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Item 1A. Risk Factors

2026-02-24 compared with 2025-02-18 · 108 added, 114 removed, 267 unchanged (45% of the section changed)

The Company’s business, operations and financial condition are subject to various risks and uncertainties.

The following describes management’s beliefs and opinions regarding the material factors that make an investment in our securities speculative or risky, as the Company’s business, operations and financial condition are subject to various risks and uncertainties.

You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including those risks set forth under the heading entitled "Cautionary Statement Concerning Forward-Looking Statements" in Item 7, and in other documents that the Company files with, or furnishes to, the SEC, before making any investment decision with respect to its securities.

If any of the risks or uncertainties actually occur or develop, the Company’s business, financial condition, results of operations and future growth prospects could change.

Some of the risks and uncertainties discussed below may have occurred in the past.

The disclosures below are provided by way of example only and are not representations as to whether or not the risks or uncertainties have occurred in the past, but are provided because if any of the risks or uncertainties actually occur or develop, the Company’s business, financial condition, results of operations and future growth prospects could change.

Under these circumstances, the trading prices of the Company’s securities could decline, and you could lose all or part of your investment in the Company’s securities.

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

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

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

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

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

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

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

Generally, raw materials and components are available from several different suppliers, however, for certain products, such as components requiring rare earth minerals sourced from China and components requiring cobalt, the Company and its suppliers may rely on one or very few suppliers or suppliers concentrated in certain regions.

For example, in April 2025, China restricted export of certain rare earth minerals and may in the future continue to restrict, expand restrictions, or stop exporting these or other materials.

Any such restrictions or delays on the export of rare earth minerals from China have caused, and may in the future cause, increased costs and/or production disruptions which could materially and adversely impact the Company’s results of operations, cash flow and financial condition.

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

and other countries.

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

For certain products, the Company may rely on one or very few suppliers, which may limit the Company’s ability to expeditiously source alternatives.

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

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

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

The Company’s business is subject to risks associated with the global trade environment, including customs and trade regulations, tariffs, quotas, import taxes and international trade agreements.

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

actions involving China, Mexico or other countries, and any corresponding retaliatory efforts, could be adopted or modified with little or no advanced notice, result in disruption to the Company's supply chain and an increase in supply chain costs that the Company may not be able to accurately assess and offset, which could in turn require the Company to increase its prices and, in the event customer demand declines as a result, adversely impact the Company’s results of operations.

For example, in 2018 the U.S.

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

Diplomatic and trade tensions between the U.S.

and China remain high.

Existing tariffs remain in effect and there is a possibility of further escalation of trade tensions or additional trade restrictions.

In 2025, the U.S.

government announced a series of tariffs on imported goods into the U.S., which prompted retaliatory actions from some of its trading partners, and in response, the Company introduced strategies to mitigate the impacts of these changes on its results of operations, including price increases and supply chain adjustments.

However, there is no assurance that the Company will be able to mitigate the full impact of all such tariffs, retaliatory actions or other changes in trade policies that have or may develop.

actions involving China, Mexico or other countries, and any corresponding retaliatory efforts, could be adopted or modified with little or no advanced notice, and result in disruption to the Company's supply chain and an increase in supply chain costs that the Company may not be able to accurately assess and offset, which could in turn require the Company to increase its prices and, in the event customer demand declines as a result, adversely impact the Company’s results of operations.

Moreover, decisions made as part of the Company’s tariff mitigation strategy concerning the rationalization, restructuring or relocation of facilities, production or component sources and any similar actions could also subject the Company to additional or new tariffs or trade regulations and interpretations of those regulations, reputational risks, and other issues relating to the importation of products.

For example, in 2025 the Company began shifting production of certain power tools to Mexico.

As a result, these products became subject to additional tariffs on imports from Mexico in 2025.

Even though the Company is taking actions to qualify for an exemption under the United States-Mexico-Canada Agreement to mitigate the additional tariff costs, there is no guarantee that the Company will be able to obtain such qualification.

There is a possibility of further escalation of trade tensions, tariffs or additional trade restrictions.

For example, in April 2025, China imposed export restrictions on certain rare earth minerals that are used in certain components of the Company’s products, which resulted in delays and shortages of certain components.

If China were to further restrict exporting, or implement burdensome and lengthy licensing processes for the export of, these materials or components, or pressure other countries to do so, the Company’s and its suppliers' ability to obtain such materials or components may be disrupted and the Company may not be able to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost.

Certain of the Company’s competitors may be better positioned than the Company to withstand or react to these kinds of changes and other restrictions on global trade and as a result the Company could lose market share to such competitors.

While the Company may be able to expand or shift sourcing options, such efforts are time consuming and would be difficult or impracticable for many products and may result in an increase in its manufacturing costs.

While the Company may be able to expand or shift sourcing options and has been focused, and continues to focus, on implementing other supply chain adjustments, such efforts are time-consuming and are, or could be, difficult or impracticable for many products and may result in an increase in its manufacturing costs, or otherwise materially and adversely impact the Company's results of operations, cash flow and financial condition.

The Company’s operations are also subject to the effects of international trade agreements and regulations such as the United States-Mexico-Canada Agreement, and the activities and regulations of the World Trade Organization.

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The Company cannot predict if, and to what extent, other countries in which its products are currently manufactured or will be manufactured in the future, or countries into which its products are imported, will be subject to, or implement, additional or increased tariffs, new trade restrictions or other changes to existing international trade agreements, the impact of which the Company may not be able to accurately assess or effectively mitigate and any of which could have a material adverse impact on its business.

In addition, efforts to withdraw from, or substantially modify, such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, import or export licensing requirements and exchange controls or new barriers to entry, could limit the Company’s ability to capitalize on current and future growth opportunities in international markets, impair its ability to expand the business by offering new products, and could adversely

impact its production costs, customer demand and relationships with customers and suppliers.

China’s limitations on exports of rare earth minerals) and exchange controls or new barriers to entry, could limit the Company’s ability to capitalize on current and future growth opportunities in international markets, impair its ability to expand the business by offering new products, and could adversely impact its production costs, customer demand and relationships with customers and suppliers.

Any of these consequences could have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

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and international mass merchants and home centers collectively comprising approximately 42% of consolidated net sales.

The loss or material reduction of business, the lack of success of sales initiatives, or changes in customer or end-user preferences or loyalties for the Company’s products, related to any such significant customer could have a material adverse impact on the Company’s results of operations and cash flows.

The loss or material reduction of business, the lack of success of sales initiatives, changes in customer business strategies or the Company's inability to support those

strategies, customers’ inability to execute on business strategies, or changes in customer or end-user preferences or loyalties for the Company’s products, related to any such significant customer could have a material adverse impact on the Company’s results of operations and cash flows.

In addition, the Company’s major customers are volume purchasers, a few of which are much larger than the Company, and have strong bargaining power with suppliers.

This factor limits the ability to recover cost increases through higher selling prices.

Furthermore, unanticipated inventory adjustments by these customers can have a negative impact on the Company's net sales.

This factor limits the Company's ability to recover cost increases through higher selling prices.

Furthermore, unanticipated inventory adjustments by these customers, whether due to external factors or changes in the price of the Company's products, could have a negative impact on the Company's net sales.

In times of tough economic conditions, the Company has experienced significant distributor inventory corrections reflecting de-stocking of the supply chain associated with difficult credit markets.

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Also, certain large customers offer house brands that compete with some of the Company’s product offerings as a lower-cost alternative.

To remain profitable and maintain or grow market share, the Company must maintain a competitive cost structure, develop new products and services, lead product innovation, successfully execute its platform design innovation efforts, respond to competitor innovations and enhance its existing products in a timely manner.

To remain profitable and maintain or grow market share, the Company must maintain a competitive cost structure, develop new products and services, lead product innovation, successfully execute its platform design innovation and brand prioritization efforts, respond to competitor innovations and enhance its existing products in a timely manner.

The Company also competes for labor, particularly in its manufacturing facilities, which can drive higher labor costs and adversely impact its ability to efficiently operate.

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

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

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

Operational Excellence, one of the Company's core imperatives, is a continuous operational improvement process applied to many aspects of the Company’s business such as procurement, quality in manufacturing, maximizing customer fill rates, driving annual net productivity, and other key business processes.

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

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

Price reductions taken by the Company in response to customer and competitive pressures, as well as price reductions and promotional actions taken to drive demand that may not result in anticipated sales levels, could also negatively impact its business.

The Company engages in restructuring actions, sometimes entailing shifts of production to low-cost countries, as part of its efforts to maintain a competitive cost structure.

If the Company does not execute restructuring actions well, its ability to meet customer demand may decline, or earnings may otherwise be adversely impacted.

Price reductions taken by the Company in response to customer and competitive pressures, as well as price reductions and marketing and promotional actions taken to drive demand that may not result in anticipated sales levels, could also negatively impact its business.

The Company engages in restructuring actions, sometimes entailing shifts of production to low-cost countries or consolidation of manufacturing sites, as part of its efforts to maintain a competitive cost structure.

If the Company does not execute restructuring actions effectively, its ability to meet customer demand may decline, or earnings may otherwise be adversely impacted.

Similarly, if such efforts to reform the cost structure are delayed relative to competitors or other market factors, the Company may lose market share and profits.

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A significant portion of the Company’s products are sold through home centers and mass merchant distribution channels in the U.S.

A consolidation of retailers in both North America and abroad has occurred over time and the increasing size

and importance of individual customers creates risk of exposure to potential volume or profitability loss.

The loss of certain larger home centers as customers would have a material adverse effect on the Company’s business.

Low demand for new products and the inability to develop and introduce new products at favorable margins could adversely impact the Company’s performance and prospects for future growth.

A consolidation of retailers in both North America and abroad has occurred over time and the increasing size and importance of individual customers creates risk of exposure to potential volume loss or reduced leverage in price negotiations, which could have an adverse effect on net sales and profitability.

Furthermore, the loss of certain larger home centers as customers would have a material adverse effect on the Company’s business.

Low demand for new products and the inability to develop and introduce new products at favorable margins and on target timelines could adversely impact the Company’s performance and prospects for future growth.

The Company’s competitive advantage is due in part to its ability to develop and introduce new products in a timely manner at favorable margins.

The uncertainties associated with developing and introducing new products, such as market demand, the unavailability of raw materials necessary for production of the Company's products and costs of development and production, may impede the successful development and introduction of new products on a consistent basis.

The uncertainties associated with developing and introducing new products, such as market demand, the

unavailability of raw materials necessary for production of the Company's products and costs of development and production, may impede the successful development and introduction of new products on a consistent or timely basis.

Introduction of new technology may result in higher costs to the Company than that of the technology replaced.

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Moreover, the ultimate success and profitability of the new products may depend on the Company’s ability to resolve technical and technological challenges in a timely and cost-effective manner, and to achieve manufacturing efficiencies.

The Company’s investments in productive capacity and commitments to fund advertising and product promotions in connection with these new products could erode profits if those expectations are not met.

The Company’s focus on innovation could result in additional investments to accelerate product development, productive capacity and advertising and product promotions in connection with the new innovative products.

If expectations of the return on these investments are not met, future earnings could be adversely affected.

The pace of technological change continues to accelerate and the Company's ability to react effectively to such change may present significant competitive risks.

The Company's future growth rate depends upon a number of factors, including its ability to (i) identify and evolve with emerging technological and broader industry trends in its target end-markets, including, but not limited to, artificial intelligence and machine learning;

(ii) defend its market share against an ever-expanding number of competitors, including many new and non-traditional competitors;

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To remain competitive, the Company will need to stay abreast of new technologies, require its employees to continue to learn and adapt to new technologies and be able to integrate them into current and future business models, products, services and processes, comply with evolving regulatory and operational requirements concerning the use of emerging technologies, and also guard against existing and new competitors disrupting the marketplace using such technologies.

For example, changing market trends, such as increased consumer demand for energy efficient products and technologies in response, in part, to climate change, require the Company to develop and adopt new innovations focused on electrification.

For example, changing market trends, such as increased consumer demand for energy efficient products and technologies in response, in part, to environmental concerns, require the Company to develop and adopt new innovations focused on electrification.

The Company may not adequately meet these demands or develop and adapt to the applicable new technologies focused on electrification, which could adversely affect the Company’s reputation and the consumer and customer demand for the Company’s products.

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

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

The Company has significant operations outside of the U.S., including manufacturing, sales and distribution facilities.

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

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The Company is committed to continuous productivity improvement and evaluating opportunities to reduce fixed costs, simplify or improve processes, and eliminate excess capacity.

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

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

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

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

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

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

The Company has undertaken restructuring and cost-reduction actions, such as restructuring of manufacturing and distribution facilities, including relocating production or component sources or closing facilities, workforce reductions and centralization of certain business support functions, the savings of which may be, and have been, mitigated by many factors, including economic weakness, inflation, competitive pressures, higher labor costs, production volume decline and decisions to increase costs in areas such as sales promotion or research and development above levels that were otherwise assumed.

In mid-2022, the Company initiated a Global Cost Reduction Program designed to achieve significant pre-tax run rate cost savings to, in part, help return adjusted gross margins to historical 35%+ levels.

While the Company completed this program as of the end of 2025, it plans to continue making significant investments in additional productivity improvements and supply chain footprint actions, and the success and anticipated cost savings from such efforts are not assured.

Failure to achieve, or delays in achieving, projected levels of efficiencies and cost savings from productivity investments and footprint actions, as well as other restructuring or cost reduction actions introduced by the Company, significant increases in the costs related to such actions, or unanticipated inefficiencies resulting from such investments (such as delays in ability to fulfil orders as a result of temporary constraints on production and storage of products) and other manufacturing and administrative reorganization actions in progress or contemplated, could adversely affect any anticipated cost savings as well as the Company’s reputation and financial position.

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

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

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

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The effects of extreme weather conditions could also place capacity constraints on the Company’s supply chain.

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

For example, rare earth minerals are critical to the design of the Company's products and some countries from which these materials are sourced have experienced severe weather.

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

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

As of December 28, 2024, the Company has approximately $7.9 billion of goodwill, approximately $2.3 billion of indefinite-lived trade names and approximately $1.4 billion of net definite-lived intangible assets.

As of January 3, 2026, the Company has approximately $7.3 billion of goodwill, approximately $2.3 billion of indefinite-lived trade names and approximately $0.8 billion of net definite-lived intangible assets.

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

The definite-lived intangible assets, including customer relationships, are amortized over their estimated useful lives and are evaluated for impairment when appropriate.

The definite-lived intangible assets, including customer relationships, are amortized

over their estimated useful lives and are evaluated for impairment when appropriate.

Impairment of intangible assets may be triggered by developments outside of the Company’s control, such as worsening economic conditions, technological change, intensified competition or other factors, which could have an adverse effect on the Company’s financial condition and results of operations.

During 2024, the Company recorded 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 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 an impairment charge of $168.4 million related to the Oil & Gas business.

During 2025, the Company recognized a $108.4 million pre-tax, non-cash impairment charge driven by updates to the Company’s brand prioritization strategy impacting the Lenox, Troy-Bilt, and Irwin trade names.

During 2024, the Company recorded a pre-tax impairment charge of $41.0 million related to the Lenox trade name and $25.5 million related to the Infrastructure business.

During 2023, the Company recorded pre-tax 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.

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.

Refer to Note S, Divestitures , for additional information on the 2024 divestiture of the Infrastructure business.

Strategic Risks

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A shortage of key employees, whether as a result of difficulty in recruiting, insufficient training or employee turnover, might jeopardize the Company’s ability to implement its business strategy, and changes in the key management team can result in loss of continuity, loss of accumulated knowledge, decreased morale, departure of other key employees, disruptions to the Company’s operations and inefficiency during transitional periods.

The Company’s acquisitions, exiting of businesses, divestitures, strategic investments and alliances and joint ventures, as well as general business reorganizations, may result in financial results that are different than expected and certain risks for its business and operations.

As part of the Company's strategy, it may acquire businesses or assets, divest businesses or assets, enter into strategic alliances and joint ventures, and make similar investments to further its business .

The Company’s exiting of businesses, divestitures, acquisitions, strategic investments and alliances and joint ventures, as well as general business reorganizations, may result in financial results that are different than expected and certain risks for its business and operations.

As part of the Company's strategy, it may divest businesses or assets, acquire businesses or assets, enter into strategic alliances and joint ventures, and make similar investments to further its business .

Risks associated with such transactions include the following, any of which could adversely affect the Company's financial results, including its effective tax rate:

• the failure to identify the most suitable target candidates for acquisitions and to close on such acquisitions within desired time frames, at a reasonable cost and on desirable terms;

• difficulty in finding buyers or alternative exit strategies in connection with divestitures in a timely manner, and on price and terms that are acceptable to the Company;

• the failure to identify the most suitable target candidates for acquisitions and to close on such acquisitions within desired time frames, at a reasonable cost and on desirable terms;

• the ability to conduct and evaluate the results of due diligence with respect to acquisitions and investment transactions, including the failure to identify significant issues with a target company’s product quality, financial disclosures, accounting practices or internal control deficiencies;

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• the diversion of Company management’s attention and other resources;

impairment of acquired goodwill and other intangible assets, and increasing the Company's expenses and working capital requirements;

• incurring significant restructuring charges and amortization expense, assuming liabilities, ongoing or new lawsuits related to the transaction or otherwise or pre-closing regulatory violations of the acquired business, potential impairment of acquired goodwill and other intangible assets, and increasing the Company's expenses and working capital requirements;

• continued post-closing involvement in a divested business, such as through continuing equity ownership, guarantees, indemnities and other financial obligations, or transition services arrangements;

• increased volatility and market vulnerability because of a more focused portfolio following completion of divestitures and investment transactions;

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

The Company has taken steps to streamline its portfolio and focus on its core Tools & Outdoor and Engineering Fastening businesses.

As a result of recent divestitures, the Company may be subject to increased volatility and vulnerability to market conditions due to its more focused portfolio.

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

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Industry and Economic Risks

The Company’s results of operations could be negatively impacted by inflationary or deflationary economic conditions which could affect the ability to obtain raw materials, component parts, freight, energy, labor and sourced finished goods in a timely and cost-effective manner, as well as lead to changes in interest rate environments which impact its cost of funds, the general strength of the economy and demand for its products in the market.

The Company’s products are manufactured using both ferrous and non-ferrous metals including, but not limited to, steel, zinc, copper, brass, aluminum, and nickel.

Additionally, the Company uses other commodity-based materials for components and packaging including, but not limited to, plastics, resins, wood and corrugated products.

The Company’s cost base also reflects significant elements for freight, energy and labor.

The Company also sources certain finished goods directly from vendors.

If the Company is unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be adversely affected.

Conversely, in the event there is deflation, the Company may experience pressure from its customers to reduce prices, and there can be no assurance that the Company would be able to reduce its cost base (through negotiations with suppliers or other measures) to offset any such price concessions which could adversely impact results of operations and cash flows.

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

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

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As described in Note G, Long-Term Debt and Financing Arrangements , of the Notes to Consolidated Financial Statements in Item 8 , the Company has a five-year $2.25 billion committed credit facility and a $1.25 billion syndicated 364-day credit agreement.

No amounts were outstanding against any of these facilities on December 28, 2024.

As of December 28, 2024, the Company had $6.2 billion principal amount of indebtedness.

No amounts were outstanding against any of these facilities on January 3, 2026.

As of January 3, 2026, the Company had $5.3 billion principal amount of indebtedness.

The instruments and agreements governing certain of the Company’s current indebtedness contain requirements or restrictive covenants that include, among other things:

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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.

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 applicable adjustment addbacks, as defined in the 364-day credit agreement, incurred in any four consecutive fiscal quarter periods, provided that the sum of the applicable adjustment addbacks incurred on or before the Company’s second fiscal quarter of 2026 may not exceed $250 million in the aggregate.

The Company was compliant with its debt covenant requirements during its 2025 fiscal year.

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It is therefore possible that the Company may be required to make higher cash contributions to the plans in future years which would reduce the cash available for other business purposes, and that the Company will have to recognize a significant pension liability adjustment which would decrease the net assets of the Company and result in higher expense in future years.

The fair value of the defined benefit plan assets on December 28, 2024 was approximately $1.7 billion.

The fair value of the defined benefit plan assets on January 3, 2026 was approximately $1.7 billion.

Legal, Tax, Regulatory and Compliance Risks

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

The use of artificial intelligence in the development of the Company's products and services could also impact its intellectual property protections.

The Company may be unaware of intellectual property rights of others that may cover some of its technology, brands, or products.

Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming and could divert the attention of the Company’s management and key personnel from its business operations.

Allegations of intellectual property infringement may also require the Company to enter into costly license agreements or necessitate redesigns of its products at substantial cost.

The Company also may be subject to significant damages or injunctions against development and sale of certain products.

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

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

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

New vulnerabilities may be introduced as cybersecurity threats continue to evolve and if the Company or its third-party vendors increase their use of, or reliance on, emerging technologies, such as generative artificial intelligence and machine learning.

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

The Company has invested and continues to invest in risk management and information security and data privacy measures it believes are appropriate to protect its systems and data, including employee and critical service

provider training, organizational investments, incident response plans, tabletop exercises, technical defenses and defensive product software designs.

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

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

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Additionally, it is possible for security vulnerabilities or a cybersecurity threat to remain undetected for an extended time period, and the prioritization of decisions with respect to security measures and remediation of known vulnerabilities undertaken by the Company, and the vendors and other third parties upon which it relies, may be inadequate to protect against or fully mitigate cybersecurity threats.

The potential consequences of a material cybersecurity incident and its effects include financial loss, reputational damage, litigation with third parties, theft of intellectual property, fines levied by both U.S.

and international government agencies, diminution in the value of the Company's investment in research, development and engineering, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect the Company's competitiveness and results of operations.

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

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

For example, many countries around the world maintain a broad array of requirements for handling personal data and product data, including the public disclosure of significant data breaches.

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

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

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

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

The use of artificial intelligence in the Company’s business operations, products and services could expose it to legal and compliance risks as well as brand or reputational harm and competitive harm, any of which may adversely affect its results of operations.

The Company’s businesses increasingly leverage artificial intelligence solutions to optimize their operations, improve customer experiences, and enhance their products and services.

While the Company believes the use of artificial intelligence can offer significant benefits and opportunities, it also introduces a range of risks and challenges and there can be no assurances that the use of such technology will result in improved operational efficiencies, cost reductions or other anticipated benefits.

The regulatory landscape surrounding artificial intelligence is rapidly evolving and the Company’s use of artificial intelligence may be subject to new legal or regulatory requirements, which may impose prohibitions or additional compliance burdens on the Company.

For example, the Company’s artificial intelligence efforts may subject it to heightened compliance and legal as well as other risks related to technology integration, accuracy, program bias, data sourcing, intellectual property infringement or misappropriation, data privacy, and cybersecurity, among others.

Moreover, the Company may experience brand or reputational harm if it fails to appropriately manage its use of artificial intelligence in compliance with applicable laws and regulations or successfully execute on strategies leveraging artificial intelligence.

Additionally, the Company’s competitors or other third parties may incorporate artificial intelligence into their products, services or operations more quickly, cost-effectively or successfully than the Company, or develop superior products and services with the aid of artificial intelligence, which could impair the Company’s ability to compete effectively and adversely affect its results of operations.

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

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The Company is subject to income taxation in the U.S.

as well as numerous foreign jurisdictions.

and numerous foreign jurisdictions.

Significant judgment is required in determining the Company’s worldwide income tax provision and accordingly there are many transactions and computations for which the final income tax determination is uncertain.

The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes.

The Company periodically assesses its liabilities and contingencies for all tax years still subject to

audit based on the most currently available information, which involves inherent uncertainty.

The Company is routinely audited by income tax authorities in many tax jurisdictions.

Although management believes the recorded tax estimates are reasonable, the ultimate outcome of any audit (or related litigation) could differ materially from amounts reflected in the Company’s income tax accruals.

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

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

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

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

Environmental legislation or regulations and changing market trends in response to climate change and other environmental related concerns may adversely affect the Company's business.

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

Increased international, regional, state and/or federal requirements or other stakeholder expectations has mandated, and could mandate in the future, more restrictive or expansive standards or more prescriptive and expansive reporting of environmental, social and governance metrics than the voluntary commitments and reporting the Company adopted.

In addition, any such requirements or other stakeholder expectations could require changes to be implemented on a more accelerated time frame than the Company anticipates or could result in changes to the Company’s business operations, supply chain and manufacturing processes.

A number of governmental bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to the potential effect of climate change, protection of the environment, human health and safety, and water and energy efficiency.

Such legislation or regulation has increased, and may continue to increase, the Company’s compliance burdens and associated costs, including potential increased costs passed along from its suppliers.

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

The Company is routinely audited by income tax authorities in various jurisdictions, and while management believes the recorded tax estimates are reasonable, the ultimate outcome of any audit (or related litigation) could differ materially from amounts reflected in the Company’s income tax

Changes in tax laws, regulations, or interpretations and applications of such laws and regulations, including the implementation of global minimum tax rules by the various taxing jurisdictions applicable to multi-national corporations, could have a material impact on the Company’s worldwide income tax provision, cash tax liability, and effective tax rate.

Changing legislation, regulations, and market trends in response to climate change and other environmental-related concerns may adversely affect the Company's business.

A number of governmental bodies have adopted, revised, or proposed legislation and regulation in response to the potential effects of climate change, protection of the environment, human health and safety, and water and energy efficiency.

There continues to be a lack of consistency and harmony in such legislation and regulation in the regions in which the Company operates, which creates economic and regulatory uncertainty.

International, regional, state and/or federal requirements or other stakeholder expectations have mandated, and could mandate in the future, different standards, timing, or reporting of environmental, social and governance metrics compared to the Company's voluntary commitments and reporting.

Such legislation or regulation has also increased, and may continue to increase, the Company’s compliance burdens and associated costs, including potential increased costs passed along from its suppliers.

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

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

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

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

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

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

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

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

Any legal proceedings, claims, disputes or investigations, whether with or without merit, can be time consuming and expensive to defend and can divert management’s attention and resources.

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

Some of the Company’s products incorporate substances that are regulated in some jurisdictions in which it conducts manufacturing operations.

Some of the Company’s products incorporate substances that are regulated in some jurisdictions in which it conducts manufacturing operations or distributes its products.

The Company has been, and could be in the future, subject to liability if it does not comply with these regulations.

In addition, the Company is currently being, and may in the future be, held responsible for remedial investigations and clean-up costs resulting from the discharge of hazardous substances into the environment, including sites that have never been owned or operated by the Company but at which it has been identified as a potentially responsible party under federal and state environmental laws and regulations.

Changes in environmental and other laws and regulations in both domestic and foreign

jurisdictions could adversely affect the Company’s operations due to increased costs of compliance and potential liability for non-compliance.

Changes in environmental and other laws and regulations in both domestic and foreign jurisdictions could adversely affect the Company’s operations due to increased costs of compliance and potential liability for non-compliance.

The Company manufactures products and performs various services that create exposure to product and professional liability claims and litigation.

The failure of the Company’s products and services to be properly manufactured, configured, installed, designed or delivered, resulting in personal injuries, property damage or business interruption could subject the Company to claims for damages.

claims for damages.

The Company has defended, and is currently defending, product liability claims, some of which have resulted in settlements or monetary judgments against the Company.

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The Company’s products could be recalled.

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

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

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

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

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

The Company's product development processes include tollgates and milestones that incorporate product safety and quality reviews and extensive testing at various stages to identify potential safety and operational hazards for customers and end users.

Product labeling and marking reviews are also conducted.

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

The Company has also been, and may in the future be, subject to regulatory requirements and penalties concerning the Company’s products.

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Legal Proceedings in Part I of this Annual Report on Form 10-K for further information about legal proceedings involving recalled products.

The Company’s sales to government customers exposes it to business volatility and risks, including government budgeting cycles and appropriations, procurement regulations, governmental policy shifts, early termination of contracts, audits, investigations, sanctions and penalties.

The Company derives a portion of its revenues from contracts with the U.S.

government, state and local governments and foreign governments.

Government contractors must comply with specific procurement regulations and other requirements.

These requirements, although customary in government contracts, could impact the Company’s performance and compliance costs, including limiting or delaying the Company’s ability to share information with its business partners, customers and investors, which may negatively impact the Company’s business and reputation.

government may demand contract terms that are less favorable than standard arrangements with private sector customers and may have statutory, contractual or other legal rights to terminate contracts with the Company.

For example, the U.S.

government may have contract clauses that permit it to terminate any of the Company’s government contracts and subcontracts at its convenience, and procurement regulations permit termination for default based on the Company’s performance.

In addition, changes in U.S.

government budgetary priorities could lead to changes in the procurement environment, affecting availability of government contracting or funding opportunities.

Changes in government procurement policy, priorities, regulations, technology initiatives and requirements, and/or contract award criteria may negatively impact the Company’s potential for growth in the government sector.

Changes in government cybersecurity and system requirements could negatively impact the Company’s eligibility for the award of future contracts, negatively impacting the Company’s business and reputation.

Government contracts laws and regulations impose certain risks, and government contracts are generally subject to audits, investigations and approval of policies, procedures and internal controls for compliance with procurement regulations and applicable law.

If violations of law are found, they could result in civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.

Each of these factors could negatively impact the Company’s business, results of operations, financial condition, and reputation.

The Company’s results of operations and earnings may not meet guidance, planning assumptions or expectations.

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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 1A. Risk Factors