I will now turn the call over to the Vice President of Investor Relations, Dennis Lange. Mr. Lange, you may begin. We are actioning significant cost efficiencies to make necessary improvements to the profitability of outdoor in response to the current market demand and refining the aerospace fastener product line cost base to drive significant growth leverage as widebody plane production continues to recover. Now turning to the product lines. Power tools was up 1 point organically led by pro-driven growth i ...

Exhibit 99.2 STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars) Exhibit 99.2 STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts) | | | | FIRST QUARTER | | | --- | --- | --- | --- | --- | | | | 2024 | | 2023 | | NET SALES | $ | 3,869.5 | $ | 3,931.8 | | COSTS AND EXPENSES | | | | | | Cost of sales | | 2,761.0 | | 3,096.3 | | Gross profit | | 1,1 ...

[Part I](index=4&type=section&id=PART%20I) [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Stanley Black & Decker, a global provider of tools and fastening solutions, is undergoing a business transformation to simplify its portfolio, drive growth, and restore gross margins, with 2023 revenues of $15.8 billion from its Tools & Outdoor and Industrial segments - The company is a global provider of hand tools, power tools, outdoor products, and engineered fastening solutions, with 2023 consolidated annual revenues of **$15.8 billion**[12](index=12&type=chunk) - A business transformation was initiated in mid-2022, which includes a **$2.0 billion** Global Cost Reduction Program through 2025, aimed at returning adjusted gross margins to historical levels of **35%+**[14](index=14&type=chunk)[16](index=16&type=chunk) - The company has reshaped its portfolio through divestitures of its Convergent Security Solutions (CSS), Mechanical Access Solutions (MAS), and Oil & Gas businesses in 2022, and has a pending agreement to sell its Infrastructure business. This is part of a strategic commitment to focus on its core markets[13](index=13&type=chunk) Geographic Revenue Distribution (2023) | Region | Percentage of Revenue | | :--- | :--- | | United States | 62% | | Europe | 16% | | Emerging Markets | 12% | | Canada | 5% | [Description of the Business](index=5&type=section&id=Description%20of%20the%20Business) The company operates in two segments: Tools & Outdoor, which generated $13.4 billion (85%) of 2023 revenue, and Industrial, contributing $2.4 billion (15%), encompassing Engineered Fastening and Infrastructure businesses 2023 Revenue by Business Segment | Segment | 2023 Revenue (Billion USD) | Percentage of Total Revenue | | :--- | :--- | :--- | | Tools & Outdoor | $13.4 | 85% | | Industrial | $2.4 | 15% | - The Tools & Outdoor segment is a worldwide leader, featuring brands such as DEWALT®, CRAFTSMAN®, STANLEY®, BLACK+DECKER®, and CUB CADET®[21](index=21&type=chunk) - The Industrial segment's Engineered Fastening business is a global leader in highly engineered, application-based solutions for industries like automotive, manufacturing, and aerospace[27](index=27&type=chunk) [Other Information](index=6&type=section&id=Other%20Information) The company faces intense competition, relies on major customers like Lowe's and Home Depot (27% of 2023 sales), improved working capital with 4.2 inventory turns, manages a global supply chain, holds patents, and maintains $124.5 million in environmental remediation reserves - Lowe's and The Home Depot are major customers, accounting for approximately **14%** and **13%** of consolidated net sales in 2023, respectively[31](index=31&type=chunk) - Working capital turns improved to **4.2** at the end of 2023, up from **3.5** in 2022, driven by inventory optimization efforts that reduced inventory by **$1.9 billion** from its peak in Q2 2022[32](index=32&type=chunk) - As of December 30, 2023, the company had reserves of **$124.5 million** for environmental remediation activities, with a reasonably possible range of costs from **$79.9 million** to **$226.8 million**[37](index=37&type=chunk) [Human Capital Management](index=8&type=section&id=Human%20Capital%20Management) As of December 30, 2023, Stanley Black & Decker employed approximately 50,500 people globally, with a human capital strategy focused on talent, DEI, and well-being, evidenced by diverse new hires and board composition, and supported by Employee Resource Groups and governance oversight - The company had approximately **50,500** employees in **59** countries as of December 30, 2023, with **36%** located in the U.S[42](index=42&type=chunk) Board of Directors and CEO Staff Diversity (2023 vs 2022) | Group | Metric | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Board of Directors** | Women | 45% | 33% | | | Racially/Ethnically Diverse | 18% | 17% | | **CEO & Direct Staff** | Women Leaders | 25% | 42% | | | Racially/Ethnically Diverse Leaders | 25% | 25% | - The company has **nine** Employee Resource Groups (ERGs) to support various dimensions of diversity, including Abilities, African Ancestry, Asian Heritage, and Pride & Allies[52](index=52&type=chunk) - Governance and oversight of human capital strategy are led by the CEO and the management Executive Committee, with regular reviews by the Board and its Compensation & Talent Development Committee[58](index=58&type=chunk) [Risk Factors](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces diverse risks including strategic (talent, M&A), operational (supply chain, customer reliance, competition), economic (inflation, currency, geopolitics), financial (indebtedness, impairment), and legal/compliance (cybersecurity, privacy, environmental, product liability) - **Strategic Risk:** The inability to recruit, retain, and develop key employees and execute effective succession planning could negatively affect business results[65](index=65&type=chunk) - **Operational Risk:** The business is subject to risks from sourcing and manufacturing, including global supply chain constraints, reliance on imports, and maintaining appropriate inventory levels. The two largest customers comprised approximately **27%** of 2023 consolidated net sales[70](index=70&type=chunk)[78](index=78&type=chunk) - **Financial Risk:** The company has significant indebtedness (**$7.3 billion** as of Dec 30, 2023) with covenants that must be maintained. It also has substantial goodwill (**$8.0 billion**) and intangible assets that are subject to impairment risk[101](index=101&type=chunk)[110](index=110&type=chunk) - **Legal & Compliance Risk:** Cybersecurity incidents, evolving data privacy laws (e.g., GDPR), complex global tax regulations, and climate change legislation pose significant risks. The company is also exposed to product liability claims and environmental remediation costs[117](index=117&type=chunk)[121](index=121&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that it has no unresolved staff comments from the SEC - None[138](index=138&type=chunk) [Cybersecurity](index=23&type=section&id=ITEM%201C.%20CYBERSECURITY) The company maintains a comprehensive cybersecurity program, overseen by the Audit Committee and led by the CIO and CISO, integrating risk management, incident response, training, and third-party risk management, with no material impact to date - Primary oversight for cybersecurity is delegated to the Audit Committee of the Board of Directors, which receives regular updates from the CIO and CISO[140](index=140&type=chunk)[141](index=141&type=chunk) - The company's CISO, with over **20 years** of experience, leads the Cyber Security Office and is responsible for the cybersecurity risk management program, reporting to the CIO[143](index=143&type=chunk)[144](index=144&type=chunk) - A Cybersecurity Incident Response Plan (IRP), leveraging NIST guidance, is in place to coordinate the investigation, containment, and mitigation of incidents[146](index=146&type=chunk) - The company states that risks from cybersecurity threats have not materially affected the company to date, and it does not believe such risks are reasonably likely to have a material effect in the long term[149](index=149&type=chunk) [Properties](index=25&type=section&id=ITEM%202.%20PROPERTIES) As of December 30, 2023, the company operates 121 significant facilities (over 100,000 sq. ft.) totaling approximately 36 million square feet across 21 states and 22 countries, which are in good condition and adequate for operations Number of Significant Facilities (>100,000 sq. ft.) by Segment | Segment | Owned | Leased | Total | | :--- | :--- | :--- | :--- | | Tools & Outdoor | 49 | 46 | 95 | | Industrial | 15 | 8 | 23 | | Corporate | 2 | 1 | 3 | | **Total** | **66** | **55** | **121** | - The combined size of these **121** significant facilities is approximately **36 million** square feet[151](index=151&type=chunk) [Legal Proceedings](index=26&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company faces significant legal matters including a potential **$32 million** CPSC civil penalty for recall reporting, ongoing FCPA investigations by the DOJ and SEC, and a class action lawsuit with derivative actions alleging misleading statements about consumer demand - **Government Investigations:** The Consumer Product Safety Commission (CPSC) has recommended a civil penalty of approximately **$32 million** for alleged untimely reporting related to product recalls[152](index=152&type=chunk) - **FCPA Matters:** The company voluntarily disclosed potential FCPA compliance issues in its international operations to the DOJ and SEC in January 2023 and is cooperating with their investigations[153](index=153&type=chunk) - **Class Action Litigation:** A class action lawsuit (Rammohan v. Stanley Black & Decker) was filed, alleging misleading statements regarding consumer demand. The company filed a motion to dismiss the complaint[156](index=156&type=chunk) - **Derivative Actions:** Several derivative complaints have been filed based on the same allegations as the Rammohan class action, and these have been stayed pending the outcome of the motion to dismiss in that case[157](index=157&type=chunk)[158](index=158&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[161](index=161&type=chunk) [Part II](index=28&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock (SWK) trades on the NYSE, with a 56th consecutive annual dividend increase in 2023, but its five-year total shareholder return lagged market indices, and no shares were repurchased in Q4 2023, with **20 million** shares remaining authorized - The company's common stock (SWK) is listed on the New York Stock Exchange[164](index=164&type=chunk) - In July 2023, the company raised its quarterly dividend, marking the **56th** consecutive annual increase[164](index=164&type=chunk) - No common shares were repurchased during the fourth quarter of 2023. A share repurchase program for up to **20 million** shares, approved in April 2022, remains in place with no expiration date[165](index=165&type=chunk)[166](index=166&type=chunk) 5-Year Cumulative Total Return Comparison | Group | 2018 | 2023 | | :--- | :--- | :--- | | Stanley Black & Decker | $100.00 | $93.18 | | S&P 500 Index | $100.00 | $208.83 | | S&P 500 Capital Goods Index | $100.00 | $199.85 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2023, Stanley Black & Decker's net sales decreased **7%** to **$15.8 billion**, resulting in a **$281.7 million** net loss, while operating cash flow significantly improved to **$1.2 billion** due to inventory reduction, with 2024 projections for diluted EPS of **$1.60-$2.85** and free cash flow of **$0.6-$0.8 billion** Consolidated Financial Highlights (2023 vs 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Sales | $15.78B | $16.95B | | Gross Profit | $3.93B | $4.28B | | Gross Margin (GAAP) | 24.9% | 25.3% | | Net (Loss) Earnings from Continuing Operations | ($281.7M) | $170.1M | | Diluted (Loss) EPS from Continuing Operations | ($1.88) | $1.06 | - The company is executing a **$2.0 billion** Global Cost Reduction Program through 2025 to simplify the organization and optimize the supply chain, targeting **35%+** adjusted gross margins[184](index=184&type=chunk) - Free cash flow was an inflow of **$853 million** in 2023, a significant turnaround from an outflow of **$1.99 billion** in 2022, driven by a **$1.12 billion** reduction in inventory[250](index=250&type=chunk)[252](index=252&type=chunk) - The 2024 outlook projects diluted EPS to be between **$1.60** and **$2.85** on a GAAP basis, and free cash flow to be between **$0.6 billion** and **$0.8 billion**[248](index=248&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) In 2023, consolidated net sales decreased **7%** to **$15.8 billion** due to volume decline, with GAAP gross margin at **24.9%**; Tools & Outdoor sales fell **7%** to **$13.4 billion** with a **5.1%** profit margin, while Industrial sales decreased **4%** to **$2.4 billion** but improved profit margin to **11.0%** Net Sales Change (2023 vs 2022) | Component | Percentage Change | | :--- | :--- | | Price | +1% | | Volume | -7% | | Divestiture (Oil & Gas) | -1% | | **Total Net Sales** | **-7%** | Segment Performance (2023 vs 2022) | Segment | Net Sales (2023) | % Change from 2022 | Segment Profit % (2023) | Segment Profit % (2022) | | :--- | :--- | :--- | :--- | :--- | | Tools & Outdoor | $13.4B | -7% | 5.1% | 6.7% | | Industrial | $2.4B | -4% | 11.0% | 9.4% | - The Tools & Outdoor segment decline was attributed to lower consumer outdoor and DIY market demand[234](index=234&type=chunk) - The Industrial segment's performance was supported by a **6%** organic revenue increase in Engineered Fastening, with double-digit growth in aerospace and automotive[238](index=238&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=40&type=section&id=Financial%20Condition%2C%20Liquidity%2C%20and%20Capital%20Resources) The company's liquidity improved in 2023 with **$1.19 billion** operating cash flow (vs. **$1.46 billion** outflow in 2022) driven by **$1.12 billion** inventory reduction, while total indebtedness stood at **$7.3 billion** and credit ratings were downgraded but remained investment grade Cash Flow Summary (in Billions) | Cash Flow | 2023 | 2022 | | :--- | :--- | :--- | | From Operating Activities | $1.19 | ($1.46) | | From Investing Activities | ($0.33) | $3.57 | | From Financing Activities | ($0.82) | ($1.97) | - As of December 30, 2023, total debt was **$7.3 billion**, consisting of **$6.2 billion** in long-term debt and **$1.1 billion** in commercial paper borrowings[101](index=101&type=chunk) - The company maintains a **$2.5 billion** five-year credit facility and a **$1.5 billion** 364-day credit agreement, which serve as liquidity backstops for its commercial paper program. No amounts were drawn on these facilities at year-end[265](index=265&type=chunk)[266](index=266&type=chunk) - In 2023, S&P, Fitch, and Moody's downgraded the company's credit ratings, though they remain investment grade (S&P A-, Fitch BBB+, Moody's Baa3)[260](index=260&type=chunk) [Critical Accounting Estimates](index=48&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include goodwill and intangible asset valuation, with a **$124.0 million** impairment charge in Q3 2023, defined benefit pension obligations sensitive to discount rates and asset returns, environmental remediation liabilities of **$125 million**, and income taxes requiring judgment on deferred tax asset realizability - **Goodwill and Intangibles:** The company has **$8.0 billion** in goodwill and **$4.0 billion** in intangible assets. A **$124.0 million** pre-tax impairment charge was recorded on the Irwin and Troy-Bilt trade names in Q3 2023[294](index=294&type=chunk)[301](index=301&type=chunk) - **Defined Benefit Obligations:** The valuation of pension obligations is sensitive to assumptions like discount rates (**5.04%** for U.S. plans in 2023) and expected return on assets (**6.70%** for U.S. plans in 2023). A **25 basis point** reduction in the discount rate would increase the projected benefit obligation by approximately **$53 million**[303](index=303&type=chunk)[304](index=304&type=chunk) - **Environmental:** The company has accrued **$125 million** for environmental remediation costs as of December 30, 2023, with a reasonably possible range of loss estimated between **$80 million** and **$227 million**[307](index=307&type=chunk) - **Income Taxes:** Significant judgment is required for the worldwide income tax provision. A valuation allowance of **$1.05 billion** is recorded against deferred tax assets deemed not more likely than not to be realized[312](index=312&type=chunk)[595](index=595&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks from foreign currency (Euro, CAD, GBP, etc.), with a hypothetical **10%** adverse movement impacting pre-tax earnings by **$217 million**, interest rates (commercial paper), and commodity prices (steel, zinc, resin), managed primarily through pricing and procurement - The company's main currency exposures are to the Euro, Canadian Dollar, British Pound, Australian Dollar, Brazilian Real, Chinese Renminbi, and Taiwan Dollar[283](index=283&type=chunk) - A hypothetical **10%** adverse movement in exchange rates is estimated to have a combined translational and transactional negative impact of approximately **$217 million** on pre-tax earnings[284](index=284&type=chunk) - Interest rate risk is primarily from the commercial paper program; a hypothetical **10%** increase in associated interest rates would result in an incremental pre-tax loss of approximately **$5 million**[286](index=286&type=chunk) - Commodity price exposures (e.g., steel, copper, resin) are generally not hedged with derivatives but are managed through pricing actions and procurement initiatives[287](index=287&type=chunk) [Financial Statements and Supplementary Data](index=51&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section provides an index to the company's audited financial statements and financial statement schedule, which are incorporated by reference - This item indexes the Financial Statements and Financial Statement Schedule, which are included from page **57** onwards in the report[322](index=322&type=chunk)[344](index=344&type=chunk) - Schedule II — Valuation and Qualifying Accounts is included in this section[344](index=344&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=51&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[323](index=323&type=chunk) [Controls and Procedures](index=52&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) As of December 30, 2023, management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting, based on the COSO framework, were effective, with no material changes in Q4 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 30, 2023[327](index=327&type=chunk) - Management assessed internal control over financial reporting based on the COSO framework and concluded it was effective as of December 30, 2023[326](index=326&type=chunk) - No changes occurred during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[328](index=328&type=chunk) [Other Information](index=52&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports that during the fourth quarter of 2023, no director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or Section 16 officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement in the fourth quarter of 2023[329](index=329&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=52&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company - Not applicable[330](index=330&type=chunk) [Part III](index=53&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=53&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE%20OF%20THE%20REGISTRANT) Information on directors and corporate governance is incorporated by reference from the 2024 proxy statement, while executive officer details are in Part I, and the Code of Business Ethics is available online - Most information required by this item is incorporated by reference from the company's definitive proxy statement[331](index=331&type=chunk) - The Code of Business Ethics is available on the company's website, and any amendments or waivers for senior officers will be posted there[332](index=332&type=chunk) [Executive Compensation](index=54&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information required for this item, including the Compensation Discussion & Analysis and details on executive and director compensation, is incorporated by reference from the company's 2024 proxy statement - All information required by this item is incorporated by reference from the company's definitive proxy statement[334](index=334&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=54&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership information is incorporated by reference from the 2024 proxy statement; as of December 30, 2023, **7,883,446** securities were issuable under approved equity plans at a weighted-average exercise price of **$133.22**, with **7,231,476** additional securities available Equity Compensation Plan Information (as of Dec 30, 2023) | Plan Category | Securities to be Issued (A) | Weighted-Average Exercise Price of Options (B) | Securities Available for Future Issuance (C) | | :--- | :--- | :--- | :--- | | Approved by security holders | 7,883,446 | $133.22 | 7,231,476 | | Not approved by security holders | — | — | — | | **Total** | **7,883,446** | **$133.22** | **7,231,476** | - The number of securities to be issued includes **5,490,848** shares underlying stock options and **2,222,052** shares underlying restricted stock units and performance awards[337](index=337&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=56&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information required for this item concerning related person transactions and director independence is incorporated by reference from the company's 2024 proxy statement - All information required by this item is incorporated by reference from the company's definitive proxy statement[339](index=339&type=chunk) [Principal Accountant Fees and Services](index=56&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information required for this item regarding principal accountant fees and services is incorporated by reference from the company's 2024 proxy statement - All information required by this item is incorporated by reference from the company's definitive proxy statement[340](index=340&type=chunk) [Part IV](index=56&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedule](index=56&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULE) This section provides an index to the financial statements, financial statement schedule (Schedule II - Valuation and Qualifying Accounts), and all exhibits filed as part of the Form 10-K - This item provides an index to the financial statements and exhibits filed with the report[341](index=341&type=chunk) - Schedule II — Valuation and Qualifying Accounts is included in this section[344](index=344&type=chunk) [Form 10-K Summary](index=58&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable to the company - Not applicable[348](index=348&type=chunk)

Stanley Black & Decker, Inc. (NYSE:SWK) Q4 2023 Earnings Conference Call February 1, 2024 8:00 AM ET Company Participants Dennis Lange - VP, IR Don Allan - President and CEO Chris Nelson - COO, EVP and President, Tools & Outdoor Pat Hallinan - EVP and CFO Conference Call Participants Julian Mitchell - Barclays Tim Wojs - Baird Chris Snyder - UBS Rob Wertheimer - Melius Research Nigel Coe - Wolfe Research Adam Baumgarten - Zelman & Associates Michael Rehaut - JPMorgan Eric Bosshard - Cleveland Research Opera ...

Fourth Quarter And Full Year 2023 Overview F e b r u a r y 1 , 2 0 2 4 StanleyBlack&Decker For those who make the world." Participants Don Allan President & CEO Chris Nelson COO, Executive Vice President And President, T&O Pat Hallinan Executive Vice President, CFO Dennis Lange Vice President, Investor Relations 4Q And FY 2023 Earnings Call | 2 Cautionary Statement | --- | --- | |----------------------------------------------------------------------------------------|-------| | | | | Certain Statements Cont ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from [ ] to [ ] Commission File Number 001-05224 STANLEY BLACK & DECKER, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CT 06-0548860 (STATE OR OTHER JURISDI ...

O c t o b e r 2 7 , 2 0 2 3 3Q 2023 Segment Overview | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------|-------|---------------|-------|-------|----------------------------|-------|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | $M | Revenue | | | ...

Financial Data and Key Metrics Changes - Revenue for the third quarter was $4 billion, down from the prior year primarily due to lower Outdoor and DIY volume [8][11] - Adjusted gross margin rose to 27.6%, a 400-basis-point sequential improvement and 290 basis points favorable compared to last year [32][53] - Adjusted diluted EPS for the quarter was $1.05, better than planned, leading to an increase in full-year adjusted diluted EPS guidance to a range of $1.10 to $1.40 [11][56] Business Line Data and Key Metrics Changes - Industrial revenue declined 4% year-over-year, impacted by lower volume and a 3-point impact from the divestiture of the Oil and Gas business [12] - Engineered Fastening organic revenues increased by 6%, with aerospace growth of 29% and auto growth of 9% [13] - Tools and Outdoor revenue was $3.4 billion, down 5% organically due to lower consumer Outdoor and DIY market demand, with Outdoor down 23% [39] Market Data and Key Metrics Changes - Emerging markets grew mid-single digits organically, excluding the impact from the exit of the Russia business, with Latin America showing notable strength [17] - U.S. retail point-of-sale for Tools and Outdoor products remained above pre-pandemic levels, supported by professional demand [31][69] - European organic revenue was down 3%, with double-digit growth in the U.K. and low single-digit growth in the Nordics [40] Company Strategy and Development Direction - The company is focused on delivering best-in-class product innovation, implementing cost efficiency measures, and driving share gain in core markets [7][10] - A strategic business transformation is underway, with a goal to restore adjusted gross margins to historical levels of 35% or more [45][50] - The company aims to achieve organic revenue growth of 2 to 3 times the market [22][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate uncertain market conditions and improve margins [10][34] - The outlook for 2024 anticipates continued gross margin expansion and cash generation, with a focus on investing for growth [92][106] - Management acknowledged the dynamic market environment, with potential impacts from consumer behavior shifts and macroeconomic factors [140][153] Other Important Information - The Global Cost Reduction Program delivered $215 million of pretax run rate savings in the quarter, on track for $2 billion run rate savings by the end of 2025 [9][78] - The company reduced inventory by approximately $300 million in the quarter, contributing to $360 million of free cash flow generation [33][80] - The company is committed to investing $30 million to grow trade skills by 2027 through initiatives like the DEWALT Grow the Trades Grant [20] Q&A Session Summary Question: Insights on margins and EPS guidance - Management indicated that gross margins improved due to cost savings from the transformation program, with expectations for continued improvement [62][128] Question: Reinvestment for growth and promotional activities - The company plans to reinvest in growth, focusing on professional end-user products and returning to traditional promotional levels [96][97] Question: Updated guidance and factors driving performance - The strong third quarter performance was driven by gross margin strength and effective SG&A management, with a reiteration of free cash flow guidance [100][102] Question: Market share growth in a flat macro environment - Management believes they can grow market share even in a mixed macro environment, focusing on key brands and strategic investments [108][138] Question: Pricing dynamics and competitive environment - The company noted disciplined pricing in the market, with no significant changes in competitive dynamics affecting their strategy [163][165]

Financial Data and Key Metrics Changes - The company reported a second quarter revenue of $4.2 billion, down from the previous year due to lower consumer Outdoor and DIY volume, as rising interest rates have tempered consumer spending [70] - Adjusted gross margin for the quarter was 23.6%, a sequential improvement of 50 basis points, marking the second consecutive quarter of gross margin expansion [70][51] - The company narrowed its full-year adjusted diluted EPS guidance range to $0.70 to $1.30 from a previous range of zero to $2 [85] Business Line Data and Key Metrics Changes - Tools and Outdoor total revenue was $3.5 billion, down 5% organically versus the prior year, with favorable price realization offset by volume decline [32] - The Industrial business segment achieved 3% organic growth in the quarter, with total segment revenue declining 5% versus 2Q 2022 due to price realization being offset by last year's oil and gas divestiture and currency effects [43] - The hand tools business was flat organically versus the prior year, overcoming softer DIY volume with international growth and strength in certain categories [42] Market Data and Key Metrics Changes - North America experienced mid-single-digit organic revenue decline, influenced by lower consumer Outdoor and DIY tool demand as well as modest customer destocking [41] - European revenue was down 1% organically, with high-single-digit organic growth in the UK and Southern regions [73] - Emerging markets' performance was down 3% organically, but excluding the impacts from the Russian business exit, remaining countries showed high-single-digit organic growth, particularly in Brazil [73] Company Strategy and Development Direction - The company is focused on transforming its operations to accelerate market share gains and drive consistent organic growth, with a commitment to return value to shareholders through cash dividends [11][38] - The strategy includes prioritizing cash flow generation, inventory optimization, and advancing innovation, electrification, and global market penetration [76] - The company aims to achieve adjusted gross margins of 35% plus by 2025, with ongoing cost reduction initiatives expected to deliver $1 billion in annualized savings by the end of 2023 [50][84] Management's Comments on Operating Environment and Future Outlook - Management noted that the outdoor season was challenging, with notable softness in point-of-sale and replenishment, particularly for higher-priced retail products [1] - The company expects continued strength in professional demand, with a potential for stronger performance in the back half of the year, despite ongoing customer destocking in certain segments [4] - Management expressed cautious optimism regarding the demand environment, indicating that while there are pressures, there are also positive trends emerging, particularly in professional markets [19][40] Other Important Information - The company reduced inventory by nearly $400 million in Q2, bringing the total reduction to $1.4 billion since mid-2022 [30] - The introduction of new products, such as the DEWALT 20-volt MAX XR Brushless Cordless Rivet Tools, is part of the company's strategy to enhance its product offerings [2] - The company is actively managing channel inventories, with expectations of modest headwinds throughout 2023 [40] Q&A Session Summary Question: Can you provide insights on the competitive environment and channel inventory dynamics? - Management acknowledged market volatility but noted that trends in point-of-sale have been positive, with July showing a good start to the quarter. They emphasized the need to monitor consumer spending shifts [19] Question: What are the expectations for gross margin improvement from the first half to the second half? - Management indicated that the improvement in gross margin is expected to be driven by the roll-off of high-cost inventory and ongoing cost savings from transformation initiatives [113] Question: How does the company plan to balance investments for growth with maintaining profitability? - Management highlighted the importance of investing in key areas such as innovation and market activation while ensuring that these investments align with long-term growth objectives [126]

Financial Data and Key Metrics Changes - The first quarter revenue was $3.9 billion, down from the previous year, primarily due to lower consumer and DIY volume, currency impacts, and the divestiture of the oil and gas business [33][81] - Adjusted EPS for the period was a loss of $0.41, significantly impacted by inventory reduction efforts [7] - Adjusted gross margins improved to approximately 23%, up 360 basis points sequentially from Q4 2022 [88] Business Segment Performance - Tools and Outdoor revenue was $3.3 billion, a decline of 13% due to lower consumer demand and a slow start to the retail outdoor season [8] - The industrial business experienced 3% organic growth, with total segment revenue declining 5% due to price realization being offset by divestitures and currency impacts [9] - Power tools and hand tools saw organic declines of 12% and 6% respectively, while the outdoor business declined 16% [35] Market Data and Key Metrics Changes - North America and Europe both experienced a 12% organic decline, while emerging markets saw a 2% decline, but excluding Russia, there was 6% organic growth in the region [81] - The retail point of sale for tools and outdoor products remained above 2019 levels, supported by price and healthy professional demand [107] Company Strategy and Industry Competition - The company is focused on cash flow generation through inventory reduction, targeting $750 million to $1 billion in inventory reduction for the year [15][80] - Strategic investments are being made in innovation and electrification to maintain market leadership [85] - The company is streamlining operations and reducing SKUs, with 60,000 SKUs approved for reduction, of which 16,000 are now decommissioned [111] Management's Comments on Operating Environment and Future Outlook - Management reiterated a full-year adjusted EPS guidance range of $0 to $2, with free cash flow expected to be between $500 million and $1 billion [80] - The company is planning for a range of demand scenarios, balancing potential continuation of current trends with the possibility of improvement or further slowdown [80] - Management expressed confidence in the transformation efforts and the potential for improved financial benefits in the future [19][91] Other Important Information - The global cost reduction program delivered $230 million in pre-tax run rate savings this quarter, with a total of $430 million captured since the program's launch [6][12] - The company is on track to achieve $1 billion in run rate savings by the end of 2023 and $2 billion by 2025 [12] Q&A Session Summary Question: What drove the upside on the operating margins in Q1? - Management indicated that the operating margins were positively impacted by effective cost controls and inventory reduction strategies [128] Question: How does the company view the pricing environment for the rest of the year? - The pricing environment is expected to remain stable, with no additional price increases anticipated [24] Question: What is the outlook for the professional segment in the second half of the year? - The professional segment is expected to remain healthy, with continued strength anticipated [62] Question: How is the company managing inventory levels in a slow demand environment? - The company is being patient with inventory management, focusing on strategic promotions to clear excess inventory while maintaining a disciplined approach to pricing [72]