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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-27 · 232 added, 255 removed, 426 unchanged (53% of the section changed)

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All references to “ Notes ” in this Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.

The following discussion also references a number of financial measures that are not defined under U.S.

Refer to the section titled "Certain Items Impacting Earnings and Non-GAAP Financial Measures" for additional information on such measures.

The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates as well as management’s beliefs and assumptions.

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There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements.

These factors include, without limitation, those set forth, or incorporated by reference, below under the heading “Cautionary Statements Under The Private Securities Litigation Reform Act Of 1995.” The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

These factors include, without limitation, those set forth, or referenced therein, below under the heading “Cautionary Statement Concerning Forward-Looking Statements.” The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

Strategic Objectives

Over the past two years, the Company has re-shaped its portfolio to focus on its leading positions in the tools & outdoor and engineered fastening markets.

In recent years, the Company has re-shaped its portfolio to focus on its leading positions in the tools & outdoor and engineered fastening markets.

Leveraging the benefits of a more focused portfolio, the Company initiated a business transformation in mid-2022 that includes reinvestment for faster growth as well as a $2.0 billion Global Cost Reduction Program through 2025.

The Company’s primary areas of multi-year strategic focus remain unchanged as follows:

• Advancing innovation, electrification and global market penetration to achieve organic revenue growth of 2 to 3 times the market;

• Advancing innovation, electrification and global market penetration to achieve mid-single digit organic revenue growth (2 to 3 times the market);

• Streamlining and simplifying the organization, and investing in initiatives that more directly impact the Company's customers and end users;

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• Prioritizing cash flow generation and inventory optimization.

The Company's business transformation is intended to drive strong financial performance over the long term, including:

• Organic revenue growth at 2 to 3 times the market;

• 35%+ adjusted gross margins;

The Company's business transformation is intended to drive strong financial performance over the long term (beyond 2027), including:

• Mid-single digit organic revenue growth (2 to 3 times the market);

• > 35% to 37% adjusted gross margins with mid to high-teens adjusted Earnings Before Interest, Taxes, Depreciation and Amortization margin ("adjusted EBITDA margin");

• Free cash flow equal to, or exceeding, net income;

• Cash Flow Return On Investment ("CFROI"), computed as cash from operations plus after-tax interest expense, divided by the two-point average of debt and equity, between 12-15%.

In terms of capital allocation, the Company remains committed, over time, to returning excess capital to shareholders through a strong and growing dividend as well as opportunistically repurchasing shares.

• Cash Flow Return On Investment ("CFROI"), computed as cash from operations plus after-tax interest expense, divided by the two-point average of debt and equity, greater than or equal to the mid-teens;

• Solid investment grade credit rating.

In terms of capital allocation, the Company remains committed, over time, to returning excess capital to shareholders through a strong and growing dividend as well as a preference toward opportunistically repurchasing shares.

In the near term, the Company intends to direct any capital in excess of the quarterly dividend on its common stock toward debt reduction and internal growth investments.

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The final delivery of the remaining shares under the ASR totaled 3,211,317 and was completed during the second quarter of 2022.

Refer to Note J, Capital Stock , for further discussion.

Refer to Note I, Capital Stock , for further discussion.

In addition, on April 23, 2021, the Board of Directors approved repurchases by the Company of its outstanding securities, other than its common stock, up to an aggregate amount of $3.0 billion.

No repurchases have been executed pursuant to this authorization to date.

Pending Sale of Infrastructure Business

In December 2023, the Company announced that it had entered into a definitive agreement for the sale of its Infrastructure business to Epiroc AB for $760 million in cash.

The transaction is subject to regulatory approval and other customary closing conditions.

The Company expects to utilize the net proceeds to reduce debt.

On April 1, 2024, the Company sold its Infrastructure business comprised of the attachment and handheld hydraulic tools business to Epiroc AB for net proceeds of $728.5 million.

The Company used the net proceeds to reduce debt in the second quarter of 2024.

On August 19, 2022, the Company sold its Oil & Gas business comprised of the pipeline services and equipment businesses to Pipeline Technique Limited.

On July 22, 2022, the Company sold its Convergent Security Solutions ("CSS") business comprised of the commercial electronic security and healthcare businesses to Securitas AB for net proceeds of approximately $3.1 billion.

On July 5, 2022, the Company sold its Mechanical Access Solutions ("MAS") business comprised of the automatic doors business to Allegion plc for net proceeds of $916.0 million.

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The Company has also divested several smaller businesses in recent years that allowed the Company to invest in other areas that fit into its long-term strategy.

Refer to Note T, Divestitures, for further discussion of the Company's divestitures.

On December 1, 2021, the Company acquired the remaining 80 percent ownership stake in MTD Holdings Inc.

("MTD"), a privately held global designer, manufacturer and distributor of lawn tractors, zero turn ride on mowers, walk behind mowers, snow blowers, residential robotic mowers, hand-held outdoor power equipment and garden tools for both residential and professional consumers under well-known brands like CUB CADET® and TROY-BILT®.

The Company previously acquired a 20 percent interest in MTD in January 2019.

On November 12, 2021, the Company acquired Excel Industries ("Excel"), a leading designer and manufacturer of premium commercial and residential turf-care equipment under the HUSTLER® brand.

This was a strategically important bolt-on acquisition that bolstered the Company's presence in the independent dealer network.

The combination of MTD, Excel and the Company's existing outdoor strategic business unit in Tools & Outdoor created a global leader in the $25 billion outdoor category, with strong brands and growth opportunities.

As part of the integration of these businesses into the Tools & Outdoor segment, the Company designed, developed and manufactured battery and electric-powered solutions for professional and residential users.

This positioned the combined businesses to be a leader in outdoor power equipment as preferences shift from gas powered equipment toward electrified solutions.

Refer to Note E, Acquisitions, for further discussion.

Refer to Note S, Divestitures, for further discussion of the Company's divestitures.

Global Cost Reduction Program

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These initiatives are expected to optimize the cost base as well as provide a platform to fund investments to accelerate growth in the core businesses.

The program consists of a selling, general, and administrative ("SG&A") planned pre-tax run-rate cost savings of $500 million and a supply chain transformation expected to deliver $1.5 billion of pre-tax run-rate cost savings by the end of 2025 to achieve projected 35%+ adjusted gross margins.

The SG&A cost savings are expected to be generated by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend.

These savings will help fund $300 million to $500 million of innovation and commercial investments through 2025 to accelerate organic growth.

The charges associated with the SG&A savings were reflected in Non-GAAP adjustments in 2022 detailed below in "Results From Operations".

The $1.5 billion of pre-tax run-rate cost savings from the supply chain transformation will be driven by the following value streams:

• Strategic Sourcing:

The SG&A cost savings were generated by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend.

These savings will help fund $300 million to $500 million of innovation and commercial investments through 2025 designed to accelerate organic growth.

The $1.5 billion of pre-tax run-rate cost savings from the supply chain transformation has been, and continues to be, driven by the following value streams:

• Material Productivity:

Implementing capabilities to source in a more efficient and integrated manner across all of the Company’s businesses and leveraging contract manufacturing;

• Operational Excellence:

Leveraging the SBD Operating Model and re-designing in-plant operations following footprint rationalization to deliver incremental efficiencies, simplified organizational design and inventory optimization;

Redesigning in-plant operations following footprint rationalization to deliver incremental efficiencies, simplified organizational design and inventory optimization leveraging a standard operating model and LEAN principles;

• Footprint Rationalization:

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Reducing complexity through platforming products and implementing initiatives to drive a SKU reduction.

The charges associated with the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations" and the full year estimate of Non-GAAP adjustments detailed below in "2024 Outlook".

The cash investment required to achieve the $1.5 billion of pre-tax run-rate supply chain cost savings is expected to be approximately $0.9 billion to $1.1 billion, of which approximately 40% is expected to be capital expenditures.

Through 2023, the Company has made approximately $0.2 billion of these cash investments.

The Company will continue prioritizing capital expenditures consistent with its existing approach and expects total capital expenditures, inclusive of the supply chain transformation, to be $400 million to $500 million for 2024 and to approximate 3.0% to 3.5% of net sales annually in 2025 and beyond.

During 2023 and since inception of the program, the Company has generated approximately $835 million and $1.0 billion, respectively, of pre-tax run-rate savings, driven by lower headcount, indirect spend reductions and the supply chain transformation.

These savings are comprised of supply chain efficiency benefits, which will support gross margin improvements as the benefits turn through inventory, and SG&A savings.

During 2024 and since inception of the program, the Company has generated approximately $510 million and $1.5 billion, respectively, of pre-tax run-rate savings, driven by lower headcount, indirect spend reductions and the supply chain

transformation.

These savings are comprised of supply chain efficiency benefits, which support gross margin improvements as the benefits turn through inventory, and SG&A savings.

The Company believes that it is on track to grow to approximately $2 billion of pre-tax run-rate savings by year-end 2025.

In addition, the Company has reduced inventory by approximately $1.9 billion since the end of the second quarter of 2022 and expects further inventory and working capital reductions to support free cash flow generation in 2024.

Driving Further Profitable Growth by Fully Leveraging the Company's Core Franchises

In addition, the Company has reduced inventory by over $2 billion since the end of the second quarter of 2022 and expects further working capital reductions to support free cash flow generation in 2025.

The cash investment required to achieve the $1.5 billion of pre-tax run-rate supply chain cost savings is expected to approximate $0.7 billion, as the source of the savings has shifted to value streams with lower required investment such as material and operational productivity.

Of the total estimated cash investment, approximately 30% is expected to be capital expenditures.

Through 2024, the Company has made approximately $0.5 billion of total cash investments.

The Company intends to continue prioritizing capital expenditures consistent with its existing approach and expects total capital expenditures, inclusive of the supply chain transformation, to approximate 2.5% to 3.0% of net sales annually in 2025 and beyond.

The charges associated with the ongoing execution of the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations" and the full year estimate of Non-GAAP adjustments detailed below in "2025 Planning Assumptions".

In addition, although the program is expected to be completed by the end of 2025, the Company expects to incur additional charges and make cash investments beyond 2025 relating to footprint actions to support the ongoing network transformation and reposition its supply chain, as necessary.

Driving Further Profitable Growth by Accelerating A Growth Culture and Fully Leveraging the Company's Core Franchises

Each of the Company's core franchises share common attributes:

they have iconic brands and attractive growth characteristics, they are scalable and defensible and they can differentiate through innovation.

• The Tools & Outdoor business carries strong brands, proven innovation, global scale, and a broad offering of power tools, hand tools, outdoor products, accessories, and storage and digital products across many channels in both developed and developing markets.

• The Engineered Fastening business within the Industrial segment is a highly profitable, GDP+ growth business offering highly engineered, value-added innovative solutions with recurring revenue attributes and global scale.

Management recognizes that the core franchises described above are important foundations that have a proven track record of providing strong cash flow and growth prospects.

they have markets which the Company believes have an attractive growth profile, compete in an attractive market structure where brands matter, can differentiate through rapid innovation and delivering productivity to customers and have the ability to achieve scale.

• The Engineered Fastening business within the Industrial segment is a GDP+ growth business offering highly engineered, value-added innovative solutions with recurring revenue attributes, and carries strong profitability potential and global scale.

Management recognizes that these core franchises are important foundations that have a proven track record of providing strong cash flow and growth prospects.

Management is committed to growing these businesses through accelerating investments into innovative product development, brand support, commercial activation, and accelerating the operations and supply chain transformation to improve fill rates and better match inventory with customer demand, while improving global cost competitiveness.

Continuing to Invest in the Stanley Black & Decker Brands

The Company has a strong portfolio of brands associated with high-quality products including the iconic DEWALT®, CRAFTSMAN® and STANLEY® brands, as well as BLACK+DECKER®, DEWALT FLEXVOLT®, DEWALT POWERSTACK®, DEWALT POWERSHIFT™, IRWIN®, LENOX®, PORTER-CABLE®, BOSTITCH®, PROTO®, MAC TOOLS®, FACOM®, Powers®, LISTA®, Vidmar®, GQ® and through the 2021 acquisitions of MTD and Excel added CUB CADET®, TROY-BILT® and HUSTLER® in the Americas.

During 2023, the National Collegiate Athletic Association sponsorship delivered DEWALT® to an estimated 237+ million viewers through TV-visible branding and 9+ million fans in stadiums at 25 colleges and universities across five Division 1 conferences (Atlantic Coast Conference, Big Ten, Big 12, Pac-12 and Mountain West).

CRAFTSMAN® returned as the title sponsor of the NASCAR CRAFTSMAN® Truck Series through the Company’s sponsorship with NASCAR as the “Official Tools Partner of NASCAR” and “Official Tools" of all NASCAR-owned tracks.

Continuing to Invest in the Portfolio of Stanley Black & Decker Brands

The Company has a strong portfolio of brands associated with high-quality products including the iconic DEWALT®, CRAFTSMAN® and STANLEY® brands, which are the priority brands across the Tools & Outdoor segment.

The Company also goes to market with strong brands such as BLACK+DECKER®, DEWALT FLEXVOLT®, DEWALT POWERSTACK®, DEWALT POWERSHIFT™, CUB CADET®, TROY-BILT®, HUSTLER®, IRWIN®, LENOX®, PORTER-CABLE®, BOSTITCH®, PROTO®, MAC TOOLS®, FACOM®, Powers®, LISTA®, Vidmar®, and GQ®.

In 2024, the McLaren team sported the DEWALT® logo prominently on the team’s cars, fire suits, and equipment during the Formula 1 season, where it won its first Formula 1 Constructors’ Championship since 1998.

The Company also advertises in the English Premier League ("EPL"), which is the number one soccer league in the world, featuring the DEWALT® brand to a global audience.

In 2024, the Company also began sponsorships with one of the EPL’s “Big Six” football clubs, Tottenham Hotspur F.C., and in France, Ligue 1 club Olympique Lyonnais, for their 2024-2025 seasons.

The Company also continued its sponsorship of one of the world’s most popular football clubs, FC Barcelona, sponsoring both the Men’s and Women’s first teams, which includes marketing rights, hospitality assets and stadium signage.

In professional golf, the Company sponsored athletes on the PGA Tour, PGA Tour Champions, and PGA Tour Americas who represented either the DEWALT® or STANLEY® brand on tour.

CRAFTSMAN® maintained the title sponsorship of the NASCAR CRAFTSMAN® Truck Series through the Company’s sponsorship with NASCAR as the “Official Tools Partner of NASCAR” and “Official Tools" of all NASCAR-owned tracks.

The Company has also maintained long-standing NASCAR and NHRA team sponsorships, which provided brand exposure during nearly 60 events in 2024 with the DEWALT®, CRAFTSMAN®, and MAC TOOLS® brands.

In 2023, the McLaren team sported the DEWALT® logo prominently on the team’s cars, fire suits, and equipment during the Formula 1 season.

The Company also advertises in the English Premier League, which is the number one soccer league in the world, featuring the DEWALT® brand to a global audience.

The Company continued its sponsorship of one of the world’s most popular football clubs, FC Barcelona, sponsoring both the Men’s and Women’s first teams, which includes team and player image rights, hospitality assets and stadium signage.

The above marketing initiatives highlight the Company's strong emphasis on brand building and commercial support, which has resulted in more than 300 billion global brand impressions from digital and traditional advertising and strong brand awareness.

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Among the goals:

placing end-user data and insights at the core of product commercialization, generating demand and brand loyalty through promotional support, in-market execution and salesforce effectiveness, evolving proven marketing programs that tie trusted global brands with societal purpose and tapping into technologies to build meaningful 1:1 experiences with customers, consumers, employees and shareholders in line with the Company’s mission and vision.

placing end-user data and insights at the core of product commercialization, generating demand and brand loyalty through promotional support, in-market execution and salesforce effectiveness, evolving proven marketing programs that tie trusted global brands with societal purpose and tapping into technologies to build meaningful 1:1 experiences with customers, end users, employees and shareholders in line with the Company’s mission and vision.

The Company’s operations are classified into two reportable business segments:

Tools & Outdoor and Industrial.

Tools & Outdoor

The Tools & Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand Tools, Accessories & Storage ("HTAS"), and Outdoor Power Equipment ("Outdoor") product lines.

The PTG product line includes both professional and consumer products.

Professional products, primarily under the DEWALT® brand, 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, and concrete and masonry anchors.

DIY and tradesperson focused products include corded and cordless electric power tools sold primarily under the CRAFTSMAN® brand, and consumer home products such as hand-held vacuums, paint tools and cleaning appliances primarily under the BLACK+DECKER® brand.

The HTAS product line 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.

Professional products, primarily under the DEWALT® brand, include professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers, sanders, and concrete prep and placement tools as well as pneumatic tools and fasteners including nail guns, nails, staplers and staples, and concrete and masonry anchors.

DIY and tradesperson focused products include corded and cordless electric power tools sold primarily under the CRAFTSMAN® and STANLEY® brands, and consumer home products such as household power tools, hand-held vacuums, and small appliances primarily under the BLACK+DECKER® brand.

The HTAS product line sells hand tools, power tool accessories and storage products primarily under the DEWALT®, CRAFTSMAN® and STANLEY® brands.

Hand tools include measuring, leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels, material handling, 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 Outdoor product line 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), hand-held outdoor power equipment, garden tools, and parts and accessories to professionals and consumers under the DEWALT®, CRAFTSMAN®, CUB CADET®, BLACK+DECKER®, and HUSTLER® brand names.

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses.

Storage products include tool boxes, sawhorses, cabinets and engineered storage solution products.

The Outdoor product line 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, hand-held outdoor power equipment, garden tools, and parts and accessories to professionals and consumers under the DEWALT®, CRAFTSMAN®, CUB CADET®, BLACK+DECKER®, and HUSTLER® brand names.

The Industrial segment is comprised of the Engineered Fastening business and the Infrastructure business prior to its sale in April 2024.

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 riveting systems, precision nut running systems, micro fasteners, high-strength structural fasteners, axel swage, latches, heat shields, pins, and couplings.

The Infrastructure business designs, manufactures, and sells attachments, typically used on excavators, and handheld hydraulic and battery-powered tools for applications in infrastructure, construction, scrap recycling, demolition, and railroad infrastructure.

RESULTS OF OPERATIONS

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Therefore, the operating results of these businesses were classified as discontinued operations through their respective dates of sale.

The divestiture of the Oil & Gas business did not qualify for discontinued operations and therefore, its results were included in the Company's continuing operations within the Industrial segment through the date of sale in the third quarter of

The pending divestiture of the Infrastructure business did not qualify for discontinued operations and therefore, its results are included in the Company's continuing operations within the Industrial segment for all periods presented.

The divestiture of the Oil & Gas and the Infrastructure businesses did not qualify for discontinued operations and therefore, their results were included in the Company's continuing operations within the Industrial segment through the date of sale in the third quarter of 2022 and the second quarter of 2024, respectively.

Certain Items Impacting Earnings and Non-GAAP Financial Measures

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The results and measures, including gross profit, SG&A, Other, net, Income taxes, and segment profit (including Corporate Overhead), on a basis excluding certain gains and charges, free cash flow, organic revenue and organic growth are Non-GAAP financial measures.

These Non-GAAP financial measures are defined and reconciled to their most directly comparable GAAP financial

measures below.

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 and ensures appropriate comparability to operating results of prior periods.

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Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

With the exception of forecasted free cash flow included in "2024 Outlook" as discussed below, the Non-GAAP financial measures of gross profit, SG&A, Other, net, Income taxes, and segment profit (including Corporate Overhead), presented on a basis excluding certain gains and charges, as well as free cash flow, organic revenue and organic growth are defined and reconciled to their most directly comparable GAAP financial measures below.

Due to high variability and difficulty in predicting items that impact cash flow from operations, a reconciliation of forecasted free cash flow to its most directly comparable GAAP estimate has been omitted.

The Company provides expectations for the non-GAAP financial measures of full-year 2025 adjusted EPS, presented on a basis excluding certain gains and charges, as well as 2025 free cash flow.

Forecasted full-year 2025 adjusted EPS is reconciled to forecasted full-year 2025 GAAP EPS under the section entitled "2025 Planning Assumptions" below.

Consistent with past methodology, forecasted full-year 2025 GAAP EPS excludes the impacts of potential acquisitions and divestitures, potential future regulatory changes or strategic shifts that could impact the Company's contingent liabilities or intangible assets, respectively, potential future cost actions in response to external factors that have not yet occurred, and any other items not specifically referenced under “2025 Planning Assumptions.” A reconciliation of forecasted 2025 free cash flow to its most directly comparable GAAP estimate is not available without unreasonable effort due to high variability and difficulty in predicting items that impact cash flow from operations, which could be material to the Company’s results in accordance with U.S.

The Company believes such a reconciliation would also imply a degree of precision that is inappropriate for this forward-looking measure.

The Company also provides multi-year strategic goals for the non-GAAP financial measures of adjusted gross margin and adjusted EBITDA margin, presented on a basis excluding certain gains and charges, as well as organic revenue growth, free cash flow, and CFROI.

A reconciliation for these non-GAAP measures is not available without unreasonable effort due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred, including the high variability and low visibility with respect to certain gains or charges that would generally be excluded from non-GAAP financial measures and which could be material to the Company’s results in accordance with U.S.

Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future multi-year periods and cannot be accomplished without unreasonable effort.

The Company believes such a reconciliation would also imply a degree of precision that is inappropriate for these forward-looking measures.

The Company’s operating results at the consolidated level as discussed below include and exclude certain gains and charges impacting gross profit, SG&A, Other, net, and Income taxes.

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3,332.7 (81.3) 3,251.4

(Loss) earnings from continuing operations before income taxes (375.7) 566.2 190.5

Earnings from continuing operations before income taxes 241.1 466.0 707.1

Income taxes on continuing operations (45.2) 92.6 47.4

Net (Loss) Earnings from Continuing Operations Attributable to Common Shareowners - Diluted (281.7) 500.4 218.7

Diluted (loss) earnings per share of common stock - Continuing operations $ (1.88) $ 3.33 $ 1.45

Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted 286.3 373.4 659.7

Diluted earnings per share of common stock - Continuing operations $ 1.89 $ 2.47 $ 4.36

(Millions of Dollars) GAAP Non-GAAP Adjustments 2

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3,290.7 (99.4) 3,191.3

Earnings from continuing operations before income taxes 37.9 642.2 680.1

(Loss) earnings from continuing operations before income taxes (375.7) 566.2 190.5

Income taxes on continuing operations (94.0) 65.8 (28.2)

Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted 165.5 558.2 723.7

Diluted earnings per share of common stock - Continuing operations $ 1.06 $ 3.56 $ 4.62

Net (Loss) Earnings from Continuing Operations Attributable to Common Shareowners - Diluted (281.7) 500.4 218.7

Diluted (loss) earnings per share of common stock - Continuing operations $ (1.88) $ 3.33 $ 1.45

(Millions of Dollars) GAAP Non-GAAP Adjustments 2

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3,370.0 (180.3) 3,189.7

Earnings from continuing operations before income taxes and equity interest 1,586.9 193.9 1,780.8

Earnings from continuing operations before income taxes 37.9 642.2 680.1

Income taxes on continuing operations (132.4) 84.0 (48.4)

Share of net earnings of equity method investment 19.0 11.2 30.2

Net Earnings from Continuing Operations Attributable to Common Shareowners - Diluted 165.5 558.2 723.7

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$ 66.3 $ 96.9 $ 25.3

Strategic Sourcing & Operational Excellence 2

Material Productivity & Operational Excellence 2

Inventory step-up charges — — 80.3

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$ 42.5 $ 10.8 $ —

Complexity Reduction 3

Complexity Reduction & Operational Excellence 8.7 9.0 7.2

Acquisition & Integration-related costs 3

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Voluntary retirement program — (2.7) 33.4

Craftsman contingent consideration remeasurement from MTD acquisition — — 101.1

Other charges (gains) 1.1 2.1 14.2

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$ (19.6) $ (25.1) $ 16.9

Environmental charges 5

Loss on sales of businesses — 10.8 8.4

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99.9 39.4 140.8

Gain on equity method investment — — (68.0)

Asset impairment charges 7

72.4 274.8 168.4

(Loss) earnings from continuing operations before income taxes $ 566.2 $ 642.2 $ 193.9

1 Footprint Rationalization costs in 2023 relate to transfers and closures of targeted manufacturing sites, including Fort Worth, Texas and Cheraw, South Carolina as previously announced in March 2023, which resulted in accelerated depreciation of production equipment of $49.1 million, non-cash asset write-downs of $44.0 million (predominantly tooling, raw materials and WIP) and other site closure and re-configuration costs of $14.6 million.

2 Strategic Sourcing & Operational Excellence costs primarily relate to third-party consultant fees to provide expertise in identifying and quantifying opportunities to source in a more integrated manner and re-design in-plant operations following footprint rationalization, developing a detailed program and related governance, and assisting the Company with the implementation of actions necessary to achieve the related objectives.

3 Complexity Reduction costs primarily relate to third-party consultant fees to assist the Company with identifying strategies related to its SKU reduction and product platforming initiatives, quantifying the opportunities and designing detailed plans to achieve the related benefits.

Earnings from continuing operations before income taxes $ 466.0 $ 566.2 $ 642.2

1 Footprint Rationalization costs in 2024 primarily relate to accelerated depreciation of manufacturing and distribution center equipment of $48.9 million and other facility exit and re-configuration costs of $45.2 million.

In 2023, transfers and closures of targeted manufacturing sites, including Fort Worth, Texas and Cheraw, South Carolina as previously announced in March 2023, resulted in accelerated depreciation of production equipment of $49.1 million, non-cash asset write-downs of $44.0 million (predominantly tooling, raw materials and WIP), and other facility exit and re-configuration costs of $14.6 million.

2 Material Productivity & Operational Excellence costs in 2023 primarily related to third-party consultant fees to provide expertise in identifying and quantifying opportunities to source in a more integrated manner and re-design in-plant operations following footprint rationalization, developing a detailed program and related governance, and assisting the Company with the implementation of actions necessary to achieve the related objectives.

3 Acquisition & integration-related costs primarily relate to the MTD and Excel acquisitions, including costs to integrate the organizations and shared processes, as well as harmonize key IT applications and infrastructure.

5 Includes deal-related costs, net of income in 2023 and 2022 related to providing transition services to previously divested businesses.

4 Includes deal-related costs, net of income related to providing transition services to previously divested businesses.

5 The $143.2 million pre-tax environmental charges in 2024 relate primarily to a reserve adjustment for the non-active Centredale Superfund site as a result of regulatory changes and revisions to remediation alternatives.

6 Refer to “Restructuring Activities” below for further discussion.

7 Asset impairment charges in 2023 include a $124.0 million pre-tax impairment loss related to the Irwin and Troy-Bilt trade names and a $150.8 million pre-tax impairment loss related to the Infrastructure business.

The $168.4 million pre-tax asset impairment charge in 2022 related to the Oil & Gas business.

7 Asset impairment charges in 2024 include a $41.0 million pre-tax impairment charge related to the Lenox trade name, a $25.5 million pre-tax impairment charge related to the Infrastructure business, and a $5.9 million pre-tax impairment charge related to a small Industrial business.

Asset impairment charges in 2023 include a $124.0 million pre-tax impairment charge related to the Irwin and Troy-Bilt trade names and a $150.8 million pre-tax impairment charge related to the Infrastructure business.

The $168.4 million pre-tax impairment charge in 2022 related to the Oil & Gas business.

Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of business segment performance.

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Consolidated Results

Net sales were $15.366 billion in 2024 compared to $15.781 billion in 2023, representing a decrease of 3%, as flat organic revenue was more than offset by a 2% decrease from the Infrastructure divestiture and 1% decrease from foreign currency.

Tools & Outdoor net sales decreased 1% compared to 2023 as a 1% increase in volume was more than offset by a 1% decrease in both price and foreign currency.

Industrial net sales decreased 15% compared to 2023 as a 1% increase in price was more than offset by a 13% decrease from the Infrastructure divestiture, a 2% decrease in volume, and a 1% decrease from foreign currency.

Net sales were $15.781 billion in 2023 compared to $16.947 billion in 2022, representing a decrease of 7%, as a 1% increase in price was more than offset by a 7% decrease in volume and a 1% decrease from the Oil & Gas divestiture.

Tools & Outdoor net sales decreased 7% compared to 2022 due to a 7% decline in volume.

Tools & Outdoor net sales decreased 7% compared to 2022 due to a 7% decrease in volume.

Industrial net sales decreased 4% compared to 2022 as a 3% increase in price was more than offset by a 4% decrease from the Oil & Gas divestiture and a 3% decrease in volume.

Net sales were $16.947 billion in 2022 compared to $15.281 billion in 2021, representing an increase of 11% driven by a 7% increase in price and a 17% increase from acquisitions, partially offset by a 10% decrease in volume and a 3% decrease from foreign currency.

Tools & Storage net sales increased 13% compared to 2021 due to a 7% increase in price and a 21% increase from acquisitions, partially offset by a 12% decrease in volume and a 3% decrease from foreign currency.

Industrial net sales increased 2% compared to 2021 primarily due to a 1% increase in volume and an 8% increase in price, partially offset by a 5% decrease from foreign currency and a 2% decrease from the Oil & Gas divestiture.

Gross Profit:

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Non-GAAP adjustments, which reduced gross profit, were $88.8 million in 2024 and $166.9 million in 2023.

Despite lower volume, the impact of selling through high-cost inventory, and production curtailments, gross profit, excluding Non-GAAP adjustments, was 26.0% of net sales in both 2023 and 2022, due to price realization, supply chain transformation benefits, lower inventory destocking costs, and lower shipping costs.

Excluding these adjustments, gross profit was 30.0% of net sales in 2024 compared to 26.0% of net sales in 2023, primarily driven by the supply chain transformation efficiencies and lower inventory destocking costs.

The Company reported gross profit of $3.933 billion, or 24.9% of net sales, in 2023 compared to $4.284 billion, or 25.3% of net sales, in 2022.

Non-GAAP adjustments, which reduced gross profit, were $166.9 million in 2023 and $127.4 million in 2022.

Excluding these adjustments, gross profit was 26.0% of net sales in 2022 compared to 33.6% in 2021, as price realization was more than offset by commodity inflation, higher supply chain costs, including the impact of planned production curtailments, and lower volume.

SG&A Expenses:

Selling, general and administrative expenses, inclusive of the provision for credit losses, were $3.333 billion, or 21.7% of net sales, in 2024 compared to $3.291 billion, or 20.9% of net sales, in 2023.

Within SG&A, Non-GAAP adjustments totaled $81.3 million in 2024 and $99.4 million in 2023.

Excluding these adjustments, SG&A was 21.2% of net sales in 2024 compared to 20.2% in 2023, as the Company invested in growth initiatives designed to deliver increased market penetration and future market share gains.

SG&A expenses, inclusive of the provision for credit losses, were $3.291 billion, or 20.9% of net sales, in 2023 compared to $3.370 billion, or 19.9% of net sales, in 2022.

SG&A declined year-over-year on an absolute dollar basis reflecting cost reductions.

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Excluding these adjustments, SG&A was 20.2% of net sales in 2023 compared to 18.8% in 2022, reflecting the impact of lower sales volume, but relatively flat year-over-year on an absolute dollar basis as the benefits from the Global Cost Reduction Program were offset by increased investments in growth initiatives, higher variable compensation expense and inflation.

SG&A expenses were $3.370 billion, or 19.9% of net sales, in 2022 compared to $3.193 billion, or 20.9% of net sales, in 2021.

Within SG&A, Non-GAAP adjustments totaled $180.3 million in 2022 and $183.6 million in 2021.

Excluding these adjustments, SG&A was 18.8% of net sales in 2022 compared to 19.7% in 2021 due to the successful implementation of cost control actions.

Distribution center costs (i.e.

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Such distribution costs classified in SG&A amounted to $534.4 million, $521.7 million and $498.7 million in 2024, 2023, and 2022, respectively.

The increase in distribution costs in 2023 compared to 2022 reflects costs associated with footprint rationalization actions under the supply chain transformation as well as the Company's focus on inventory reduction.

The year-over-year increases in distribution costs in 2024 and 2023 are driven by temporary cost increases to support the Company's distribution network redesign.

Other, net totaled $448.8 million, $320.1 million, and $274.8 million in 2024, 2023, and 2022, respectively.

The year-over-year increase in 2024 is primarily driven by an environmental remediation reserve adjustment relating to the Centredale site, as further discussed in Note R, Contingencies , partially offset by lower intangible asset amortization due to the divestiture of the Infrastructure business.

Excluding Non-GAAP adjustments, Other, net, totaled $325.2 million, $345.2 million, and $257.9 million in 2024, 2023, and 2022, respectively.

The increase in 2023 is driven by higher pension and environmental remediation costs as well as write-downs on certain investments.

The year-over-year increase in 2022 was primarily due to higher intangible asset amortization due to the MTD and Excel acquisitions and appreciation of investments in 2021.

The decrease in 2024 is driven by lower intangible asset amortization expense as a result of the divestiture of the Infrastructure business.

The increase in 2023 was driven by higher pension and environmental remediation costs as well as write-downs on certain investments.

Loss on Sales of Businesses:

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During 2022, the Company reported a net loss of $8.4 million primarily related to the divestiture of the Oil & Gas business.

During 2021, the Company reported a $0.6 million net loss on divestitures.

Gain on Equity Method Investment:

Upon the acquisition of MTD in the fourth quarter of 2021, the Company recognized a $68.0 million gain on its previously held equity method investment.

Refer to Note E, Acquisitions , for further discussion.

Asset Impairment Charges :

During 2023, the Company recorded impairment charges of $274.8 million, comprised of a $124.0 million impairment charge related to the Irwin and Troy-Bilt trade names and a $150.8 million impairment charge related to the Infrastructure business.

During 2022, the Company recorded an impairment charge of $168.4 million related to the Oil & Gas business.

Refer to Note F, Goodwill and Intangible Assets , for additional information on the trade name impairments.

Refer to Note T, Divestitures , for additional information on the pending divestiture of the Infrastructure business and the 2022 divestiture of the Oil & Gas business.

During 2024, the Company recorded pre-tax, non-cash impairment charges of $72.4 million, comprised of $41.0 million related to the Lenox trade name, $25.5 million related to the Infrastructure business, and $5.9 million related to a small business in the Industrial segment.

During 2023, the Company recorded pre-tax, non-cash impairment charges of $274.8 million, comprised of $124.0 million related to the Irwin and Troy-Bilt trade names and $150.8 million related to the Infrastructure business.

During 2022, the Company recorded a pre-tax, non-cash impairment charge of $168.4 million related to the Oil & Gas business.

Refer to Note E, Goodwill and Intangible Assets , for additional information on the trade name impairments.

Refer to Note S, Divestitures , for additional information on the 2024 divestiture of the Infrastructure business and the 2022 divestiture of the Oil & Gas business.

Interest, net:

Net interest expense in 2024 was $319.5 million compared to $372.5 million in 2023 and $283.8 million in 2022.

The 2023 increase was primarily driven by higher U.S.

interest rates and debt issuances in March 2023, partially offset by higher interest income due to an increase in rates.

The 2024 decrease was primarily driven by lower commercial paper balances and lower U.S.

interest rates.

The increase in 2023 compared to 2022 was primarily driven by higher U.S.

interest rates and higher average balances relating to the Company's commercial paper borrowings, as well as the $1.0 billion issuance of debt in the first quarter of 2022, partially offset by higher interest income due to an increase in rates.

interest rates and debt issuances in March 2023, partially offset by higher interest income due to an increase in rates.

Income Taxes :

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This effective tax rate differs from the U.S.

statutory tax rate primarily due to tax benefits associated with partial realignment of the Company's legal structure, remeasurement of uncertain tax position reserves, the recognition of previously unrecognized foreign deferred tax assets, state income taxes, and tax credits, partially offset by non-deductible expenses, U.S.

tax on foreign earnings, withholding taxes, and losses for which a tax benefit is not recognized.

Excluding the tax effect on Non-GAAP adjustments, the effective tax rate on continuing operations in 2023 was (14.8)%.

This effective tax rate differs from the U.S.

statutory tax rate primarily due to a tax benefit associated with an intra-entity asset transfer of certain intangible assets related to the continued reorganization of the supply chain, tax on foreign earnings at tax rates different than the U.S.

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tax on foreign earnings and the remeasurement of uncertain tax position reserves.

Excluding the tax effect on Non-GAAP adjustments, the effective tax rate on continuing operations in 2021 was 6.7%.

This effective tax rate differs from the U.S.

statutory tax rate primarily due to a tax benefit associated with an intra-entity asset transfer of certain intangible assets related to the Company's supply chain reorganization, tax on foreign earnings, the remeasurement of uncertain tax position reserves, the remeasurement of deferred tax assets and liabilities due to foreign corporate income tax rate changes, and the tax benefit of equity-based compensation.

On December 20, 2021, the Organization for Economic Cooperation and Development (“OECD”) published a proposal for the establishment of a global minimum tax rate of 15% (“Pillar Two").

The Pillar Two rules provide a template that jurisdictions can translate into domestic law, to assist with the implementation within an agreed upon timeframe and in a coordinated manner, and are effective for fiscal years beginning after January 1, 2024.

To date, jurisdictions in which the Company operates are in various stages of implementation.

The Company has performed an initial assessment of the potential impact to income taxes as a result of Pillar Two.

The assessment of the potential impact is based on the most recent tax filings, country-by-country reporting, and financial statements of affected subsidiaries.

On December 20, 2021, the Organization for Economic Cooperation and Development published a proposal for the establishment of a global minimum tax rate of 15% (“Pillar Two").

The Pillar Two rules provide a template that jurisdictions can translate into domestic law, to assist with the implementation within an agreed upon timeframe and in a coordinated manner.

Certain countries in which the Company operates have enacted legislation effective January 1, 2024, while other jurisdictions are in various stages of implementation.

The Company has performed an assessment of the potential impact to its income taxes as a result of Pillar Two.

The assessment of the potential impact is based on the most recent tax filings, country-by-country reporting, and financial statements of affected

subsidiaries.

Based on results of the assessment, the Company believes it can avail itself of the transitional safe harbor rules in most jurisdictions in which the Company operates.

There are, however, a limited number of jurisdictions where the transitional safe harbor relief does not apply.

There are, however, a limited number of jurisdictions where the transitional safe harbor relief does not apply for which the Company has accrued global minimum taxes of $3.9 million in 2024.

The Company does not currently expect a material impact to income taxes in those jurisdictions in the near term.

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% of Net sales 9.0 % 5.1 % 6.7 %

Tools & Outdoor net sales decreased $62.9 million, or 1%, in 2024 compared to 2023 as a 1% increase in volume was more than offset by a 1% decrease in both price and foreign currency.

Organic revenue was flat as growth in DEWALT® was offset by the weak consumer and DIY backdrop.

Organic revenue decreased 1% in North America, remained flat in Europe, and increased 6% in the rest of the world.

Segment profit amounted to $1,197.4 million, or 9.0% of net sales, in 2024 compared to $687.6 million, or 5.1% of net sales, in 2023.

Excluding Non-GAAP adjustments of $143.1 million and $196.7 million in 2024 and 2023, respectively, segment profit amounted to 10.1% of net sales in 2024 compared to 6.6% of net sales in 2023, primarily due to supply chain transformation benefits and lower inventory destocking costs, which were partially offset by growth investments.

Tools & Outdoor net sales decreased $1.057 billion, or 7%, in 2023 compared to 2022 due to a 7% decline in volume.

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Excluding Non-GAAP adjustments of $196.7 million and $235.4 million in 2023 and 2022, respectively, segment profit amounted to 6.6% of net sales in 2023 compared to 8.4% in 2022, as supply chain transformation savings and reduced shipping costs were more than offset by selling through high-cost inventory, production curtailments and lower volume.

Tools & Outdoor net sales increased $1.606 billion, or 13%, in 2022 compared to 2021 due to a 7% increase in price and a 21% increase from acquisitions, partially offset by a 12% decrease in volume and a 3% decrease from foreign currency.

The overall 5% organic decline was a result of lower consumer and DIY market demand.

Organic revenue in emerging markets increased 1% and declined in both Europe and North America by 6%.

Segment profit amounted to $971.9 million, or 6.7% of net sales, in 2022 compared to $1.985 billion, or 15.5% of net sales, in 2021.

Excluding Non-GAAP adjustments of $235.4 million and $178.4 million in 2022 and 2021, respectively, segment profit amounted to 8.4% of net sales in 2022 compared to 16.9% in 2021, as the benefit from price realization was more than offset by commodity inflation, higher supply chain costs, production curtailment costs and lower volume.

(Millions of Dollars) 2024 2023 2022

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% of Net sales 12.4 % 11.0 % 9.4 %

Industrial net sales decreased $352.5 million, or 15%, in 2024 compared to 2023, as a 1% increase in price was more than offset by a 13% decrease from the Infrastructure divestiture, a 2% decrease in volume, and a 1% decrease from foreign currency.

Engineered Fastening organic revenues increased 2% as aerospace and general industrial growth was partially offset by market softness in automotive.

Segment profit totaled $254.9 million, or 12.4% of net sales, in 2024 compared to $266.5 million, or 11.0% of net sales, in 2023.

Excluding Non-GAAP adjustments of $3.6 million and $18.7 million in 2024 and 2023, respectively, segment profit amounted to 12.5% of net sales in 2024 compared to 11.8% of net sales in 2023, as lower volume in automotive was more than offset by price realization and cost control.

Industrial net sales decreased $109.4 million, or 4%, in 2023 compared to 2022, as a 3% increase in price was more than offset by a 4% decrease from the Oil & Gas divestiture and a 3% decrease in volume.

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Excluding Non-GAAP adjustments of $18.7 million and $7.8 million in 2023 and 2022, respectively, segment profit amounted to 11.8% of net sales in 2023 compared to 9.7% in 2022, as price realization and cost control more than offset lower volume.

Industrial net sales increased $60.3 million, or 2%, in 2022 compared to 2021, due to a 1% increase in volume and an 8% increase in price, partially offset by a 5% decrease from foreign currency and a 2% decrease from the Oil & Gas divestiture.

Engineered Fastening organic revenues increased 7% driven by growth in the aerospace, automotive, and industrial markets.

Infrastructure organic revenues were up 14% with Attachment Tools providing 17% growth, which was partially offset by an organic decline in Oil & Gas, prior to its divestiture.

Segment profit totaled $236.2 million, or 9.4% of net sales, in 2022 compared to $256.6 million, or 10.4% of net sales, in 2021.

Excluding Non-GAAP adjustments of $7.8 million and $13.1 million in 2022 and 2021, respectively, segment profit amounted to 9.7% of net sales in 2022 compared to 10.9% in 2021, as higher volumes and price realization were more than offset by commodity inflation, higher supply chain costs and adverse mix.

Corporate Overhead

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Excluding Non-GAAP adjustments of $23.4 million, $50.9 million, and $64.5 million in 2024, 2023, and 2022, respectively, the Corporate Overhead element of SG&A was $247.2 million, $261.3 million, and $229.5 million in 2024, 2023, and 2022, respectively.

The year-over-year decrease in 2024 compared to 2023 was primarily driven by the Company’s ongoing efforts to simplify the corporate cost structure and reduce indirect spend.

The year-over-year increase in 2023 compared to 2022 was primarily driven by higher employee-related variable compensation costs.

The year-over-year decrease in 2022 compared to 2021 was primarily due to lower employee-related costs.

RESTRUCTURING ACTIVITIES

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Total $ 28.9 $ 99.9 $ (84.2) $ 0.8 $ 45.4

During 2023, the Company recognized net restructuring charges of $39 million, primarily related to severance and facility closures associated with the footprint rationalization actions under the supply chain transformation.

During 2024, the Company recognized net restructuring charges of approximately $100 million, primarily related to severance and facility closures associated with the supply chain transformation.

The Company expects to achieve annual net cost savings of approximately $129 million by the end of 2025 related to the restructuring costs incurred during 2024.

The majority of the $45 million of reserves remaining as of December 28, 2024 is expected to be utilized within the next twelve months.

During 2022, the Company recognized net restructuring charges of $141 million, primarily related to severance and related costs, including SG&A cost actions under the Global Cost Reduction Program.

During 2023, the Company recognized net restructuring charges of approximately $39 million, primarily related to severance and facility closures associated with the footprint rationalization actions under the supply chain transformation.

The Company estimates that these actions resulted in net cost savings of approximately $45 million in 2024.

During 2021, the Company recognized net restructuring charges of $15 million, primarily related to facility closures and asset impairments.

During 2022, the Company recognized net restructuring charges of approximately $141 million, primarily related to severance and related costs, including SG&A cost actions under the Global Cost Reduction Program.

The Company estimates that these actions resulted in net cost savings of approximately $300 million in 2023.

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and $13 million in Corporate.

This outlook discussion is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects.

The Company expects 2024 diluted earnings per share to approximate $1.60 to $2.85 on a GAAP basis ($3.50 to $4.50 excluding Non-GAAP adjustments).

Free cash flow is expected to approximate $0.6 billion to $0.8 billion, significantly ahead of net income, as the Company continues to prioritize inventory reductions.

This outlook assumes the previously announced Infrastructure divestiture closes at the end of the first quarter 2024.

The difference between 2024 diluted earnings per share outlook and the diluted earnings per share range, excluding Non-GAAP adjustments, is approximately $1.65 to $1.90, consisting primarily of charges related to the supply chain transformation under the Global Cost Reduction Program.

2025 PLANNING ASSUMPTIONS

This discussion of certain planning assumptions is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects.

The Company's planning assumptions for 2025 are for diluted earnings per share on a GAAP basis to be $4.05 (+/- $0.65), diluted earnings per share excluding Non-GAAP adjustments to be $5.25 (+/- $0.50), and free cash flow to be $750 million (+/- $100 million).

These planning assumptions exclude the impact of new 2025 tariffs.

The difference between the planning assumptions for 2025 diluted earnings per share on a GAAP basis and diluted earnings per share excluding Non-GAAP adjustments is approximately $1.05 to $1.35, consisting primarily of charges related to the supply chain transformation under the Global Cost Reduction Program.

FINANCIAL CONDITION

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Operating Activities:

Cash flows provided by operations were $1.191 billion in 2023 compared to cash used in operations of $1.460 billion in 2022.

Cash flows provided by operations were $1.107 billion in 2024 compared to $1.191 billion in 2023 as higher earnings were more than offset by lower cash flows from working capital due to the significant inventory reduction in 2023.

In 2023, cash flows provided by operations were $1.191 billion compared to cash used in operations of $1.460 billion in 2022.

The year-over-year change was primarily driven by the Company's focus on reducing inventory, as evidenced by a decline of $1.123 billion in inventory in 2023.

In 2022, cash flows used in operations were $1.460 billion compared to cash provided by operations of $663.1 million in 2021.

The year-over-year change was mainly attributable to lower accounts payable balances, lower earnings from continuing operations, and higher inventory balances.

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 in the first half of 2022 as consumer and DIY demand softened.

Free Cash Flow:

Free cash flow, as defined in the table below, was an inflow of $853 million in 2023 compared to an outflow of $1.990 billion in 2022 and an inflow of $144 million in 2021.

The year-over-year changes in free cash flow are due to the same factors discussed above in operating activities, as well as lower planned capital expenditures in 2023.

Management considers free cash flow an important indicator of its liquidity and capital efficiency, 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.

Free cash flow, as defined in the table below, was an inflow of $753 million in 2024 compared to an inflow of $853 million in 2023 and an outflow of $1.990 billion in 2022.

The year-over-year changes in free cash flow are due to the same factors discussed above in operating activities.

Management considers free cash flow an important indicator of its liquidity and capital efficiency, 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 stock and business acquisitions, among other items.

(Millions of Dollars) 2024 2023 2022

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Investing Activities:

Cash flows used in investing activities totaled $328 million in 2023 primarily due to capital and software expenditures of $338 million.

Cash flows provided by investing activities totaled $394 million in 2024 primarily due to net proceeds from sales of businesses of $736 million, partially offset by capital and software expenditures of $354 million.

Cash flows used in investing activities in 2023 totaled $328 million, primarily due to capital and software expenditures of $338 million.

Cash flows provided by investing activities in 2022 totaled $3.573 billion, primarily due to proceeds from the Security and Oil & Gas divestitures, net of cash sold, of $4.147 billion, partially offset by capital and software expenditures of $530 million.

Cash flows used in investing activities in 2021 totaled $2.624 billion, driven by business acquisitions of $2.044 billion, net of cash acquired, primarily related to the MTD and Excel acquisitions, and capital and software expenditures of $519 million.

Financing Activities:

Cash flows used in financing activities totaled $1.557 billion in 2024 primarily driven by net repayments of short-term commercial paper borrowings of $1.057 billion and cash dividend payments on common stock of $491 million.

Cash flows used in financing activities totaled $816 million in 2023 primarily driven by net repayments of short-term commercial paper borrowings of $1.045 billion and cash dividend payments on common stock of $483 million, partially offset by net proceeds from debt issuances of $745 million.

Cash flows used in financing activities totaled $1.971 billion in 2022 primarily driven by share repurchases of $2.323 billion, credit facility repayments of $2.5 billion, the redemption and conversion of preferred stock for $750 million, cash dividend payments on common stock of $466 million, and net repayments of short-term commercial paper borrowings of $138 million, partially offset by $2.5 billion from credit facility borrowings, net proceeds from debt issuances of $993 million and proceeds from the issuance of remarketed Series D Preferred Stock of $750 million.

Cash flows provided by financing activities totaled $919 million in 2021 primarily driven by net short-term commercial paper borrowings of $2.225 billion and proceeds from issuances of common stock of $131 million, partially offset by the redemption and conversion of preferred stock for $750 million, cash dividend payments on common stock of $475 million, and $75 million related to the termination of interest rate swaps.

Fluctuations in foreign currency rates positively impacted cash by $2 million in 2023.

Fluctuations in foreign currency rates negatively impacted cash by $32 million and $62 million in 2022 and 2021, respectively, due to the strengthening of the U.S.

Fluctuations in foreign currency rates negatively impacted cash by $106 million in 2024 and $32 million in 2022, due to the strengthening of the U.S.

dollar against other currencies.

Refer to Note H, Long-Term Debt and Financing Arrangements , and Note J, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

Fluctuations in foreign currency rates positively impacted cash by $2 million in 2023 due to the weakening of the U.S.

dollar against other currencies.

Refer to Note G, Long-Term Debt and Financing Arrangements , and Note I, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

Credit Ratings and Liquidity:

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rating agencies on its senior unsecured debt (S&P A-, Fitch BBB+, Moody's Baa3), as well as its commercial paper program (S&P A-2, Fitch F2, Moody's P-3).

In the first quarter of 2023, Fitch downgraded the Company's senior unsecured debt credit rating to BBB+, from its previous rating of A-, and its commercial paper program to F2, from its previous rating of F1.

In the third quarter of 2023, S&P downgraded the Company's senior unsecured debt credit rating to A-, from its previous rating of A, and its commercial paper program to A-2, from its previous rating of A-1.

In the fourth quarter of 2023, Moody's downgraded the Company's senior unsecured debt credit rating to Baa3, from its previous rating of Baa2, and its commercial paper program to P-3, from its previous rating of P-2.

There were no changes to any of the Company's credit ratings during 2024.

Failure to maintain investment grade rating levels could adversely affect the Company’s cost of funds, liquidity, and access to capital markets, but would not have an adverse effect on the Company’s ability to access its existing committed credit facilities.

Cash and cash equivalents totaled $449 million as of December 30, 2023 of which approximately 50% was held in foreign jurisdictions.

Cash and cash equivalents totaled $291 million as of December 28, 2024, which was primarily held in foreign jurisdictions.

Cash and cash equivalents totaled $449 million as of December 30, 2023, of which approximately 50% was held 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 $110 million at December 28, 2024.

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company to elect to pay the net tax liability interest-free over a period of up to eight years.

See the "Contractual Obligations" table below for

the estimated amounts due by period.

See the "Contractual Obligations" table below for the estimated amounts due by period.

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 $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S.

As of December 30, 2023, the Company had commercial paper borrowings outstanding of $1.1 billion, of which $399.7 million in Euro denominated commercial paper was designated as a net investment hedge.

Refer to Note I, Financial Instruments , for further discussion.

As of December 31, 2022, the Company had commercial paper borrowings outstanding of $2.1 billion, which did not include any Euro denominated commercial paper.

The Company has a five-year $2.5 billion committed credit facility (the “5-Year Credit Agreement”).

As of December 28, 2024, the Company had no commercial paper borrowings outstanding.

As of December 30, 2023, the Company had $1.1 billion of borrowings outstanding, of which $399.7 million in Euro denominated commercial paper was designated as a net investment hedge.

Refer to Note H, Financial Instruments , for further discussion.

In June 2024, the Company amended and restated its existing five-year $2.5 billion committed credit facility with the concurrent execution of a new five year $2.25 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 $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.

A sub-limit of an amount equal to the Euro equivalent of $800.0 million is designated for swing line advances.

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 8, 2026 or upon termination.

The Company must repay all advances under the 5-Year Credit Agreement by the earlier of June 28, 2029 or upon termination.

The 5-Year Credit Agreement is designated to be a liquidity back-stop for the Company's $3.5 billion U.S.

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As of December 28, 2024 and December 30, 2023, the Company had not drawn on its five-year committed credit facility.

In September 2023, the Company terminated its $1.5 billion syndicated 364-Day Credit Agreement (the "Syndicated 364-Day Credit Agreement") dated September 2022, as amended.

In June 2024, the Company terminated its 364-Day $1.5 billion committed credit facility ("the 2023 Syndicated 364-Day Credit Agreement") dated September 2023.

There were no outstanding borrowings under the 2023 Syndicated 364-Day Credit Agreement upon termination and as of December 30, 2023.

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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 2024 Syndicated 364-Day Credit Agreement.

The Company must repay all advances under the 2023 Syndicated 364-Day Credit Agreement by the earlier of September 4, 2024 or upon termination.

The Company must repay all advances under the 2024 Syndicated 364-Day Credit Agreement by the earlier of June 27, 2025 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.

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As of December 28, 2024, the Company had not drawn on its 2024 Syndicated 364-Day Credit Agreement.

In September 2023, the Company terminated its $0.5 billion revolving credit loan (the "Club 364-Day Credit Agreement") dated September 2022, as amended.

There were no outstanding borrowings under the Club 364-Day Credit Agreement upon termination and as of December 31, 2022.

In addition, the Company has other short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating $252 million, of which approximately $155 million was available at December 30, 2023.

Approximately $97 million of the short-term credit lines were utilized primarily pertaining to outstanding letters of credit for which there are no required or reported debt balances.

The 5-Year Credit Agreement and the 2024 Syndicated 364-Day Credit Agreement, as described above, contain customary affirmative and negative covenants, including but not limited to, maintenance of an interest coverage ratio.

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").

The Company must maintain, for each period of four consecutive fiscal quarters of the Company, an interest coverage ratio of not less than 3.50 to 1.00, provided that the Company is only required to maintain an interest coverage ratio of not less than (i) 1.50 to 1.00 for any four fiscal quarter period ending on or before the end of the Company’s second fiscal quarter of 2024, and (ii) 2.50 to 1.00 for any four fiscal quarter period ending after the Company’s second fiscal quarter of 2024 through and including the Company’s second fiscal quarter of 2025.

For purposes of calculating the Company’s compliance with the interest coverage ratio, as defined in each credit agreement, the Company is permitted to increase EBITDA to allow for additional adjustment addbacks incurred prior to the end of the Company’s second fiscal quarter of 2025, provided that (A) the sum of the applicable adjustment addbacks incurred through and including the Company’s second fiscal quarter of 2024 may not exceed $500 million in the aggregate, and (B) the sum of the applicable adjustment addbacks incurred from the Company’s third fiscal quarter of 2024 through and including the Company’s second fiscal quarter of 2025 may not exceed $250 million in the aggregate;

provided, further, that the sum of the applicable adjustment addbacks for any four consecutive fiscal quarter period may not exceed $500 million in the aggregate.

In addition, the Company has other short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating to $296 million, of which approximately $206 million was available at December 28, 2024 and approximately $90 million of the short-term credit lines were utilized primarily pertaining to outstanding letters of credit for which there are no required or reported debt balances.

Short-term arrangements are reviewed annually for renewal.

At December 28, 2024, the aggregate amount of short-term and long-term committed and uncommitted lines of credit was approximately $3.8 billion.

In addition, at December 30, 2023, $1.1 billion was recorded as short-term commercial paper borrowings.

The weighted-average interest rates on U.S.

dollar denominated short-term borrowings for the years ended December 28, 2024 and December 30, 2023 were 5.6% and 5.1%, respectively.

The weighted-average interest rate on Euro denominated short-term borrowings for the year ended December 30, 2023 was 3.5%.

For the year ended December 31, 2022, the Company had not drawn on its Euro denominated short-term borrowings.

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

In February 2023, 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, not to exceed $500 million in the aggregate, for amounts incurred during each four fiscal quarter period beginning with the period ending in the third quarter of 2023 through the period ending in the second quarter of 2024, and (b) amend the minimum interest coverage ratio from 3.5 times to not less than 1.5 to 1.0 times computed quarterly, on a rolling twelve months (last twelve months) basis, for the period from and including the third quarter of 2023 through the second quarter of 2024.

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

The amended provisions described above also apply to the 2023 Syndicated 364-Day Credit Agreement.

The weighted-average interest rates on Euro denominated short-term borrowings for the years ended December 28, 2024 and December 30, 2023 were 3.9% and 3.5%, respectively.

In March 2023, the Company issued $350.0 million of senior unsecured term notes maturing March 6, 2026 ("2026 Term Notes") and $400.0 million of senior unsecured term notes maturing March 6, 2028 (“2028 Term Notes”).

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The Company used the net proceeds from the offering for general corporate purposes, including repayment of indebtedness under the commercial paper program.

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 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 $993 million, net of approximately $7 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 program.

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750 million ("2019 Equity Units").

Each unit had a stated amount of $100 and initially consisted 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 per share, 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").

In November 2022, the Company generated cash proceeds of $750 million from the successful remarketing of the Series D Preferred Stock (the "Remarketed Series D Preferred Stock"), as described more fully in Note J, Capital Stock .

Upon completion of the remarketing, the holders of the 2019 Equity Units received 4,723,500 common shares and the Company issued 750,000 shares of Remarketed Series D Preferred Stock.

Holders of the Remarketed Series D Preferred Stock were entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 7.5% per annum of the $1,000 per share liquidation preference (equivalent to $75.00 per annum per share).

On November 15, 2022, the Company informed holders that it would redeem all outstanding shares of the Remarketed Series D Preferred Stock on December 22, 2022 (the “Redemption Date”) at $1,007.71 per share in cash, which was equal to 100% of the liquidation preference of a share of Remarketed Series D Preferred Stock, plus accumulated and unpaid dividends to, but excluding, the Redemption Date.

In December 2022, the Company redeemed the Remarketed Series D Preferred Stock, paying $750 million in cash.

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 million, plus an additional amount related to the forward component of the contract.

In November 2022, the Company amended the settlement date to November 2024, or earlier at the Company's option.

Refer to Note H, Long-Term Debt and Financing Arrangements , and Note J, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

In June 2024, the Company amended the settlement date to June 2026, or earlier at the Company's option.

Refer to Note G, Long-Term Debt and Financing Arrangements , and Note I, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

Contractual Obligations:

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Interest payments on long-term debt (b) 2,977 228 378 286 2,085

Short-term borrowings 1,075 1,075 — — —

Lease obligations 565 130 196 122 117

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Total contractual cash obligations $ 11,159 $ 1,855 $ 1,918 $ 1,508 $ 5,878

(a) Future payments on long-term debt encompass all payments related to aggregate debt maturities, excluding certain fair value adjustments included in long-term debt, as discussed further in Note H, Long-Term Debt and Financing Arrangements.

(b) Future interest payments on long-term debt reflect the applicable interest rate in effect at December 28, 2024 .

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(d) In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty which obligates the Company to pay $350 million, plus an additional amount related to the forward component of the contract.

In November 2022, the Company amended the settlement date to November 2024, or earlier at the Company's option.

See Note J, Capital Stock, for further discussion.

In June 2024, the Company amended the settlement date to June 2026, or earlier at the Company's option.

See Note I, Capital Stock, for further discussion.

(e) This amount principally represents contributions either required by regulations or laws or, with respect to unfunded plans, necessary to fund current benefits.

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However, due to the high degree of uncertainty regarding the timing of potential future cash flows associated with the contingent consideration liability related to the Craftsman acquisition and the unrecognized tax liabilities of $167 million and $518 million, respectively, at December 28, 2024, the Company is unable to make a reliable estimate of when (if at all) these amounts may be paid.

Refer to Note M, Fair Value Measurements, and Note Q, Income Taxes, for further discussion.

Refer to Note L, Fair Value Measurements, and Note P, Income Taxes, for further discussion.

Payments of the above contractual and other obligations (with the exception of payments related to debt principal, the forward stock purchase contract, and tax obligations) will typically generate a cash tax benefit such that the net cash outflow will be lower than the gross amounts summarized above.

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lines of credit $ 3,500 $ 1,250 $ — $ 2,250 $ —

Short-term borrowings, long-term debt and lines of credit are explained in detail within Note H, Long-Term Debt and Financing Arrangements .

Short-term borrowings, long-term debt and lines of credit are explained in detail within Note G, Long-Term Debt and Financing Arrangements .

Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments, currencies, commodities and other items traded in global markets.

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interest rates.

At December 30, 2023, the impact of a hypothetical 10% increase in the interest rates associated with the Company’s outstanding commercial paper borrowings would have been an incremental pre-tax loss of approximately $5 million.

The impact of a hypothetical 10% increase in the average interest rate of the Company’s average commercial paper borrowings outstanding during 2024 would have been an incremental pre-tax loss of approximately $5 million.

The Company had no outstanding commercial paper borrowings at December 28, 2024.

The Company has exposure to commodity prices in many businesses, particularly brass, nickel, resin, aluminum, copper, zinc, steel, and energy used in the production of finished goods.

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In 2024, investment gains resulted in an increase of $15 million to pension plan assets.

In 2022 and 2021, investment returns on

pension plan assets resulted in a decrease of $560 million and an increase $81 million, respectively.

The funded status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 87% in 2023, 2022 and 2021.

In 2023 and 2022, investment returns on pension plan assets resulted in an increase of $144 million and a decrease of $560 million, respectively.

The funded status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 90% in 2024 and 87% in both 2023 and 2022.

The Company expects funding obligations on its defined benefit plans to be approximately $30 million in 2025.

Management has worked to minimize this exposure by freezing and terminating defined benefit plans where appropriate.

Refer to Note L, Employee Benefit Plans, for further discussion regarding the Company's pension plans.

Refer to Note K, Employee Benefit Plans, for further discussion regarding the Company's pension plans.

The Company has access to financial resources and borrowing capabilities around the world.

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Impairment tests are completed separately with respect to the goodwill of each of the Company’s reporting units.

For its annual impairment testing performed in the third quarter of 2023, the Company applied a quantitative test for all of its reporting units using a discounted cash flow valuation model.

For its annual impairment testing performed in the third quarter of 2024, the Company applied a quantitative test for each of its reporting units using a discounted cash flow valuation model.

Based on the results of the Company’s annual impairment testing, it was determined that the fair value of each of its reporting units was in excess of its carrying amount.

As previously disclosed in the Company’s Form 10-Q for the third quarter of 2023, the fair value of the Engineered Fastening reporting unit exceeded its carrying amount by 16%.

In connection with the preparation of the Consolidated Financial Statements for the year ended December 30, 2023, the Company performed an updated impairment analysis with respect to the Engineered Fastening reporting unit, which included approximately $2.020 billion of goodwill at year-end.

The key assumptions applied to the updated cash flow projections for the Engineered Fastening reporting unit included a 10.0% discount rate, near-term revenue growth rates over the next six years, which represented a compound annual growth rate of approximately 5%, and a 3% perpetual growth rate.

Based on this analysis, it was determined that the fair value of the Engineering Fastening reporting unit exceeded its carrying amount by 22%.

The increase in excess fair value is reflective of a slightly more favorable long-term outlook based on 2023 results and a lower carrying value driven by working capital reductions.

Management remains confident in the long-term viability and success of the Engineered Fastening reporting unit,

particularly given its market position, growth prospects, such as automotive electrification and the aerospace market recovery, and geographies served.

As previously discussed, in December 2023, the Company entered into an agreement to sell its Infrastructure business.

As a result, the Company performed an impairment analysis with respect to the Infrastructure reporting unit and recognized a $150.8 million pre-tax asset impairment charge to adjust the carrying amount of the long-lived asset group to its estimated fair value less selling costs.

Refer to Note T, Divestitures , for further discussion.

With respect to the quantitative tests, the key assumptions applied to the cash flow projections were a discount rate of 10% for both reporting units, near-term revenue growth rates over the next six years, which represented cumulative annual growth rates

ranging from approximately 4.0% to 4.5%, and perpetual growth rates of 3%.

These assumptions contemplated business, market and overall economic conditions.

Based on the results of this testing, the Company determined that the fair value for each of the reporting units exceeded its carrying amount in excess of 30%.

Furthermore, management performed sensitivity analyses on the estimated fair values from the discounted cash flow valuation models utilizing more conservative assumptions that reflect reasonably likely future changes in the discount rate and perpetual growth rate.

The discount rate was increased by 100 basis points with no impairment indicated.

The perpetual growth rate was decreased by 150 basis points with no impairment indicated.

The Company also tested its indefinite-lived trade names for impairment during the third quarter of 2024 utilizing a discounted cash flow model.

The key assumptions used included discount rates, royalty rates, and perpetual growth rates applied to the projected sales.

With the exception of the Irwin and Troy-Bilt trade names discussed below, the Company determined that the fair values of its indefinite-lived trade names exceeded their respective carrying amounts.

During the third quarter of 2023, as a result of new leadership within the Tools & Outdoor segment, the Company reviewed its brand portfolio resulting in a decision to shift prioritization and investment to its major brands, while leveraging certain of its specialty brands in a more focused manner.

As a result of this shift in brand prioritization, the Company recognized a $124.0 million pre-tax, non-cash impairment charge related to the Irwin and Troy-Bilt trade names in the third quarter of 2023.

With the exception of the Lenox trade name discussed below, the Company determined that the fair values of its indefinite-lived trade names exceeded their respective carrying amounts.

During 2024, the Company continued its brand prioritization and investment strategy for its major brands, while leveraging certain of its specialty brands in a more focused manner.

As a result of these ongoing brand prioritization efforts, the Company recognized a $41.0 million pre-tax, non-cash impairment charge related to the Lenox trade name in the third quarter of 2024.

Subsequent to this impairment charge, the Lenox trade name carrying value totaled $115.0 million.

In the third quarter of 2023, the Company recognized a $124.0 million pre-tax, non-cash impairment charge related to the Irwin and Troy-Bilt trade names.

Subsequent to this impairment charge, the carrying value of the Irwin and Troy-Bilt trade names totaled $113.0 million.

The Company intends to continue utilizing these trade names, which accounted for less than 5% of 2023 net sales for the Tools & Outdoor segment, indefinitely in more focused product categories and end markets.

The Company intends to continue utilizing these trade names indefinitely, which represented approximately 6% of 2024 net sales for the Tools & Outdoor segment.

In the event that future operating results of any of the Company's reporting units or indefinite-lived trade names do not meet current expectations, management, based upon conditions at the time, would consider taking restructuring or other strategic actions, as necessary, to maximize revenue growth and profitability.

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The Company’s weighted-average discount rates used to determine benefit obligations at December 30, 2023 for the United States and international pension plans were 5.04% and 4.43%, respectively.

As discussed further in Note L, Employee Benefit Plans , the Company develops the expected return on plan assets considering various factors, which include its targeted asset allocation percentages, historic returns, and expected future returns.

As discussed further in Note K, Employee Benefit Plans , the Company develops the expected return on plan assets considering various factors, which include its targeted asset allocation percentages, historic returns, and expected future returns.

The Company’s expected rate of return assumptions for the United States and international pension plans were 6.47% and 5.45%, respecti vely, at December 28, 2024.

The Company will us e a 5.99% we ighted-average expected rate of return assumption to determine t he 2024 n et periodic benefit cost.

The Company will use a 6.57% weighted-av erage expected rate of return assumption to determine t he 2025 n et periodic benefit cost.

A 25 basis point reduction in the expected rate of return assumption would increase 2025 net periodic benefit cost by approximately $4 million on a pre-tax basis.

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The Company recognized approximately $24 million of defined benefit plan expense in 2024, which may fluctuate in future years depending upon various factors including future discount rates and actual returns on plan assets.

Additional information regarding the Company's pension plans is available in Note L, Employee Benefit Plans.

Additional information regarding the Company's pension plans is available in Note K, Employee Benefit Plans.

ENVIRONMENTAL — The Company incurs costs related to environmental issues as a result of various laws and regulations governing current operations as well as the remediation of previously contaminated 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.

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.

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.

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Liabilities have been recorded on those sites in accordance with this policy.

Additional information regarding environmental matters is available in Note S, Contingencies.

Additional information regarding environmental matters is available in Note R, Contingencies.

INCOME TAXES — The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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The Company periodically assesses its liabilities and contingencies for all tax years still subject to audit based on the most current available information, which involves inherent uncertainty.

Additional information regarding income taxes is available in Note Q, Income Taxes.

CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995

Additional information regarding income taxes is available in Note P, Income Taxes.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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, but not limited to, any projections or guidance of earnings, revenue, profitability 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;

All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any goals, projections, planning assumptions or guidance of earnings, income, revenue, margins, costs or sales, sales growth, profitability or other financial items;

any statements of the plans, strategies and objectives of management for future operations, including expectations around the Company's ongoing transformation;

future market share gain, any statements concerning proposed new products, services or developments;

any statements regarding future economic conditions or performance;

any statements relating to initiatives concerning environmental, social and governance ("ESG") matters, including environmental sustainability and diversity, equity and inclusion;

any statements of belief;

any statements concerning future dividends or share repurchases;

any statements relating to initiatives concerning environmental, social and governance matters;

any statements of beliefs, plans, intentions or expectations;

any statements and assumptions regarding possible tariff and tariff impact projections and related mitigation plans;

and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “could,” “project,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “run-rate,” “annualized,” “forecast,” “commit,” “goal,” “target,” “design,” “on-track,” “position or positioning,” “guidance” or any other similar words.

Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “could,” “project,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “run-rate,” “annualized,” “forecast,” “commit,” “objective,” “goal,” “prospect,” “target,” “design,” “on-track,” “position or positioning,” “guidance,” “aim,” “multi-year” 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.

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(ii) macroeconomic factors, including global and regional business conditions, commodity prices, inflation and deflation, interest rate volatility, currency exchange rates, and uncertainties in the global financial markets related to the recent failures of several financial institutions;

(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 in Europe and the emerging markets in which the Company generates sales, particularly Latin America and China;

(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 that the tightened credit markets may have on the Company or its customers or suppliers;

(ix) the extent to which the Company has to write off accounts receivable, inventory or other 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, supply chain and distribution disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, natural disasters, pandemics, sanctions, political unrest, war or terrorism, including the conflicts between Russia and Ukraine, and Israel and Hamas and tensions or conflicts in South Korea, China and Taiwan;

(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 and risks related to the transition to a lower-carbon economy, such as the Company’s 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 its manufacturing facilities and business operations;

(xv) failure to meet ESG expectations or standards, or achieve its ESG goals;

(xvi) 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;

(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, trade controls such as section 301 tariffs and section 232 steel and aluminum tariffs, and import and export controls;

(iv) the Company’s ability to predict the timing and extent of any trade related regulations, restrictions and tariffs as well as its ability to successfully assess the impact to its business of, and mitigate or respond to macroeconomic or trade and tariff changes or policies;

(v) the economic, political, cultural and legal environment in Europe and the emerging markets in which the Company generates sales, particularly Latin America and China;

(vi) realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures;

(vii) pricing pressure and other changes within competitive markets;

(viii) availability and price of raw materials, component parts, freight, energy, labor and sourced finished goods;

(ix) the impact that the tightened credit markets may have on the Company or its customers or suppliers;

(x) the extent to which the Company has to write off accounts receivable, inventory or other assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers;

(xi) the Company's ability to identify and effectively execute productivity improvements and cost reductions;

(xii) potential business, supply chain and distribution disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, natural disasters or pandemics, sanctions, political unrest, war or terrorism, including the conflicts between Russia and Ukraine, and Israel and Hamas and tensions or conflicts in South Korea, China, Taiwan and the Middle East;

(xiii) the continued consolidation of customers, particularly in consumer channels, and the Company’s continued reliance on significant customers;

(xiv) managing franchisee relationships;

(xv) the impact of poor weather conditions and climate change and risks related to the transition to a lower-carbon economy, such as the Company's ability to successfully adopt new technology, meet market-driven demands for carbon neutral and renewable energy technology, or to comply with changes in environmental regulations or requirements, which may be more stringent and complex, impacting its manufacturing facilities and business operations as well as remediation plans and costs relating to any of its current or former locations or other sites;

(xvi) maintaining or improving production rates in the Company's manufacturing facilities, responding to significant changes in customer preferences or expectations, product demand and fulfilling demand for new and existing products, and learning, adapting and integrating new technologies into products, services and processes;

(xvii) changes in the competitive landscape in the Company's markets;

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operations, including sales to non-U.S.

(xix) the impact from demand changes within world-wide markets associated with homebuilding and remodeling;

(xix) the impact from demand changes within world-wide markets associated with construction and housing, general industrial, automotive, aerospace, outdoor and other markets which the Company serves;

(xx) potential adverse developments in new or pending litigation and/or government investigations;

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(xxiv) attracting, developing and retaining senior management and other key employees, managing a workforce in many jurisdictions, labor shortages, work stoppages or other labor disruptions;

(xxv) the Company's ability to keep abreast with the pace of technological change;

(xxv) the Company's ability to keep abreast with the pace of

technological change;

(xxvi) changes in accounting estimates;

(xxvii) the Company’s ability to protect its intellectual property rights and to maintain its public reputation and the strength of its brands;

and (xxviii) the Company’s ability to implement, and achieve the expected benefits (including cost savings and reduction in working capital) from, its Global Cost Reduction Program including:

continuing to advance innovation, electrification and global market penetration to achieve organic revenue growth of 2-3 times the market;

(xxviii) critical or negative publicity, including on social media, whether or not accurate, concerning the Company’s brands, products, culture, key employees or suppliers, or initiatives, and the Company's handling of diverging stakeholder expectations regarding the same, and (xxix) the Company’s ability to implement, and achieve the expected benefits (including cost savings and reduction in working capital) from, its Global Cost Reduction Program including:

continuing to advance innovation, electrification and global market penetration to achieve mid-single digit organic revenue growth;

streamlining and simplifying the organization, and investing in initiatives that more directly impact the Company's customers and end users;

returning adjusted

gross margins to historical 35%+ levels by accelerating the supply chain transformation to leverage strategic sourcing, drive operational excellence, consolidate facilities, optimize the distribution network and reduce complexity of the product portfolio;

returning adjusted gross margins to historical 35%+ levels by accelerating the supply chain transformation to leverage material productivity, drive operational excellence, rationalize manufacturing and distribution networks, including consolidating facilities and optimizing the distribution network, and reduce complexity of the product portfolio;

improving fill rates and matching inventory with customer demand;

prioritizing cash flow generation and inventory optimization;

executing the SBD Operating Model to deliver operational excellence through efficiency, simplified organizational design;

delivering operational excellence through efficiency, simplified organizational design;

and reducing complexity through platforming products and implementing initiatives to drive a SKU reduction.

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

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and forward-looking statements in documents that are incorporated by reference herein speak only as of the date of those documents.

The Company does not undertake any obligation or intention to update or revise any forward-looking statements, whether as a result of future events or circumstances, new information or otherwise, except as required by law.

Any standards of measurement and performance made in reference to the Company's ESG and other sustainability plans and goals are developing and based on assumptions that continue to evolve, and no assurance can be given that any such plan, initiative, projection, goal, commitment, expectation, or prospect can or will be achieved.

The inclusion of information related to ESG goals and initiatives is not an indication that such information is material under the standards of the Securities and Exchange Commission.

Any standards of measurement and performance made in reference to the Company's environmental, social, governance and other sustainability plans and goals are developing and based on assumptions that continue to evolve and may be subject to change, and no assurance can be given that any such plan, initiative, projection, goal, commitment, expectation, or prospect can or will be achieved.

The inclusion of information related to such goals and initiatives is not an indication that such information is material under the standards of the Securities and Exchange Commission.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company incorporates by reference the material captioned “Market Risk” in Item 7 and in Note I, Financial Instruments , of the Notes to Consolidated Financial Statements in Item 8 .

The Company incorporates by reference the material captioned “Market Risk” in Item 7 and in Note H, Financial Instruments , of the Notes to Consolidated Financial Statements in Item 8 .

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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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 7. Management’s Discussion and Analysis