Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains statements reflecting the Company's views about its future performance that constitute “forward-looking statements” under the Private Securities Litigation Act of 1995. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Please read the information under the caption entitled “Cautionary Statement under the Private Securities Litigation Reform Act of 1995."

Throughout this Management's Discussion and Analysis (“MD&A”), references to Notes refer to the "Notes To Unaudited Condensed Consolidated Financial Statements" in Part 1, Item 1 of this Form 10-Q, unless otherwise indicated.

BUSINESS OVERVIEW

Strategy

The Company is a global provider of hand tools, power tools, outdoor products and related accessories, as well as a leading provider of engineered fastening solutions. The Company continues to execute its long-term business strategy focused on organic growth in excess of the market and industry, geographic and customer diversification to foster sustainable revenue, earnings and cash flow growth. In recent years, the Company has re-shaped its portfolio to focus on its leading positions in the tools & outdoor and engineered fastening markets. Leveraging the benefits of a more focused portfolio, the Company initiated a business transformation in mid-2022 that includes reinvestment for faster growth as well as a $2.0 billion Global Cost Reduction Program through 2025. The Company’s primary areas of multi-year strategic focus remain unchanged as follows:

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

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

• Returning adjusted gross margins to historical 35%+ levels by accelerating the operations and supply chain transformation to improve fill rates and better match inventory with customer demand; and

• Prioritizing cash flow generation and inventory optimization.

In terms of capital allocation, the Company remains committed, over time, to returning excess capital to shareholders through a strong and growing dividend as well as opportunistically repurchasing shares. In the near term, the Company intends to direct any capital in excess of the quarterly dividend on its common stock toward debt reduction and internal growth investments.

The Company’s environmental, social and governance ("ESG") strategy is integrated into, and informed by, its overall long-term business strategy. The portfolio changes discussed above prompted the Company to re-baseline its ESG data and update its ESG targets to align with the more focused Company and its business priorities and goals, while maintaining continuity with the legacy ESG pillars of people, products, and planet. The Company’s renewed ESG priorities are as follows:

• The People strategy includes broad based diversity, equity & inclusion ("DEI") initiatives supported by equal employment opportunities and the Company's Growing the Trades program. To grow the trades, the Company is tailoring its philanthropic efforts to fund trade skill-building initiatives with $30 million pledged by 2027. The Company believes this will generate end-user loyalty and brand ambassadorship that fuels long-term demand.

• The Product strategy is focused on minimizing the environmental footprint of the Company’s products through an emphasis on Sustainable Innovation. The Company’s products are increasingly designed with sustainability in mind – from more sustainable materials specified in product design and packaging, to more eco-friendly impacts resulting from the use of its products, to thoughtful end-of-life repair, reuse and recycling programs. To measure progress in this space, the Company set an intensity-based goal to reduce the greenhouse gas ("GHG") emissions of its products' material, transportation, and use phases (Scope 3) by 52% by 2030. To reach this goal, the Company plans to engage two-thirds of its suppliers to set their own Scope 1 and 2 GHG emissions reduction targets by 2027. The Company plans to work with customers and suppliers to try to reduce or eliminate problematic plastics in its packaging and improve packaging sustainability, with a specific goal to be set by 2025; and plans to continue the transformation of its product portfolio to quieter, safer, and more eco-friendly offerings through electrification.

• The Planet strategy for Sustainable Operations is focused on the responsible stewardship of the Company’s owned and operated facilities. The Company is implementing a climate science-based plan with a goal to reduce its internal operational GHG emissions by 42% (Scope 1 and Scope 2) by 2030, against the 2022 baseline. The Company expects to do this by continuing to invest in renewable power sources, such as wind and solar, while improving efficiencies

through capital investments, and evaluating additional tools like power purchase agreements and energy attribute certificates. The Company will also pursue zero-waste-to-landfill across all its global manufacturing and distribution sites by 2040. The Company believes the responsible stewardship of its operations is important for energy independence and operations resilience, and increasingly as a value proposition for its customers, who value sustainable upstream suppliers as they work to reduce their own carbon footprint.

The Company’s annual ESG report, issued in August 2023, details the evolution of its ESG strategy and refreshed public commitments. The report includes a comprehensive review of the Company's ESG program and builds on a long history of annually reporting its sustainability metrics and public goals. As explained in the ESG report, the Company's goals contemplate a number of assumptions and there can be no assurances that those assumptions will be correct or that such goals will be achieved or retained.

Refer to section "Human Capital Management" in Item 1. Business of the Company’s Form 10-K for the year ended December 30, 2023 for additional information regarding the Company's commitment to supporting its employees and improving diversity, equity and inclusion.

Common Stock And Other Securities

In April 2021, the Board of Directors approved repurchases by the Company of its outstanding securities other than common stock up to an aggregate amount of $3.0 billion. No repurchases have been executed pursuant to this authorization to date.

Divestitures

On April 1, 2024, the Company sold its Infrastructure business to Epiroc AB for net proceeds of $728.5 million. The Company used the net proceeds to reduce debt in the second quarter of 2024.

Refer to Note Q, Divestitures, for further discussion.

Global Cost Reduction Program

In mid-2022, the Company launched a program comprised of a series of initiatives designed to generate cost savings by resizing the organization and reducing inventory with the ultimate objective of driving long-term growth, improving profitability and generating strong cash flow. These initiatives are expected to optimize the cost base as well as provide a platform to fund investments to accelerate growth in the core businesses. The program consists of a selling, general, and administrative ("SG&A") planned pre-tax run-rate cost savings of $500 million and a supply chain transformation expected to deliver $1.5 billion of pre-tax run-rate cost savings by the end of 2025 to achieve projected 35%+ adjusted gross margins.

The SG&A cost savings are expected to be generated by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend. These savings will help fund $300 million to $500 million of innovation and commercial investments through 2025 to accelerate organic growth.

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

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

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

• Footprint Rationalization: Transforming the Company’s manufacturing and distribution network from a decentralized and inefficient system of sites built through years of acquisitions to a strategically focused supply chain, inclusive of site closures, transformations of existing sites into manufacturing centers of excellence and re-configuration of the distribution network; and

• Complexity Reduction: Reducing complexity through platforming products and implementing initiatives to drive a SKU reduction.

The charges associated with the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations" and the full year estimate of Non-GAAP adjustments detailed below in "2024 Outlook". The cash investment required to achieve the $1.5 billion of pre-tax run-rate supply chain cost savings is expected to be approximately $0.9 billion to $1.1 billion, of which approximately 40% is expected to be capital expenditures. The Company will continue prioritizing capital expenditures consistent with its existing approach and expects total capital expenditures, inclusive of the

supply chain transformation, to be $400 million to $500 million for 2024 and to approximate 3.0% to 3.5% of net sales annually in 2025 and beyond.

During the first three months of 2024 and since inception of the program, the Company has generated approximately $145 million and $1.2 billion, respectively, of pre-tax run-rate savings, driven by lower headcount, indirect spend reductions and the supply chain transformation. These savings are comprised of supply chain efficiency benefits, which will support gross margin improvements as the benefits turn through inventory, and SG&A savings. The Company believes that it is on track to grow to approximately $2 billion of pre-tax run-rate savings by year-end 2025. In addition, the Company has reduced inventory by approximately $1.9 billion since the end of the second quarter of 2022 and expects further inventory and working capital reductions to support free cash flow generation in 2024.

Segments

The Company’s operations are classified into two reportable business segments: Tools & Outdoor and Industrial. Both reportable segments have significant international operations and are exposed to translational and transactional impacts from fluctuations in foreign currency exchange rates.

Tools & Outdoor

The Tools & Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand Tools, Accessories & Storage ("HTAS"), and Outdoor Power Equipment ("Outdoor") product lines. Annual revenues in the Tools & Outdoor segment were $13.4 billion in 2023, representing 85% of the Company’s total revenues.

The PTG product line includes both professional and consumer products. Professional products, primarily under the DEWALT® brand, include professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers and sanders, as well as pneumatic tools and fasteners including nail guns, nails, staplers and staples, and concrete and masonry anchors. DIY and tradesperson focused products include corded and cordless electric power tools sold primarily under the CRAFTSMAN® brand, and consumer home products such as hand-held vacuums, paint tools and cleaning appliances primarily under the BLACK+DECKER® brand.

The HTAS product line sells hand tools, power tool accessories and storage products. Hand tools include measuring, leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels and industrial and automotive tools. Power tool accessories include drill bits, screwdriver bits, router bits, abrasives, saw blades and threading products. Storage products include tool boxes, sawhorses, medical cabinets and engineered storage solution products.

The Outdoor product line primarily sells corded and cordless electric lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, pressure washers and related accessories, and gas powered lawn and garden products, including lawn tractors, zero turn ride on mowers, walk behind mowers, snow blowers, residential robotic mowers, utility terrain vehicles (UTVs), hand-held outdoor power equipment, garden tools, and parts and accessories to professionals and consumers under the DEWALT®, CRAFTSMAN®, CUB CADET®, BLACK+DECKER®, and HUSTLER® brand names.

Industrial

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. Annual revenues in the Industrial segment were $2.4 billion in 2023, representing 15% of the Company’s total revenues.

The Engineered Fastening business primarily sells highly engineered components such as fasteners, fittings and various engineered products, which are designed for specific application across multiple verticals. The product lines include externally threaded fasteners, blind rivets and tools, blind inserts and tools, drawn arc weld studs and systems, engineered plastic and mechanical fasteners, self-piercing riveting systems, precision nut running systems, micro fasteners, high-strength structural fasteners, axel swage, latches, heat shields, pins, and couplings.

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

RESULTS OF OPERATIONS

On April 1, 2024, the Company completed the previously announced sale of its Infrastructure business to Epiroc AB. This divestiture does not qualify for discontinued operations and therefore, its results are included in the Company's Consolidated Statements of Operations and Comprehensive Loss for all periods presented.

Certain Items Impacting Earnings and Non-GAAP Financial Measures

The Company has provided a discussion of its results both inclusive and exclusive of certain gains and charges. The results and measures, including gross profit, SG&A, Other, net, Income taxes, and segment profit (including Corporate Overhead), on a basis excluding certain gains and charges, free cash flow, organic revenue and organic growth are Non-GAAP financial measures. The Company considers the use of Non-GAAP financial measures relevant to aid analysis and understanding of the Company’s results and business trends aside from the material impact of these items and ensures appropriate comparability to operating results of prior periods. Supplemental Non-GAAP information should not be considered in isolation or as a substitute for the related GAAP financial measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

With the exception of forecasted free cash flow included in “2024 Outlook” as discussed below, the Non-GAAP financial measures of gross profit, SG&A, Other, net, Income taxes, and segment profit (including Corporate Overhead), presented on a basis excluding certain gains and charges, as well as free cash flow, organic revenue and organic growth are defined and reconciled to their most directly comparable GAAP financial measures below. Due to high variability and difficulty in predicting items that impact cash flow from operations, a reconciliation of forecasted free cash flow to its most directly comparable GAAP estimate has been omitted. The Company believes such a reconciliation would also imply a degree of precision that is inappropriate for this forward-looking measure.

The Company’s operating results at the consolidated level as discussed below include and exclude certain gains and charges impacting gross profit, SG&A, Other, net, and Income taxes. The Company’s business segment results as discussed below include and exclude certain gains and charges impacting gross profit and SG&A. These amounts for the first quarters of 2024 and 2023 are as follows:

First Quarter 2024

			(Millions of Dollars)						GAAP						Non-GAAP Adjustments****2						Non-GAAP
			Gross profit						$	1,108.5					$	14.4					$	1,122.9
			Selling, general and administrative1						851.8						(20.1)						831.7
			Earnings before income taxes						48.3						71.5						119.8
			Income taxes						28.8						6.8						35.6
			Net earnings						19.5						64.7						84.2
			Diluted earnings per share of common stock						$	0.13					$	0.43					$	0.56

First Quarter 2023

			(Millions of Dollars)						GAAP						Non-GAAP Adjustments****2						Non-GAAP
			Gross profit						$	835.5					$	73.4					$	908.9
			Selling, general and administrative1						825.1						(20.7)						804.4
			Loss before income taxes						(164.1)						106.8						(57.3)
			Income taxes						23.7						(20.4)						3.3
			Net loss						(187.8)						127.2						(60.6)
			Diluted loss per share of common stock						$	(1.26)					$	0.85					$	(0.41)
1			Includes provision for credit losses
2			Refer to table below for additional detail of the Non-GAAP adjustments

Below is a summary of the pre-tax Non-GAAP adjustments for the first quarters of 2024 and 2023.

(Millions of Dollars)						2024						2023
Supply Chain Transformation Costs:
Footprint Rationalization1						$	8.4					$	59.3
Strategic Sourcing & Operational Excellence2						5.8						14.1
Facility-related costs						0.7						0.7
Voluntary retirement program						—						(0.1)
Other charges (gains)						(0.5)						(0.6)
Gross Profit						$	14.4					$	73.4
Supply Chain Transformation Costs:
Footprint Rationalization1						$	7.5					$	0.1
Complexity Reduction						0.3						0.1
Acquisition & Integration-related costs3						2.8						10.1
Transition services costs related to previously divested businesses						5.5						12.8
Voluntary retirement program						—						(0.9)
Other charges (gains)						4.0						(1.5)
Selling, general and administrative						$	20.1					$	20.7
Other, net4						$	(3.5)					$	(7.0)
Loss on sales of businesses						—						7.6
Asset impairment charges5						25.5						—
Restructuring charges6						15.0						12.1
Earnings (loss) before income taxes						$	71.5					$	106.8

1			Footprint Rationalization costs in 2024 primarily relate to accelerated depreciation of production equipment of $4.9 million and other facility exit and re-configuration costs of $10.0 million. In 2023, transfers and closures of targeted manufacturing sites, including Fort Worth, Texas and Cheraw, South Carolina as previously announced in March 2023, resulted in accelerated depreciation of production equipment of $17.0 million and non-cash asset write-downs of $42.2 million (predominantly tooling, raw materials and WIP).
2			Strategic Sourcing & Operational Excellence costs in 2023 primarily relate to third-party consultant fees to provide expertise in identifying and quantifying opportunities to source in a more integrated manner and re-design in-plant operations following footprint rationalization, developing a detailed program and related governance, and assisting the Company with the implementation of actions necessary to achieve the related objectives.
3			Acquisition & integration-related costs primarily relate to the MTD and Excel acquisitions, including costs to integrate the organizations and shared processes, as well as harmonize key IT applications and infrastructure.
4			Includes deal-related costs, net of income related to providing transition services to previously divested businesses.
5			The $25.5 million pre-tax asset impairment charge in 2024 related to the Infrastructure business.
6			Refer to “Restructuring Activities” below for further discussion.

Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of business segment performance. Organic growth is utilized to describe the Company's results excluding the impacts of foreign currency fluctuations, acquisitions during their initial 12 months of ownership, and divestitures.

Consolidated Results

Net Sales: Net sales were $3.870 billion in the first three months of 2024 compared to $3.932 billion in the first three months of 2023, representing a decrease of 2% driven by a 1% decrease in volume and a 1% decrease from foreign currency. Tools & Outdoor net sales decreased 1% compared to the first three months of 2023, due to a 1% decline in volume. Industrial net sales decreased 5% compared to the first three months of 2023 as a 1% increase in price was more than offset by a 5% decrease in volume and a 1% decrease from foreign currency.

Gross Profit: Gross profit was $1.109 billion, or 28.6% of net sales, in the first three months of 2024 compared to $835.5 million, or 21.2% of net sales, in the first three months of 2023. Non-GAAP adjustments, which reduced gross profit, were $14.4 million for the three months ended March 30, 2024 and $73.4 million for the three months ended April 1, 2023. Excluding these adjustments, gross profit was 29.0% of net sales for the three months ended March 30, 2024, compared to 23.1% for the three months ended April 1, 2023, primarily due to lower inventory destocking costs, supply chain transformation benefits and lower shipping costs.

SG&A Expenses: SG&A, inclusive of the provision for credit losses, was $851.8 million, or 22.0% of net sales, in the first three months of 2024, compared to $825.1 million, or 21.0% of net sales, in the first three months of 2023. Within SG&A, Non-GAAP adjustments totaled $20.1 million for the three months ended March 30, 2024 and $20.7 million for the three months ended April 1, 2023. Excluding these adjustments, SG&A was 21.5% of net sales for the three months ended March 30, 2024, compared to 20.5% for the three months ended April 1, 2023, as the Company increased investment in innovation and growth initiatives.

Distribution center costs (i.e. warehousing and fulfillment facility and associated labor costs) are classified within SG&A. This classification may differ from other companies who may report such expenses within cost of sales. Due to diversity in practice, to the extent the classification of these distribution costs differs from other companies, the Company’s gross margins may not be comparable. Such distribution costs classified in SG&A amounted to $130.5 million and $129.5 million for the first three months of 2024 and 2023, respectively.

Other, net: Other, net totaled $80.0 million and $63.7 million in the first three months of 2024 and 2023, respectively. Excluding Non-GAAP adjustments, Other, net, totaled $83.5 million and $70.7 million in the first three months of 2024 and 2023, respectively. The year-over-year increase was primarily driven by higher environmental costs and write-downs on certain investments.

Loss on Sales of Businesses: During the first quarter of 2023, the Company reported a pre-tax loss of $7.6 million primarily related to the divestiture of a small business in the Industrial segment.

Asset Impairment Charge: During the first three months of 2024, the Company recorded a pre-tax impairment loss of $25.5 million related to the Infrastructure business. Refer to Note Q, Divestitures, for additional information on the divestiture of the Infrastructure business completed in the second quarter of 2024.

Interest, net: Net interest expense was $87.9 million in the first quarter of 2024 compared to $91.1 million in the first quarter of 2023. The year-over-year decrease was primarily driven by higher interest income due to an increase in rates.

Income Taxes: For the three months ended March 30, 2024, the Company recognized income tax expense of $28.8 million, resulting in an effective tax rate of 59.6%. Excluding the tax effect on Non-GAAP adjustments, for the three months ended March 30, 2024, the Company recognized income tax expense of $35.6 million, resulting in an effective tax rate of 29.7%. These effective tax rates differ from the U.S. statutory tax rate of 21% primarily due to non-deductible expenses, losses for which a tax benefit is not recognized, and U.S. tax on foreign earnings, partially offset by tax credits and state income taxes.

For the three months ended April 1, 2023, the Company recognized income tax expense of $23.7 million, resulting in an effective tax rate of (14.4)%. Excluding the tax effect on Non-GAAP adjustments, for the three months ended April 1, 2023, the Company recognized an income tax expense of $3.3 million, resulting in an effective tax rate of (5.8)%. These effective tax rates differ from the U.S. statutory tax rate of 21% primarily due to U.S. tax on foreign earnings, non-deductible expenses, and interest on unrecognized tax benefits, partially offset by tax on foreign earnings at tax rates different than the U.S. tax rate, state income taxes, and tax credits.

Refer to Note M, Income Taxes, for additional information on the impacts in interim periods of changes in its estimated annual effective income tax rate.

On December 20, 2021, the Organization for Economic Cooperation and Development (“OECD”) published a proposal for the establishment of a global minimum tax rate of 15% (“Pillar Two"). The Pillar Two rules provide a template that jurisdictions can translate into domestic law to assist with the implementation within an agreed upon timeframe and in a coordinated manner, which became effective for fiscal years beginning after January 1, 2024. To date, jurisdictions in which the Company operates are in various stages of implementation.

The OECD and other countries continue to publish guidance and legislation which include transition and safe harbor rules. The Company expects to avail itself of the transitional safe harbor rules in most jurisdictions in which the Company operates. There are, however, a limited number of jurisdictions where the transitional safe harbor relief does not apply. The Company expects the Pillar Two tax impact from these jurisdictions to be immaterial to its estimated annual effective rate for 2024 and continues to monitor developments in legislation, regulation, and interpretive guidance in this area.

Business Segment Results

The Company’s reportable segments represent businesses that have similar products, services and end markets, among other factors. The Company utilizes segment profit which is defined as net sales minus cost of sales and SG&A inclusive of the provision for credit losses (aside from corporate overhead expense), and segment profit as a percentage of net sales to assess the profitability of each segment.

The Company’s operations are classified into two reportable business segments: Tools & Outdoor and Industrial.

Tools & Outdoor:

									Year-to-Date
(Millions of Dollars)															2024						2023
Net sales															$	3,284.6					$	3,315.4
Segment profit															$	255.7					$	18.7
% of Net sales															7.8		%				0.6		%

Tools & Outdoor net sales decreased $30.8 million, or 1%, in the first three months of 2024 compared to the first three months of 2023 as volume growth in DEWALT® was more than offset by a muted market demand backdrop which contributed to a 1% decline in volume. Organic revenue decreased 2% and 3% in North America and Europe, respectively, and increased 7% in the rest of the world. During the first quarter of 2024, the U.S. retail point-of-sale demand was down modestly versus the prior year with modest growth in outdoor.

Segment profit for the first three months of 2024 was $255.7 million, or 7.8% of net sales, compared to $18.7 million, or 0.6% of net sales, in the first three months of 2023. Excluding Non-GAAP adjustments of $22.9 million and $79.2 million for the three months ended March 30, 2024 and April 1, 2023, respectively, segment profit was 8.5% of net sales in the first three months of 2024 and 3.0% in the first three months of 2023. The year-over-year increase was a result of lower inventory destocking costs, supply chain transformation benefits and reduced shipping costs, which were partially offset by increased growth investments.

Industrial:

									Year-to-Date
(Millions of Dollars)															2024						2023
Net sales															$	584.9					$	616.4
Segment profit															$	65.2					$	67.4
% of Net sales															11.1		%				10.9		%

Industrial net sales decreased $31.5 million, or 5%, in the first three months of 2024 compared to the first three months of 2023, as a 1% increase in price was more than offset by a 5% decrease in volume, exclusively in Infrastructure, and a 1% decrease from foreign currency. Engineered Fastening organic revenues increased 5%, with aerospace and automotive growth, which was partially offset by general industrial market softness.

Industrial segment profit for the first three months of 2024 totaled $65.2 million, or 11.1% of net sales, compared to $67.4 million, or 10.9% of net sales, in the corresponding 2023 period. Excluding Non-GAAP adjustments of $5.7 million and $0.3 million for the three months ended March 30, 2024 and April 1, 2023, respectively, segment profit amounted to 12.1% of net sales in the first three months of 2024 compared to 11.0% in the first three months of 2023, due to price realization and cost control.

Corporate Overhead

Corporate Overhead includes the corporate overhead element of SG&A, which is not allocated to the business segments. Corporate Overhead amounted to $64.2 million and $75.7 million in the first quarter of 2024 and 2023, respectively. Excluding Non-GAAP adjustments of $5.9 million for the three months ended March 30, 2024 and $14.6 million for the three months ended April 1, 2023, the corporate overhead element of SG&A was $58.3 million and $61.1 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from December 30, 2023 to March 30, 2024 is as follows:

(Millions of Dollars)			December 30, 2023						Net Additions						Usage						Currency						March 30, 2024
Severance and related costs			$	25.8					$	13.3					$	(6.6)					$	0.4					$	32.9
Facility closures and other			3.1						1.7						(3.4)						—						1.4
Total			$	28.9					$	15.0					$	(10.0)					$	0.4					$	34.3

For the three months ended March 30, 2024, the Company recognized net restructuring charges of $15.0 million, primarily related to severance costs. The Company expects to achieve annual net cost savings of approximately $27 million by the end of 2025 related to the restructuring costs incurred during the three months ended March 30, 2024. The majority of the $34.3 million of reserves remaining as of March 30, 2024 is expected to be utilized within the next 12 months.

Segments:

The $15 million of net restructuring charges for the three months ended March 30, 2024 includes: $7 million in the Tools & Outdoor segment; $6 million in Industrial; and $2 million in Corporate.

The anticipated annual net cost savings of approximately $27 million related to the first quarter 2024 restructuring actions include: $17 million in the Tools & Outdoor segment; $5 million in the Industrial segment; and $5 million in Corporate.

2024 OUTLOOK

This outlook discussion is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company is reiterating 2024 guidance and expects diluted earnings per share to approximate $1.60 to $2.85 on a GAAP basis ($3.50 to $4.50 excluding Non-GAAP adjustments). Free cash flow is expected to approximate $0.6 billion to $0.8 billion.

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

FINANCIAL CONDITION

Liquidity, Sources and Uses of Capital: The Company’s primary sources of liquidity are cash flows generated from operations and available lines of credit under various credit facilities.

Operating Activities: Cash flows used in operations were $431.0 million in the first quarter of 2024 compared to $286.3 million in the corresponding period of 2023. The year-over-year change was primarily driven by changes in working capital as the Company builds inventory for the Tools & Outdoor spring selling season, as well as higher variable compensation, partially offset by higher earnings.

Free Cash Flow: Free cash flow, as defined in the table below, was an outflow of $496.7 million in the first quarter of 2024 compared to an outflow of $354.5 million in the corresponding period of 2023. The year-over-year change in free cash flow was primarily due to the same factors discussed above in operating activities. Management considers free cash flow an important indicator of its liquidity and capital efficiency, as well as its ability to fund future growth and provide dividends to shareowners, and is useful information for investors. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items.

									Year-to-Date
(Millions of Dollars)															2024						2023
Net cash used in operating activities															$	(431.0)					$	(286.3)
Less: capital and software expenditures															(65.7)						(68.2)
Free cash flow															$	(496.7)					$	(354.5)

Investing Activities: Cash flows used in investing activities totaled $63.2 million and $61.2 million in the first quarter of 2024 and 2023, respectively, primarily due to capital and software expenditures of $65.7 million and $68.2 million, respectively.

Financing Activities: Cash flows provided by financing activities totaled $548.6 million in the first quarter of 2024, primarily driven by net short-term commercial paper borrowings of $674.9 million, partially offset by cash dividend payments on common stock of $121.8 million. Cash flows provided by financing activities totaled $324.2 million in the first quarter of 2023, primarily driven by proceeds from debt issuances, net of fees, of $747.2 million, partially offset by net repayments of short-term commercial paper borrowings of $285.9 million and cash dividend payments on common stock of $119.8 million.

Credit Ratings & Liquidity:

The Company maintains investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt (S&P A-, Fitch BBB+, Moody's Baa3), as well as its commercial paper program (S&P A-2, Fitch F2, Moody's P-3). There were no changes to any of the Company's credit ratings during the first quarter of 2024. Failure to maintain investment grade rating levels could adversely affect the Company’s cost of funds, liquidity and access to capital markets, but would not have an adverse effect on the Company’s ability to access its existing committed credit facilities.

Cash and cash equivalents totaled $476.6 million as of March 30, 2024, which was primarily held in foreign jurisdictions. Cash and cash equivalents totaled $449.4 million as of December 30, 2023, of which approximately 50% was held in foreign jurisdictions.

As a result of the Tax Cuts and Jobs Act (the "Act"), the Company's tax liability related to the one-time transition tax associated with unremitted foreign earnings and profits totaled $171 million at March 30, 2024. The Act permits a U.S. company to elect to pay the net tax liability interest-free over a period of up to eight years. The Company has considered the implications of paying the required one-time transition tax and believes it will not have a material impact on its liquidity.

The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of March 30, 2024, the Company had commercial paper borrowings outstanding of $1.7 billion, of which $357.1 million in Euro denominated commercial paper was designated as a net investment hedge. As of December 30, 2023, the Company had $1.1 billion of borrowings outstanding, of which $399.7 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.

The Company has a five-year $2.5 billion committed credit facility (the “5-Year Credit Agreement”). Borrowings under the 5-Year Credit Agreement may be made in U.S. Dollars, Euros or Pounds Sterling. A sub-limit amount of $814.3 million is designated for swing line advances which may be drawn in Euros pursuant to the terms of the 5-Year Credit Agreement. Borrowings bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and specific terms of the 5-Year Credit Agreement. The Company must repay all advances under the 5-Year Credit Agreement by the earlier of September 8, 2026 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop for the Company's $3.5 billion U.S. Dollar and Euro commercial paper program. As of March 30, 2024 and December 30, 2023, the Company had not drawn on its five-year committed credit facility.

The Company has a $1.5 billion syndicated 364-Day Credit Agreement (the "2023 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2023 Syndicated 364-Day Credit Agreement may be made in U.S. Dollars or Euros and bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and pursuant to the terms of the 2023 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2023 Syndicated 364-Day Credit Agreement by the earlier of September 4, 2024 or upon termination. The Company may, however, convert all advances outstanding upon termination into a term loan that shall be repaid in full no later than the first anniversary of the termination date provided that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The 2023 Syndicated 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.5 billion U.S. Dollar and Euro commercial paper program. As of March 30, 2024 and December 30, 2023, the Company had not drawn on its 2023 Syndicated 364-Day Credit Agreement.

The Company has an interest coverage covenant that must be maintained to permit continued access to its committed credit facilities described above. 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"). In February 2023, the Company entered into an amendment to its 5-Year Credit Agreement to: (a) amend the definition of Adjusted EBITDA to allow for additional adjustment addbacks, not to exceed $500 million in the aggregate, for amounts incurred during each four fiscal quarter period beginning with the period ending in the third quarter of 2023 through the period ending in the second quarter of 2024, and (b) amend the minimum interest coverage ratio from 3.5 times to not less

than 1.5 to 1.0 times computed quarterly, on a rolling twelve months (last twelve months) basis, for the period from and including the third quarter of 2023 through the second quarter of 2024. The minimum interest coverage ratio will revert back to 3.5 times for periods after the second quarter of 2024. The amended provisions described above also apply to the 2023 Syndicated 364-Day Credit Agreement.

In March 2023, the Company issued $350.0 million of senior unsecured term notes maturing March 6, 2026 ("2026 Term Notes") and $400.0 million of senior unsecured term notes maturing March 6, 2028 (“2028 Term Notes”). The 2026 Term Notes accrue interest at a fixed rate of 6.272% per annum and the 2028 Term Notes at a fixed rate of 6.0% per annum, with interest payable semi-annually in arrears, and both notes rank equally in right of payment with all of the Company's existing and future unsecured unsubordinated debt. The Company received total net proceeds from this offering of $745.3 million, net of $4.7 million of underwriting expenses and other fees associated with the transaction. The Company used the net proceeds from the offering for general corporate purposes, including repayment of indebtedness under the commercial paper program.

In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty for 3,645,510 shares of common stock. The contract obligates the Company to pay $350 million, plus an additional amount related to the forward component of the contract. In November 2022, the Company amended the settlement date to November 2024, or earlier at the Company's option.

Refer to Note G, Long-Term Debt and Financing Arrangements, for further discussion of the Company's financing arrangements.

OTHER MATTERS

There have been no changes in the Company’s critical accounting estimates during the first quarter of 2024. Refer to the “Other Matters” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K for the year ended December 30, 2023 for a discussion of the Company’s critical accounting estimates.