to meet customer demand or may hinder its production capacity or supply chain;

• disruptions in commerce, including with respect to financial and other economic activities, services, travel and supply chains, and impacts on third parties with which the Company does business, which has, and may in the future result in, disruptions in the Company's supply chain, the inability of customers or suppliers to meet their obligations to the Company, loss or disruption of essential manufacturing and supply elements, operational delays, and increases in the cost of freight and labor;

• modifications to the Company’s business practices, including with respect to employee travel, employee work locations, restrictions on in-person meetings and events, and government-mandated vaccine protocols or policies;

• deteriorating economic conditions, such as economic slowdowns or recessions or significant disruptions or volatility in financial markets;

• delays or modifications to the Company's strategic plans and other initiatives, including as a result of temporary and permanent cost-reduction measures such as adjustments to its supply chain and manufacturing labor base to match the demand environment or reductions in staffing, compensation and benefits, both of which the Company implemented in response to the COVID-19 pandemic, and may continue or occur in the future.

The degree to which COVID-19 and related responses continue to affect the Company’s business, liquidity, results and operations will depend on future developments, which continue to be highly uncertain and cannot be predicted.

These uncertainties, include, but are not limited to, the duration of the outbreak, the severity of any resurgence in cases, the actions to contain the virus or treat its impact and the availability and effectiveness of vaccines and other treatments.

Any future global and national health concerns could lead to further and/or increased volatility in global capital and credit markets.

A sustained downturn in customer demand or other economic conditions could result in material charges related to bad debt or inventory write-offs, restructuring charges, or impairments of long-lived assets, including both tangible and intangible assets.

Furthermore, a sustained downturn in financial markets and asset values could adversely affect the Company’s cost of capital, liquidity and access to capital markets, in addition to potentially increasing its pension funding obligations to ensure its pension plans continue to be adequately funded.

The Company’s success depends on its ability to improve productivity and streamline operations to control or reduce costs.

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The Company has undertaken restructuring and cost-reduction actions, the savings of which may be mitigated by many factors, including economic weakness, inflation, competitive pressures, higher labor costs and decisions to increase costs in areas such as sales promotion or research and development above levels that were otherwise assumed.

In the third quarter of 2022, the Company initiated a supply chain transformation aiming to improve fill rates and better match the needs of its customers, while improving gross margins.

This transformation will involve significant investment from the Company over the next two to three years, and the success and anticipated cost savings from this transformation are not assured.

In mid-2022, the Company initiated a supply chain transformation designed to return adjusted gross margins to historical 35%+ levels by improving fill rates and better matching inventory with customer demand.

This transformation has and will continue to involve significant investment from the Company, and the success and anticipated cost savings from this transformation are not assured.

Failure to achieve, or delays in achieving, projected levels of efficiencies and cost savings from this transformation and other restructuring or cost reduction actions introduced by the Company, significant increases in the costs related to such actions, or unanticipated inefficiencies resulting from this transformation and other manufacturing and administrative reorganization actions in progress or contemplated, could adversely affect the anticipated cost savings.

A material disruption of the Company's operations, particularly at its manufacturing facilities or within its information technology infrastructure, could adversely affect business.

The Company's facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to natural disasters or other disruptions, including hurricanes and floods, power outages, fires, explosions, terrorism, equipment failures, sabotage, cyber incidents, any potential effects of climate change and adverse weather conditions, labor disputes, critical supply failure, inaccurate downtime forecast, political disruption, public health crises, like a regional or global pandemic, and other reasons, which can result in undesirable consequences, including financial losses and damaged relationships with customers.

The COVID-19 pandemic has disrupted, and may continue to disrupt, the Company's supply chain, distribution channels, production facilities, operations and customer demand, which has negatively impacted its operations and adversely affected its business and could continue to do so.

The Company's facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to natural disasters or other disruptions, including hurricanes and floods, power outages, fires, explosions, terrorism or other geopolitical tensions, equipment failures, sabotage, cybersecurity incidents, any potential effects of climate change and adverse weather conditions, labor disputes, critical supply failure, inaccurate downtime forecast, political disruption, public health crises, like a regional or global pandemic such as COVID-19, and other reasons, which can result in undesirable consequences, including financial losses and damaged relationships with customers.

The Company employs information technology systems and networks to support the business and relies on them to process, transmit and store electronic information, and to manage or support a variety of business processes and activities.

Disruptions to its information technology infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, cybersecurity incidents, and other events, including disruptions at its cloud computing, server, systems and other third party IT service providers, could interfere with its operations, interrupt production and shipments, damage customer and business partner relationships, and negatively impact its reputation.

The development of technology products and services presents security and safety risks.

An increasing number of the Company's products, services, and technologies are delivered with Internet of Things (IoT) capabilities and the accompanying interconnected device networks, which include sensors, data and advanced computing capabilities.

The Company has developed product software designs that it believes are less susceptible to cyber-attacks, but despite these efforts, if products and services that include IoT solutions do not work as intended or are compromised, the possible consequences include financial loss, reputational damage, exposure to legal claims or enforcement actions, theft of intellectual property, and diminution in the value of the Company's investment in research, development and engineering, which in turn could adversely affect its competitiveness and results of operations.

Industry and Economic Risks

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Further, as a result of inflationary or deflationary economic conditions, the Company believes it is possible that a limited number of suppliers may either cease operations or require additional financial assistance from the Company in order to fulfill their obligations.

In a limited number of circumstances, the magnitude of the Company’s purchases of certain items is of such significance that a change in established relationships with suppliers or increase in the costs of purchased raw materials, component parts or finished goods could result in manufacturing interruptions, delays, inefficiencies or an inability to market

Changes in value-added tax rebates, currently available to the Company or to its suppliers, could also increase the costs of the Company’s manufactured products, as well as purchased products and components, and could adversely affect the Company’s results.

In addition, many of the Company’s products incorporate battery technology.

As the world moves towards a lower-carbon economy and as other industries begin to adopt similar battery technology for use in their products or increase their current consumption of battery technology, the increased demand could place capacity constraints on the Company’s supply chain.

In addition, increased demand for battery technology may also increase the costs to the Company for both the battery cells as well as the underlying raw materials such as cobalt and lithium, among others.

If the Company is unable to mitigate any possible supply constraints or related increased costs or drive alternative technology through innovation, its profitably and financial results could be negatively impacted.

Uncertainty about the financial stability of economies outside the U.S.

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• a devaluation of foreign currencies could have an adverse effect on the value of financial assets of the Company in the effected countries;

• the impact of an event or changes to political and economic conditions (individual country default, Brexit, or break up of the Euro) could have an adverse impact on the global credit markets and global liquidity potentially impacting the Company’s ability to access these credit markets and to raise capital or disrupt global energy supply or supply chains.

• the impact of an event or changes to political and economic conditions (individual country default, or break up of the Euro) could have an adverse impact on the global credit markets and global liquidity potentially impacting the Company’s ability to access these credit markets and to raise capital or disrupting global energy supply or supply chains.

The Company is exposed to market risk from changes in foreign currency exchange rates which could negatively impact profitability.

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dollar strengthens relative to local currencies, the Company’s earnings could be negatively impacted.

Although the Company utilizes risk management tools, including hedging, as it deems appropriate, to mitigate a portion of potential market fluctuations in foreign currencies, there can be no assurance that such measures will result in all market fluctuation exposure being eliminated.

Although the Company

utilizes risk management tools, including hedging, as it deems appropriate, to mitigate a portion of potential market fluctuations in foreign currencies, there can be no assurance that such measures will result in all market fluctuation exposure being eliminated.

The Company generally does not hedge the translation of its non-U.S.

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The potential issuance of such securities may limit the Company’s ability to implement elements of its business strategy and may have a dilutive effect on earnings.

As described in Note H, Long-Term Debt and Financing Arrangements , of the Notes to Consolidated Financial Statements in Item 8 , the Company has a five-year $2.5 billion committed credit facility, a $1.5 billion syndicated 364-Day Credit Agreement, and a $0.5 billion revolving credit loan.

As described in Note H, Long-Term Debt and Financing Arrangements , of the Notes to Consolidated Financial Statements in Item 8 , the Company has a five-year $2.5 billion committed credit facility and a $1.5 billion syndicated 364-Day Credit Agreement.

No amounts were outstanding against any of these facilities on December 30, 2023.

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• maintenance of a specified financial ratio.

Specifically, the Company has an interest coverage covenant that must be maintained to permit continued access to its committed revolving credit facilities.

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");

The Company has an interest coverage covenant that must be maintained to permit continued access to its committed credit facilities.

The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted net Interest Expense ("Adjusted EBITDA"/"Adjusted Net Interest Expense");

such adjustments to interest or EBITDA include, but are not limited to, removal of non-cash interest expense and stock-based compensation expense.

During 2022, the interest coverage ratio must not be less than 3.5 times and is computed quarterly, on a rolling twelve months (last twelve months) basis.

Under this covenant definition, the interest coverage ratio was 8.6 times EBITDA or higher in each of the 2022 quarterly measurement periods.

Subject to certain adjustments for portions of the 2023 and 2024 fiscal year periods as detailed below, the interest coverage ratio must not be less than 3.5 times and is computed quarterly, on a rolling twelve months (last twelve months) basis.

In February 2023, the Company entered into amendments to its credit facilities described above to:

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The minimum interest coverage ratio will revert back to 3.5 times for periods after the second quarter of 2024.

The Company was compliant with its debt covenant requirements in each of the 2023 quarterly measurement periods.

Management does not believe it is reasonably likely the Company will breach this covenant.

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The Company’s long-term growth plans are dependent on, among other things, the availability of funding to support corporate initiatives and the ability to increase sales of existing product lines.

While the Company has not encountered financing difficulties to date, the capital and credit markets have experienced extreme volatility and disruption in the past (including in connection with COVID-19) and may again in the future.

While the Company has not encountered financing difficulties to date, the capital and credit markets have experienced extreme volatility and disruption in the past and may again in the future.

Market conditions could make it more difficult for the Company to borrow or otherwise obtain the cash required for significant new corporate initiatives.

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In addition, the major rating agencies regularly evaluate the Company for purposes of assigning credit ratings.

The Company’s ability to access the credit markets, and the cost of these borrowings, is affected by the strength of its credit ratings and current

market conditions.

The Company’s ability to access the credit markets, and the cost of these borrowings, is affected by the strength of its credit ratings and current market conditions.

Failure to maintain credit ratings that are acceptable to investors may adversely affect the cost and other terms upon which the Company is able to obtain financing, as well as its access to the capital markets.

Discontinuation, reform or replacement of the London Inter-bank Offered Rate ("LIBOR") and other benchmark rates, or uncertainty related to the potential for any of the foregoing, may adversely affect the Company.

Certain of the Company’s contracts and derivative financial instruments use short-term prevailing interest rates, including LIBOR, as a reference rate.

In March 2021, UK Financial Conduct Authority announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021.

Banks currently reporting information used to set U.S.

dollar LIBOR are presently expected to stop doing so by mid-2023.

In addition, other regulators have suggested reforming or replacing other benchmark rates.

These may be replaced by the Secured Overnight Financing Rate or other benchmark rates over the next several years.

The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets.

These changes, and related uncertainty as to the nature of such potential discontinuation, reform or replacement may create incremental uncertainty in obtaining financing or increase the cost of borrowing.

At this time, the Company cannot predict the overall effect of the modification or discontinuation of LIBOR or the establishment of alternative benchmark rates.

The Company is exposed to credit risk on its accounts receivable.

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If the Company were required to write-down all or part of its goodwill, indefinite-lived trade names, or other definite-lived intangible assets, its net income and net worth could be materially adversely affected.

As a result of the Black and Decker merger and other acquisitions, the Company has approximately $8.5 billion of goodwill, approximately $2.5 billion of indefinite-lived trade names and approximately $2.0 billion of net definite-lived intangible assets on December 31, 2022.

As of December 30, 2023, the Company has approximately $8.0 billion of goodwill, approximately $2.4 billion of indefinite-lived trade names and approximately $1.6 billion of net definite-lived intangible assets.

The Company is required to periodically, at least annually, determine if its goodwill or indefinite-lived trade names have become impaired, in which case it would write down the impaired portion of the asset.

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The Company attempts to protect its intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements;

however, there can be no assurances that these resources will adequately protect the Company’s intellectual property rights and deter misappropriation or improper use of its technology.

The Company’s trademarks have a reputation for quality and value and are important to the Company's success and competitive position.

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In addition, the Company's patents may not be of sufficient scope or strength to provide meaningful protection or commercial advantage.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact the Company's reputation and results of operations.

Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to

information technology ("IT") systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company, its products, its customers and/or its third-party service providers, including cloud providers.

While the Company has experienced, and expects to continue to experience, these types of threats and incidents, none of them to date have been material to the Company.

The Company deploys measures which align to industry accepted frameworks to deter, prevent, detect, respond to, and mitigate these threats.

The Company has invested and continues to invest in risk management and information security and data privacy measures in order to protect its systems and data, including employee training, organizational investments, incident response plans, table top exercises and technical defenses.

The cost and operational consequences of implementing, maintaining and enhancing these measures could increase significantly to overcome increasingly intense, complex, and sophisticated global cyber threats.

Despite these efforts, cybersecurity incidents (against the Company or parties with whom the Company contracts), depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (the Company's or that of third parties) and the disruption of business operations.

The potential consequences of a material cybersecurity incident and its effects include financial loss, reputational damage, litigation with third parties, theft of intellectual property, fines levied by the Federal Trade Commission or other government agencies, diminution in the value of the Company's investment in research, development and engineering, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect its competitiveness and results of operations.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact the Company's reputation, operating results, and financial condition.

The Company’s information systems and data may be vulnerable to cybersecurity threats and incidents which can include uncoordinated individual attempts to gain unauthorized access to information technology ("IT") systems, sophisticated and targeted measures known as advanced persistent threats, breaches due to human error, malfeasance, or other cybersecurity incidents directed at the Company, its products, services and technologies, including those leveraging “Internet of Things” capabilities, its customers and/or its third-party service providers, including cloud providers.

The Company deploys measures which leverage industry accepted frameworks to deter, prevent, detect, respond to, and mitigate these threats.

The Company has invested and continues to invest in risk management and information security and data privacy measures in order to protect its systems and data, including employee and critical service provider training, organizational investments, incident response plans, tabletop exercises, technical defenses and defensive product software designs.

Despite these efforts, cybersecurity incidents (against the Company or parties with whom the Company contracts), depending on their nature and scope, could potentially result in the misappropriation, disclosure, destruction, corruption or unavailability of critical data and confidential or proprietary information (the Company's or that of third parties) and the disruption of business operations.

Any of the foregoing can be exacerbated by a delay or failure to detect a cybersecurity incident or the full extent of such incident.

In addition, cybersecurity laws and regulations continue to evolve, and are increasingly demanding, both in the U.S.

and globally, which adds compliance complexity and may increase costs of compliance and expose the Company to reputational damage or litigation, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions.

While the Company carries cyber insurance, it cannot be certain that coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to the Company on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

The report, rumor or assumption regarding a potential breach may have similar results, even if no breach has been attempted or occurred.

Any of the foregoing may have a material adverse effect on the Company’s business, operating results and financial condition.

The report, rumor, assumption, or perception of a potential or suspected cybersecurity incident may have similar results, even if no such incident has been attempted or occurred.

Any of the foregoing may have a material adverse effect on the Company’s reputation, operating results and financial condition.

The Company is exposed to risks related to compliance with data privacy laws.

To conduct its operations, the Company regularly moves data across national borders, and consequently is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security.

To conduct its operations, the Company regularly moves data across national borders, and consequently is subject to a variety of continuously evolving and developing laws and regulations in the U.S.

and abroad regarding privacy, data protection and data security.

The scope of the laws that may be applicable to the Company is often uncertain and may be conflicting, particularly with respect to foreign laws.

For example, the European Union’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, greatly increased the jurisdictional reach of European Union law and added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches.

Similarly, the California Consumer Privacy Act of 2018 (“CCPA”), which became effective in January 2020, provided, among other things, a new private right of action for data breaches, required companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and provided consumers with additional rights.

The California Privacy Rights Act of 2020, which became effective on January 1, 2023, amends and expands the CCPA, creating new industry requirements, consumer privacy rights and enforcement mechanisms.

Virginia and Colorado have also passed robust privacy laws that come into effect on January 1, 2023 and July 1, 2023, respectively.

The Company's reputation and brand and its ability to attract new customers could also be adversely impacted if the Company fails, or is perceived to have failed, to properly respond to security breaches of its or third party’s information technology systems.

For example, lawmaking bodies within the EU, United Kingdom, China and India have increased their jurisdictional reach and added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches.

Similarly, in the U.S., state-specific privacy regulations have created and continue to create new industry requirements, consumer privacy rights and enforcement mechanisms.

The Company's reputation and brand and its ability to attract new customers could also be adversely impacted if the Company fails, or is perceived to have failed, to properly respond to breaches resulting from its management of consumer data or of its or third party’s information technology systems.

Such failure to properly respond could also result in similar exposure to liability.

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All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time.

Privacy laws that may be implemented in the future, and court decisions impacting activities across borders, including the Schrems II decision invalidating the EU - U.S.

Privacy Shield, will continue to require changes to certain business practices, thereby increasing costs, or may result in negative publicity, require significant management time and attention, and may subject the Company to remedies that may harm its business, including fines or demands or orders that the Company modify or cease existing business practices.

Privacy laws that may be implemented in the future, including laws regarding data and generative artificial intelligence, and court decisions impacting activities across borders, will continue to require changes to certain business practices, thereby increasing costs, or may result in negative publicity, require significant management time and attention, and may subject the Company to remedies that may harm its business, including fines or demands or orders that the Company modify or cease existing business practices.

Significant judgment and certain estimates are required in determining the Company’s worldwide provision for income taxes.

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Additionally, the global income tax provision can be materially impacted due to foreign currency fluctuations against the U.S.

dollar since a significant amount of the Company’s earnings are generated outside the United States.

Lastly, it is possible that future income tax legislation, including the Organization for Economic Cooperation and Development (“OECD”) Global Minimum Tax, may be enacted that could have a material impact on the Company’s worldwide income tax provision, cash tax liability, and effective tax rate beginning with the period that such legislation becomes enacted.

The OECD Global Minimum Tax is expected to require multi-national corporations with revenue in excess of €750 million to pay an effective tax rate of at least 15% in each jurisdiction in which they operate effective with the 2024 tax year.

Climate change and climate change legislation or regulations may adversely affect the Company's business.

The effects of climate change, such as severe weather, including droughts and water scarcity, could impact the Company’s business, disrupt the Company’s operations by impacting the availability and costs of materials needed for manufacturing and increase insurance and other operating costs.

There may be operational risk due to the significant impact climate change could pose to employees’ lives, the Company’s supply chain, or electrical power availability from climate-related weather events.

The Company also faces risks related to the transition to a lower-carbon economy, such as its ability to successfully adopt new technology, meet market-driven demands for carbon neutral and renewable energy technology, or to comply with more stringent and increasingly complex environmental regulations or requirements for the Company's manufacturing facilities and business operations, increased prices related to freight and shipping costs and other permitting requirements.

dollar since a significant amount of the Company’s earnings are generated outside the U.S.

Lastly, it is possible that future income tax legislation, may be enacted that could have a material impact on the Company’s worldwide income tax provision, cash tax liability, and effective tax rate beginning with the period that such legislation becomes enacted.

For instance, the Organization for Economic Cooperation and Development has enacted model rules for a new global minimum tax framework applicable to multi-national corporations, and various governments have enacted, or are in the process of enacting, legislation implementing all or part of these rules.

Climate change legislation or regulations and changing market trends in response to climate change may adversely affect the Company's business.

There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.

Increased public awareness and concern regarding global climate change may result in more international, regional and/or federal requirements or other stakeholder expectations that could mandate more restrictive or expansive standards, more prescriptive reporting of environmental, social and governance metrics than the voluntary commitments the Company adopted, or require

related changes on a more accelerated time frame than the Company anticipates.

Increased international, regional, state and/or federal requirements or other stakeholder expectations could mandate more restrictive or expansive standards, more prescriptive reporting of environmental, social and governance metrics than the voluntary commitments the Company adopted, or require related changes on a more accelerated time frame than the Company anticipates.

A number of governmental bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to the potential effect of climate change.

Such legislation or regulation has and potentially could include provisions for a “cap and trade” system of allowances and credits or a carbon tax or require increased measurement of metrics and disclosure, among other provisions.

The Company currently purchases renewable energy certificates (“RECs”) to mitigate the potential impact of carbon tax and is also assessing expanding its use of solar panels as an alternative energy source.

The Company currently purchases renewable energy certificates (“RECs”) to reduce Scope 2 emissions and is also assessing expanding its use of solar panels as an alternative energy source.

If carbon tax legislation is changed or adopted, the Company may not be able to mitigate the future impact of carbon tax through the purchase of RECs and the use of solar panels or other measures.

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If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements on the Company, they may have a material adverse effect on the Company’s business, access to credit, capital expenditures, operating results and financial condition.

The Company also faces risks related to the transition to a lower-carbon economy, such as its ability to successfully adopt new technology, meet market-driven demands for low carbon, carbon neutral and renewable energy technology, or to comply with more stringent and increasingly complex environmental regulations or requirements for the Company's manufacturing facilities and business operations, increased prices related to freight and shipping costs and other permitting requirements.

In addition, many of the Company’s products incorporate battery technology.

The Company’s failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could negatively impact its results of operations or cash flows.

The Company is exposed to and becomes involved in various litigation matters arising out of the ordinary routine conduct of its business, including, from time to time, actual or threatened litigation relating to such items as commercial transactions, product liability, workers compensation, arrangements between the Company and its distributors, franchisees or vendors, intellectual property claims and regulatory actions.

The Company is exposed to and becomes involved in various legal proceedings, claims, disputes and investigations arising out of the conduct of its business, including the matters described in Item 3.

Legal Proceedings in Part I of this Annual Report on Form 10-K and other, actual or threatened proceedings, claims, disputes or investigations relating to such items as securities laws, anti-trust laws, commercial transactions, product liability, workers compensation, employee benefits plans, arrangements between the Company and its distributors, franchisees or vendors, intellectual property claims and regulatory actions.

In addition, the Company is subject to environmental laws in each jurisdiction in which business is conducted.

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In addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary from the Company’s estimates for such contingent liabilities.

Refer to Note S, Contingencies , of the Notes to Consolidated Financial Statements in Item 8 for further information about legal proceedings and other loss contingencies.

The Company’s products could be recalled.

The Company maintains an awareness of and responsibility for the potential health and safety impacts on its customers.

The Company maintains an awareness of and responsibility for the potential health and safety impacts on its customers and end users.

The Company's product development processes include tollgates for product safety review, and extensive testing is conducted on product safety.

Safety reviews are performed at various product development milestones, including a review of product labeling and marking to ensure safety and operational hazards are identified for the customer.

Safety reviews are performed at various product development milestones, including a review of product labeling and marking to ensure safety and operational hazards are identified for the customer and end user.

Despite safety and quality reviews, the Consumer Product Safety Commission or other applicable regulatory bodies may require, or the Company may voluntarily institute, the recall, repair or replacement of the Company’s products if those products are found not to be in compliance with applicable standards or regulations.

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The Company may provide public guidance on expected results of operations for future periods.

This guidance is comprised of forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in this Form 10-K and in the Company’s other public filings and public statements, and is based necessarily on assumptions the Company makes at the time it provides such guidance.

This guidance is comprised of forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in this Annual Report on Form 10-K and in the Company’s other public filings and public statements, and is based necessarily on assumptions the Company makes at the time it provides such guidance.

The Company’s guidance may not always be accurate.

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If, in the future, the Company’s results of operations for a particular period do not meet its guidance or the expectations of investment analysts, the Company reduces its guidance for future periods, or the Company withdraws guidance, the market price of the Company’s common stock could decline significantly.

If the Company is unable to maintain effective internal control over financial reporting, the accuracy and timeliness of its financial reporting may be adversely affected , which could have a material adverse effect on the Company’s financial condition and the trading price of its common stock.

As a public company, the Company is required to design and maintain proper and effective internal control over financial reporting and to report any material weaknesses in such internal control.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that the Company evaluate and determine the effectiveness of its internal control over financial reporting and provide a management report on the internal control over financial reporting, which must be attested to by the Company’s independent registered public accounting firm.

If the Company is unable to maintain effective internal control over financial reporting, its ability to record, process and report financial information timely and accurately could be adversely affected, which could subject the Company to litigation or investigations, require management resources, increase costs, negatively affect investor confidence and adversely impact its stock price.

Subsequent to the filing of its 2020 Form 10-K, the Company received comments from the SEC Staff regarding its accounting for equity units issued in May 2017 and November 2019 (the “Equity Units”).

Upon further reflection of the comments received by the Staff and the nature of the Equity Units, the Company determined that errors were made in its original accounting conclusions resulting from material weaknesses in its internal control over financial reporting for such instruments.

During the first quarter of fiscal 2022, the Company successfully completed the testing necessary to conclude that the material weaknesses have been remediated.

If in the future the Company’s internal control over financial reporting is determined to be not effective, resulting in a material weakness, investor perceptions regarding the reliability of the Company’s financial statements may be adversely affected which could cause a decline in the market price of its stock and otherwise negatively affect the Company’s financial condition.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors