Stanley Black & Decker(SWK) - 2025 Q2 - Quarterly Results

Financial Statements Condensed Consolidated Statements of Operations In the second quarter of 2025, Stanley Black & Decker reported net sales of $3.95 billion, a slight decrease from $4.02 billion in the prior year's quarter. The company achieved a significant turnaround in profitability, with net earnings from continuing operations reaching $101.9 million, compared to a net loss of $19.2 million in Q2 2024. This improvement is also reflected in the year-to-date results, where net earnings from continuing operations rose to $192.3 million from just $0.3 million in the previous year Key Financial Metrics | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $3,945.2M | $4,024.4M | $7,689.8M | $7,893.9M | | Gross Profit | $1,066.5M | $1,141.2M | $2,187.3M | $2,249.7M | | Gross Margin | 27.0% | 28.4% | 28.4% | 28.5% | | Income from Operations | $106.9M | $56.3M | $311.7M | $192.5M | | Net Earnings (Loss) from Continuing Operations | $101.9M | $(19.2)M | $192.3M | $0.3M | | Diluted EPS from Continuing Operations | $0.67 | $(0.13) | $1.27 | $0.00 | Condensed Consolidated Balance Sheets As of June 28, 2025, the company's total assets stood at $22.49 billion, a slight increase from $21.85 billion at the end of 2024. The increase was driven by higher accounts receivable, while inventories remained relatively stable. On the liability side, total current liabilities grew significantly to $6.59 billion from $4.92 billion, mainly due to increases in short-term borrowings and current maturities of long-term debt. Long-term debt decreased from $5.60 billion to $4.76 billion Key Balance Sheet Items | Balance Sheet Item | June 28, 2025 | December 28, 2024 | | :--- | :--- | :--- | | Total Current Assets | $6,877.8M | $6,377.7M | | Inventories, net | $4,639.0M | $4,536.4M | | Total Assets | $22,492.6M | $21,848.9M | | Total Current Liabilities | $6,592.1M | $4,916.9M | | Long-term Debt | $4,757.8M | $5,602.6M | | Total Shareowners' Equity | $9,063.0M | $8,719.9M | Summary of Cash Flow Activity For the first half of 2025, the company experienced a net cash outflow from operating activities of $205.7 million, a significant shift from a $142.0 million inflow in the same period of 2024, primarily due to unfavorable changes in working capital. Consequently, year-to-date free cash flow was negative at $350.3 million, compared to a negative $10.9 million in the prior year. The company paid $248.5 million in dividends year-to-date Key Cash Flow Metrics (Year-to-Date) | Cash Flow Metric (YTD) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(205.7)M | $142.0M | | Capital and software expenditures | $(144.6)M | $(152.9)M | | Free cash flow (before dividends) | $(350.3)M | $(10.9)M | | Cash dividends on common stock | $(248.5)M | $(243.6)M | - Free cash flow is defined as cash flow from operations less capital and software expenditures and is considered an important measure of liquidity and ability to fund growth and returns to shareholders[7] Segment Performance Business Segment Information Both of the company's segments, Tools & Outdoor and Engineered Fastening, experienced year-over-year declines in net sales and segment profit for both the second quarter and year-to-date periods of 2025. The Tools & Outdoor segment's profit margin decreased to 6.9% in Q2 2025 from 9.0% in Q2 2024. The Engineered Fastening segment saw a more significant profit margin drop, from 13.5% to 7.2% in the same period. Notably, the Industrial segment was renamed to "Engineered Fastening" in Q1 2025 to reflect a more focused portfolio after recent divestitures Segment Performance Overview | Segment Performance (Q2 2025 vs Q2 2024) | Net Sales | Segment Profit | Profit Margin | | :--- | :--- | :--- | :--- | | Tools & Outdoor | $3,461.4M vs $3,528.7M | $238.1M vs $316.1M | 6.9% vs 9.0% | | Engineered Fastening | $483.8M vs $495.7M | $35.0M vs $66.8M | 7.2% vs 13.5% | - In the first quarter of 2025, the Industrial segment was renamed "Engineered Fastening" following recent divestitures. This was a name change only and did not impact financial statements or segment results[9] Non-GAAP Financial Measures and Reconciliations Reconciliation of GAAP to Non-GAAP Earnings Measures The company provides Non-GAAP financial measures to aid in the analysis of business trends by excluding certain items. For Q2 2025, Non-GAAP diluted EPS from continuing operations was $1.08, substantially higher than the GAAP figure of $0.67. For the year-to-date period, Non-GAAP diluted EPS was $1.83 compared to GAAP EPS of $1.27. These adjustments primarily relate to supply chain transformation costs, a voluntary retirement program, and other charges EPS Reconciliation (Continuing Operations) | EPS Reconciliation (Continuing Operations) | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | GAAP Diluted EPS | $0.67 | $1.27 | | Non-GAAP Adjustments | $0.41 | $0.56 | | Non-GAAP Diluted EPS | $1.08 | $1.83 | Reconciliation of GAAP to Non-GAAP Segment Profit Non-GAAP adjustments significantly increased reported segment profits. In Q2 2025, the Tools & Outdoor segment's Non-GAAP profit was $276.5 million (8.0% margin) versus a GAAP profit of $238.1 million (6.9% margin). Similarly, Engineered Fastening's Non-GAAP profit was $52.3 million (10.8% margin) compared to a GAAP profit of $35.0 million (7.2% margin). Adjustments primarily stem from costs associated with a voluntary retirement program and supply chain transformation Segment Profit Reconciliation | Segment Profit Reconciliation (Q2 2025) | GAAP Profit | Non-GAAP Adjustments | Non-GAAP Profit | | :--- | :--- | :--- | :--- | | Tools & Outdoor | $238.1M | $38.4M | $276.5M | | Engineered Fastening | $35.0M | $17.3M | $52.3M | - Non-GAAP adjustments for business segments are mainly due to separation benefit costs from a voluntary retirement program, footprint actions, and other costs related to supply chain transformation[12][14] Reconciliation of GAAP Earnings to EBITDA The company calculates EBITDA and Adjusted EBITDA to provide further insight into its operating performance. For Q2 2025, Adjusted EBITDA was $318.2 million (8.1% of net sales), a decrease from $429.3 million (10.7% of net sales) in Q2 2024. The year-to-date Adjusted EBITDA also declined to $680.0 million from $771.9 million in the prior year EBITDA Reconciliation | EBITDA Reconciliation | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | EBITDA | $237.0M | $211.3M | $570.2M | $487.7M | | Adjusted EBITDA | $318.2M | $429.3M | $680.0M | $771.9M | | Adjusted EBITDA Margin | 8.1% | 10.7% | 8.8% | 9.8% | Reconciliation of GAAP Revenue Growth to Organic Growth To better illustrate underlying sales performance, the company provides organic growth figures, which exclude currency fluctuations, acquisitions, and divestitures. In Q2 2025, the company's reported GAAP revenue declined by 2%. After accounting for a 1% positive impact from currency, the organic revenue decline was 3%. The Tools & Outdoor segment saw a 3% organic decline, while the Engineered Fastening segment had a 1% organic decline Revenue Growth Reconciliation | Q2 2025 Growth Reconciliation | GAAP Revenue Growth | Currency Impact | Organic Growth | | :--- | :--- | :--- | :--- | | Stanley Black & Decker | -2% | 1% | -3% | | Tools & Outdoor | -2% | 1% | -3% | | Engineered Fastening | -2% | 2% | -1% | Summary of Non-GAAP Adjustments In Q2 2025, pre-tax Non-GAAP adjustments totaled $83.0 million. The largest components were related to a voluntary retirement program implemented in June 2025, ongoing supply chain transformation costs (including footprint rationalization), and complexity reduction initiatives within the Engineered Fastening business. These adjustments were partially offset by a gain on the sale of a distribution center - Key pre-tax Non-GAAP adjustments in Q2 2025 included: - Voluntary Retirement Program: $51.6M in costs ($11.9M in Gross Profit, $33.5M in SG&A, $6.2M in Other, net) - Supply Chain Transformation: $13.7M in costs ($8.7M in Gross Profit, $5.0M in SG&A) - Complexity Reduction & Operational Excellence: $10.5M in costs (SG&A) - Gain on Sale: An $8.1 million gain on the sale of a distribution center was recorded in 'Other, net'[19][21]