Stanley Black & Decker Annual Report 2020

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FY2020 Annual Report · Stanley Black & Decker

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BUILT FOR
PERFORMANCE
GUIDED BY
PURPOSE

2020
Annual Report

2020
WELL POSITIONED
TO CAPITALIZE ON
GROWTH TRENDS

ACCELERATION OF eCOMMERCE

FOCUS ON HEALTH & SAFETY

ELECTRIFICATION OF AUTOMOTIVE
AND OUTDOOR PRODUCTS

CONSUMER RECONNECTION
WITH HOME & GARDEN

TO OUR STAKEHOLDERS

Compassion, empathy and care for
all stakeholders — these are terms not
typically associated with successful
high-performance corporate leadership
in the pre-pandemic era.

James M. Loree
Chief Executive Officer

However, all those elements, in conjunction with a
recognition that corporations have an inherent ability, as
well as an important obligation, to be a force for societal
good, have been critical during the pandemic and, we
believe, will continue to rise in importance in the coming
months and years. It is our view that, to have any chance of
solving society’s biggest and most pressing sustainability
challenges, including climate, inequality, racial justice,
workforce skills, technological governance and others, we
must collaborate with our peers, the public sector and NGOs
to drive positive change and to do it resolutely. Stanley
Black & Decker is all in on this and has been for years. We
are now going on five years of activating the elevation of our
commitment to corporate social responsibility (read ESG)
and directing our efforts in that vein.

Before I go any further, I must thank our 53,000 employees
for all their contributions and dedication to the Company
during 2020, the year of the pandemic. Our people, while
dealing with their own, and in some cases staggering,
personal hardships and challenges, are the reason I can
share the story and results that I do in the coming pages.
This inspired team came together as one and rose to the
occasion, navigating an incredibly challenging backdrop with
confidence, agility and grace to close out 2020 with a strong
performance in the areas of financial results, ESG and overall
social impact. Moreover, our people and our Company have
never been better positioned for future positive performance,
the effect of which is already being felt in 2021. At the center
of it all is our purpose, “For Those Who Make the World,” as
well as a humanistic commitment to compassion, empathy
and care for all stakeholders.

A WORLD IN TUMULT

I cannot help but think of this letter as a time capsule of
sorts. Many years from now when future generations look
back at the events of 2020, I believe they will see it as a
pivotal year. Comfortable paradigms along with institutional

norms and assumptions were shattered across the globe
with remarkable speed and force. Agility and resilience
became performance differentiators for individuals, teams
and organizations. Among other things, this improbable year
opened the aperture into the art of the possible. It is through
that lens that I write this letter, reflective of the relentlessly
volatile, turbulent, yet positive catalytic year that was 2020,
as well as the awesome promise of 2021 and beyond.

Nothing could have fully prepared any of us for what would
follow a calm start to 2020, which abruptly ended on March
11, 2020, when the WHO declared the onset of a global
pandemic. The ensuing scourge reached massive scale with
over 2.6 million (and counting) fatalities in 192 countries. This
global phenomenon placed new and difficult burdens on
people everywhere, wreaked havoc with demand trends and
supply chains and increased business continuity challenges
to levels never before experienced. The U.S., long a paragon
of stability, descended into political chaos, extremism,
divisiveness and the stark reemergence of deeply rooted
racial justice issues added to the disorderly backdrop.

Our purpose, “For Those Who Make the World,” and our
solid cultural and financial foundation combined to serve
as a stabilizing guide for us as our leaders and teams
mobilized effectively across our global enterprise. Starting
in China, then quickly migrating to Europe and the U.S., the
pandemic roared across the globe with ferocity, exposing
income, healthcare, race and gender inequalities along the
way. Stakeholder capitalism suddenly took center stage as
businesses, governments and communities joined forces to
face into the exigencies of the crisis.

Our people responded beautifully. At the very onset, we
established pandemic-era tactical priorities: (1) protect
the health and safety of our employees and supply
chain partners; (2) ensure financial stability and business
continuity; and (3) do our part to help mitigate the impact of
the virus in our communities.

STANLEY BLACK AND DECKER 2020 ANNUAL REPORTEmployee Health & Safety
Nothing is more important to us than ensuring the health
and safety of our employees. In addition to being a matter
of life and death during this pandemic, our focus in this
area is essential to winning the trust and confidence of our
associates, at a time when uncertainty in their lives is at an
all-time high and misinformation about the virus is rampant.
From the beginning, we implemented comprehensive safety
measures and informed and guided our employees on how to
keep themselves and their families as safe as possible, both
inside and outside of the workplace.

We formed an Executive Safety Committee to keep the
organization current with the latest scientific, health and
medical information and added a Chief Medical Officer
to our team. We mandated mask wearing in our facilities
prior to official health organization guidance, and our safety
measures have met and often significantly exceeded those
required by public health guidelines. Through these measures,
including mandatory masks, social distancing, temperature
screening and spacing out shifts, as well as testing, tracking
and quarantining as required, we have worked tirelessly to
keep employees safe. And we provided personal protective
equipment (PPE) not only for our employees but also for their
families to use outside of work.

As a result of these safety efforts and the commitment of all
our employees, our COVID-19 case rates and fatalities have
remained well below the regional total population data.

Maintaining Business Continuity
and Serving Customers
Our manufacturing plants, distribution centers and overall
supply chain have largely operated continuously with very few
interruptions during the course of the pandemic.

Stanley Black & Decker’s products and our customers
support, among others, those who make the world,
including the frontline, essential workers, caregivers and
first responders, manufacturers of medical and other
critical equipment, maintenance personnel at healthcare
facilities, construction workers who are maintaining critical
infrastructure and workers engaged in natural disaster relief
activities. Without access to our tools, fasteners, security
systems and numerous other products, these essential
services providers would face difficulties in doing their jobs.

Supporting Our Communities
Generous community support has always been a feature of
the Stanley Black & Decker culture; however in 2020 we took
it to a new level in the spirit of giving back in a time of crisis:

• We doubled our charitable contributions, donating to
COVID-19 relief funds globally, nationally and locally, with
a focus on food scarcity and healthcare services. As part
of this program, we matched all employee donations
2-for-1 to amplify our colleagues’ actions in their

local communities around the world;

• We established an emergency relief program for our
employees, which provides financial assistance to
Stanley Black & Decker employees and their families
to help those who have been severely impacted by
the pandemic;

• We used our supply chain skills to help acquire critical
PPE for distribution to frontline healthcare workers and first

responders in our communities; and

• We formed a global, companywide COVID-19 Community
Response Task Force to allocate the Company’s time,

talents, innovation capabilities and other expertise to help

mitigate societal COVID-19-related challenges.

We watched in dismay as the pandemic, with its
disproportionate impact on Black and Hispanic individuals,
exposed racial inequities that have existed in the U.S. for
generations. In the wake of the brutal and senseless
George Floyd incident, we publicly declared that “We Are
for Those Who Demand Justice, Take a Stand for Equality
and Commit to Inclusivity for All.” In that connection, we have
committed to a 10-point racial justice action plan, developed
in concert with our African Ancestry Network, to make a
difference for our employees and our communities. The
actions are well underway. Throughout this process we have
gained new understanding of the power of listening to diverse
voices and creating a workplace where all people’s voices are
heard and all people are valued.

BACK FROM THE BRINK

Very early on in April, with the pandemic having aggressively
spread to most of the world, our revenue temporarily
collapsed, averaging 40% down for four straight consecutive
weeks in the month. In response, we quickly and effectively
implemented a $1 billion cost reduction program. Our top 50
executives voluntarily took temporary 20% base pay cuts and
our board followed suit with a commensurate reduction in its
director retainer fees. Over 10,000 salaried employees were
placed on furloughs or reduced work schedules. Indirect cost
reductions totaling $500 million annualized were implemented.
We took actions to supplement our already strong liquidity
position. In short, by mid-May we were hunkered down and
ready for any scenario which might emerge.

Suddenly, in the last week of April and on into the summer
months, an abrupt and very positive phenomenon emerged in
the Tools & Storage vertical that vastly improved the trajectory
of our 2020 business.

Our end users, many of them homebound with more time
on their hands sheltering in place, began to discover and/or
rediscover DIY projects, both indoors and outdoors.

We enjoyed a surge in North American retail sales of a
magnitude never experienced before.

By May, point-of-sale of our tool products was running
30% to 40% higher than the prior year and eCommerce
growth surged at levels even higher than that. Fortunately,
both we and our channel partners had solid inventory
positions at the onset and we ramped up production at our
factories to extraordinary levels. By the third quarter, the
favorable demand trend had extended to Europe and other
markets around the world, albeit at somewhat lower levels
but still in strong double-digit territory.

The second half of 2020 proved to be an all-out test of
our supply chain resiliency and ability to serve the growth.
Customer inventory levels were substantially reduced by
mid-year and our global factories were running at historic
levels just to keep up with end user demand, and they still
are. We faced rolling labor shortages, supplier issues and
various arbitrary government edicts potentially impacting our
supply chain in jurisdictions all over the globe. However, we
were able to prevail and operate continuously with only minor
exceptions during the year.

GROSS MARGIN

RECORD OPERATING MARGIN

2020 Summary of Results

TOTAL REVENUES

$14.5B

+10% Second-Half
Organic Growth

34.7%*

Up 120 Bps
Versus Prior Year

EARNINGS PER SHARE

RECORD FREE CASH FLOW

$9.04*

$1.7B

Up 8% Versus Prior Year

136% of Net Income

* Excludes M&A Related and Other Charges

14.6%*

Up 110 Bps
Versus Prior Year

CASH FLOW RETURN
ON INVESTMENT

~16%

On the heels of an excellent third quarter, the fourth
quarter was the pinnacle of our 2020 performance, and
we entered 2021 stronger than ever. It was truly a display
of our Company’s teamwork, operational excellence and
commitment to our purpose.

Our ESG Commitments
We view ESG through a holistic lens and believe our biggest
impacts can come by creating a diverse and inclusive culture
and advancing a bold Corporate Social Responsibility (CSR)
strategy that addresses climate change and our Company’s
role in society.

Our CSR strategy includes 2030 commitments in three areas:
Empower Makers, Innovate with Purpose, and Create a More
Sustainable World. Each commitment area is aligned to and
supports several of the UN Sustainable Development Goals.

• First, we are working to empower 10 million makers and
creators to adapt to a changing world and workforce
through STEAM education (science, technology,

engineering, arts and math), vocational and trade skills,
Makerspaces and promoting employee career mobility.

• Second, we are working to enhance up to 500 million
lives by developing innovative products that address
unmet societal needs, improve product impacts through
circular design, and reduce supply chain emissions by
tasking two-thirds of our supply chain by spend to set

science-based Scope 1 and Scope 2 targets by 2025.

• Finally, we are endeavoring to help create a more
sustainable world by becoming carbon-positive, eliminating
landfilling, and reducing water use in water-stressed and

water-scarce areas.

In June 2020, we achieved our ECOSMART™ 5-year
commitments to reduce our energy consumption, carbon
emissions, waste generation and water consumption by 20%
against our 2015 baseline.

Last year, we continued to accrue reputational gains for
industry leadership. We were ranked first in our industry
by Fortune’s The World’s Most Admired Companies, and
won a Reuters Responsible Business Award for Business
Transformation. For the first time, we were recognized
by Fast Company on its list of The 100 Best Workplaces
for Innovators, and ranked first in our category by Forbes
America’s Best Employers for Women. We earned a top-score
from Corporate Equality Index as a Best Place to Work for
LGBTQ Equality. And we continued to be recognized as a
leader on the Dow Jones Sustainability Indices’ World Index
for the third consecutive year and its North American Index
for the 10th consecutive year as well as being designated as a
global leader by CDP for the eighth consecutive year.

You can learn more about our efforts by visiting our website
and viewing our annual sustainability reports (https://www.
stanleyblackanddecker.com/social-responsibility/annual-
sustainability-reports).

2020 FINANCIAL PERFORMANCE

2020 was by far the most difficult backdrop we’ve
ever faced, but we were prepared for volatility and our
people rose to meet the challenges. Fortunately, we went
into it with strength and stayed strong for the duration.
Back in 2016, we committed to a vision that embodied
purpose-driven performance. That was the distinguishing
factor for Stanley Black & Decker last year. We’ve built a
company that is anchored by a people-oriented culture,
striving to (1) deliver top-quartile financial performance,
(2) become known as one of the world’s great innovators
and (3) elevate an already strong commitment to ESG and
corporate social responsibility.

We demonstrated in 2020 that when corporations like ours
put people first and work to have a positive impact on society

STANLEY BLACK AND DECKER 2020 ANNUAL REPORT

at large, the result can be extraordinary resilience, which
benefits our shareholders through outstanding growth,
cash flow, margin expansion and ESG, and that is the
story of 2020.

Stanley Black & Decker exited 2020 with strong momentum
and reported record financial results, utilizing our cost
management and 10% second-half organic growth to deliver
gross and operating margin rate expansion, 8% earnings per
share growth* and $1.7B of free cash flow.

Full-year revenue totaled $14.5 billion, a 1% increase from
the prior year. Our full-year operating margin rate was a
record 14.6%*, benefitting from a 120-basis point increase
in our gross margin rate*. Diluted EPS was $9.04*, up 8%
over the prior year. Free cash flow was a record $1.7 billion,
resulting in a conversion rate of 136% of net income. Our
strong free cash flow profile supported our 53rd annual
dividend increase, the acquisition of Consolidated Aerospace
Manufacturing and a modest amount of deleveraging, in line
with our strong investment grade credit targets. Our cash
flow return on investment grew to 16%, slightly above the
high end of our long-term financial objective.

A key element to last year’s financial performance was our
swift and proactive cost response initiated in the second
quarter, which delivered approximately $500 million of
savings in 2020 and positioned the businesses for a
solid operating margin delivery. This program enabled
our businesses to post historically strong trough margins
during the downturn and has also enabled a new range of
profitability as growth resumed. We believe that many of
these benefits are sustainable, and by leveraging our tech-
enabled productivity initiatives that we call margin resiliency,

* Excludes M&A Related and Other Charges

Our Operating Model

we have a significant opportunity to achieve historic gross
margin levels in the coming years.

Tools & Storage delivered 4% organic growth in 2020 as the
business quickly pivoted mid-year to serve a surge in demand
caused by a consumer refocus on the home and garden as
well as an acceleration in eCommerce that resulted in 18%
organic growth in the second half. This phenomenon was
experienced around the world with North America (+19%),
Europe (+15%) and emerging markets (+17%) all delivering
second-half organic expansions. The success in 2020 was
accelerated by a steady stream of innovations brought to
market across all our brands and categories, including
our breakthrough innovations of DEWALT FLEXVOLT,
ATOMIC and XTREME.

In Industrial (-15%), we weathered the deepest market-driven
retraction in the second quarter as many of our automotive
and general industrial focused customers curtailed or shut
down production early in the pandemic. As we moved
through 2020, the market environment improved, and
revenue was better each successive quarter. This business
is well positioned to capture the benefits from an industrial
market recovery in 2021.

Finally, Security proved once again to be a resilient segment
in a downturn, limiting its organic decline to 4%. Compared
to past cycles, the business had to navigate customer and
governmental health restrictions that were unique to the
pandemic and most pronounced in the second quarter.
However, the team used 2020 to accelerate its transition and
develop new health and safety focused offerings that can
support its transformation and deliver growth and margin
improvements in 2021 and beyond.

Value Creation Model

A WELL-ESTABLISHED MODEL FOR DRIVING
PERFORMANCE & INNOVATION

SBD Operating Model
Our Stanley Black & Decker Operating Model (SBD Operating
Model) is the framework for our businesses to focus their
priorities and allocate resources in order to sustain financial
performance. This model has continuously evolved over the
last 15 years to ensure we are elevating best practices and
incorporating the capabilities required to win in the 2020s.

At the center of the model is the interrelationship between
People and Technology, which emphasizes our belief that the
right combination of digitally proficient skillsets applying new
technologies can be an enormous source of value creation
and sustainability for the corporation.

The criticality of Performance Resiliency has been reinforced
in the last few years and has prepared us to successfully
tackle the volatility, uncertainty, complexity and ambiguity that
characterizes today’s world.

Stanley Black & Decker has a long and storied track record
of leading innovation, delivering breakthroughs to the market
such as DEWALT FLEXVOLT, ATOMIC and XTREME. Extreme
Innovation takes this innovation culture and accelerates
progress by expanding our innovation ecosystem to include
external collaborations with startups and entrepreneurs,
academic institutions, research labs and others.

An intense focus on Operations Excellence and asset
efficiency is mandatory in a dynamic world in which the bar
for competitiveness is always moving higher. To help maintain
our edge, a much more agile, adaptable and technology-
enabled supply chain is necessary to manufacture closer to
our customers.

Lastly, to sustain our market share growth, we need to evolve
and adapt to ensure we are leveraging our commercial best
practices, maintaining the superior position of our world class
brands and applying technology to gain sharper end user
insights to elevate our Customer’s Experiences to nothing
short of Extraordinary.

Value Creation Model
Our well-established and proven value creation model has
recurrently produced strong, long-term shareholder returns.
This time-tested model starts with our world class brands,
attractive growth platforms, and scalable and defensible
franchises. Importantly, it leverages the power of the
SBD Operating Model—enabling the achievement of the
Company’s long-term financial objectives.

We also employ a balanced capital allocation approach over
time, in which we commit to returning 50% of our capital to
shareholders in the form of dividends and/or opportunistic
share repurchases, with the remaining 50% earmarked for
acquisitions to further strengthen our business portfolio and
fuel growth.

Innovation Ecosystem
Our pursuit to become known as one of the world’s great
innovative companies is a consuming passion for us. In this
ever more complex, faster moving world with disruption and
democratization of innovation occurring across the globe,
no one individual or institution alone can possibly have the
imagination, knowledge and resources to successfully go
it alone. Therefore, in addition to our internal network of
innovation teams, we are building a vast network of resources
to advance our products and processes, generate new
revenue models and give us a lens into the various disruptive

STANLEY BLACK AND DECKER 2020 ANNUAL REPORTInnovation Ecosystem

forces representing both future threats and opportunities.
This network includes entrepreneurial accelerators,
academics, other companies, our venture investment
portfolio, Stanley X, our Industry 4.0, Advanced Analytics
and AI centers of excellence, government and academic
research labs and much more.

Our ecosystem addresses all technologies that we consider
strategic and cuts across all of our businesses and functions.
It is loosely coordinated by our Technology Council under the
direction of our Chief Technology Officer.

Our strategy, value creation model, operating model and
innovation ecosystem have grown and evolved to respond
to our changing world.

THE ROAD BEFORE US

Stanley Black & Decker’s framework for success integrates
the components of our cultural foundation and great financial
heritage to position us to win in the 2020s. This isn’t the
first time our resilience has been tested and it won’t be the
last, hence why we’ve structured our portfolio to capitalize
on emerging opportunities.

We have developed and are executing a number of
catalysts that have the potential to sustain above-market
growth for the coming years. We have a strong track record of
innovation-led performance, with the 5-year period preceding
2020 delivering 5% average organic growth. Additionally, the
pandemic has accelerated or, in some cases, created new
opportunities across the enterprise. We have been working
to position our businesses to capture market recoveries and

accelerating trends surrounding the consumer’s reconnection
with the home and garden, the rapid shift to eCommerce,
electrification and an increased focus on health and safety.
A series of notable growth catalysts are summarized below:

• eCommerce—With revenues approaching $2 billion,

this global channel has the potential for strong double-
digit growth for the foreseeable future. We are investing

in new talent, digital capabilities and our brands,
including the revitalization of the BLACK+DECKER

brand, to capture this compelling opportunity.

• CRAFTSMAN—This iconic brand rollout has delivered
approximately $900 million of growth, net of cannibalization,
since hitting the market 30 months ago and we are just
beginning to tap the full potential of the brand with a
strong lineup of new product launches planned for 2021
and beyond.

• Core & Breakthrough Innovation—In Tools, we continue to
strengthen our position as the industry leader in maximizing
power output with innovations like DEWALT POWER DETECT
and FLEXVOLT ADVANTAGE. The extension of our innovative
FLEXVOLT, ATOMIC and XTREME power tool platforms

into new products and categories is taking this aggregate
$600 million dollar business to new levels. POWER DETECT
and FLEXVOLT ADVANTAGE utilize technology advances in
batteries, electronics and motors to automatically optimize

the system to maximize the power output of the tool. We also

have a significant opportunity ahead to lead electrification
of outdoor products, delivering innovation that reduces
carbon emissions by displacing gasoline engines
and delivers noise reductions.

Strategic Framework

Continue Organic
Growth Momentum

Be Selective and Operate
in Markets Where:

• SBD OPERATING MODEL
as a catalyst

• MIX into higher growth,
higher margin businesses

• BRAND is meaningful

• VALUE proposition is
definable and sustainable

through innovation

• INCREASE relative weighting
of emerging markets

• GLOBAL cost leadership is
achievable

Pursue Acquisitive Growth

• BUILD upon global Tools
platform

• EXPAND Industrial platform /
diversify Engineered Fastening
and Infrastructure

• CONSOLIDATE Commercial
Electronic Security industry,
pending transformation

• Security is poised to serve the increased societal

focus on health and safety. Our transformation came
at the right time as Security is leveraging capabilities

that have been developed during the last two years such
as digitally proficient talent, technology and partnerships
to commercialize new solutions. These are products,
such as automated entrance management with facility
threshold controls, contact and proximity tracing and
touchless doors for commercial establishments, that

provide excellent growth potential.

• Finally, for Industrial, the Stanley Engineered Fastening
business is well positioned to capture increased
penetration as the automotive market shifts to
electric and hybrid vehicles which carry per vehicle
penetration rates about 3–6 times greater than a standard
internal combustible engine. As this trend is forecasted
to accelerate in the 2020s, we are investing to capture
this opportunity.

Growing our businesses through M&A is central to our
strategy. While we continue to monitor the market for
acquisitions, we have a line of sight for acquisition growth
with our option to purchase the remaining 80% in MTD
products beginning in July 2021 at an all-in EBITDA multiple
in the range of 7–8 times. MTD is a leading manufacturer in
the $20+ billion and growing outdoor products market. Our
current planning assumption calls for the exercise of our MTD
option and the potential addition of up to $3 billion of revenue
from the transaction in 2022. This is also a compelling organic
growth opportunity in the professional outdoor equipment
market, as well as to drive electric-powered and autonomous
mower offerings while employing our successful commercial
model to fully leverage our portfolio of brands and channels.

Stanley Black & Decker will benefit from this powerful list of
growth catalysts and ended 2020 with margins in expansion
mode. We are extremely well positioned to benefit from our
mantra of going into the crisis with strength, staying strong
throughout and emerging on the other side even stronger.

CLOSING

I began this letter with a nod to the rising importance of
compassion, empathy and care as it relates to leadership
in the 2020s. Ours is a volatile world, full of complexity and
uncertainty. Trust is at a premium and human connectivity is
essential. There is an ever-growing array of “must haves” for
high performance: purpose, innovation, digital transformation,
ESG, lifelong learning, upskilling, DE&I, human connection,
employee experience . . . the list goes on. In a world fraught
with increasing risks and unknowable twists and turns,
with gut-wrenching technological change accelerating at a
steady pace and some important, once reliable institutions
unable to adjust, it takes an enormous amount of energy,
resiliency and agility for corporations to thrive. People have
an unquenchable thirst for clarity at a time when ambiguity is
pervasive. The year 2020 was perhaps the greatest test in this
century of our ability to thrive amidst enormous challenges.
Our people comported themselves exactly as we would have
expected, with boldness, courage, determination and a strong
sense of responsibility. As a result, we are looking ahead with
great excitement and optimism as we prepare to seize the
opportunities ahead.

James M. Loree
Chief Executive Officer

STANLEY BLACK AND DECKER 2020 ANNUAL REPORT

FINANCIAL HIGHLIGHTS

(MILLIONS OF DOLLARS, EXCEPT
PER-SHARE AMOUNTS, CONTINUING
OPERATIONS)

2020 (1)

2019 (1)

2018(1)

2017 (1)

2016

SWK

Revenue

Gross Margin—$

Gross Margin—%

Operating Margin—$

Operating Margin—%

Working Capital Turns

Free Cash Flow*

Diluted EPS

Tools & Storage
Revenue

Segment Profit—$

Segment Profit —%

Industrial
Revenue

Segment Profit—$

Segment Profit—%

Security
Revenue

Segment Profit—$

Segment Profit —%

$ 14,534.6

5,039.1

34.7%

2,125.6

14.6%

10.4

1,674

9.04

$ 14,442.2

$ 4,845.2

33.5%

$ 13,982.4

$ 4,916.8

35.2%

$ 1,943.7

$ 1,902.9

13.5%

9.8

1,081

8.40

13.6%

8.8

769

8.15

$ 9,814.0

$ 1,535.7

15.6%

$ 10,329.7

1,888.1

18.3%

$ 10,062.1

$ 1,577.6

15.7%

2,352.7

292.7

12.4%

1,852.2

182.2

9.8%

$ 2,434.7

359.9

14.8%

$ 2,187.8

345.8

15.8%

$ 1,945.4

212.3

10.9%

$ 1,980.6

211.5

10.7%

$ 12,966.6

$ 11,593.5

4,825.1

$ 4,268.0

37.2%

1,863.6

14.4%

9.1

976

7.46

9,045.0

1,520.7

16.8%

36.8%

$ 1,635.5

14.1%

10.8

1,138

6.53

$ 7,619.2

$ 1,258.4

16.5%

1,974.3

$ 1,864.0

345.9

17.5%

300.1

16.1%

1,947.3

$ 2,110.3

213.7

11.0%

267.9

12.7%

(1) With the exception of Free Cash Flow, results exclude acquisition-related charges, a non-cash fair value adjustment, gain or loss on sales of
businesses, an environmental remediation settlement, cost reduction programs, an incremental freight charge related to a service provider’s
bankruptcy, charges related to the extinguishment of debt, Security business transformation, margin resiliency initiatives, the release of a
contingent consideration liability relating to the CAM acquisition, tax charges related to the Tax Cuts and Jobs Act, and a one-time tax benefit
related to a supply chain reorganization, as applicable.

* Free Cash Flow = Net cash flow from operating activities less capital and software expenditures. Free Cash Flow for 2016–2017
is shown as previously reported, which excludes the impacts from the 2018 adoption of ASU 2016-15, “Classification of Certain
Cash Receipts and Cash Payments” and ASU 2016-18, “Restricted Cash.”

2020 SCORECARD

ADJUSTED EBITDA
(CONTINUING OPERATIONS)(a)
($ MILLIONS)

EPS
(CONTINUING OPERATIONS)(b)
($ GAAP) ($ ADJUSTED)

FREE CASH FLOW(c)
($ MILLIONS)

$2,064 $2,187 $2,283

$2,450

$1,809

$6.53

$8.05

$7.46

$9.04

$7.77

$8.15

$8.40

$6.35

$3.99

$1,138

$976

$1,081

$769

WORKING CAPITAL TURNS(d)

$1,674

10.8

9.1

8.8

9.8

10.4

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

AVERAGE CAPITAL EMPLOYED(e)
($ BILLIONS)

CASH FLOW RETURN ON
INVESTMENT(f)

TOTAL SALES GROWTH

ORGANIC SALES GROWTH

$11.2

$9.9

$12.1

$12.3

14%

12%

$14.0

16%

12%

(1%)

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

(a) “EBITDA” (earnings before interest, taxes, depreciation, and amortization) and “Adjusted EBITDA” are non-GAAP measurements. Management believes Adjusted EBITDA, which
excludes the impacts of acquisition-related and other charges, is important for the ability to determine the earnings power of the Company. Adjusted EBITDA for 2020 results
excludes $400 million of (pre-tax) charges related to a cost reduction program, charges related to the extinguishment of debt, acquisitions, Security business transformation,
margin resiliency initiatives, and a net loss on the sales of businesses, partially offset by a release of a contingent consideration liability relating to the CAM acquisition. Adjusted

EBITDA for 2019 results excludes $363 million of (pre-tax) charges related to restructuring, acquisitions, charges related to the extinguishment of debt, Security business
transformation, margin resiliency initiatives, and a gain on a sale of a business. Adjusted EBITDA for 2018 results excludes $450 million of (pre-tax) charges related to acquisitions,
an environmental remediation settlement, a non-cash fair value adjustment, a cost reduction program, an incremental freight charge related to a service provider’s bankruptcy,
and a loss related to a previously divested business. Adjusted EBITDA for 2017 results excludes $156 million of (pre-tax) charges related to acquisition-related charges and a
$264 million (pre-tax) gain on sales of businesses.

(b), (c), (d), (e) and (f) refer to the inside back cover.

(MILLIONS OF DOLLARS, CONTINUING OPERATIONS)

2020

2019

2018

2017

2016

Net earnings before equity interest

1,226

969

605

1,227

Interest income

Interest expense

Income taxes

Depreciation and amortization

(18)

223

578

(54)

284

161

560

(69)

278

416

507

(40)

223

301

461

968

(23)

194

262

408

EBITDA
Pre-tax acquisition-related charges and other

2,050

1,920

1,737

2,172

1,809

400

363

450

(108)

—

Adjusted EBITDA

2,450

2,283

2,187

2,064

1,809

STANLEY BLACK AND DECKER 2020 ANNUAL REPORT

AT-A-GLANCE

A Global Industrial Leader

INDUSTRIAL

$2.3B

~$1.7B
STANLEY Engineered
Fastening

~$0.6B
Infrastructure

SECURITY

$1.9B

~$1.5B
Commercial Electronic
Security

~$0.3B
Automatic Doors

~$0.1B
Healthcare Solutions

TOOLS & STORAGE

$10.3B

~$6.6B
Power Tools & Equipment

~$3.7B
Hand Tools,
Accessories & Storage

#1
in Tools & Storage

#2
in Commercial
Electronic Security

A GLOBAL LEADER
in Engineered Fastening

10
Consecutive Years
Dow Jones Sustainability
NA Index

3
Consecutive Years
Dow Jones Sustainability
World Index

TOOLS & STORAGE

INDUSTRIAL

SECURITY

The worldwide leader in tools and
storage, we create the tools that build
and maintain the world. Tradespeople
and Do-It-Yourselfers alike rely on us
every day for the toughest, strongest,
most innovative hand tools, power tools
and storage solutions in the market.

We build the solutions that keep
your world running seamlessly—
from preferred engineered fastening
solutions in the automotive and
industrial channels to infrastructure
solutions including hydraulic tools
and attachments.

We deliver peace of mind with
advanced electronic safety,
security and monitoring solutions,
automatic doors, and sophisticated
patient safety, asset tracking and
productivity solutions.

Leading Brands

Tools & Storage

Infrastructure

STANLEY

DEWALT

Irwin

Facom

CRAFTSMAN

MAC Tools

BLACK+DECKER

Sidchrome

Porter Cable

BOSTITCH

Powers

Lenox

Proto

Vidmar

Lista

STANLEY
Oil & Gas

STANLEY
LaBounty

STANLEY
Infrastructure

Paladin

Pengo

Engineered
Fastening

STANLEY
Engineered
Fastening

CribMaster

Consolidated
Aerospace
Manufacturing

Bristol

Voss

EA Patton

Aerofit

Security

Healthcare

STANLEY
Security

Sonitrol

STANLEY
Access
Technologies

STANLEY
Healthcare

AeroScout

Hugs

Wander Guard

OUR MISSION: BE A FORCE FOR GOOD

At Stanley Black & Decker, we believe
corporations have a broad role to play to
help solve societal challenges like climate
change and income inequality—working to
be a force for good.

“We are for the makers and creators, the builders
and the caregivers. Sustainability is integral to our
business strategy.”

James M. Loree
Chief Executive Officer

ECOSMART Is Our Commitment To A Sustainable Future

Our 2030 Global Corporate Social Responsibility Strategy

PEOPLE
EMPOWER MAKERS

PRODUCT
INNOVATE WITH
PURPOSE

Enable 10 million creators and
makers to thrive in a changing world

Innovate our products to enhance
the lives of 500 million people and
improve environmental impacts

PLANET
CREATE A MORE
SUSTAINABLE WORLD

Positively impact the environment
through our operations

10,000,000

500,000,000

500,000

d
e
r
e
w
o
p
m
E
e
p
o
e
P

Empowering Makers
Through Large-Scale
Partnerships

d
e
c
n
a
h
n
E
s
e
v
L

1,815,960

8,875,052

Sustainable Innovation
Through Collaboration

671,838

203,230

Upskilling Our
Employee Base

206,539

169,530

Sustainable Innovation
from Within

400,000

e
2
O
C
T
m

300,000

200,000

e
n

i
l

e
s
a
B

T
B
S

100,000

SCIENCE-BASED TARGET

2018

2019

2020

2030

2018

2019

2020

2030

2015 2016 2017 2018 2019 2020 ...2030

ECOSMARTTM Scorecard

ENERGY
(KBTU/HR)

CARBON
(MT/KHR)

WATER
(GAL/HR)

WASTE
(LBS/HR)

28.9

27.9

26.3

25.3

3.26

3.00

2.62

2.47

3.48

3.26

3.17

1.63

1.66

1.58

1.60

Non-recast

Recast

Scope 1: Mobile & Stationary
Scope 2: Purchased Electricity
Recast accounts for acquisition,
consolidation and divestment

TOTAL RECORDABLE RATE (TRR)
AND LOST TIME RATE (LTR)

INCIDENTS/100 HEADS

0.94

TRR

0.84

0.80

0.74

0.25

0.23

0.22

LTR

0.48

0.17

2017

2018

2019

2020

2017

2018

2019

2020

2017

2018

2019

2020

2017

2018

2019

2020

2016

2017

2018

2019

2020

STANLEY BLACK AND DECKER 2020 ANNUAL REPORT

Our Leadership

Board of Directors

George W. Buckley
Chairman,
Stanley Black & Decker, Inc.
Chairman,
Smiths Group plc
Retired Chairman,
President & Chief Executive
Officer, 3M Company

Andrea J. Ayers
Former President &
Chief Executive Officer,
Convergys Corporation

Patrick D. Campbell
Retired Senior Vice President &
Chief Financial Officer,
3M Company
Chairman, Newell Brands Inc.
Chairman, Herc Holdings Inc.

Carlos M. Cardoso
Principal,
CMPC Advisors LLC
Chairman,
Garrett Motion Inc.

Debra A. Crew
President, North America &
Global Supply, Diageo plc

Michael D. Hankin
President & Chief
Executive Officer,
Brown Advisory Incorporated

James M. Loree
Chief Executive Officer,
Stanley Black & Decker, Inc.

Robert B. Coutts
Retired Executive Vice President,
Electronic Systems,
Lockheed Martin Corporation

Jane M. Palmieri
President,
Industrial Intermediates &
Infrastructure, Dow Inc.

Mojdeh Poul
Executive Vice President,
Health Care Business Group,
3M Company

Dmitri L. Stockton
Former Chairman, President &
Chief Executive Officer,
GE Asset Management

Irving Tan
Chairman, Asia-Pacific
Japan & China,
Cisco Systems Inc.

Management Team

James M. Loree
Chief Executive Officer

Mukesh Dalal
Chief Artificial Intelligence Officer

Donald Allan, Jr.
President & Chief Financial Officer

Jeffery D. Ansell
Executive Vice President,
Stanley Black & Decker

Guru Bandekar
Chief Procurement Officer,
Global Supply Management

Sudhi N. Bangalore
Chief Technology Officer,
Global Operations

Thomas D. Ehrhardt
President, Engineered Fastening,
Automotive

Rhonda O. Gass
Vice President &
Chief Information Officer

Deb J. Geyer
Vice President & Corporate
Responsibility Officer

Minh T. Hua
Chief Talent Officer

Michael A. Bartone
Vice President, Corporate Tax

Michael D. Keogh
President, STANLEY X

Matthew M. Kushner
President, Global Electronic
Security

Dennis M. Lange
Vice President,
Investor Relations

Shannon L. Lapierre
Vice President & Chief
Communications Officer

Jocelyn S. Belisle
Vice President &
Chief Accounting Officer

Robert L. Blackburn
Senior Vice President,
Global Operations

Steven J. Brodrick
Vice President, Performance
Resiliency & Business
Transformation

Janet M. Link
Senior Vice President,
General Counsel and Secretary

Jaime A. Ramirez
Executive Vice President &
President, Tools & Storage

Frank A. Mannarino
President, Power Tools Group,
Tools & Storage

J. Douglas Redpath
President,
STANLEY Infrastructure

Mark T. Maybury
Chief Technology Officer

Lee B. McChesney
Vice President Corporate
Finance & Chief Financial Officer,
Tools & Storage

Allison A. Nicolaidis
President, Hand Tools & Storage
Group, Tools & Storage

Graham N. Robinson
Senior Vice President & President,
STANLEY Industrial

Joseph S. Simms

Chief Diversity Officer

Charles E. Stumb
President, Engineered Fastening,
Industrial

James P. O’Sullivan
President, Global Sales &
Marketing, Tools & Storage

Robert T. Paternostro
Vice President & Treasurer

Robert H. Raff
President, STANLEY Security

Pradheepa Raman
Chief Transformation Officer,
Tools & Storage

Stephen M. Subasic
Senior Vice President & Chief
Human Resources Officer

Corbin B. Walburger
Vice President,
Business Development

John H. Wyatt
Senior Vice President &
President, STANLEY Outdoor

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 2, 2021
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)

Connecticut
(State or Other Jurisdiction of
Incorporation or Organization)

06-0548860
(I.R.S. Employer
Identification Number)

1000 STANLEY DRIVE
NEW BRITAIN, CT 06053
(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number, Including Area Code 860 225-5111

Securities Registered Pursuant to Section 12(b) of the Act:

Title Of Each Class

Trading Symbol(s)

Common Stock $2.50 Par Value per Share

Corporate Units

SWK

SWT

Name Of Each Exchange on Which Registered
New York Stock Exchange

New York Stock Exchange

Securities Registered Pursuant To Section 12(g) Of The Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ¨ No þ

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the
Exchange Act.

Large Accelerated Filer

Non-Accelerated Filer

þ
¨

Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

¨
☐

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report.☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
As of June 26, 2020, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $21.8 billion based on the New
York Stock Exchange closing price for such shares on that date. On February 15, 2021, the registrant had 160,893,004 shares of common stock outstanding.

Portions of the registrant’s definitive proxy statement relating to its 2021 annual meeting of shareholders (the "2021 Proxy Statement") are incorporated by reference
into Part III of this Annual Report on Form 10-K where indicated. The 2021 Proxy Statement will be filed with the U.S. Securities Exchange Commission within
120 days after the end of the fiscal year to which this report relates.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I

BUSINESS.......................................................................................................................................
RISK FACTORS..............................................................................................................................
UNRESOLVED STAFF COMMENTS..........................................................................................
PROPERTIES..................................................................................................................................
LEGAL PROCEEDINGS................................................................................................................
MINE SAFETY DISCLOSURES....................................................................................................

PART II

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.........................................
SELECTED FINANCIAL DATA...................................................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...........................................................................................................
CONTROLS AND PROCEDURES................................................................................................
OTHER INFORMATION...............................................................................................................

PART III

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE
REGISTRANT.................................................................................................................................
EXECUTIVE COMPENSATION...................................................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS............................................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE...........................................................................................................................
PRINCIPAL ACCOUNTANT FEES AND SERVICES.................................................................

EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.........................................................

FORM 10-K SUMMARY...............................................................................................................

PART IV

3
9
22
22
22
22

23
25

27
50
50

50
51
51

56
56

ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.

ITEM 5.

ITEM 6.
ITEM 7.

ITEM 7A.
ITEM 8.
ITEM 9.

ITEM 9A.
ITEM 9B.

ITEM 10.

ITEM 11.
ITEM 12.

ITEM 13.

ITEM 14.

ITEM 15.
ITEM 16.

SIGNATURES
EX-4.11
EX-10.6
EX-10.7
EX-10.17
EX-10.28
EX-10.29
EX-21
EX-23
EX-24
EX-31.1(a)
EX-31.1(b)
EX-32.1
EX-32.2

PART I

ITEM 1. BUSINESS

FORM 10-K

Stanley Black & Decker, Inc. ("the Company") was founded in 1843 by Frederick T. Stanley and incorporated in Connecticut in
1852. In March 2010, the Company completed a merger ("the Merger") with The Black & Decker Corporation (“Black &
Decker”), a company founded by S. Duncan Black and Alonzo G. Decker and incorporated in Maryland in 1910. At that time,
the Company changed its name from The Stanley Works to Stanley Black & Decker, Inc. The Company’s principal executive
office is located at 1000 Stanley Drive, New Britain, Connecticut 06053 and its telephone number is (860) 225-5111.

The Company is a diversified global provider of hand tools, power tools and related accessories, engineered fastening systems
and products, services and equipment for oil & gas and infrastructure applications, commercial electronic security and
monitoring systems, healthcare solutions, and automatic doors, with 2020 consolidated annual revenues of $14.5 billion.
Approximately 61% of the Company’s 2020 revenues were generated in the United States, with the remainder largely from
Europe (19%), emerging markets (11%) and Canada (5%).

The Company continues to execute a growth and acquisition strategy that involves industry, geographic and customer
diversification to foster sustainable revenue, earnings and cash flow growth. The Company remains focused on delivering
above-market organic growth with margin expansion by leveraging its proven and long-standing Stanley Black & Decker
Operating Model (“SBD Operating Model”) which has continually evolved over the past 15 years as times have changed. At the
center of the SBD Operating Model is the concept of the interrelationship between people and technology, which intersect and
interact with the other key elements: Performance Resiliency, Extreme Innovation, Operations Excellence and Extraordinary
Customer Experience. Each of these elements co-exists synergistically with the others in a systems-based approach. The
Company will leverage the SBD Operating Model to continue making strides towards achieving its vision of delivering top-
quartile financial performance, becoming known as one of the world’s leading innovators and elevating its commitment to
social responsibility.

The above strategy has also resulted in approximately $11.5 billion of acquisitions since 2002 (excluding the Merger), which
was enabled by strong cash flow generation and increased debt capacity. In recent years, the Company completed the
acquisitions of Consolidated Aerospace Manufacturing, LLC ("CAM") for approximately $1.4 billion, International Equipment
Solutions Attachments Group ("IES Attachments") for approximately $654 million, Nelson Fastener Systems ("Nelson") for
approximately $424 million, the Tools business of Newell Brands ("Newell Tools") for approximately $1.8 billion, and the
Craftsman® brand from Sears Holdings Corporation ("Sears Holdings") for an estimated cash purchase price of approximately
$937 million on a discounted basis. The CAM acquisition further diversifies the Company's presence in the industrial markets
and expands its portfolio of specialty fasteners in the aerospace and defense markets. The IES Attachments acquisition further
diversified the Company's presence in the industrial markets, expanded its portfolio of attachment solutions and provided a
meaningful platform for continued growth. The Nelson acquisition was complementary to the Company's product offerings,
enhanced its presence in the general industrial end markets, and expanded its portfolio of highly-engineered fastening solutions.
The Newell Tools acquisition, which included the industrial cutting, hand tool and power tool accessory brands IRWIN® and
LENOX®, enhanced the Company’s position within the global tools & storage industry and broadened the Company’s product
offerings and solutions to customers and end users, particularly within power tool accessories. The Craftsman acquisition
provided the Company with the rights to develop, manufacture and sell Craftsman®-branded products in non-Sears Holdings
channels.

In January 2019, the Company acquired a 20 percent interest in MTD Holdings Inc. ("MTD"), a privately held global
manufacturer of outdoor power equipment, for $234 million in cash. Under the terms of the agreement, the Company has the
option to acquire the remaining 80 percent of MTD beginning on July 1, 2021. The investment in MTD increases the
Company's presence in the greater than $20 billion lawn and garden segment and enables the two companies to work together to
pursue revenue and cost opportunities, improve operational efficiency, and introduce new and innovative products for
professional and residential outdoor equipment customers, utilizing each company's respective portfolios of strong brands.

In May 2019, the Company sold its Sargent and Greenleaf mechanical locks business within the Security segment for net
proceeds of $79 million. In February 2017, the Company completed the sale of the majority of its mechanical security
businesses, which included the commercial hardware brands of Best Access, phi Precision and GMT, for net proceeds of
approximately $717 million. These divestitures allowed the Company to invest in other areas of the Company that fit into its
long-term growth strategy.

The Company has also divested several smaller businesses in recent years that did not fit into its long-term strategic objectives.

Refer to Note E, Acquisitions and Investments, and Note T, Divestitures, of the Notes to Consolidated Financial Statements in
Item 8 for further discussion.

The Company’s growth and acquisition strategy is interdependent with its social responsibility strategy focused on workforce
upskilling, product innovation, and environmental preservation including mitigating the impacts of climate change. These are
core business issues that ensure the long-term viability of the Company, its customers, suppliers, and communities. The
Company has established environmental, social and corporate governance targets embodied in its 2030 Corporate Social
Responsibility (“CSR”) strategy that include upskilling 10 million makers and creators, enhancing 500 million lives through
purpose driven product innovation, becoming carbon-positive, landfill-free, and reducing water use in water stressed and scarce
areas. The carbon positive target includes third-party approved science-based targets to reduce absolute scope 1 and 2
greenhouse gas emissions by greater than 100% by 2030, and to reduce supply chain emissions by 35%. The Company’s CSR
strategy considers all life-cycle stages including material procurement from supply chain partners, product design,
manufacturing, distribution and transportation, product use, product service and end-of-life. Refer to section "Human Capital
Management" for additional information regarding the Company's commitment to upskilling its employees and improving
diversity, equity and inclusion.

Description of the Business

The Company’s operations are classified into three reportable business segments, which also represent its operating segments:
Tools & Storage, Industrial and Security. All segments have significant international operations and are exposed to translational
and transactional impacts from fluctuations in foreign currency exchange rates.

Additional information regarding the Company’s business segments and geographic areas is incorporated herein by reference to
the material captioned “Business Segment Results” in Item 7 and Note P, Business Segments and Geographic Areas, of the
Notes to Consolidated Financial Statements in Item 8.

Tools & Storage

The Tools & Storage segment is comprised of the Power Tools and Equipment ("PTE") and Hand Tools, Accessories & Storage
("HTAS") businesses. Annual revenues in the Tools & Storage segment were $10.3 billion in 2020, representing 71% of the
Company’s total revenues.

The PTE business includes both professional and consumer products. Professional products 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, concrete and masonry anchors.
Consumer products include corded and cordless electric power tools sold primarily under the BLACK+DECKER® brand, lawn
and garden products, including hedge trimmers, string trimmers, lawn mowers, edgers and related accessories, and home
products such as hand-held vacuums, paint tools and cleaning appliances.

The HTAS business 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 segment sells its products to professional end users, distributors, retail consumers and industrial customers in a wide variety
of industries and geographies. The majority of sales are distributed through retailers, including home centers, mass merchants,
hardware stores, and retail lumber yards, as well as third-party distributors and a direct sales force.

Industrial

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. Annual revenues in the
Industrial segment were $2.3 billion in 2020, representing 16% 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 business sells to customers in the automotive,
manufacturing, electronics, construction, and aerospace industries, amongst others, and its products are distributed through
direct sales forces and, to a lesser extent, third-party distributors.

The Infrastructure business consists of the Attachment Tools and Oil & Gas product lines. Attachment Tools sells hydraulic
tools and high quality, performance-driven heavy equipment attachment tools for off-highway applications. Oil & Gas sells and
rents custom pipe handling, joint welding and coating equipment used in the construction of large and small diameter pipelines,
and provides pipeline inspection services. The Infrastructure business sells to the oil and natural gas pipeline industry and other
industrial customers. The products and services are primarily distributed through a direct sales force and, to a lesser extent,
third-party distributors.

Security

The Security segment is comprised of the Convergent Security Solutions ("CSS") and Mechanical Access Solutions ("MAS")
businesses. Annual revenues in the Security segment were $1.9 billion in 2020, representing 13% of the Company’s total
revenues.

The CSS business designs, supplies and installs commercial electronic security systems and provides electronic security
services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system maintenance.
Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the time of initial
equipment installation. The business also sells healthcare solutions, which include asset tracking, infant protection, pediatric
protection, patient protection, wander management, fall management, and emergency call products. The CSS business sells to
consumers, retailers, educational, financial and healthcare institutions, as well as commercial, governmental and industrial
customers. The MAS business primarily sells automatic doors to commercial customers. Products for both businesses are sold
predominantly on a direct sales basis.

Other Information

Competition

The Company competes on the basis of its reputation for product quality, its well-known brands, its commitment to customer
service, its strong customer relationships, the breadth of its product lines, its innovative products and customer value
propositions.

The Company encounters active competition in the Tools & Storage and Industrial segments from both larger and smaller
companies that offer the same or similar products and services. Certain large customers offer private label brands (“house
brands”) that compete across a wide spectrum of the Company’s Tools & Storage segment product offerings. Competition in
the Security segment is generally fragmented via both large international companies and regional providers. Competition tends
to be based primarily on price and the quality and comprehensiveness of services offered to customers.

Major Customers

A significant portion of the Company’s Tools & Storage products are sold to home centers and mass merchants in the U.S. and
Europe. A consolidation of retailers both in North America and abroad has occurred over time. While this consolidation and the
domestic and international expansion of these large retailers have provided the Company with opportunities for growth, the
increasing size and importance of individual customers creates a certain degree of exposure to potential sales volume loss.
Lowe's accounted for approximately 15%, 15% and 12% of the Company's consolidated net sales in 2020, 2019 and 2018,
respectively, while The Home Depot accounted for approximately 12% and 10% of the Company's consolidated net sales in
2020 and 2019, respectively. No other customer exceeded 10% of the Company's consolidated net sales in 2020, 2019 or 2018.

Working Capital

The Company continues to practice the five operating principles encompassed by Operations Excellence, one element of the
SBD Operating Model, which work in concert: sales and operations planning, operational lean, complexity reduction, global
supply management, order-to-cash excellence, the application of Industry 4.0 and upskilling the Company's workforce. The
Company develops standardized business processes and system platforms to reduce costs and provide scalability. The continued
focus on the operating principles above have been instrumental in reducing working capital and creating significant
opportunities to generate incremental free cash flow (defined as cash flow from operations less capital and software
expenditures). Working capital turns were 10.4 at the end of 2020, up 0.6 turns from 2019, reflecting the strong revenue
performance in 2020. The Company plans to continue leveraging Operations Excellence to generate ongoing improvements,
both in the existing business and future acquisitions, in working capital turns, cycle times, complexity reduction and customer
service levels, with a long-term goal of sustaining 10+ working capital turns.

Raw Materials

The Company’s products are manufactured using resins, ferrous and non-ferrous metals including, but not limited to, steel, zinc,
copper, brass, aluminum and nickel. The Company also purchases components such as batteries, motors, and electronic
components to use in manufacturing and assembly operations along with resin-based molded parts. The raw materials required
are procured globally and generally available from multiple sources at competitive prices. As part of the Company's Enterprise
Risk Management, the Company has implemented a supplier risk mitigation strategy in order to identify and address any
potential supply disruption or material scarcity issues associated with commodities, components, finished goods and critical
services. The Company does not anticipate difficulties in obtaining supplies for any raw materials or energy used in its
production processes.

Patents and Trademarks

No business segment is solely dependent, to any significant degree, on patents, licenses, franchises or concessions, and the loss
of one or several of these patents, licenses, franchises or concessions would not have a material adverse effect on any of the
Company's businesses. The Company owns numerous patents, none of which individually is material to the Company's
operations as a whole. These patents expire at various times over the next 20 years. The Company holds licenses, franchises and
concessions, none of which individually or in the aggregate are material to the Company's operations as a whole. These
licenses, franchises and concessions vary in duration, but generally run from one to 40 years.

The Company has numerous trademarks that are used in its businesses worldwide. In the Tools & Storage segment, significant
trademarks include STANLEY®, BLACK+DECKER®, DEWALT®, FLEXVOLT®, IRWIN®, LENOX®, CRAFTSMAN®,
PORTER-CABLE®, BOSTITCH®, FATMAX®, Powers®, Guaranteed Tough®, MAC TOOLS®, PROTO®, Vidmar®,
FACOM®, Expert®, LISTA® and the yellow & black color scheme for power tools and accessories. Significant trademarks in
the Industrial segment include STANLEY®, CRC®, NELSON®, LaBounty®, Dubuis®, CribMaster®, POP®, Avdel®, Heli-
Coil®, Tucker®, NPR®, Spiralock®, PALADIN®, CAM®, Bristol Industries®, Voss™, Aerofit™, EA Patten™, Integra®,
Optia®, PENGO® and STANLEY® Assembly Technologies. The Security segment includes significant trademarks such as
STANLEY®, HSM®, SONITROL®, Stanley Access Technologies™, AeroScout®, Hugs®, WanderGuard®, Roam Alert®,
MyCall®, Arial® and Bed-Check®. The terms of these trademarks typically vary from 10 to 20 years, with most trademarks
being renewable indefinitely for like terms.

Governmental Regulations

The Company's operations are subject to numerous federal, state and local laws and regulations, both within and outside the
U.S., in areas such as environmental protection, international trade, data privacy, tax, consumer protection, government
contracts, and others. The Company is subject to import and export controls, tariffs, and other trade-related regulations and
restrictions in the countries in which it has operations or otherwise does business. These controls, tariffs, regulations, and
restrictions have had, and may continue to have, a material impact on the Company's business, including its ability to sell
products and to manufacture or source components. Refer to Item 1A. Risk Factors in Part I of this Form 10-K for additional
information regarding various laws and regulations that affect the Company's business operations.

The Company is also subject to various environmental laws and regulations in the U.S. and foreign countries where it has
operations. In the normal course of business, the Company is involved in various legal proceedings relating to environmental
issues. The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is
probable that a liability has been incurred and the amount of loss can be reasonably estimated. In the event that no amount in
the range of probable loss is considered most likely, the minimum loss in the range is accrued. The amount of liability recorded
is based on an evaluation of currently available facts with respect to each individual site and includes such factors as existing
technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities
recorded do not take into account any claims for recoveries from insurance or third parties. As assessments and remediation
progress at individual sites, the amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal
information that becomes available. As of January 2, 2021 and December 28, 2019, the Company had reserves of $174.2
million and $213.8 million, respectively, for remediation activities associated with Company-owned properties, as well as for
Superfund sites, for losses that are probable and estimable. Of the 2020 amount, $46.7 million is classified as current and
$127.5 million as long-term, which is expected to be paid over the estimated remediation period. As of January 2, 2021, the
Company has recorded $15.9 million in other assets related to funding by the Environmental Protection Agency ("EPA") and
monies received have been placed in trust in accordance with the Consent Decree associated with the West Coast Loading
Corporation ("WCLC") proceedings, as further discussed in Note S, Contingencies, of the Notes to Consolidated Financial
Statements in Item 8. Accordingly, the Company's net cash obligation as of January 2, 2021 associated with the aforementioned
remediation activities is $158.3 million. The range of environmental remediation costs that is reasonably possible is $102.9
million to $245.3 million, which is subject to change in the near term. The Company may be liable for environmental
remediation of sites it no longer owns. Liabilities have been recorded on those sites in accordance with the Company's policy.

The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and
adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future
periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision
in estimating future contingent liability costs, the Company does not expect that any sum it may have to pay in connection with
these matters in excess of the amounts recorded will have a materially adverse effect on its financial position, results of
operations or liquidity. Additional information regarding environmental matters is available in Note S, Contingencies, of the
Notes to Consolidated Financial Statements in Item 8.

Compliance with government regulations, including environmental regulations, has not had, and based on current information
and the applicable laws and regulations currently in effect, is not expected to have a material effect on the Company's capital
expenditures, results of operations or competitive position. However, laws and regulations may be changed, accelerated or
adopted that impose significant operational restrictions and compliance requirements upon the Company and which could
negatively impact its operating results and financial condition.

Human Capital Management

The Company’s purpose is For Those Who Make the World, which puts employees, customers, communities and plants at the
heart of its human capital strategies and practices. The Company defines success as delivering value for all stakeholders. The
Company believes its commitment to quality, safety and sustainability enables its vision to be the type of uniquely human-
centered global industrial company that strives to keep every stakeholder in mind and the Company's values, operating model
and oversight of its human capital support this purpose.

As of January 2, 2021, the Company had approximately 53,100 employees in over 60 countries, approximately one-third of
whom were employed in the U.S. In addition, the Company had approximately 10,500 temporary contractors globally,
primarily in operations. The workforce is comprised of approximately 68% hourly-paid employees, principally in
manufacturing, distribution center and security monitoring operations, and 32% salaried employees. Nearly 1,400 U.S.
employees are covered by collective bargaining agreements dispersed among 28 different local labor unions, and a majority of
European employees are represented by workers councils. The Company strives to maintain a positive relationship with all its
employees, as well as the unions and workers councils representing them where applicable. There have been no significant
interruptions of the Company’s operations in recent years due to labor disputes.

Governance and Oversight

The CEO and the management Executive Committee are entrusted with developing and advancing the Company’s key human
capital strategy which is reviewed with the Board of Directors. The Chief Human Resource Officer is charged with the
development and stewardship of this strategy on an enterprise-wide basis. This incorporates a broad range of dimensions,
including culture, values, labor and employee relations, leadership capabilities, performance management and total rewards.
Diversity, equity and inclusion are key to successfully achieving business and organizational objectives. Key processes include
ongoing performance and development feedback, quarterly diversity, equity and inclusion reviews, and periodic engagement
surveys that are reviewed by the management Executive Committee and Board of Directors. Code of Business Ethics,
Workplace Harassment Prevention, and Managing Unconscious Bias trainings are provided to employees and the content is
regularly reviewed for applicability and improvement, and updated as needed. All employees have access to the
INTEGRITY@SBD platform where support, guidance and resources are available on topics regarding integrity, code of ethics,
diversity, compliance, and workplace harassment. Employees are encouraged to address any concerns through multiple
channels, including anonymously whenever possible, without fear of retaliation or retribution.

Diversity, Equity & Inclusion

The Company's management Executive Committee, Board of Directors and workforce are dedicated to diversity, equity and
inclusion and work to ensure that all employees feel valued, heard and are positioned to succeed. As of January 2, 2021, the
Company's CEO and his direct staff reside in the U.S. and are comprised of 27% women and 20% of the CEO and his direct
staff are racially or ethnically diverse. Women represent approximately 31% of the global workforce. As stated in the
Company's Equal Employment Opportunity reporting to the U.S. government, in the U.S., approximately 33% of employees are
racially or ethnically diverse.

The Company strives to create a culture of equality that unlocks human potential and uncovers the key drivers of a workplace in
which everyone can advance and thrive. The Company is executing initiatives across the global workforce designed to foster an
inclusive workplace and facilitate equitable career development opportunities. The Company has nine employee resource
groups ("ERGs") with more than 90 local chapters across the globe. These ERGs are formed around various dimensions of
diversity and participation across groups is encouraged. The ERGs include Abilities (including cognitive, social-emotional, and
physical abilities), African Ancestry, Asian Heritage, Hispanic/Latinx, Developing Professionals, Pride & Allies (LGBTQ+),

Veterans, Women, and Working Parents. Company leaders actively participate, sponsor and engage with the ERGs.
Management monitors hiring, retention, promotion and continued progress toward achieving the Company's diversity goals.
The Company also prioritizes investing in its communities by supporting individuals and organizations that advance these goals
across cities and regions in which it operates. In 2020, the management Executive Committee prioritized a focus on gender and
racial/ethnic diversity across the Company. The Company launched an equity campaign designed to reach, inspire, support and
engage (“RISE”) women and people of color. Through RISE, the Company has supported ten actions to confront racism and
social injustice throughout its communities and across the world, which includes specific goals across culture, career, and
community focus areas. In 2019, the Company became a signatory of Paradigm for Parity committing to addressing the gender
gap in corporate leadership. The Company has also participated in the Business Roundtable Diversity & Inclusion Index, where
the largest U.S.-based employers are committed to building a more inclusive environment. The Company's CEO was among the
signatories of the CEO Action for Diversity & Inclusion.

Lifelong Learning

The Company believes a sustainable competitive advantage is achieved through lifelong learning. The employees' rate of
learning, resilience, and adaptive performance enables the Company to innovate, operate with excellence, and deliver value to
customers and shareholders. Employee learning and development is a key enabler to engage, motivate and inspire the
Company's workforce and is supported internally through the Stanley Black & Decker University and externally with key
partners. Tailored programs address career advancement, leadership development, and skill development needs of the
workforce across the Company. Employees consumed more than 25,000 hours of online voluntary learning in 2020. As a leader
in advanced manufacturing the Company also strives to provide meaningful training and development for critical skills, new
skills, and ways of working with technology to its labor and factory workforce. This includes new operational skills,
maintenance, digital, and management skills. The Company utilizes a broad range of capabilities, modes of learning, and
platforms, including the use of artificial intelligence and data analytics to achieve its lifelong learning and advanced
manufacturing objectives.

Talent Attraction, Advancement, and Retention

The diversity of skills, ways of working, and adaptability of the Company's operating model continue to increase and are
reflected in all aspects of its talent management practices. Approximately 35% of global new hires in 2020 were women, and in
the U.S. approximately 47% of new employees were racially or ethnically diverse. Internal talent reviews are conducted
annually to manage talent and leadership performance. The Company utilizes feedback provided by employees through
multiple channels, including internal social platforms, listening sessions, and periodic surveys to improve the employee
experience and aspires to be the employer of choice. Development and succession plans are managed in partnership with
Human Resources and business segments. Employee compensation and benefits are globally managed and locally adjusted to
maintain market and skill competitiveness to attract and retain talent.

Employee Wellness, Health and Safety

The Company is committed to providing competitive benefits to attract and retain talent, that vary by country, including
benefits and programs to support healthy lifestyles, mental health, and retirement readiness. In 2020, the Company's
commitment to ensuring the health and safety of its employees and supply chain partners was demonstrated through its agile
and adaptive response to the ongoing novel coronavirus (COVID-19) pandemic. The Company was able to sustain business
operations by implementing critical safety measures and wellness policies, oversight and systems. These actions proved to be
highly effective in protecting critical manufacturing and operating employees in site locations and field operations. The
Company also quickly transitioned its office employees around the globe to a nearly complete virtual workforce, providing the
necessary technical and collaboration support to enable these employees to adjust to a virtual working environment. The
Company believes the adopted hybrid work policies are likely to be a lasting result of the pandemic and will be a key enabler to
support the broad needs of critical on-site to fully virtual employees. Additional information regarding the Company's response
to COVID-19 is available under the caption “COVID-19 Pandemic” in Item 7.

The Company’s Environmental, Health, and Safety (“EHS”) Management System Plan describes the core elements of health
and safety responsibility and accountability, including policies and procedures, designed in alignment with global standards, the
Company’s Code of Business Ethics, applicable law and individual facility needs. Health and safety requirements apply to all
employees and operating unit locations worldwide, including all manufacturing facilities, distribution centers, warehouses, field
service centers, retail, office locations and mobile units, as well as to the Company's subsidiaries and joint ventures (in which
the Company exercises decision making control over operations). Legal requirements may vary in different countries in which
the Company’s facilities are located. Primary measures of safety performance include Total Recordable Incident Rate ("TRIR")
and the Lost Time Incident Rate ("LTIR") based upon the number of incidents per 100 employees (or per 200,000 work hours).

Through December 2020, the Company reported a TRIR of 0.48, a LTIR of 0.17 and zero work-related fatalities. Reported total
workforce numbers include employees and supervised contractors.

Additional information regarding the Company's Human Capital programs and initiatives is available in the Company's Annual
Sustainability Report located under the Social Responsibility section of the Company’s website. The information on the
Company’s website is not, and is not intended to be, part of this Form 10-K and is not incorporated into this report by reference.

Research and Development Costs

Research and development costs, which are classified in Selling, general and administrative ("SG&A"), were $211.0 million,
$255.2 million and $275.8 million for fiscal years 2020, 2019 and 2018, respectively. The reduction in spending in 2020 versus
2019 was primarily due to the temporary cost actions taken in response to COVID-19 that were broadly reinstated. In 2021, the
Company plans to return to historic normalized spend levels consistent with 2019 as the Company continues to focus on
becoming known as one of the world's greatest innovators and remains committed to generating new core and breakthrough
innovations.

Available Information

The Company’s website is located at http://www.stanleyblackanddecker.com. This URL is intended to be an inactive textual
reference only. It is not intended to be an active hyperlink to the Company's website. The information on the Company's
website is not, and is not intended to be, part of this Form 10-K and is not incorporated into this report by reference. The
Company makes its Forms 10-K, 10-Q, 8-K and amendments to each available free of charge on its website as soon as
reasonably practicable after filing them with, or furnishing them to, the U.S. Securities and Exchange Commission ("SEC").

ITEM 1A. RISK FACTORS

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 Statements Under the Private Securities
Litigation Reform Act of 1995" in Item 7, and in other documents that the Company files with 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. 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.

Business and Operational Risks

The continued adverse effects of the COVID-19 pandemic and an indeterminate recovery period could have a materially
negative impact on the Company’s business, operations, financial condition, results of operations, and liquidity, the nature
and extent of which is highly uncertain.

The impact of the COVID-19 pandemic has resulted in a widespread public health crisis and governmental authorities have
implemented numerous measures attempting to contain and mitigate the effects of the virus. These measures have adversely
affected, and may continue to adversely affect, the Company’s workforce and operations and the operations of its customers,
distributors, suppliers and contractors. There is significant uncertainty regarding such measures and potential future measures,
and restrictions on the Company's access to its manufacturing facilities or on its support operations or workforce, or similar
limitations for its distributors and suppliers. These measures have limited and could continue to limit customer demand and/or
the Company's capacity to meet customer demand, which could have a material negative impact on its financial condition and
results of operations. In addition, a sustained downturn in customer demand or other economic conditions could result in
material charges related to bad debt or inventory write-offs, restructuring charges, or impairments of long-lived assets,
including both tangible and intangible assets. Furthermore, a sustained downturn in financial markets and asset values could
adversely affect the Company’s cost of capital, liquidity and access to capital markets, in addition to potentially increasing its
pension funding obligations to ensure its pension plans continue to be adequately funded.

The ongoing COVID-19 pandemic has caused the Company to modify its business practices (including employee travel,
employee work locations, and cancellation of physical participation in meetings, events and conferences), and the Company
may take further actions as may be required by government authorities or that the Company determines are in the best interests

of its employees, customers, distributors, suppliers and contractors. There is no certainty that such measures will be sufficient to
mitigate the risks posed by the virus, and the Company's ability to perform critical functions could be harmed. Furthermore, as a
result of the ongoing COVID-19 pandemic, the Company executed certain temporary and permanent cost reduction measures
including adjustments to its supply chain and manufacturing labor base to match the demand environment and reductions in
staffing, compensation and benefits in a manner that allows the Company to respond to changes in demand. These cost
reduction measures may not prove to be successful and the Company may need to undertake further measures that could
adversely impact its business and/or its ability to ramp up operations in a timely manner.

The continued spread of COVID-19 has caused, and may continue to cause, disruptions in the Company's supply chain, cause
delay, or limit the ability of, customers to continue to operate and perform, including in making timely payments to the
Company, result in the Company's inability to meet its consumers' and customers' needs due to disruptions in manufacturing
and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements, and cause other
unpredictable events.

In addition, the ongoing COVID-19 pandemic may also limit the Company’s resources or delay the Company’s ability to
implement strategic initiatives. If strategic initiatives are delayed, such initiatives may not achieve some or all of the expected
benefits, which could have a material adverse effect on the Company’s competitive position, business, financial condition and
results of operations and cash flows.

The continued spread of COVID-19 has caused, and may continue to cause, significant reductions in demand or significant
volatility in demand for certain of the Company’s products. As lockdowns occurred in the first and second quarters of 2020,
those subject to lockdowns engaged in home improvement projects in large numbers, and demand for the Company’s products
at its retail partners increased significantly. As different geographical areas anticipate moving into a recovery era, demand for
the Company’s products may decrease as focus shifts to activities outside the home. The degree to which COVID-19 ultimately
affects the Company’s results and operations will depend on future developments, which are highly uncertain and cannot be
predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or
treat its impact, the availability, distribution, acceptance and efficacy of a vaccine, and how quickly and to what extent normal
economic and operating conditions can resume.

Changes in customer preferences, the inability to maintain mutually beneficial relationships with large customers, inventory
reductions by customers, and the inability to penetrate new channels of distribution could adversely affect the Company’s
business.

The Company has certain significant customers, particularly home centers and major retailers. In 2020, the two largest
customers comprised approximately 27% of net sales, with U.S. and international mass merchants and home centers
collectively comprising approximately 42% of net sales. The loss or material reduction of business, the lack of success of sales
initiatives, or changes in customer 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 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.

If customers in the Convergent Security Solutions ("CSS") business are dissatisfied with services and switch to competitive
services or disconnect for other reasons, such as preference for digital technology products or other technology enhancements
not then offered by CSS, the Company's attrition rates may increase. In periods of increasing attrition rates, recurring revenue
and results of operations may be materially adversely affected. The risk is more pronounced in times of economic uncertainty,
as customers may reduce amounts spent on the products and services the Company provides.

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. Such distributor de-stocking exacerbated sales volume
declines pertaining to weak end user demand and the broader economic recession. The Company’s results may be adversely
impacted in future periods by such customer inventory adjustments. Further, the inability to continue to penetrate new channels
of distribution may have a negative impact on the Company’s future results.

The Company faces active global competition and if it does not compete effectively, its business may suffer.

The Company faces active competition and resulting pricing pressures. The Company’s products compete on the basis of,
among other things, its reputation for product quality, its well-known brands, price, innovation and customer service
capabilities. The Company competes with both larger and smaller companies that offer the same or similar products and

services or that produce different products appropriate for the same uses. These companies are often located in countries such as
China, Taiwan and India where labor and other production costs are substantially lower than in the U.S., Canada and Western
Europe. 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 defend market share, the Company must maintain a competitive cost structure,
develop new products and services, lead product innovation, respond to competitor innovations and enhance its existing
products in a timely manner. 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 profit margins.

Operations Excellence, one element of the SBD Operating Model, 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
Operations Excellence principles to its key business processes, including those of acquired businesses, 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 and retain market share. 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. 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.

Customer consolidation could have a material adverse effect on the Company’s business.

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

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 and
costs of development and production, may impede the successful development and introduction of new products on a consistent
basis. Introduction of new technology may result in higher costs to the Company than that of the technology replaced. That
increase in costs, which may continue indefinitely or until increased demand and greater availability in the sources of the new
technology drive down its cost, could adversely affect the Company’s results of operations. Market acceptance of the new
products introduced in recent years and scheduled for introduction in future years may not meet sales expectations due to
various factors, such as the failure to accurately predict market demand, end-user preferences, evolving industry standards, or
the emergence of new or disruptive technologies. 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 pace of technological change continues to accelerate and the Company's ability to react effectively to such change may
present significant competitive risks.

The pace of technological change is increasing at an exponential rate. The continued creation, development and advancement of
new technologies such as 5G data networks, artificial intelligence, blockchain, quantum computing, data analytics, 3-D printing,
robotics, sensor technology, data storage, neural networks, augmented reality, amongst others, as well as other technologies in
the future that are not foreseen today, continue to transform the Company’s processes, products and services.

In order to remain competitive, the Company will need to stay abreast of such technologies, require its employees to continue to
learn and adapt to new technologies and be able to integrate them into its current and future business models, products, services
and processes and also guard against existing and new competitors disrupting its business using such technologies. The
Company’s strategy, value creation model, operating model and innovation ecosystem have important technological elements
and many of the Company’s products and offerings are based on technological advances, including artificial intelligence,

machine learning, advanced analytics and the Internet of Things. In addition, the Company will need to compete for talent that
is familiar with such technologies including upskilling its workforce. There can be no assurance that the Company will continue
to compete effectively with its industry peers due to technological changes, which could result in a material adverse effect on
the Company's business and results of operations.

The Company has significant operations outside of the United States, which are subject to political, legal, economic and
other risks arising from operating outside of the United States.

The Company generates a significant portion of its total revenue outside of the United States. Business operations outside of the
United States are subject to political, economic and other risks inherent in operating in certain countries, such as:

•

the difficulty of enforcing agreements and protecting assets through legal systems outside the U.S. including
intellectual property rights, which may not be recognized, and which the Company may not be able to protect outside
the U.S. to the same extent as under U.S. law;

• managing widespread operations and enforcing internal policies and procedures such as compliance with U.S. and

foreign anti-bribery, anti-corruption, and sanctions regulations;
trade protection measures and import or export licensing requirements including those related to the U.S.'s relationship
with China;
the application of certain labor regulations outside of the United States;
compliance with a wide variety of non-U.S. laws and regulations;
ongoing stability or changes in the general political and economic conditions in the countries where the Company
operates, particularly in emerging markets;
the threat of nationalization and expropriation;
increased costs and risks of doing business and managing a workforce in a wide variety of jurisdictions;
the increased possibility of cyber threats in certain jurisdictions;
government controls limiting importation of goods;
government controls limiting payments to suppliers for imported goods;
limitations on, or impacts from, the repatriation of foreign earnings; and
exposure to wage, price and capital controls.

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Changes in the political or economic environments in the countries in which the Company operates could have a material
adverse effect on its financial condition, results of operations or cash flows. Additionally, the Company is subject to complex
U.S., foreign and other local laws and regulations that are applicable to its operations abroad, such as the Foreign Corrupt
Practices Act of 1977, the UK Bribery Act of 2010 and other anti-bribery and anti-corruption laws. Although the Company has
implemented internal controls, policies and procedures and employee training and compliance programs to deter prohibited
practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing
such internal policies and violating applicable laws and regulations. Any determination that the Company has violated anti-
bribery or anti-corruption laws or sanctions regulations could have a material adverse effect on the Company’s business,
operating results and financial condition. Compliance with international and U.S. laws and regulations that apply to the
Company’s international operations increases the cost of doing business in foreign jurisdictions. Violations of such laws and
regulations may result in severe fines and penalties, criminal sanctions, administrative remedies or restrictions on business
conduct, and could have a material adverse effect on the Company’s reputation, its ability to attract and retain employees, its
business, operating results and financial condition.

The Company’s business is subject to risks associated with sourcing and manufacturing overseas.

The Company imports large quantities of finished goods, component parts and raw materials. Substantially all of its import
operations are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements,
bilateral actions or, in some cases unilateral action. In addition, the countries in which the Company’s products and materials
are manufactured or imported from (including importation into the U.S. of the Company's products manufactured overseas)
may from time to time impose additional quotas, duties, tariffs or other restrictions on its imports (including restrictions on
manufacturing operations) or adversely modify existing restrictions. In recent years, changes in U.S. policy regarding
international trade, including import and export regulation and international trade agreements, have negatively impacted the
Company’s business. 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. Additional tariffs imposed
by the U.S. on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response,
could result in an increase in supply chain costs that the Company may not be able to offset or otherwise adversely impact the
Company’s results of operations. Furthermore, imported products and materials may be subject to future tariffs or other trade
measures in the U.S. Imports are also subject to unpredictable foreign currency variation which may increase the Company’s

cost of goods sold. Adverse changes in these import costs and restrictions, or failure by the Company’s suppliers to comply
with customs regulations or similar laws, could harm the Company’s business.

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. Although these trade
agreements generally have positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or
eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also
impose requirements that adversely affect the Company’s business, such as setting quotas on products that may be imported
from a particular country into key markets including the U.S. or the European Union ("EU"), or making it easier for other
companies to compete, by eliminating restrictions on products from countries where the Company’s competitors source
products.

The Company’s ability to import products in a timely and cost-effective manner may also 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, severe weather due to climate change or increased homeland security requirements in the U.S. and
other countries. These issues could delay importation of products or require the Company to locate alternative ports or
warehousing providers to avoid disruption to customers. These alternatives may not be available on short notice or could result
in higher transit costs, which could have an adverse impact on the Company’s business and financial condition.

In addition, the Company has a number of key suppliers in South Korea. Escalation of hostilities with North Korea and/or
military action in the region 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 incurred to produce and deliver products to its customers.

The Company’s success depends on its ability to improve productivity and streamline operations to control or reduce costs.

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 actions, the savings
of which may be mitigated by many factors, including economic weakness, competitive pressures, and decisions to increase
costs in areas such as sales promotion or research and development above levels that were otherwise assumed. Failure to
achieve, or delays in achieving, projected levels of efficiencies and cost savings from such measures, or unanticipated
inefficiencies resulting from manufacturing and administrative reorganization actions in progress or contemplated, would
adversely affect the Company’s business and financial results.

The performance of the Company may suffer from business disruptions with catastrophic losses affecting distribution
centers and other infrastructure, or other costs associated with information technology, system implementations, or cyber
security risks.

The Company’s operations are significantly dependent on infrastructure, notably certain distribution centers and security alarm
monitoring facilities, which are concentrated in various geographic locations. Factors that are hard to predict or are beyond the
Company’s control, like weather (including any potential effects of climate change), natural disasters, supply and commodity
shortages, fire, explosions, acts or threats of war or terrorism, political unrest, cybersecurity breaches, sabotage, generalized
labor unrest or public health crises, including pandemics, could damage or disrupt the Company’s infrastructure, or that of its
suppliers or distributors. If the Company does not effectively plan for or respond to disruptions in its operations, or cannot
quickly repair damage to its information, production or supply systems, the Company may be late in delivering or unable to
deliver products and services to its customers, and the quality and safety of its products and services might be negatively
affected. If a material or extended disruption occurs, the Company may lose its customers’ or business partners’ confidence or
suffer damage to its reputation, and long-term consumer demand for its products and services could decline. Although the
Company maintains business interruption insurance, it may not fully protect the Company against all adverse effects that could
result from significant disruptions. These events could materially and adversely affect the Company’s product sales, financial
condition and results of operations.

The Company relies heavily on digital technology, including those of third parties, to manage and operate its businesses, and
record and process transactions. Digital technologies are important to sales and marketing, production planning, manufacturing,
customer service and order fulfillment among other business-critical processes. Consistent and efficient operation of the
computer hardware and software systems is imperative to the successful sales and earnings performance of the Company's
various businesses in many countries. Additionally, the Company relies on software applications and enterprise cloud storage
systems and cloud computing services provided by third-party vendors, and the Company's business may be adversely affected
by service disruptions or security breaches in such third-party systems.

In addition, the Company is in the process of system integrations, conversions, and capability additions such as eCommerce,
Artificial Intelligence and Data Analytics to drive enhanced business outcomes. There can be no assurances that expected
expense or revenue synergies will be achieved or that there will not be delays to the expected timing of system integrations,
conversions or capability additions. It is possible the costs to complete the system integrations, conversions or capability
additions may exceed expectations, and that significant costs may be incurred that will require immediate expense recognition
as opposed to capitalization. The risk of disruption to key operations and overall business is increased when complex system
changes, such as integrations, conversions or additions are undertaken. If systems fail to function effectively, or become
damaged, operational delays may ensue and the Company may be forced to make significant expenditures to remedy such
issues. Any significant disruption in the Company’s digital technology could have a material adverse impact on its business and
results.

Despite efforts to prevent such situations and maintaining insurance policies and loss control and risk management practices
that partially mitigate these risks, the Company’s digital technologies may be affected by damage or interruption from, among
other causes, power outages, system failures or cyber attacks.

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.

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 any 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. 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.

In addition, many of the Company’s products incorporate battery technology. 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. In addition, 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. If the Company is unable to
mitigate any possible supply constraints, related increased costs or drive alternative technology through innovation, its
profitably and financial results could be negatively impacted.

Uncertainty about the financial stability of economies outside the U.S. could have a significant adverse effect on the
Company's business, results of operations and financial condition.

The Company generates approximately 39% of its revenues outside the U.S., including 19% from Europe and 11% from
various emerging market countries. Each of the Company’s segments generates sales in these marketplaces. While the
Company believes any downturn in the European or emerging marketplaces might be offset to some degree by the relative
stability in North America, the Company’s future growth, profitability and financial liquidity could be affected, in several ways,
including but not limited to the following:

•
•

depressed consumer and business confidence may decrease demand for products and services;
customers may implement cost reduction initiatives or delay purchases to address inventory levels;

•

significant declines of foreign currency values in countries where the Company operates could impact both the revenue
growth and overall profitability in those geographies;
a slowing or contracting Chinese economy could reduce China’s consumption and negatively impact the Company’s
sales in that region, as well as globally;
a devaluation of foreign currencies could have an effect on the credit worthiness (as well as the availability of funds)
of customers in those regions impacting the collectability of receivables;
a devaluation of foreign currencies could have an adverse effect on the value of financial assets of the Company in the
effected countries; and
the impact of an event (individual country default, Brexit, or break up of the Euro) could have an adverse impact on
the global credit markets and global liquidity potentially impacting the Company’s ability to access these credit
markets and to raise capital.

Continuing uncertainty associated with Brexit could adversely affect the Company’s business.

While the UK Parliament has voted to approve the withdrawal/transition agreement negotiated by the EU and the UK
government and while, in December 2020, the UK and the EU agreed on a trade and cooperation agreement that will apply
provisionally after the end of the transition period, significant uncertainty remains with respect to the impacts of Brexit. Brexit
could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to
instability in global political institutions, regulatory agencies and financial markets. Any impact from Brexit on the Company's
business and operations over the long term will depend, in part, on the outcome of the implementation of the trade and
cooperation agreement, future agreements (or lack thereof) between the UK and the EU, including with respect to tariff, tax
treaties, trade, regulatory, and other negotiations.

In particular, the Company's operations in the UK will be particularly exposed to the risks and uncertainties relating to Brexit.
Under the trade and cooperation agreement, UK service suppliers no longer benefit from automatic access to the entire EU
single market, UK goods no longer benefit from the free movement of goods and there is no longer the free movement of
people between the UK and the EU. The Bank of England and other observers have warned of a significant probability of a
Brexit-related recession in the UK. Volatility in exchanges rates, including potential declines in the value of the British Pound,
and in interest rates are also expected. Disruptions and uncertainty caused by Brexit may also cause customers to closely
monitor their costs and reduce their spending budget on the Company's products and services. These impacts could cause a
significant decline in revenue as the Company generates approximately 4% of its revenues in the UK. In addition, as the UK
determines which EU laws to replace or replicate, including UK competition laws, Brexit could lead to potentially divergent
national laws and regulations. Lack of clarity about the future relationship between the UK and the EU, and the laws and
regulations that may apply, including in particular with respect to aspects of laws and regulations which were not covered by
the trade and cooperation agreement, such as financial laws and regulations, could increase costs and depress economic activity.
Any of the foregoing factors could result in an uncertain and difficult regulatory environment that could negatively impact the
Company’s UK business.

The Company is exposed to market risk from changes in foreign currency exchange rates which could negatively impact
profitability.

The Company manufactures and sells its products in many countries throughout the world. As a result, there is exposure to
foreign currency risk as the Company enters into transactions and makes investments denominated in multiple currencies. The
Company’s predominant currency exposures are related to the Euro, Canadian Dollar, British Pound, Australian Dollar,
Brazilian Real, Argentine Peso, Chinese Renminbi (“RMB”) and the Taiwan Dollar. In preparing its financial statements, for
foreign operations with functional currencies other than the U.S. dollar, asset and liability accounts are translated at current
exchange rates, while income and expenses are translated using average exchange rates. With respect to the effects on translated
earnings, if the U.S. dollar strengthens relative to local currencies, the Company’s earnings could be negatively impacted.
Although the Company utilizes risk management tools, including hedging, as it deems appropriate, to mitigate a portion of
potential market fluctuations in foreign currencies, there can be no assurance that such measures will result in all market
fluctuation exposure being eliminated. The Company generally does not hedge the translation of its non-U.S. dollar earnings in
foreign subsidiaries but may choose to do so in certain instances.

The Company sources many products from China and other low-cost countries for resale in other regions. To the extent the
RMB or other currencies appreciate, the Company may experience cost increases on such purchases. The Company may not be
successful at implementing customer pricing or other actions in an effort to mitigate the related cost increases and thus its
profitability may be adversely impacted.

Financing Risks

The Company has incurred, and may incur in the future, significant indebtedness, and may in the future issue additional
equity securities, including in connection with mergers or acquisitions, which may impact the manner in which it conducts
business or the Company’s access to external sources of liquidity. The potential issuance of such securities may limit the
Company’s ability to implement elements of its growth strategy and may have a dilutive effect on earnings.

As described in Note H, Long-Term Debt and Financing Arrangements, of the Notes to Consolidated Financial Statements in
Item 8, the Company has a five-year $2.0 billion committed credit facility and a 364-day $1.0 billion committed credit facility.
No amounts were outstanding against either of these facilities at January 2, 2021. As of January 2, 2021, the Company had $4.3
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:

•
•
•

a limitation on creating liens on certain property of the Company and its subsidiaries;
a restriction on entering into certain sale-leaseback transactions;
customary events of default. If an event of default occurs and is continuing, the Company might be required to repay
all amounts outstanding under the respective instrument or agreement; and

• maintenance of a specified financial ratio. The Company has an interest coverage covenant that must be maintained to
permit continued access to its committed revolving credit facilities. The interest coverage ratio tested for covenant
compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted Interest
Expense ("adjusted EBITDA"/"adjusted Interest Expense"); such adjustments to interest or EBITDA include, but are
not limited to, removal of non-cash interest expense and stock-based compensation expense. In April 2020, the
Company entered into an amendment to: (a) amend the definition of Adjusted EBITDA to allow for additional
adjustment addbacks, which primarily relate to anticipated incremental charges related to the COVID-19 pandemic, for
amounts incurred beginning in the second quarter of 2020 through the second quarter of 2021, and (b) lower the
minimum interest coverage ratio from 3.5 to 2.5 times for the period from and including the second quarter of 2020
through the end of fiscal year 2021. The interest coverage ratio must not be less than 2.5 times and is computed
quarterly, on a rolling twelve months (last twelve months) basis. Under this covenant definition, the interest coverage
ratio was 8.4 times EBITDA or higher in each of the 2020 quarterly measurement periods. Management does not
believe it is reasonably likely the Company will breach this covenant. Failure to maintain this ratio could adversely
affect further access to liquidity.

Future instruments and agreements governing indebtedness may impose other restrictive conditions or covenants. Such
covenants could restrict the Company in the manner in which it conducts business and operations as well as in the pursuit of its
growth and acquisition strategy.

The Company is exposed to counterparty risk in its hedging arrangements.

From time to time, the Company enters into arrangements with financial institutions to hedge exposure to fluctuations in
currency and interest rates, including forward contracts, options and swap agreements. The Company may incur significant
losses from hedging activities due to factors such as demand volatility. The failure of one or more counterparties to the
Company’s hedging arrangements to fulfill their obligations could adversely affect the Company’s results of operations.

Tight capital and credit markets or the failure to maintain credit ratings could adversely affect the Company by limiting the
Company’s ability to borrow or otherwise access liquidity.

The Company’s long-term growth plans are dependent on, among other things, the availability of funding to support corporate
initiatives and complete appropriate acquisitions and the ability to increase sales of existing product lines. While the Company
has not encountered financing difficulties to date, the capital and credit markets have experienced extreme volatility and
disruption in the past and may again in the future. Market conditions could make it more difficult for the Company to borrow or
otherwise obtain the cash required for significant new corporate initiatives and acquisitions.

Furthermore, there could be a number of follow-on effects from a credit crisis on the Company’s businesses, including
insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of the
Company’s products and services and/or customer insolvencies.

In addition, the major rating agencies regularly evaluate the Company for purposes of assigning credit ratings. The Company’s
ability to access the credit markets, and the cost of these borrowings, is affected by the strength of its credit ratings and current

market conditions. Failure to maintain credit ratings that are acceptable to investors may adversely affect the cost and other
terms upon which the Company is able to obtain financing, as well as its access to the capital markets.

Discontinuation, reform or replacement of the London Inter-bank Offered Rate ("LIBOR") and other benchmark rates, or
uncertainty related to the potential for any of the foregoing, may adversely affect the Company.

A portion of the Company’s indebtedness bears interest at rates that fluctuate with changes in certain short-term prevailing
interest rates, including the LIBOR. The UK Financial Conduct Authority announced in 2017 that it intends to phase out
LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark rates. These
may be replaced by the Secured Overnight Financing Rate or other benchmark rates over the next several years. The
discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on
contractual mechanics in the credit markets or cause disruption to the broader financial markets. These changes, and related
uncertainty as to the nature of such potential discontinuation, reform or replacement may create incremental uncertainty in
obtaining financing or increase the cost of borrowing. At this time, the Company cannot predict the overall effect of the
modification or discontinuation of LIBOR or the establishment of alternative benchmark rates.

The Company is exposed to credit risk on its accounts receivable.

The Company’s outstanding trade receivables are not generally covered by collateral or credit insurance. While the Company
has procedures to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be no assurance
such procedures will effectively limit its credit risk and avoid losses, which could have an adverse effect on the Company’s
financial condition and operating results.

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 a result of the Black and Decker merger and other acquisitions, the Company has approximately $10.0 billion of goodwill,
approximately $2.2 billion of indefinite-lived trade names and approximately $1.9 billion of net definite-lived intangible assets
at January 2, 2021. 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. 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.

If the investments in employee benefit plans do not perform as expected, the Company may have to contribute additional
amounts to these plans, which would otherwise be available to cover operating expenses or other business purposes.

The Company sponsors pension and other post-retirement defined benefit plans. The Company’s defined benefit plan assets are
currently invested in equity securities, government and corporate bonds and other fixed income securities, money market
instruments and insurance contracts. The Company’s funding policy is generally to contribute amounts determined annually on
an actuarial basis to provide for current and future benefits in accordance with applicable law which require, among other
things, that the Company make cash contributions to under-funded pension plans. During 2020, the Company made cash
contributions to its defined benefit plans of approximately $40 million and expects to contribute $41 million to its defined
benefit plans in 2021.

There can be no assurance that the value of the defined benefit plan assets, or the investment returns on those plan assets, will
be sufficient in the future. 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 at January 2, 2021 was approximately $2.4 billion.

Strategic Risks

The successful execution of the Company’s business strategy depends on its ability to recruit, retain, train, motivate, and
develop employees and execute effective succession planning.

The success of the Company’s efforts to grow its business depends on the contributions and abilities of key executives and
management personnel, its sales force and other personnel, including the ability of its sales force to adapt to any changes made

in the sales organization and achieve adequate customer coverage. The Company must therefore continue to recruit, retain, train
and motivate management, sales and other personnel sufficiently to maintain its current business and support its projected
growth. In addition, the Company must invest heavily in reskilling and upskilling its employees, including placing an emphasis
on lifelong learning.

A shortage of key employees might jeopardize the Company’s ability to implement its growth strategy, and changes in the key
management team can result in loss of continuity, loss of accumulated knowledge, departure of other key employees,
disruptions to the Company’s operations and inefficiency during transitional periods. The Company’s reputation, business,
revenue and results of operations could be materially and adversely affected if it is unable to recruit, retain, train, motivate, and
develop employees and successfully execute organizational change and management transitions at leadership levels.

The Company’s acquisitions, as well as general business reorganizations, may result in significant costs and certain risks
for its business and operations.

In 2020, the Company completed the Consolidated Aerospace Manufacturing, LLC (“CAM”) acquisition, as well as smaller
acquisitions, and may make additional acquisitions in the future.

Acquisitions involve a number of risks, including:

•
•
•
•
•

•
•
•

•

the failure to identify the most suitable candidates for acquisitions;
the difficulties and cost in obtaining any necessary regulatory approvals;
the ability to identify and close on appropriate acquisition opportunities within desired time frames at reasonable cost;
the anticipated additional revenues from the acquired companies do not materialize, despite extensive due diligence;
the possibility that the acquired companies will not be successfully integrated or that anticipated cost savings,
synergies, or other benefits will not be realized;
the acquired businesses will lose market acceptance or profitability;
the diversion of Company management’s attention and other resources;
the incurrence of unexpected costs and liabilities, including those associated with undisclosed pre-closing regulatory
violations by the acquired business; and
the loss of key personnel, clients or customers of acquired companies.

In addition, the success of the Company’s long-term growth and acquisition strategy will depend in part on successful general
reorganization including its ability to:

•
•
•

combine businesses and operations;
integrate departments, systems and procedures; and
obtain cost savings and other efficiencies from such reorganizations, including the Company's margin resiliency
initiative.

Failure to effectively integrate acquired companies, consummate or manage any future acquisitions or general business
reorganizations, and mitigate the related risks, may adversely affect the Company’s existing businesses and harm its operational
results due to large write-offs, significant restructuring costs, contingent liabilities, substantial depreciation, and/or adverse tax
or other consequences. The Company cannot ensure that such integrations and reorganizations will be successfully completed
or that all of the planned synergies and other benefits will be realized.

Expansion of the Company’s activity in emerging markets may result in risks due to differences in business practices and
cultures.

The Company’s growth plans include efforts to increase revenue from emerging markets through both organic growth and
acquisitions. Local business practices in these regions may not comply with U.S. laws, local laws or other laws applicable to the
Company. When investigating potential acquisitions, the Company seeks to identify historical practices of target companies that
would create liability or other exposures for the Company were they to continue post-completion or as a successor to the target.
Where such practices are discovered, the Company assesses the risk to determine whether it is prepared to proceed with the
transaction. In assessing the risk, the Company looks at, among other factors, the nature of the violation, the potential liability,
including any fines or penalties that might be incurred, the ability to avoid, minimize or obtain indemnity for the risks, and the
likelihood that the Company would be able to ensure that any such practices are discontinued following completion of the
acquisition through implementation of its own policies and procedures. Due diligence and risk assessment are, however,
imperfect processes, and it is possible that the Company will not discover problematic practices until after completion, or that
the Company will underestimate the risks associated with historical activities. Should that occur, the Company may incur fees,
fines, penalties, injury to its reputation or other damage that could negatively impact the Company's earnings.

Legal, Tax, Regulatory and Compliance Risks

The Company’s brands are important assets of its businesses and violation of its trademark rights by imitators, or the failure
of its licensees or vendors to comply with the Company’s product quality, manufacturing requirements, marketing
standards, and other requirements could negatively impact revenues and brand reputation. Any inability to protect the
Company's other intellectual property rights could also reduce the value of its products and services or diminish its
competitiveness.

The Company considers its intellectual property rights, including patents, trademarks, copyrights and trade secrets, and licenses
held, to be a significant part and valuable aspect of its business. The Company attempts to protect its intellectual property rights
through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party
nondisclosure and assignment agreements.

The Company’s trademarks have a reputation for quality and value and are important to the Company's success and competitive
position. Unauthorized use of the Company’s trademark rights may not only erode sales of the Company’s products, but may
also cause significant damage to its brand name and reputation, interfere with its ability to effectively represent the Company to
its customers, contractors, suppliers, and/or licensees, and increase litigation costs. Similarly, failure by licensees or vendors to
adhere to the Company’s standards of quality and other contractual requirements could result in loss of revenue, increased
litigation, and/or damage to the Company’s reputation and business. There can be no assurance that the Company’s ongoing
efforts to protect its brand and trademark rights and ensure compliance with its licensing and vendor agreements will prevent all
violations.

In addition, the Company's ability to compete could be negatively impacted by its failure to obtain and adequately protect its
intellectual property and preserve its associated intellectual property rights, including patents, copyrights, trade secrets, and
licenses, as well as its products and any new features of its products or processes. The Company's patent applications may not
be approved and any patents owned could be challenged, invalidated or designed around by third parties. In addition, the
Company's patents may not be of sufficient scope or strength to provide meaningful protection or commercial advantage.

The Company is exposed to risks related to cybersecurity.

The Company’s operations rely on the secure processing, storage and transmission of confidential, sensitive, proprietary and
other types of information relating to its business operations, as well as confidential and sensitive information about its
customers and employees maintained in the Company’s computer systems and networks, certain products and services, and in
the computer systems and networks of its third-party vendors. Cyber threats are rapidly evolving as data thieves and hackers
have become increasingly sophisticated and carry out direct large-scale, complex automated attacks against a company or
through vendor software supply chain compromises. In particular, the Company is increasingly relying on its IT infrastructure
to support its operations as it manages the impact of COVID-19, including supporting remote-work protocols for a substantial
number of the Company’s employees in regions impacted by the spread of COVID-19, which can increase cyber risks. The
Company is not able to anticipate or prevent all such attacks and could be held liable for any resulting material security breach
or data loss. In addition, it is not always possible to deter misconduct by employees or third-party vendors.

Breaches of the Company’s technology systems, or those of the Company’s vendors, whether from circumvention of security
systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or
malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical
breaches or other actions, have and may result in manipulation or corruption of sensitive data, material interruptions or
malfunctions in the Company’s or such vendors’ websites, applications, data processing, and certain products and services, or
disruption of other business operations. Furthermore, any such breaches could compromise the confidentiality and integrity of
material information held by the Company (including information about the Company’s business, employees or customers), as
well as sensitive personally identifiable information, the disclosure of which could lead to identity theft. Breaches of the
Company’s products that rely on technology and internet connectivity can expose the Company to product and other liability
risk and reputational harm. Measures that the Company takes to avoid, detect, mitigate or recover from material incidents,
including implementing and conducting training on insider trading policies for the Company’s employees and maintaining
contractual obligations for the Company’s third-party vendors, can be expensive, and may be insufficient, circumvented, or may
become ineffective.

The Company has invested and continues to invest in risk management and information security and data privacy measures in
order to protect its systems and data, including employee training, organizational investments, incident response plans, table top
exercises and technical defenses. The cost and operational consequences of implementing, maintaining and enhancing further
data or system protection measures could increase significantly to overcome increasingly intense, complex, and sophisticated

global cyber threats. Despite the Company’s best efforts, it is not fully insulated from data breaches and system disruptions.
Recent well-publicized security breaches at other companies have led to enhanced government and regulatory scrutiny of the
measures taken by companies to protect against cyber-attacks, and may in the future result in heightened cybersecurity
requirements, including additional regulatory expectations for oversight of vendors and service providers. Any material
breaches of cybersecurity, including the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary
information or sensitive or confidential data, or media reports of perceived security vulnerabilities to the Company’s systems,
products and services or those of the Company’s third parties could cause the Company to experience reputational harm, loss of
customers and revenue, fines, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for
failure to safeguard the Company’s customers’ information, or financial losses that are either not insured against or not fully
covered through any insurance maintained by the Company. The report, rumor or assumption regarding a potential breach may
have similar results, even if no breach has been attempted or occurred. Any of the foregoing may have a material adverse effect
on the Company’s business, operating results and financial condition.

The Company is exposed to risks related to compliance with data privacy laws.

To conduct its operations, the Company regularly moves data across national borders, and consequently is subject to a variety
of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data
protection and data security. 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, the European Union’s General Data Protection Regulation
(“GDPR”), which became effective in May 2018, greatly increased the jurisdictional reach of European Union law and added a
broad array of requirements for handling personal data, including the public disclosure of significant data breaches. Similarly,
the California Consumer Privacy Act of 2018 (“CCPA”), came into effect in January 2020, provides, among other things, a new
private right of action for data breaches, requires companies that process information on California residents to make new
disclosures to consumers about their data collection, use and sharing practices, and provides consumers with additional rights.
The California Privacy Rights and Enforcement Act, which will become effective on January 1, 2023 amends and expands the
CCPA, creating new industry requirements, consumer privacy rights and enforcement mechanisms. The Company's reputation
and brand and its ability to attract new customers could also be adversely impacted if the Company fails, or is perceived to have
failed, to properly respond to security breaches of its or third party’s information technology systems. Such failure to properly
respond could also result in similar exposure to liability.

Additionally, other countries have enacted or are enacting data localization laws that require data to stay within their borders. In
many cases, these laws and regulations apply not only to transfers between unrelated third parties but also to transfers between
the Company and its subsidiaries.

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, including the Schrems II decision invalidating the EU - U.S. Privacy
Shield, will continue to require changes to certain business practices, thereby increasing costs, 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.

Significant judgment and certain estimates are required in determining the Company’s worldwide provision for income
taxes. Future tax law changes and audit results may materially increase the Company’s prospective income tax expense.

The Company is subject to income taxation in the U.S. as well as 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 United
States. Lastly, it is possible that future income tax 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.

The Company’s failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could
negatively impact its results of operations or cash flows.

The Company is exposed to and becomes involved in various litigation matters arising out of the ordinary routine conduct of its
business, including, from time to time, actual or threatened litigation relating to such items as commercial transactions, product
liability, workers compensation, arrangements between the Company and its distributors, franchisees or vendors, intellectual
property claims and regulatory actions.

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. 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, 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.

The Company manufactures products, configures and installs security systems and performs various services that create
exposure to product and professional liability claims and litigation. The failure of the Company’s products, systems 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. The Company has and is currently
defending product liability claims, some of which have resulted in settlements or monetary judgments against the Company.
The costs associated with defending ongoing or future product liability claims and payment of damages could be substantial.
The Company’s reputation could also be adversely affected by such claims, whether or not successful.

There can be no assurance that the Company will be able to continue to successfully avoid, manage and defend such matters. In
addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary
from the Company’s estimates for such contingent liabilities.

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. 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 ensure safety and operational hazards are identified for the customer.

Despite safety and quality reviews, the Consumer Product Safety Commission or other applicable regulatory bodies may
require, or the Company may 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. A recall could increase the Company's costs and
adversely impact its reputation.

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.

The U.S. 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 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.

Other Risks

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

The Company’s results of operations and earnings may not meet guidance or expectations. The Company may provide public
guidance on expected results of operations for future periods. This guidance is comprised of forward-looking statements subject
to risks and uncertainties, including the risks and uncertainties described in this Form 10-K and in the Company’s other public
filings and public statements, and is based necessarily on assumptions the Company makes at the time it provides such
guidance. The Company’s guidance may not always be accurate. The Company may also choose to withdraw guidance, as it
did in response to the uncertainty of the COVID-19 pandemic. If, in the future, the Company’s results of operations for a
particular period do not meet its guidance or the expectations of investment analysts, the Company reduces its guidance for
future periods, or the Company withdraws guidance, the market price of the Company’s common stock could decline
significantly.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of January 2, 2021, the Company and its subsidiaries owned or leased significant facilities used for manufacturing,
distribution and sales offices in 20 states and 18 countries. The Company leases its corporate headquarters in New Britain,
Connecticut. The Company has 92 facilities including its corporate headquarters that are larger than 100,000 square feet, as
follows:

Tools & Storage.........................................................................................
Industrial.....................................................................................................
Security.......................................................................................................
Corporate....................................................................................................
Total...........................................................................................................

43
15
1
2
61

22
6
2
1
31

65
21
3
3
92

Owned

Leased

Total

The combined size of these facilities is approximately 25 million square feet. The buildings are in good condition, suitable for
their intended use, adequate to support the Company’s operations, and generally fully utilized.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of business, the Company is involved in various lawsuits and claims, including product liability,
environmental and distributor claims, and administrative proceedings. The Company does not expect that the resolution of these
matters will have a materially adverse effect on the Company’s consolidated financial position, results of operations or
liquidity.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is listed and traded on the New York Stock Exchange, Inc. (“NYSE”) under the abbreviated
ticker symbol “SWK”, and is a component of the Standard & Poor’s (“S&P”) 500 Composite Stock Price Index. The
Company’s high and low quarterly stock prices on the NYSE for the years ended January 2, 2021 and December 28, 2019
follow:

2020

2019

High

Low

Dividend Per
Common
Share

High

Low

Dividend Per
Common
Share

QUARTER:
First............................................................. $
$
Second........................................................
$
Third...........................................................
$
Fourth.........................................................
Total...........................................................

172.53 $
148.23 $
166.25 $
190.94 $

72.03 $
92.13 $
135.61 $
161.48 $
$

0.69 $
0.69 $
0.70 $
0.70 $
2.78

138.92 $
153.08 $
152.51 $
167.76 $

115.69 $
127.22 $
128.85 $
135.09 $
$

0.66
0.66
0.69
0.69
2.70

As of February 5, 2021, there were 9,029 holders of record of the Company’s common stock. Information required by
Item 201(d) of Regulation S-K concerning securities authorized for issuance under equity compensation plans can be found
under Item 12 of this Annual Report on Form 10-K.

Issuer Purchases of Equity Securities

The following table provides information about the Company’s purchases of equity securities that are registered by the
Company pursuant to Section 12 of the Securities Exchange Act of 1934 for the three months ended January 2, 2021:

2020
September 27 - October 31........
November 1 - November 28......
November 29 - January 2..........
Total...........................................

Total Number Of
Shares Purchased
(a)

Average Price Paid
Per Share

3,494
11
79,591
83,096

$
$
$
$

175.67
164.57
176.76
176.71

Total Number
Of Shares
Purchased As Part Of
A Publicly
Announced Plan
or Program

—
—
—
—

Maximum Number Of
Shares That May
Yet Be Purchased
Under The Program
(b)
11,450,000
11,450,000
11,450,000
11,450,000

(a) The shares of common stock in this column were deemed surrendered to the Company by participants in various benefit
plans of the Company to satisfy the participants’ taxes related to vesting or delivery of time-vesting restricted share
units under those plans.

(b) On July 20, 2017, the Board of Directors approved a new repurchase program for up to 15.0 million shares of the

Company’s common stock and terminated its previously approved repurchase program. As of January 2, 2021, the
authorized shares available for repurchase under the new repurchase program totaled approximately 11.5 million shares.
The currently authorized shares available for repurchase do not include approximately 3.6 million shares reserved and
authorized for purchase under the Company’s previously approved repurchase program relating to a forward share
purchase contract entered into in March 2015. Refer to Note J, Capital Stock, of the Notes to Consolidated Financial
Statements in Item 8 for further discussion.

Stock Performance Graph

The following line graph compares the yearly percentage change in the Company’s cumulative total shareholder return for the
last five years to that of the S&P 500 Index and the S&P 500 Industrials Index. The Company has decided to use the S&P 500
Industrials Index, which is utilized by a number of the Company’s industrial peers, for the purpose of this disclosure.

THE POINTS IN THE ABOVE TABLE ARE AS FOLLOWS:

2015

2016

2017

2018

2019

2020

Stanley Black & Decker....................................................... $ 100.00 $ 109.65 $ 165.01 $ 117.68 $ 167.54 $ 183.69

S&P 500................................................................................. $ 100.00 $ 111.95 $ 136.38 $ 129.28 $ 171.90 $ 202.96

S&P 500 Industrials............................................................... $ 100.00 $ 110.16 $ 135.19 $ 130.05 $ 174.00 $ 213.76

The comparison assumes $100 invested at the closing price on January 2, 2016 in the Company’s common stock, S&P 500
Index, and S&P 500 Industrials Index. Total return assumes reinvestment of dividends.

ITEM 6. SELECTED FINANCIAL DATA

Acquisitions and divestitures completed by the Company during the five-year period presented below affect comparability of
results. Refer to Note E, Acquisitions and Investments, and Note T, Divestitures, of the Notes to Consolidated Financial
Statements in Item 8 and prior year 10-K filings for further information.

65.8 %
21.3 %
1.8 %
0.6 %
1.4 %
8.7 %
8.3 %

2020 (a)
(Millions of Dollars, Except Per Share Amounts)
$ 14,535
Net sales............................................................................
Net Earnings Attributable to Common Shareowners........ $ 1,210
Earnings per share of common stock:
Basic.................................................................................. $ 7.85
Diluted............................................................................... $ 7.77
Percent of net sales:
Cost of sales......................................................................
Selling, general and administrative(e)...............................
Other, net...........................................................................
Restructuring charges........................................................
Interest, net........................................................................
Earnings before income taxes and equity interest.............
Net Earnings Attributable to Common Shareowners........
Balance sheet data:
Total assets(f)....................................................................
Long-term debt, including current maturities...................
Stanley Black & Decker, Inc.’s shareowners’ equity.......
Ratios:
Total debt to total capital...................................................
Income tax rate..................................................................
Common stock data:
Dividends per share........................................................... $ 2.78
$ 70.40
Equity per basic share at year-end....................................
Market price per share — high.......................................... $ 190.94
Market price per share — low........................................... $ 72.03
Weighted-average shares outstanding (in 000’s):
Basic..................................................................................
Diluted...............................................................................
Other information:
Average number of employees(g).....................................
Shareowners of record at end of year................................

$ 23,566
$ 4,245
$ 11,060

154,176
155,861

62,606
9,064

27.7 %
3.3 %

2019 (b)
$ 14,442
956
$

2018 (c)
$ 13,982
605
$

2017 (d)
$ 12,967
$ 1,227

2016
$ 11,594
968
$

$
$

6.44
6.35

$
$

4.06
3.99

$
$

8.20
8.05

$
$

6.63
6.53

66.7 %
21.1 %
1.7 %
1.1 %
1.6 %
7.8 %
6.6 %

65.3 %
22.7 %
2.1 %
1.1 %
1.5 %
7.3 %
4.3 %

63.1 %
23.1 %
2.1 %
0.4 %
1.4 %
11.8 %
9.5 %

63.2 %
22.7 %
1.6 %
0.4 %
1.5 %
10.6 %
8.3 %

$ 20,597
$ 3,180
$ 9,136

$ 19,408
$ 3,822
$ 7,836

$ 19,098
$ 3,806
$ 8,302

$ 15,655
$ 3,806
$ 6,374

27.8 %
14.2 %

34.9 %
40.7 %

31.5 %
19.7 %

37.4 %
21.3 %

$
2.70
$ 60.97
$ 167.76
$ 115.69

$
2.58
$ 53.07
$ 175.91
$ 108.45

$
2.42
$ 55.20
$ 170.03
$ 115.75

$
2.26
$ 42.80
$ 125.78
$ 90.14

148,365
150,558

148,919
151,643

149,629
152,449

146,041
148,207

61,755
9,360

60,785
9,727

57,076
10,014

53,231
10,313

(a) The Company's 2020 results include $400 million of pre-tax charges related to a cost reduction program, loss on

extinguishment of debt, inventory step-up charges, deal costs, Security business transformation and margin resiliency
initiatives, and a net loss related to the sales of businesses, partially offset by a release of a contingent consideration
liability relating to the CAM acquisition. As a result, as a percentage of Net sales, Cost of sales was 49 basis points
higher, Selling, general, & administrative was 121 basis points higher, Other, net was 6 basis points higher,
Restructuring charges was 57 basis points higher, and Earnings before income taxes and equity interest was 275 basis
points lower. The Company also recorded a tax benefit of $211 million, which is comprised of a $119 million one-time
tax benefit associated with a supply chain reorganization and a $92 million tax benefit of the above pre-tax charges. In
addition, the Company's share of MTD's net earnings included an after-tax charge of approximately $10 million.
Overall, the amounts described above resulted in a decrease to the Company's 2020 Net earnings attributable to
common shareowners of $199 million (or $1.27 per diluted share).

(b) The Company's 2019 results include $363 million of pre-tax charges related to restructuring, deal and integration costs,
loss on extinguishment of debt, Security business transformation and margin resiliency initiatives, and a gain on a sale
of a business. As a result, as a percentage of Net sales, Cost of sales was 27 basis points higher, Selling, general, &
administrative was 97 basis points higher, Other, net was 21 basis points higher, Restructuring charges was 106 basis
points higher, and Earnings before income taxes and equity interest was 251 basis points lower. In addition, the

Company's share of MTD's net earnings included an after-tax charge of approximately $24 million. Overall, the
amounts described above resulted in a decrease to the Company's 2019 Net earnings attributable to common
shareowners of $309 million (or $2.05 per diluted share).

remediation settlement, a non-cash fair value adjustment, a cost reduction program, an incremental freight charge
related to a service provider's bankruptcy, and a loss related to a previously divested business. As a result, as a
percentage of Net sales, Cost of sales was 47 basis points higher, Selling, general, & administrative was 113 basis
points higher, Other, net was 77 basis points higher, Restructuring charges was 84 basis points higher, and Earnings
before income taxes was 322 basis points lower. The Company also recorded a net tax charge of $181 million, which
is comprised of charges related to the Tax Cuts and Jobs Act ("the Act"), partially offset by the tax benefit of the above
pre-tax charges. Overall, the amounts described above resulted in a decrease to the Company's 2018 Net earnings
attributable to common shareowners of $631 million (or $4.16 per diluted share).

(d) The Company's 2017 results include $156 million of pre-tax acquisition-related charges and a $264 million pre-tax

gain on sales of businesses, primarily related to the divestiture of the mechanical security businesses. As a result, as a
percentage of Net sales, Cost of sales was 36 basis points higher, Selling, general, & administrative was 29 basis points
higher, Other, net was 45 basis points higher, Restructuring charges was 11 basis points higher, and Earnings before
income taxes was 83 basis points higher. The net tax benefit of the acquisition-related charges and gain on sales of
businesses was $7 million. Income taxes for 2017 also includes a one-time net tax charge of $24 million related to the
Act. Overall, the acquisition-related charges, gain on sales of businesses, and one-time net tax charge related to the Act
resulted in a net increase to the Company's 2017 Net earnings attributable to common shareowners of $91 million (or
$0.59 per diluted share).

(e) SG&A is inclusive of the Provision for credit losses.
(f)

In the first quarter of 2019, the Company adopted ASU 2016-02, Leases (Topic 842) ("new lease standard") utilizing
the transition method, which allowed the new lease standard to be applied as of the adoption date with no adjustment
for periods prior to fiscal year 2019. As a result, total assets as of January 2, 2021 and as of December 28, 2019 reflect
a lease right-of-use asset of approximately $523 million and $535 million, respectively.

(g) The average number of employees includes temporary contractors.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The financial and business analysis below provides information which the Company believes is relevant to an assessment and
understanding of its consolidated financial position, results of operations and cash flows. This financial and business analysis
should be read in conjunction with the Consolidated Financial Statements and related notes. All references to “Notes” in this
Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.

The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the
Company’s views about its future performance that constitute “forward-looking statements” under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and
projections about the industry and markets in which the Company operates as well as management’s beliefs and assumptions.
Any statements contained herein (including without limitation statements to the effect that Stanley Black & Decker, Inc. or its
management “believes,” “expects,” “anticipates,” “plans” and similar expressions) that are not statements of historical fact
should be considered forward-looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to predict. There are a number of important factors that could cause
actual results to differ materially from those indicated by such forward-looking statements. These factors include, without
limitation, those set forth, or incorporated by reference, below under the heading “Cautionary Statements Under The Private
Securities Litigation Reform Act Of 1995.” The Company does not intend to update publicly any forward-looking statements
whether as a result of new information, future events or otherwise.

Strategic Objectives

The Company continues to pursue a growth and acquisition strategy, which involves industry, geographic and customer
diversification to foster sustainable revenue, earnings and cash flow growth, and employ the following strategic framework in
pursuit of its vision to deliver top-quartile financial performance, become known as one of the world’s leading innovators and
elevate its commitment to social responsibility:

•

Continue organic growth momentum by leveraging the SBD Operating Model to drive innovation and commercial
excellence, while diversifying toward higher-growth, higher-margin businesses;

Be selective and operate in markets where brand is meaningful, the value proposition is definable and sustainable
through innovation, and global cost leadership is achievable; and

Pursue acquisitive growth on multiple fronts by building upon its existing global tools platform, expanding the
Industrial platform in Engineered Fastening and Infrastructure, consolidating the commercial electronic security
industry, and pursuing adjacencies with sound industrial logic.

Execution of the above strategy has resulted in approximately $11.5 billion of acquisitions since 2002 (excluding the Black &
Decker merger), a 20 percent investment in MTD Holdings Inc. ("MTD"), several divestitures, improved efficiency in the
supply chain and manufacturing operations, and enhanced investments in organic growth, enabled by cash flow generation and
increased debt capacity. In addition, the Company's continued focus on diversification and organic growth has resulted in
improved financial results and an increase in its global presence. The Company also remains focused on leveraging its SBD
Operating Model to deliver success in the 2020s and beyond. The latest evolution of the SBD Operating Model builds on the
strength of the Company's past while embracing changes in the external environment to ensure the Company has the right
skillsets, incorporates technology advances in all areas, maintains operational excellence, drives efficiency in business
processes and resiliency into its culture, delivers extreme innovation and ensures the customer experience is world class. The
operating model underpins the Company's ability to deliver above-market organic growth with margin expansion, maintain
efficient levels of selling, general and administrative expenses ("SG&A") and deliver top-quartile asset efficiency.

The Company’s long-term financial objectives remain as follows:

•
•
•
•
•
•

4-6% organic revenue growth;
10-12% total revenue growth;
10-12% total EPS growth (7-9% organically) excluding acquisition-related charges;
Free cash flow equal to, or exceeding, net income;
Sustain 10+ working capital turns; and
Cash Flow Return On Investment ("CFROI") between 12-15%.

In terms of capital allocation, the Company remains committed, over time, to returning approximately 50% of free cash flow to
shareholders through a strong and growing dividend as well as opportunistically repurchasing shares. The remaining free cash
flow (approximately 50%) will be deployed towards acquisitions.

COVID-19 Pandemic

The novel coronavirus (COVID-19) outbreak has adversely affected the Company's workforce and operations, as well as the
operations of its customers, distributors, suppliers and contractors. The COVID-19 pandemic has also resulted in significant
volatility and uncertainty in the markets in which the Company operates. To successfully navigate through this unprecedented
period, the Company has remained focused on the following key priorities:

Ensuring the health and safety of its employees and supply chain partners;

•
• Maintaining business continuity and financial strength and stability;
•
•

Serving its customers as they provide essential products and services to the world; and
Doing its part to mitigate the impact of the virus across the globe.

To respond to the volatile and uncertain environment, the Company implemented a comprehensive cost reduction and
efficiency program, which delivered approximately $500 million of savings in 2020 and is expected to deliver net savings of
approximately $125 million in 2021. Cost actions executed under the program included headcount reductions, furloughs,
reduced employee work schedules, a voluntary retirement program, and footprint rationalizations. The Company has taken steps
to make some of the cost actions permanent while certain employees were returned to full-time status. This ensures the
sustainability of the cost reduction program into 2021 while providing more employment stability for the Company's remaining
associates.

The program’s primary focus was to: (a) adjust the Company’s supply chain and manufacturing labor base to match the demand
environment; (b) substantially reduce indirect spending; (c) reduce staffing, compensation and benefits in a manner that ensured
the Company was prepared to respond to changes in demand; and (d) capture the significant raw material deflation opportunity
from 2020. In addition, the Company reduced capital expenditures in 2020.

As a result of these actions, the Company continues to believe it is in a strong financial position and has significant flexibility to
continue navigating this dynamic period. However, the overall impact of the COVID-19 pandemic on the Company's business,
results of operations, or liquidity remains uncertain. Refer to Financial Condition below and Item 1A. Risk Factors in Part I of
this Form 10-K for further discussion.

Share Repurchases

In April 2018, the Company repurchased 1,399,732 shares of common stock for approximately $200 million. In July 2018, the
Company repurchased 2,086,792 shares of common stock for approximately $300 million.

Acquisitions and Investments

On February 24, 2020, the Company acquired Consolidated Aerospace Manufacturing, LLC ("CAM"), an industry-leading
manufacturer of specialty fasteners and components for the aerospace and defense markets. The acquisition further diversifies
the Company's presence in the industrial markets and expands its portfolio of specialty fasteners in the aerospace and defense
markets.

On March 8, 2019, the Company acquired the International Equipment Solutions Attachments businesses, Paladin and Pengo,
("IES Attachments"), manufacturers of high quality, performance-driven heavy equipment attachment tools for off-highway
applications. The acquisition further diversified the Company's presence in the industrial markets, expanded its portfolio of
attachment solutions and provided a meaningful platform for growth.

On January 2, 2019, the Company acquired a 20 percent interest in MTD, a privately held global manufacturer of outdoor
power equipment. MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers,

snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the terms of the agreement,
the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2,
2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 Earnings
Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with an equitable sharing arrangement for future EBITDA
growth. The investment in MTD increases the Company's presence in the greater than $20 billion lawn and garden segment and
enables the two companies to work together to pursue revenue and cost opportunities, improve operational efficiency, and
introduce new and innovative products for professional and residential outdoor equipment customers, utilizing each company's
respective portfolios of strong brands.

On April 2, 2018, the Company acquired Nelson Fastener Systems (“Nelson”), which excluded Nelson's automotive stud
welding business. This acquisition, which has been integrated into the Engineered Fastening business, was complementary to
the Company's product offerings, enhanced its presence in the general industrial end markets, and expanded its portfolio of
highly-engineered fastening solutions.

On March 9, 2017, the Company acquired the Tools business of Newell Brands ("Newell Tools") which included the highly
attractive industrial cutting, hand tool and power tool accessory brands IRWIN® and LENOX®. The acquisition enhanced the
Company’s position within the global tools & storage industry and broadened the Company’s product offerings and solutions to
customers and end users, particularly within power tool accessories.

On March 8, 2017, the Company purchased the Craftsman® brand from Sears Holdings Corporation (“Sears Holdings”). The
acquisition provided the Company with the rights to develop, manufacture and sell Craftsman®-branded products in non-Sears
Holdings channels. The acquisition significantly increased the availability of Craftsman®-branded products to consumers in
previously underpenetrated channels, enhanced innovation, and added manufacturing jobs in the U.S. to support growth.

Refer to Note E, Acquisitions and Investments, for further discussion.

Divestitures

On May 30, 2019, the Company sold its Sargent and Greenleaf mechanical locks business within the Security segment. On
February 22, 2017, the Company sold the majority of its mechanical security businesses, which included the commercial
hardware brands of Best Access, phi Precision and GMT. These divestitures allow the Company to invest in other areas of the
Company that fit into its long-term growth strategy.

The Company has also divested several smaller businesses in recent years that did not fit into its long-term strategic objectives.

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

Certain Items Impacting Earnings

Throughout MD&A, the Company has provided a discussion of the outlook and results both inclusive and exclusive of
acquisition-related and other charges. The results and measures, including gross profit and segment profit, on a basis excluding
these amounts are considered relevant to aid analysis and understanding of the Company's results aside from the material
impact of these items. These amounts are as follows:

2020

The Company reported $400 million in pre-tax charges during 2020, which were comprised of the following:

•

•
•
•

$71 million reducing Gross Profit pertaining to inventory step-up charges, a cost reduction program and facility-related
costs;
$176 million in SG&A primarily for a cost reduction program, Security business transformation and margin resiliency
initiatives;
$9 million in Other, net primarily related to a cost reduction program, loss on interest rate swaps in connection with the
extinguishment of debt, and deal transactions costs, partially offset by a release of a contingent consideration liability
relating to the CAM acquisition;
$14 million net loss related to the sales of businesses;
$83 million in Restructuring charges pertaining to severance and facility closures; and
$47 million related to a loss on the extinguishment of debt.

The tax effect on the above net charges was approximately $92 million. The Company also recorded a one-time tax benefit of
$119 million associated with a supply chain reorganization. In addition, the Company's share of MTD's net earnings included
an after-tax charge of approximately $10 million related primarily to restructuring charges. The amounts above resulted in net
after-tax charges of $199 million, or $1.27 per diluted share.

2019

The Company reported $363 million in pre-tax charges during 2019, which were comprised of the following:

•
•

•
•
•

•

$40 million reducing Gross Profit pertaining to facility-related and inventory step-up charges;
$139 million in SG&A primarily for integration-related costs, Security business transformation and margin resiliency
initiatives;
$30 million in Other, net primarily related to deal transaction costs;
$17 million gain related to the sale of the Sargent & Greenleaf business;
$153 million in Restructuring charges pertaining to severance and facility closures associated with a cost reduction
program; and
$18 million related to a non-cash loss on the extinguishment of debt.

The tax effect on the above net charges was approximately $78 million. In addition, the Company's share of MTD's net
earnings included an after-tax charge of approximately $24 million primarily related to an inventory step-up adjustment. The
amounts above resulted in net after-tax charges of $309 million, or $2.05 per diluted share.

2018

The Company reported $450 million in pre-tax charges during 2018, which were comprised of the following:

•

•
•

$66 million reducing Gross Profit primarily pertaining to inventory step-up charges for the Nelson acquisition and an
incremental freight charge due to nonperformance by a third-party service provider;
$158 million in SG&A primarily for integration-related costs, consulting fees, and a non-cash fair value adjustment;
$108 million in Other, net primarily related to deal transaction costs and a settlement with the Environmental
Protection Agency ("EPA");
$1 million related to a previously divested business; and
$117 million in Restructuring charges which primarily related to a cost reduction program.

The Company also recorded a net tax charge of $181 million, which was comprised of charges related to the Tax Cuts and Jobs
Act ("the Act") partially offset by the tax benefit of the above pre-tax charges. The above amounts resulted in net after-tax
charges of $631 million, or $4.16 per diluted share.

Driving Further Profitable Growth by Fully Leveraging Our Core Franchises

Each of the Company's franchises share common attributes: they have world-class brands and attractive growth characteristics,
they are scalable and defensible, they can differentiate through innovation, and they are powered by the SBD Operating Model.

•

The Tools & Storage business is the tool company to own, with strong brands, proven innovation, global scale, and a
broad offering of power tools, hand tools, accessories, and storage & digital products across many channels in both
developed and developing markets.

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

The Security business, with its attractive recurring revenue, presents a significant margin accretion opportunity over
the longer term and has historically provided a stable revenue stream through economic cycles, is a gateway into the
digital world and an avenue to capitalize on rapid market or societal changes. Security has embarked on a business
transformation which will apply technology to lower its cost to serve and create new commercial offerings for its small
to medium enterprise and large key account customers.

While diversifying the business portfolio through strategic acquisitions remains important, management recognizes that the core
franchises described above are important foundations that continue to provide strong cash flow and growth prospects.
Management is committed to growing these businesses through innovative product development, brand support, continued
investment in emerging markets and a sharp focus on global cost competitiveness.

Continuing to Invest in the Stanley Black & Decker Brands

The Company has a strong portfolio of brands associated with high-quality products including STANLEY®,
BLACK+DECKER®, DEWALT®, FLEXVOLT®, IRWIN®, LENOX®, CRAFTSMAN®, PORTER-CABLE®,
BOSTITCH®, PROTO®, MAC TOOLS®, FACOM®, AeroScout®, Powers®, LISTA®, Vidmar®, SONITROL®, and GQ®.
Among the Company's most valuable assets, STANLEY®, BLACK+DECKER® and DEWALT® are recognized as three of
the world's great brands, while CRAFTSMAN® is recognized as a premier American brand.

The Company’s initial strategic marketing plan for 2020 was to put brand awareness into overdrive through continued
sponsorships and a live presence at nearly 500 tried-and-true sporting events, including NASCAR and NHRA racing, Major
League Baseball (“MLB”) and global soccer with English Premier League (“EPL”) and FC Barcelona (“FCB”). In March 2020,
COVID-19 brought a halt to live sporting events worldwide and with the stands virtually empty, the Company revised its
strategic marketing plan in order to bring a virtual brand experience to life.

Through the power of Zoom, the Company provided fans a new kind of venue by hosting virtual VIP and customer engagement
events. The Company brought the owners, the players, the drivers and the influencers together online to engage audiences and
reinforce its name brands, including CRAFTSMAN®, DEWALT® and STANLEY®.

In late spring and summer 2020, when sponsorship events like NASCAR, MLB, EPL and FCB resumed with millions of fans
tuning in from the comfort of home, the Company’s brands were there with strong visibility thanks to prime stadium signage
placement and car wraps that put CRAFTSMAN®, DEWALT®, BLACK+DECKER®, IRWIN®, MAC TOOLS® and
STANLEY® front, center and in the lead.

The above marketing initiatives highlight the Company's strong emphasis on brand building and commercial support, which has
resulted in more than 300 billion global brand impressions from digital and traditional advertising and strong brand awareness.
The Company will continue allocating its brand and advertising spend wisely to capture the emerging digital landscape, while
continuing to evolve proven marketing programs to deliver famous global brands that are deeply committed to societal
improvement, along with transformative technologies to build relevant and meaningful 1:1 customer, consumer, employee and
shareholder relationships in support of the Company's long-term vision.

The SBD Operating Model: Winning in the 2020s

Over the past 15 years, the Company has successfully leveraged its proven and continually evolving operating model to focus
the organization to sustain top-quartile performance, resulting in asset efficiency, above-market organic growth and expanding
operating margins. In its first evolution, the Stanley Fulfillment System ("SFS") focused on streamlining operations, which
helped reduce lead times, realize synergies during acquisition integrations, and mitigate material and energy price inflation. In
2015, the Company launched a refreshed and revitalized SFS operating system, entitled SFS 2.0, to drive from a more
programmatic growth mentality to a true organic growth culture by more deeply embedding breakthrough innovation and
commercial excellence into its businesses, and at the same time, becoming a significantly more digitally-enabled enterprise.
Entering into 2020 and recognizing the changing dynamics of the world in which the Company operates, including the
acceleration of technological change, geopolitical instability and the changing nature of work, the Company launched the SBD
Operating Model: Winning in the 2020s.

At the center of the model is the concept of the interrelationship between people and technology. The remaining four categories
are: Performance Resiliency; Extreme Innovation; Operations Excellence and Extraordinary Customer Experience. Each of
these elements co-exists synergistically with the others in a systems-based approach.

People and Technology
This pillar emphasizes the Company's belief that the right combination of digitally proficient people applying technology such
as artificial intelligence, machine learning, advanced analytics, Internet of Things and others in focused ways can be an
enormous source of value creation and sustainability for the Company. It also brings to light the changing nature of work and
the talent and skillsets required for individuals and institutions to thrive in the future. With technology infiltrating the workplace
at an increasingly rapid pace, the Company believes that the winners in the 2020s will invest heavily in reskilling, upskilling
and lifelong learning with an emphasis on the places where people and technology intersect. In other words, technology can
make humans more powerful and productive if, and only if, humans know how to apply the technology to maximum advantage.
The Company has created plans and programs, as well as a new leadership model to ensure people have the right skills, tools
and mindsets to thrive in this era. The ability for employees to embrace technology, learn and relearn new skills and take
advantage of the opportunities presented in this new world will be critical to the Company's success.

Performance Resiliency

The Company views performance resiliency as the agility, flexibility and adaptability to sustain strong performance regardless
of the operating environment conditions, which requires planning for the unexpected and anticipating exogenous volatility as
the new normal. Technology, applied to key business processes, products and business models, will be a key enabler for value
creation and performance resiliency as the Company executes sustainable, ongoing transformation across the enterprise.

Extreme Innovation
The Company has a historically strong foundation in innovation, launching more than 1,000 products a year, including
breakthroughs such as DEWALT Flexvolt, Atomic and Xtreme. In recent years, the Company has expanded its innovation-
focused internal teams and external partnerships, but now it is growing that innovation ecosystem at a rapid pace, expanding the
number of external collaborations with start-ups and entrepreneurs, academic institutions, research labs and others. This
innovation culture, which includes a focus on social impact in addition to the Company's traditional product and customer
focus, enables the Company to introduce products to market faster and reimagine how to operate in today’s technology-enabled,
fast-paced world.

Operations Excellence
An intense focus on operations excellence and asset efficiency is mandatory in a dynamic world in which the bar for
competitiveness is always moving higher. To help maintain the Company's edge, a much more agile, adaptable and technology-
enabled supply chain is necessary to manufacture closer to its customers. This “Make Where We Sell” strategy will improve
customer responsiveness, lower lead times, reduce costs and mitigate geopolitical and currency risk while facilitating major
improvements in carbon footprint.

Extraordinary Customer Experience
Customers are increasingly demanding world-class experiences from their brands and expectations for execution at the
customer level are growing every day. It is no longer sufficient to have great products on the shelf or in the catalog. The
Company knows that to sustain market share growth, it needs to evolve and adapt to provide the types of experiences that
customers now expect. Each of the Company's businesses evaluates and works to systematically improve its various customer
experiences and acts on customer insights to continuously improve to the extraordinary level. As previously noted, the
interaction between people and technology will define success in this area.

Leveraging the SBD Operating Model, the Company is building a culture in which it strives to become known as one of the
world’s great innovative companies by embracing the current environment of rapid innovation and digital transformation. The
Company continues to build a vast innovation focused ecosystem to pursue faster innovation and to remain aware of and open
to new technologies and advances by leveraging both internal initiatives and external partnerships. The innovation ecosystem
used in concert with the SBD Operating Model is anticipated to allow the Company to apply innovation to its core processes in
manufacturing and back office functions to reduce operating costs and inefficiencies, develop core and breakthrough product
innovations within each of its businesses, and pursue disruptive business models to either push into new markets or change
existing business models before competition or new market entrants capture the opportunity. The Company continues to make
progress towards this vision, as evidenced by the creation of Innovation Everywhere, a program that encourages and empowers
all employees to implement value creation and cost savings using collaborative and innovative solutions, breakthrough
innovation teams in each business, the Stanley Ventures group, which invests capital in new and emerging start-ups in core
focus areas, the Techstars partnership, which selects start-ups from around the world with the goal of bringing breakthrough
technologies to market, the Manufactory 4.0, which is the Company's epicenter for Industry 4.0 technology development and
partnership, and STANLEY X, a Silicon Valley based team, which is building its own set of disruptive initiatives and exploring
new business models.

The Company has made a significant commitment to the SBD Operating Model and management believes that its success will
be characterized by continued asset efficiency, organic growth in the 4-6% range in the long-term as well as expanded operating
margin rates over the next 3 to 5 years as the Company leverages the growth and pursues structural cost reductions with the
margin resiliency initiatives.

The Company believes that the SBD Operating Model will serve as a powerful value driver in the years ahead, ensuring the
Company is positioned to win in the 2020s by developing and obtaining the right people and technology to deliver performance
resiliency, extreme innovation, operations excellence and an extraordinary customer experience. The operating model, in
concert with the Company's innovation ecosystem, will enable the Company to change as rapidly as the external environment
which directly supports achievement of the Company's long-term financial objectives, including its vision, and further enables
its shareholder-friendly capital allocation approach, which has served the Company well in the past and will continue to do so
in the future.

Outlook for 2021

This outlook discussion is intended to provide broad insight into the Company’s near-term earnings and cash flow generation
prospects. The Company expects 2021 diluted earnings per share to approximate $9.15 to $9.85 ($9.70 to $10.30 excluding
acquisition-related and other charges). This range is $0.40 wider than the Company's traditional guide recognizing that while
visibility has improved, the operating environment remains dynamic. Free cash flow conversion, defined as free cash flow
divided by net income, is expected to approximate 100%.

The difference between the 2021 diluted earnings per share outlook and the diluted earnings per share range, excluding charges,
is $0.45 - $0.55, consisting of acquisition-related and other charges. These forecasted charges primarily relate to facility moves,
deal and integration costs and functional transformation initiatives.

RESULTS OF OPERATIONS

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

Terminology: The term “organic” is utilized to describe results aside from the impacts of foreign currency fluctuations,
acquisitions during their initial 12 months of ownership, and divestitures. This ensures appropriate comparability to operating
results of prior periods.

Net Sales: Net sales were $14.535 billion in 2020 compared to $14.442 billion in 2019, representing an increase of 1% driven
by a 2% increase from acquisitions, primarily CAM, and a 1% increase in price, partially offset by pandemic-related volume
decreases of 2%. Organic growth of 10% in the second half of 2020 and acquisitions more than offset first half pandemic
related market impacts. Tools & Storage net sales increased 3% compared to 2019 due to 2% increases in both volume and
price, partially offset by a decrease of 1% from foreign currency. Industrial net sales decreased 3% compared to 2019 primarily
due to volume decreases of 15%, partially offset by acquisition growth of 12%. Security net sales declined 5% compared to
2019 as 1% increases in both price and small bolt-on commercial electronic security acquisitions were more than offset by a 5%
decrease in volume and a 2% decrease from the sales of the Sargent & Greenleaf business and the commercial electronic
security businesses in five countries in Europe and emerging markets.

Net sales were $14.442 billion in 2019 compared to $13.982 billion in 2018, representing an increase of 3% driven by organic
growth of 3%, including a 2% increase in volume and 1% increase in price. Acquisitions, primarily IES Attachments, increased
sales by 2%, while the impact of foreign currency decreased sales by 2%. Tools & Storage net sales increased 3% compared to
2018 due to increases in volume and price of 4% and 1%, respectively, partially offset by a 2% decrease from foreign currency.
Industrial net sales increased 11% compared to 2018 primarily due to acquisition growth of 16%, partially offset by decreases
of 3% from lower volumes and 2% from foreign currency. Security net sales declined 2% compared to 2018 as 1% increases in
both price and small bolt-on commercial electronic security acquisitions were more than offset by a 3% decrease due to foreign
currency and a 1% decrease from the sale of the Sargent & Greenleaf business.

Gross Profit: The Company reported gross profit of $4.968 billion, or 34.2% of net sales, in 2020 compared to $4.806 billion,
or 33.3% of net sales, in 2019. Acquisition-related and other charges, which reduced gross profit, were $71.2 million in 2020
and $39.7 million in 2019. Excluding these charges, gross profit was 34.7% of net sales in 2020 compared to 33.5% in 2019,
driven by productivity, margin resiliency initiatives and price realization.

The Company reported gross profit of $4.806 billion, or 33.3% of net sales, in 2019 compared to $4.851 billion, or 34.7% of net
sales, in 2018. Acquisition-related and other charges, which reduced gross profit, were $39.7 million in 2019 and $65.7 million
in 2018. Excluding these charges, gross profit was 33.5% of net sales in 2019, compared to 35.2% in 2018, as volume,
productivity and price were more than offset by tariffs, commodity inflation and foreign exchange.

SG&A Expense: Selling, general and administrative expenses, inclusive of the provision for credit losses (“SG&A”), were
$3.090 billion, or 21.3% of net sales, in 2020 compared to $3.041 billion, or 21.1% of net sales, in 2019. Within SG&A,
acquisition-related and other charges totaled $176.1 million in 2020 and $139.5 million in 2019. Excluding these charges,
SG&A was 20.0% of net sales in 2020 compared to 20.1% in 2019, primarily reflecting the benefits of cost management
programs implemented in response to the global pandemic, partially offset by growth investments to pursue market recoveries
and opportunities across the businesses that have emerged during the pandemic.

SG&A expenses were $3.041 billion, or 21.1% of net sales, in 2019 compared to $3.172 billion, or 22.7% of net sales, in 2018.
Acquisition-related and other charges totaled $139.5 million in 2019 and $157.8 million in 2018. Excluding these charges,
SG&A was 20.1% of net sales in 2019 compared to 21.6% in 2018, primarily reflecting disciplined cost management and
actions taken in response to external headwinds.

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 $347.8 million in 2020, $326.7 million in 2019 and
$316.0 million in 2018.

Corporate Overhead: The corporate overhead element of SG&A, which is not allocated to the business segments, amounted to
$297.7 million, or 2.0% of net sales, in 2020, $229.5 million, or 1.6% of net sales, in 2019 and $202.8 million, or 1.5% of net
sales, in 2018. Excluding acquisition-related charges of $60.3 million in 2020, $23.4 million in 2019, and $12.7 million in

2018, the corporate overhead element of SG&A was 1.6% of net sales in 2020, compared to 1.4% of net sales in 2019 and
2018. The increase in 2020 compared to 2019 and 2018 was primarily due to higher employee-related costs.

Other, net: Other, net totaled $262.8 million in 2020 compared to $249.1 million in 2019 and $287.0 million in 2018.
Excluding acquisition-related and other charges, Other, net totaled $253.8 million, $218.9 million, and $178.9 million in 2020,
2019, and 2018, respectively. The year-over-year increase in 2020 was driven by higher intangible asset amortization and
negative impacts from foreign currency. The year-over-year increase in 2019 was driven by higher intangible asset amortization
and a favorable resolution of a prior claim in 2018.

Loss (Gain) on Sales of Businesses: During 2020, the Company reported a $13.5 million net loss primarily relating to the sale
of a product line within Oil & Gas. During 2019, the Company reported a $17.0 million gain relating to the sale of the Sargent
and Greenleaf business. During 2018, the Company reported a $0.8 million loss relating to a previously divested business.

Loss on Debt Extinguishments: During the fourth quarter of 2020, the Company extinguished $1.154 billion of its notes payable
and recognized a $46.9 million pre-tax loss primarily due to a make-whole premium payment. In 2019, the Company
extinguished $750 million of its notes payable and recognized a $17.9 million pre-tax loss related to the write-off of deferred
financing fees.

Interest, net: Net interest expense in 2020 was $205.1 million compared to $230.4 million in 2019 and $209.2 million in 2018.
The decrease in 2020 compared to 2019 was primarily driven by lower U.S. interest rates and lower average balances relating to
the Company's commercial paper borrowings, partially offset by lower interest income due to a decline in rates. The increase in
net interest expense in 2019 versus 2018 was primarily driven by interest on the senior unsecured notes issued in November
2018 and lower interest income on deposits due to a decline in rates.

Income Taxes: On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted.
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer
social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net
interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The
CARES Act did not have a material impact on the Company's consolidated financial statements in 2020. The Company
continues to evaluate the potential impacts the CARES Act may have on its operations and consolidated financial statements in
future periods.

The Company's effective tax rate was 3.3% in 2020, 14.2% in 2019, and 40.7% in 2018. Excluding the one-time tax benefit of
$118.8 million recorded in the second quarter of 2020 to reverse a deferred tax liability previously established related to certain
unremitted earnings of foreign subsidiaries not permanently reinvested as a result of initiating a supply chain reorganization,
and the impact of divestitures and acquisition-related and other charges previously discussed, the effective tax rate in 2020 was
15.1%. This effective tax rate differs from the U.S. statutory tax rate primarily due to tax on foreign earnings at tax rates
different than the U.S. rate, the re-measurement of uncertain tax position reserves, the tax benefit of equity compensation, and
tax benefits arising from an increase in deferred tax assets associated with the Company’s supply chain reorganization and
partial realignment of the Company's legal structure.

Excluding the impact of divestitures and acquisition-related and other charges previously discussed, the effective tax rate in
2019 was 16.0%. This effective tax rate differed from the U.S. statutory tax rate primarily due to a portion of the Company's
earnings being realized in lower-taxed foreign jurisdictions and the favorable effective settlements of income tax audits.

The 2018 effective tax rate included net charges associated with the Act, which primarily related to the re-measurement of
existing deferred tax balances, adjustments to the one-time transition tax, and the provision of deferred taxes on unremitted
foreign earnings and profits for which the Company no longer asserted indefinite reinvestment. Excluding the impacts of the net
charge related to the Act as well as the acquisition-related and other charges previously discussed, the effective tax rate in 2018
was 16.0%. This effective tax rate differed from the U.S. statutory tax rate primarily due to a portion of the Company's
earnings being realized in lower-taxed foreign jurisdictions and the favorable effective settlements of income tax audits.

Business Segment Results

The Company’s reportable segments are aggregations of 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. Segment profit excludes the corporate overhead expense element of SG&A,
other, net (inclusive of intangible asset amortization expense), gain or loss on sales of businesses, restructuring charges, loss on
debt extinguishments, interest income, interest expense, income taxes and share of net earnings or losses of equity method
investment. Corporate overhead is comprised of world headquarters facility expense, cost for the executive management team
and expenses pertaining to certain centralized functions that benefit the entire Company but are not directly attributable to the
businesses, such as legal and corporate finance functions. Refer to Note F, Goodwill and Intangible Assets, and Note O,
Restructuring Charges, for the amount of intangible asset amortization expense and net restructuring charges, respectively,
attributable to each segment.

The Company classifies its business into three reportable segments, which also represent its operating segments: Tools &
Storage, Industrial and Security.

Tools & Storage:

The Tools & Storage segment is comprised of the Power Tools & Equipment ("PTE") and Hand Tools, Accessories & Storage
("HTAS") businesses. The PTE business includes both professional and consumer products. Professional products 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,
concrete and masonry anchors. Consumer products include corded and cordless electric power tools sold primarily under the
BLACK+DECKER® brand, lawn and garden products, including hedge trimmers, string trimmers, lawn mowers, edgers and
related accessories, and home products such as hand-held vacuums, paint tools and cleaning appliances. The HTAS business
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.

(Millions of Dollars)
Net sales.................................................................................................. $
Segment profit........................................................................................ $
% of Net sales.........................................................................................

2020
10,330
1,842

2019
10,062
1,533

$
$

17.8 %

15.2 %

2018

9,814
1,393

14.2 %

Tools & Storage net sales increased $267.6 million, or 3%, in 2020 compared to 2019 due to a 2% increase in both volume and
price, partially offset by unfavorable currency of 1%. The 4% organic growth was driven by a strong second half organic
performance of 18% from a consumer reconnection with the home and garden and a shift to eCommerce that emerged from the
pandemic and was accelerated by a robust lineup of new and innovative products. Double digit growth was realized across all
regions in the second half of 2020. For the full year, North America and Europe organic growth more than offset a decline in
emerging markets.

Segment profit amounted to $1.842 billion, or 17.8% of net sales, in 2020 compared to $1.533 billion, or 15.2% of net sales, in
2019. Excluding acquisition-related and other charges of $46.4 million and $44.3 million in 2020 and 2019, respectively,
segment profit amounted to 18.3% of net sales in 2020 compared to 15.7% in 2019, as volume, productivity, cost control and
price were partially offset by new growth investments, tariffs and currency.

Tools & Storage net sales increased $248.1 million, or 3%, in 2019 compared to 2018 due to a 4% increase in volume and 1%
increase in price, partially offset by unfavorable currency of 2%. The 5% organic growth was led by North America and
Europe, more than offsetting a decline in emerging markets. North America organic growth was driven by the roll-out of the
Craftsman brand and new product innovation, such as DEWALT Flexvolt, Atomic and Xtreme, partially offset by declines in
Canada and industrial-focused businesses. Europe growth was supported by new products and successful commercial actions.
The organic decline in emerging markets was driven by weak market conditions in Turkey, China and certain countries in Latin
America, which more than offset the benefits from price, new product launches and e-commerce expansion.

Segment profit amounted to $1.533 billion, or 15.2% of net sales, in 2019 compared to $1.393 billion, or 14.2% of net sales, in
2018. Excluding acquisition-related and other charges of $44.3 million and $142.6 million in 2019 and 2018, respectively,
segment profit amounted to 15.7% of net sales in 2019 compared to 15.6% in 2018, as the benefits from volume leverage,
actions taken in response to external headwinds and price were partially offset by tariffs, commodity inflation, and foreign
exchange.

Industrial:

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. 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 consists of the Attachment Tools and Oil & Gas product lines.
Attachment Tools sells hydraulic tools and high quality, performance-driven heavy equipment attachment tools for off-highway
applications. Oil & Gas sells and rents custom pipe handling, joint welding and coating equipment used in the construction of
large and small diameter pipelines and provides pipeline inspection services.

(Millions of Dollars)
Net sales.................................................................................................. $
Segment profit......................................................................................... $
% of Net sales..........................................................................................

2020

2019

2018

2,353
226
9.6 %

$
$

2,435
334
13.7 %

2,188
320
14.6 %

Industrial net sales decreased $82.0 million, or 3%, in 2020 compared to 2019, due to pandemic-related market declines in
volume of 15%, partially offset by acquisition growth of 12%. Engineered Fastening organic revenues decreased 15% for the
full year, due to the significant impacts from the pandemic to automotive and general industrial production. Infrastructure
organic revenues were down 15% from lower volumes in Attachment Tools and a sharp decline in Oil & Gas pipeline
construction. The deepest segment organic revenue decline was the second quarter and each quarter thereafter delivered
stronger revenue as markets recovered.

Segment profit totaled $225.6 million, or 9.6% of net sales, in 2020 compared to $334.1 million, or 13.7% of net sales, in 2019.
Excluding acquisition-related and other charges of $67.1 million and $25.8 million in 2020 and 2019, respectively, segment
profit amounted to 12.4% of net sales in 2020 compared to 14.8% in 2019, as productivity gains and cost control were more
than offset by market driven volume declines.

Industrial net sales increased $246.9 million, or 11%, in 2019 compared to 2018, due to acquisition growth of 16%, partially
offset by declines of 3% in volume and 2% from foreign currency. Engineered Fastening organic revenues decreased 3% as
fastener penetration gains were more than offset by inventory reductions and lower production levels within industrial and
automotive customers. Infrastructure organic revenues were down 2%, as growth within Oil & Gas was offset by declines in
hydraulic tools from a difficult scrap steel market.

Segment profit totaled $334.1 million, or 13.7% of net sales, in 2019 compared to $319.8 million, or 14.6% of net sales, in
2018. Excluding acquisition-related and other charges of $25.8 million and $26.0 million in 2019 and 2018, respectively,
segment profit amounted to 14.8% of net sales in 2019 compared to 15.8% in 2018, as productivity gains and cost control were
more than offset by lower volume and externally driven cost inflation.

Security:

The Security segment is comprised of the Convergent Security Solutions ("CSS") and the Mechanical Access Solutions
("MAS") businesses. The CSS business designs, supplies and installs commercial electronic security systems and provides
electronic security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and
system maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance
at the time of initial equipment installation. The business also sells healthcare solutions, which include asset tracking, infant
protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The
MAS business primarily sells automatic doors.

2020

2019

2018

1,852
109
5.9 %

$
$

1,945
127
6.5 %

1,981
169
8.5 %

Security net sales decreased $93.2 million, or 5%, in 2020 compared to 2019, as 1% increases in both price and small bolt-on
commercial electronic security acquisitions were more than offset by a 5% decrease in volume attributed to the pandemic and a
2% decrease from divestitures. Organic sales for North America declined 3% driven by lower installations within commercial
electronic security and automatic doors. Europe declined 4% organically as growth in France and the Nordics was offset by
lower volume in the UK related to the pandemic. While customer access and sales were severely impeded by government
lockdowns and safety precautions in the first half of 2020, the market and business showed recovery across the second half.

Segment profit amounted to $108.7 million, or 5.9% of net sales, in 2020 compared to $126.6 million, or 6.5% of net sales, in
2019. Excluding acquisition-related and other charges of $73.5 million and $85.7 million in 2020 and 2019, respectively,
segment profit amounted to 9.8% of net sales in 2020 compared to 10.9% in 2019, as price and cost control were more than
offset by lower volume from pandemic disruptions and growth investments.

Security net sales increased $35.2 million, or 2%, in 2019 compared to 2018, as 1% increases in both price and small bolt-on
commercial electronic security acquisitions were more than offset by a 3% decrease due to foreign currency and a 1% decrease
from the sale of the Sargent & Greenleaf business. Organic sales for North America increased 3% driven by increased
installations within commercial electronic security and higher volumes in healthcare and automatic doors. Europe declined 1%
organically as growth in France was offset by continued market weakness in the Nordics and the UK.

Segment profit amounted to $126.6 million, or 6.5% of net sales, in 2019 compared to $169.3 million, or 8.5% of net sales, in
2018. Excluding acquisition-related and other charges of $85.7 million and $42.2 million in 2019 and 2018, respectively,
segment profit amounted to 10.9% of net sales in 2019 compared to 10.7% in 2018, as the benefits of organic growth and a
focus on cost containment were partially offset by investments to support the business transformation in commercial electronic
security and the dilutive impact from the Sargent & Greenleaf divestiture.

RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from December 28, 2019 to January 2, 2021 is as follows:

(Millions of Dollars)
Severance and related costs.......................................... $
Facility closures and asset impairments.......................
Total............................................................................. $

December 28,
2019

Net Additions

Usage

Currency

January 2,
2021

140.3 $
7.5
147.8 $

63.9 $
19.1
83.0 $

(111.0) $
(23.9)
(134.9) $

(5.7) $
—
(5.7) $

87.5
2.7
90.2

During 2020, the Company recognized net restructuring charges of $83.0 million, primarily related to severance costs
associated with a cost reduction program announced in the second quarter of 2020. The Company expects to achieve annual net
cost savings of approximately $175 million by the end of 2021 related to restructuring costs incurred during 2020. The majority
of the $90.2 million of reserves remaining as of January 2, 2021 is expected to be utilized within the next twelve months.

During 2019, the Company recognized net restructuring charges of $154.1 million, primarily related to severance costs
associated with a cost reduction program announced in the third quarter of 2019. The 2019 actions resulted in annual net cost
savings of approximately $185 million, primarily in the Tools & Storage segment.

During 2018, the Company recognized net restructuring charges of $160.3 million, which primarily related to a cost reduction
program executed in the fourth quarter of 2018. This amount reflected $151.0 million of net severance charges associated with
the reduction of 4,184 employees and $9.3 million of facility closure and other restructuring costs. The 2018 actions resulted in
annual net cost savings of approximately $230 million, primarily in the Tools & Storage and Security segments.

Segments: The $83 million of net restructuring charges in 2020 includes: $40 million pertaining to the Tools & Storage
segment; $29 million pertaining to the Industrial segment; $9 million pertaining to the Security segment; and $5 million
pertaining to Corporate.

The anticipated annual net cost savings of approximately $175 million related to the 2020 restructuring actions include: $71
million in the Tools & Storage segment; $61 million in the Industrial segment; $31 million in the Security segment; and $12
million in Corporate.

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 provided by operations were $2.022 billion in 2020 compared to $1.506 billion in 2019. The
year-over-year increase was mainly attributable to higher earnings driven by increased demand in the Tools & Storage segment
and strong cost control.

In 2019, cash flows from operations were $1.506 billion compared to $1.261 billion in 2018. The year-over-year increase was
mainly attributable to improved working capital (accounts receivable, inventory, accounts payable, and deferred revenue) as a
result of an intense focus on working capital management and lower inventory investment associated with Tools & Storage
brand roll-outs.

Free Cash Flow: Free cash flow, as defined in the table below, was $1.674 billion in 2020 compared to $1.081 billion in 2019
and $769 million in 2018. The improvement in free cash flow in 2020 was driven by higher operating cash flows as discussed
above and lower capital expenditures due to cash preservation initiatives implemented during the year in response to
COVID-19 driven market volatility. Management considers free cash flow an important indicator of its liquidity, as well as its
ability to fund future growth and provide dividends to shareowners. Free cash flow does not include deductions for mandatory
debt service, other borrowing activity, discretionary dividends on the Company’s common and preferred stock and business
acquisitions, among other items.

(Millions of Dollars)
Net cash provided by operating activities................................................. $
Less: capital and software expenditures...................................................

Free cash flow........................................................................................... $

2020

2019

2018

2,022 $

(348)
1,674 $

1,506 $

(425)
1,081 $

1,261

(492)
769

As previously discussed, the COVID-19 pandemic has adversely affected the Company's operations, as well as the operations
of its customers, distributors, suppliers and contractors, and has resulted in significant volatility and uncertainty in the markets
in which the Company operates. Although the Company experienced a strong demand improvement in the second half of 2020,
primarily in its Tools & Storage segment, the long-term impact of the COVID-19 pandemic on the Company's business, results
of operations, and liquidity remains uncertain. However, the Company continues to believe it is in a strong financial position as
of January 2, 2021 and has significant flexibility to navigate this volatile period as the Company: (a) continues to maintain
strong investment grade credit ratings; (b) possesses approximately $1.4 billion of cash on-hand as of January 2, 2021; (c)
manages a robust and highly-rated $3.0 billion commercial paper program; and (d) carries $3.0 billion of revolving credit
facilities backed by a well-capitalized and diverse bank group. Refer to Item 1A. Risk Factors in Part I of this Form 10-K for
further discussion of the COVID-19 pandemic.

Investing Activities: Cash flows used in investing activities totaled $1.577 billion in 2020, driven by business acquisitions of
$1.324 billion, net of cash acquired, mainly related to the CAM acquisition, and capital and software expenditures of $348
million.

Cash flows used in investing activities in 2019 totaled $1.209 billion, driven by business acquisitions of $685 million, primarily
related to IES Attachments, capital and software expenditures of $425 million and purchases of investments of $261 million,
which mainly related to the 20 percent investment in MTD.

Cash flows used in investing activities in 2018 totaled $989 million, primarily due to business acquisitions of $525 million,
mainly related to the Nelson acquisition, and capital and software expenditures of $492 million. The increase in capital and
software expenditures in 2018 was primarily due to technology-related and capacity investments to support the Company's
strong organic growth and its SFS 2.0 initiatives.

Financing Activities: Cash flows provided by financing activities totaled $616 million in 2020 primarily driven by net proceeds
from debt issuances of $2.223 billion and $897 million of proceeds from issuances of common stock, partially offset by
payments on long-term debt of $1.154 billion, cash dividend payments on common stock of $432 million, net repayments of
short-term borrowings of $343 million under the Company's commercial paper program, and a $250 million Craftsman deferred
purchase price payment.

Cash flows used in financing activities totaled $293 million in 2019 driven by payments on long-term debt of $1.150 billion and
cash dividend payments of $402 million, partially offset by $735 million in net proceeds from the issuance of equity units and
net proceeds from debt issuances of $496 million.

Cash flows used in financing activities in 2018 totaled $562 million primarily related to the repurchase of common shares for
$527 million and cash dividend payments of $385 million, partially offset by $433 million of net proceeds from short-term
borrowings under the Company's commercial paper program.

Fluctuations in foreign currency rates positively impacted cash by $23 million in 2020 due to the weakening of the U.S. Dollar
against other currencies, while negatively impacting cash by $1 million and $54 million in 2019 and 2018, respectively, due to
the strengthening of the U.S. Dollar against the Company's other currencies.

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

Credit Ratings and Liquidity:

The Company maintains strong investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt
(S&P A, Fitch A-, Moody's Baa1), as well as its commercial paper program (S&P A-1, Fitch F1, Moody's P-2). In the second
quarter of 2020, S&P and Fitch revised their outlooks to ‘negative’ from ‘stable’ in response to the potential negative economic
effects stemming from the COVID-19 pandemic. Refer to Item 1A. Risk Factors in Part I of this Form 10-K for further
discussion of the risks associated with the ongoing COVID-19 pandemic. Failure to maintain strong 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 $1.381 billion as of January 2, 2021, comprised of $1.119 billion in the U.S. and $262
million in foreign jurisdictions. As of December 28, 2019, cash and cash equivalents totaled $298 million, comprised of $57
million in the U.S. and $241 million in foreign jurisdictions.

As a result of the Act, the Company's tax liability related to the one-time transition tax associated with unremitted foreign
earnings and profits totaled $325 million at January 2, 2021. 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. See the Contractual Obligations table below for the estimated amounts due by
period. The Company has considered the implications of paying the required one-time transition tax, and believes it will not
have a material impact on its liquidity.

The Company has a $3.0 billion commercial paper program which includes Euro denominated borrowings in addition to U.S.
Dollars. As of January 2, 2021, the Company had no borrowings outstanding. As of December 28, 2019, the Company had
approximately $336 million of borrowings outstanding representing Euro denominated commercial paper, which was
designated as a net investment hedge. Refer to Note I, Financial Instruments, for further discussion.

The Company has a five-year $2.0 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 $653.3 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 12, 2023 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop
for the Company's $3.0 billion U.S. Dollar and Euro commercial paper program. As of January 2, 2021, and December 28,
2019, the Company had not drawn on its five-year committed credit facility.

In September 2020, the Company terminated its 364-day $1.0 billion committed credit facility and concurrently executed a new
364-Day $1.0 billion committed credit facility (the "364-Day Credit Agreement"). Borrowings under the 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 364-Day Credit Agreement. The Company must repay all
advances under the 364-Day Credit Agreement by the earlier of September 8, 2021 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 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.0
billion U.S. Dollar and Euro commercial paper program previously discussed. As of January 2, 2021 and December 28, 2019,
the Company had not drawn on its 364-Day committed credit facility.

In addition, the Company has other short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating
$469 million, of which approximately $373 million was available at January 2, 2021. Short-term arrangements are reviewed
annually for renewal.

At January 2, 2021, the aggregate amount of committed and uncommitted lines of credit, long-term and short-term, was
approximately $3.5 billion. At January 2, 2021, $2 million was recorded as short-term borrowings relating to amounts
outstanding against uncommitted lines. In addition, $96 million of the short-term credit lines was utilized primarily pertaining

to outstanding letters of credit for which there are no required or reported debt balances. The weighted-average interest rate on
U.S. dollar denominated short-term borrowings for 2020 and 2019 were 1.3% and 2.3%, respectively. The weighted-average
interest rate on Euro denominated short-term borrowings for 2020 and 2019 were negative 0.2% and 0.3%, respectively.

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 Interest Expense ("adjusted EBITDA"/"adjusted Interest Expense").
In April 2020, 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, which primarily relate to anticipated incremental charges related to the
COVID-19 pandemic, for amounts incurred beginning in the second quarter of 2020 through the second quarter of 2021, and
(b) lower the minimum interest coverage ratio from 3.5 to 2.5 times for the period from and including the second quarter of
2020 through the end of fiscal year 2021. These amendments are also applicable to the new 364-Day Credit Agreement
described above.

In November 2020, the Company issued $750.0 million of senior unsecured term notes maturing November 15, 2050 ("2050
Term Notes"). The 2050 Term Notes will accrue interest at a fixed rate of 2.75% per annum, with interest payable semi-
annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured
unsubordinated debt. The Company received total net proceeds from this offering of approximately $740 million, net 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 other borrowings.

Contemporaneously with the issuance of the 2050 Term Notes, the Company redeemed the 3.4% senior unsecured term notes
due 2021 (“2021 Term Notes”) and the 2.9% senior unsecured term notes due 2022 (“2022 Term Notes”) for approximately
$1.2 billion representing the outstanding principal amounts, accrued and unpaid interest, and a make-whole premium. The
Company recognized a net pre-tax loss of $47 million from the extinguishment, which was comprised of the $49 million make-
whole premium payment and a $2 million loss related to the write-off of deferred financing fees, partially offset by a $4 million
gain relating to the write-off of unamortized fair value swap terminations. The Company also recognized a pre-tax loss of
$20 million relating to the unamortized loss on cash flow swap terminations related to the 2022 Term Notes. Refer to Note I,
Financial Instruments, for further discussion.

In February 2020, the Company issued $750 million of senior unsecured term notes maturing March 15, 2030 ("2030 Term
Notes") and $750.0 million of fixed-to-fixed reset rate junior subordinated debentures maturing March 15, 2060 (“2060 Junior
Subordinated Debentures”). The 2030 Term Notes accrue interest at a fixed rate of 2.3% per annum, with interest payable semi-
annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured and
unsubordinated debt. The 2060 Junior Subordinated Debentures bear interest at a fixed rate of 4.0% per annum, payable semi-
annually in arrears, up to but excluding March 15, 2025. From and including March 15, 2025, the interest rate will be reset for
each subsequent five-year reset period equal to the Five-Year Treasury Rate plus 2.657%. The Five-Year Treasury Rate is
based on the average yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities.
On each five-year reset date, the 2060 Junior Subordinated Debentures can be called at par value. The 2060 Junior
Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to all of the Company’s existing
and future senior debt. The Company received total net proceeds from these offerings of approximately $1.483 billion, net of
underwriting expenses and other fees associated with the transactions. The net proceeds from the offering were used for general
corporate purposes, including acquisition funding.

In December 2019, the Company redeemed all of the outstanding 2052 Junior Subordinated Debentures for approximately $760
million, which represented 100% of the principal amount plus accrued and unpaid interest.

In March 2019, the Company issued $500 million of senior unsecured notes maturing on March 1, 2026 ("2026 Term Notes").
The 2026 Term Notes accrue interest at a fixed rate of 3.40% per annum with interest payable semi-annually in arrears. The
2026 Term Notes rank equally in right of payment with all of the Company's existing and future unsecured and unsubordinated
debt. The Company received net cash proceeds of $496 million which reflected the notional amount offset by a discount,
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 other borrowings.

In February 2019, the Company redeemed all of the outstanding 2053 Junior Subordinated Debentures for approximately $406
million, which represented 100% of the principal amount plus accrued and unpaid interest.

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750 million ("2019 Equity
Units"). Each unit has a stated amount of $100 and initially consisted of a three-year forward stock purchase contract ("2022

Purchase Contracts") for the purchase of a variable number of shares of common stock, on November 15, 2022, for a price of
$100, and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock,
without par, with a liquidation preference of $1,000 per share ("Series D Preferred Stock"). The Company received
approximately $735 million in cash proceeds from the 2019 Equity Units, net of offering expense and underwriting costs and
commissions, and issued 750,000 shares of Series D Preferred Stock, recording $750 million in preferred stock. The proceeds
were used, together with cash on hand, to redeem the 2052 Junior Subordinated Debentures in December 2019, as discussed
above. The Company also used $19 million of the proceeds to enter into capped call transactions utilized to hedge potential
economic dilution. On and after November 15, 2022, the Series D Preferred Stock may be converted into common stock at the
option of the holder. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or a
combination thereof. On or after December 22, 2022, the Company may elect to redeem for cash, all or any portion of the
outstanding shares of the Series D Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any
accumulated and unpaid dividends. If the Company calls the Series D Preferred Stock for redemption, holders may convert their
shares immediately preceding the redemption date. Upon settlement of the 2022 Purchase Contracts, the Company will receive
additional cash proceeds of $750 million. The Company pays the holders of the 2022 Purchase Contracts quarterly contract
adjustment payments, which commenced February 15, 2020. As of January 2, 2021, the present value of the contract
adjustment payments was approximately $76 million.

In March 2018, the Company purchased from a financial institution “at-the-money” capped call options with an approximate
term of three years, on 3.2 million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate
premium of $57 million. In February 2020, the Company net-share settled 0.6 million of the 3.2 million capped options on its
common stock and received 61,767 shares using an average reference price of $162.26 per common share. On June 9, 2020, the
Company amended the 2018 capped call options to align with and offset the potential economic dilution associated with the
common shares issuable upon conversion of the remarketed Series C Preferred Stock, as further discussed below. Subsequent to
the amendment, the capped call options had an initial lower strike price of $148.34 and an upper strike price of $165.00, which
was approximately 30% higher than the closing price of the Company's common stock on June 9, 2020. As of January 2, 2021,
due to the customary anti-dilution provisions, the lower and upper strike prices were $148.14 and $164.77, respectively. The
aggregate fair value of the options at January 2, 2021 was $53 million.

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750 million ("2017 Equity Units").
Each unit has a stated amount of $100 and initially consisted of a three-year forward stock purchase contract ("2020 Purchase
Contracts") for the purchase of a variable number of shares of common stock, on May 15, 2020, for a price of $100, and a 10%
beneficial ownership interest in one share of 0% Series C Cumulative Perpetual Convertible Preferred Stock, without par, with
a liquidation preference of $1,000 per share ("Series C Preferred Stock"). The Company received approximately $726 million in
cash proceeds from the 2017 Equity Units, net of underwriting costs and commissions, before offering expenses, and issued
750,000 shares of Series C Preferred Stock, recording $750 million in preferred stock. The proceeds were used for general
corporate purposes, including repayment of short-term borrowings. The Company also used $25 million of the proceeds to enter
into capped call transactions utilized to hedge potential economic dilution.

In May 2020, the Company successfully remarketed the Series C Preferred Stock, a described more fully in Note J, Capital
Stock. The remarketing generated cash proceeds of $750 million which were applied to settle the holders' stock purchase
contract obligations, resulting in the Company issuing 5,463,750 common shares. Holders of the remarketed Series C Preferred
Stock are entitled to receive cumulative dividends, if declared by the Board of Directors, at an initial fixed rate equal to 5.0%
per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum per share). In connection with the
remarketing, the conversion rate was reset to 6.7352 shares of the Company's common stock, which is equivalent to a
conversion price of approximately $148.47 per share. As of January 2, 2021, due to the customary anti-dilution provisions, the
conversion rate was 6.7504, equivalent to a conversion price of approximately $148.14 per share of common stock. Beginning
on May 15, 2020, the holders have the option to convert the Series C Preferred Stock into common stock. At the election of the
Company, upon conversion, the Company may deliver cash, common stock, or a combination thereof. The Company does not
have the right to redeem the Series C Preferred Stock prior to May 15, 2021. At the election of the Company, on or after May
15, 2021, the Company may redeem for cash, all or any portion of the outstanding shares of the Series C Preferred Stock at a
redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid dividends. If the Company calls
the Series C Preferred Stock for redemption, holders may convert their shares immediately preceding the redemption date.

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

Contractual Obligations: The following table summarizes the Company’s significant contractual obligations and commitments
that impact its liquidity:

Payments Due by Period
2021

Total

(Millions of Dollars)
Long-term debt (a)................................................. $
Interest payments on long-term debt (b)................
Short-term borrowings...........................................
Lease obligations...................................................
Inventory purchase commitments (c)....................
Deferred compensation..........................................
Marketing commitments........................................
Derivatives (d).......................................................
Forward stock purchase contract (e)......................
Pension funding obligations (f).............................
Contract adjustment fees (g)..................................
U.S. income tax (h)................................................
Total contractual cash obligations..................... $

2022-2023

2024-2025

Thereafter

4,300 $
3,363
2
599
545
28
39
177
350
41
78
325

9,847 $

— $
161
2
141
545
1
27
174
—
41
39
35

— $
324
—
192
—
1
12
3
350
—
39
91

1,166 $

1,012 $

— $
324
—
118
—
1
—
—
—
—
—
197

640 $

4,300
2,554
—
148
—
25
—
—
—
—
—
2

7,029

(a) Future payments on long-term debt encompass all payments related to aggregate debt maturities, excluding certain fair

value adjustments included in long-term debt, as discussed further in Note H, Long-Term Debt and Financing
Arrangements.

(b) Future interest payments on long-term debt reflect the applicable interest rate in effect at January 2, 2021.
(c)

Inventory purchase commitments primarily consist of open purchase orders to purchase raw materials, components, and
sourced products.

(d) Future cash flows on derivative instruments reflect the fair value and accrued interest as of January 2, 2021. The

(e)

ultimate cash flows on these instruments will differ, perhaps significantly, based on applicable market interest and
foreign currency rates at their maturity.
In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty
which obligates the Company to pay $350 million, plus an additional amount related to the forward component of the
contract. In February 2020, the Company amended the settlement date to April 2022, or earlier at the Company's
option. See Note J, Capital Stock, for further discussion.

(f) This amount principally represents contributions either required by regulations or laws or, with respect to unfunded
plans, necessary to fund current benefits. The Company has not presented estimated pension and post-retirement
funding beyond 2021 as funding can vary significantly from year to year based upon changes in the fair value of the
plan assets, actuarial assumptions, and curtailment/settlement actions.

(g) These amounts represent future contract adjustment payments to holders of the Company's 2022 Purchase Contracts.

See Note J, Capital Stock, for further discussion.

(h) Income tax liability for the one-time deemed repatriation tax on unremitted foreign earnings and profits. See Note Q,

Income Taxes, for further discussion.

To the extent the Company can reliably determine when payments will occur, the related amounts will be included in the table
above. However, due to the high degree of uncertainty regarding the timing of potential future cash flows associated with the
contingent consideration liability related to the Craftsman acquisition and the unrecognized tax liabilities of $187 million and
$494 million, respectively, at January 2, 2021, the Company is unable to make a reliable estimate of when (if at all) these
amounts may be paid. Refer to Note E, Acquisitions and Investments, Note M, Fair Value Measurements, and Note Q, Income
Taxes, for further discussion.

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

Other Significant Commercial Commitments:

Amount of Commitment Expirations Per Period

(Millions of Dollars)
U.S. lines of credit

Total

2021

2022-2023

2024-2025

Thereafter

3,000 $

1,000 $

2,000 $

— $

—

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

MARKET RISK

Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments,
currencies, commodities and other items traded in global markets. The Company is exposed to market risk from changes in
foreign currency exchange rates, interest rates, stock prices, bond prices and commodity prices, amongst others.

Exposure to foreign currency risk results because the Company, through its global businesses, enters into transactions and
makes investments denominated in multiple currencies. The Company’s predominant currency exposures are related to the
Euro, Canadian Dollar, British Pound, Australian Dollar, Brazilian Real, Argentine Peso, Chinese Renminbi and the Taiwan
Dollar. Certain cross-currency trade flows arising from both trade and affiliate sales and purchases are consolidated and netted
prior to obtaining risk protection through the use of various derivative financial instruments which may include: purchased
basket options, purchased options, collars, cross-currency swaps and currency forwards. The Company is thus able to capitalize
on its global positioning by taking advantage of naturally offsetting exposures and portfolio efficiencies to reduce the cost of
purchasing derivative protection. At times, the Company also enters into foreign exchange derivative contracts to reduce the
earnings and cash flow impacts of non-functional currency denominated receivables and payables, primarily for affiliate
transactions. Gains and losses from these hedging instruments offset the gains or losses on the underlying net exposures.
Management determines the nature and extent of currency hedging activities, and in certain cases, may elect to allow certain
currency exposures to remain un-hedged. The Company may also enter into cross-currency swaps and forward contracts to
hedge the net investments in certain subsidiaries and better match the cash flows of operations to debt service requirements.
Management estimates the foreign currency impact from its derivative financial instruments outstanding at the end of 2020
would have been an incremental pre-tax loss of approximately $43 million based on a hypothetical 10% adverse movement in
all net derivative currency positions. The Company follows risk management policies in executing derivative financial
instrument transactions, and does not use such instruments for speculative purposes. The Company generally does not hedge the
translation of its non-U.S. dollar earnings in foreign subsidiaries, but may choose to do so in certain instances in future periods.

As mentioned above, the Company routinely has cross-border trade and affiliate flows that cause an impact on earnings from
foreign exchange rate movements. The Company is also exposed to currency fluctuation volatility from the translation of
foreign earnings into U.S. dollars and the economic impact of foreign currency volatility on monetary assets held in foreign
currencies. It is more difficult to quantify the transactional effects from currency fluctuations than the translational effects.
Aside from the use of derivative instruments, which may be used to mitigate some of the exposure, transactional effects can
potentially be influenced by actions the Company may take. For example, if an exposure occurs from a European entity
sourcing product from a U.S. supplier it may be possible to change to a European supplier. Management estimates the
combined translational and transactional impact, on pre-tax earnings, of a 10% overall movement in exchange rates is
approximately $157 million, or approximately $0.85 per diluted share. In 2020, translational and transactional foreign currency
fluctuations negatively impacted pre-tax earnings by approximately $73 million, or approximately $0.40 per diluted share.

The Company’s exposure to interest rate risk results from its outstanding debt and derivative obligations, short-term
investments, and derivative financial instruments employed in the management of its debt portfolio. The debt portfolio
including both trade and affiliate debt, is managed to achieve capital structure targets and reduce the overall cost of borrowing
by using a combination of fixed and floating rate debt as well as interest rate swaps, and cross-currency swaps.

The Company’s primary exposure to interest rate risk comes from its commercial paper program in which the pricing is
partially based on short-term U.S. interest rates. At January 2, 2021, the impact of a hypothetical 10% increase in the interest
rates associated with the Company’s commercial paper borrowings would have an immaterial effect on the Company’s
financial position and results of operations.

The Company has exposure to commodity prices in many businesses, particularly brass, nickel, resin, aluminum, copper, zinc,
steel, and energy used in the production of finished goods. Generally, commodity price exposures are not hedged with
derivative financial instruments, but instead are actively managed through customer product and service pricing actions,
procurement-driven cost reduction initiatives and other productivity improvement projects.

Fluctuations in the fair value of the Company’s common stock affect domestic retirement plan expense as discussed below in
the Employee Stock Ownership Plan ("ESOP") section of MD&A. Additionally, the Company has $120 million of liabilities as
of January 2, 2021 pertaining to unfunded defined contribution plans for certain U.S. employees for which there is mark-to-
market exposure.

The assets held by the Company’s defined benefit plans are exposed to fluctuations in the market value of securities, primarily
global stocks and fixed-income securities. The funding obligations for these plans would increase in the event of adverse
changes in the plan asset values, although such funding would occur over a period of many years. In 2020, 2019, and 2018,
investment returns on pension plan assets resulted in a $280 million increase, a $323 million increase, and a $72 million
decrease, respectively. The Company expects funding obligations on its defined benefit plans to be approximately $41 million
in 2021. The Company employs diversified asset allocations to help mitigate this risk. Management has worked to minimize
this exposure by freezing and terminating defined benefit plans where appropriate.

The Company has access to financial resources and borrowing capabilities around the world. There are no instruments within
the debt structure that would accelerate payment requirements solely due to a change in credit rating.

The Company’s existing credit facilities and sources of liquidity, including operating cash flows, are considered more than
adequate to conduct business as normal. Accordingly, based on present conditions and past history, management believes it is
unlikely that operations will be materially affected by any potential deterioration of the general credit markets that may occur.
The Company believes that its strong financial position, operating cash flows, committed long-term credit facilities and
borrowing capacity, and ability to access equity markets, provide the financial flexibility necessary to continue its record of
annual dividend payments, to invest in the routine needs of its businesses, to make strategic acquisitions and to fund other
initiatives encompassed by its growth strategy and maintain its strong investment grade credit ratings.

OTHER MATTERS

Employee Stock Ownership Plan ("ESOP") — As detailed in Note L, Employee Benefit Plans, the Company has an ESOP
under which the ongoing U.S. Core and 401(k) defined contribution plans have been funded. Overall ESOP expense was
affected by the market value of the Company’s stock on the monthly dates when shares were released, among other factors. The
Company’s net ESOP activity resulted in expense of $6.3 million in 2020, income of $0.5 million in 2019 and expense of $0.4
million in 2018. U.S. defined contribution retirement plan expense will increase in the future as all remaining unallocated shares
were released in the first quarter of 2020.

CRITICAL ACCOUNTING ESTIMATES — Preparation of the Company’s Consolidated Financial Statements requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Significant accounting policies used in the preparation of the Consolidated Financial Statements are described in Note A,
Significant Accounting Policies. Management believes the most complex and sensitive judgments, because of their significance
to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters with
inherent uncertainty. The most significant areas involving management estimates are described below. Actual results in these
areas could differ from management’s estimates.

ALLOWANCE FOR CREDIT LOSSES — The Company maintains an allowance for credit losses, which represents an
estimate of expected losses over the remaining contractual life of its receivables. The allowance is determined using two
methods. The amounts calculated from each of these methods are combined to determine the total amount reserved. First, a
specific reserve is established for individual accounts where information indicates the customers may have an inability to meet
financial obligations. In these cases, management uses its judgment, based on the surrounding facts and circumstances, to
record a specific reserve for those customers against amounts due to reduce the receivable to the amount expected to be
collected. These specific reserves are reevaluated and adjusted as additional information is received. Second, a reserve is
determined for all customers based on a range of percentages applied to receivable aging categories. These percentages are
based on historical collection rates, write-off experience, and forecasts of future economic conditions.

If circumstances change, for example, due to the occurrence of higher-than-expected defaults, a significant adverse change in a
major customer’s ability to meet its financial obligation to the Company, or adverse changes in forecasts of future economic
conditions, then the Company's estimates of the recoverability of receivable amounts due could be reduced.

INVENTORIES — Inventories in the U.S. are primarily valued at the lower of Last-In First-Out (“LIFO”) cost or market,
while non-U.S. inventories are primarily valued at the lower of First-In, First-Out (“FIFO”) cost and net realizable value. The
calculation of LIFO reserves, and therefore the net inventory valuation, is affected by inflation and deflation in inventory
components. The Company continually reviews the carrying value of discontinued product lines and stock-keeping-units
(“SKUs”) to determine that these items are properly valued. The Company also continually evaluates the composition of its

inventory and identifies obsolete and/or slow-moving inventories. Inventory items identified as obsolete and/or slow-moving
are evaluated to determine if write-downs are required. The Company assesses the ability to dispose of these inventories at a
price greater than cost. If it is determined that cost is less than market or net realizable value, as applicable, cost is used for
inventory valuation. If market value or net realizable value, as applicable, is less than cost, the Company writes down the
related inventory to that value.

GOODWILL AND INTANGIBLE ASSETS — The Company acquires businesses in purchase transactions that result in the
recognition of goodwill and intangible assets. The determination of the value of intangible assets requires management to make
estimates and assumptions. In accordance with Accounting Standards Codification ("ASC") 350-20, Goodwill, acquired
goodwill and indefinite-lived intangible assets are not amortized but are subject to impairment testing at least annually or when
an event occurs or circumstances change that indicate it is more likely than not an impairment exists. Definite-lived intangible
assets are amortized and are tested for impairment when an event occurs or circumstances change that indicate it is more likely
than not that an impairment exists. Goodwill represents costs in excess of fair values assigned to the underlying net assets of
acquired businesses. At January 2, 2021, the Company reported $10.038 billion of goodwill, $2.198 billion of indefinite-lived
trade names and $1.858 billion of net definite-lived intangibles.

Management tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment as defined in
ASC 280, Segment Reporting, or one level below an operating segment (component level) as determined by the availability of
discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels
of an operating segment having similar economic characteristics. If the carrying value of a reporting unit (including the value of
goodwill) is greater than its estimated fair value, an impairment charge would be recorded for the amount that the carrying
amount of the reporting unit exceeded its fair value.

As required by the Company’s policy, goodwill was tested for impairment in the third quarter of 2020. In accordance with
Accounting Standards Update ("ASU") 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for
Impairment, companies are permitted to first assess qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a
quantitative goodwill impairment test. Impairment tests are completed separately with respect to the goodwill of each of the
Company’s reporting units. For its annual impairment testing performed in the third quarter of 2020, the Company applied a
quantitative test for all of its reporting units using a discounted cash flow valuation model. Based on the results of this testing, it
was determined that the fair value of each of the reporting units substantially exceeded its respective carrying amount by in
excess of 40%, with the exception of the Infrastructure reporting unit as discussed below.

As previously disclosed in the Company's Form 10-Q for the third quarter of 2020, the fair value of the Infrastructure reporting
unit exceeded its carrying amount by 16%. In connection with the preparation of the Consolidated Financial Statements for the
year ended January 2, 2021, the Company performed an updated impairment analysis with respect to the Infrastructure
reporting unit, which included approximately $585 million of goodwill at year-end. The key assumptions applied to the updated
cash flow projections for the Infrastructure reporting unit included a 9.5% discount rate, near-term revenue growth rates over
the next six years, which represented a compound annual growth rate of approximately 4%, and a 3% perpetual growth rate.
Based on this analysis, it was determined that the fair value of the Infrastructure reporting unit exceeded its carrying amount by
23%. The increase in excess fair value is reflective of an improved near-term outlook based on results and trends in the fourth
quarter of 2020. Management remains confident in the long-term viability and success of the Infrastructure reporting unit based
on its leading market position in its respective industries and the Company's continued commitment to, and investments in,
organic growth and margin resiliency initiatives.

For the Company’s remaining reporting units, the key assumptions applied to the cash flow projections were discount rates,
which ranged from 7.5% to 9.5%, near-term revenue growth rates over the next six years, which represented cumulative annual
growth rates ranging from approximately 3% to 5%, and perpetual growth rates of 3%. These assumptions contemplated
business, market and overall economic conditions. Furthermore, management performed sensitivity analyses on the estimated
fair values from the discounted cash flow valuation models for these reporting units utilizing more conservative assumptions
that reflect reasonably likely future changes in the discount rate and perpetual growth rate. The discount rate was increased by
100 basis points with no impairment indicated. The perpetual growth rate was decreased by 150 basis points with no
impairment indicated.

The Company also tested its indefinite-lived trade names for impairment during the third quarter of 2020 utilizing a discounted
cash flow model. The key assumptions used included discount rates, royalty rates, and perpetual growth rates applied to the
projected sales. With the exception of an immaterial trade name, the Company determined that the fair values of its indefinite-
lived trade names exceeded their respective carrying amounts.

In the event that future operating results of any of the Company's reporting units or indefinite-lived trade names do not meet
current expectations, management, based upon conditions at the time, would consider taking restructuring or other strategic
actions, as necessary, to maximize revenue growth and profitability. A thorough analysis of all the facts and circumstances
existing at that time would need to be performed to determine if recording an impairment loss would be appropriate.

DEFINED BENEFIT OBLIGATIONS — The valuation of pension and other postretirement benefits costs and obligations is
dependent on various assumptions. These assumptions, which are updated annually, include discount rates, expected return on
plan assets, future salary increase rates, and health care cost trend rates. The Company considers current market conditions,
including interest rates, to establish these assumptions. Discount rates are developed considering the yields available on high-
quality fixed income investments with maturities corresponding to the duration of the related benefit obligations. The
Company’s weighted-average discount rates used to determine benefit obligations at January 2, 2021 for the United States and
international pension plans were 2.39% and 1.31%, respectively. The Company’s weighted-average discount rates used to
determine benefit obligations at December 28, 2019 for the United States and international pension plans were 3.20% and
1.80%, respectively. As discussed further in Note L, Employee Benefit Plans, the Company develops the expected return on
plan assets considering various factors, which include its targeted asset allocation percentages, historic returns, and expected
future returns. The Company’s expected rate of return assumptions for the United States and international pension plans were
5.25% and 3.90%, respectively, at January 2, 2021. The Company will use a 3.16% weighted-average expected rate of return
assumption to determine the 2021 net periodic benefit cost. A 25 basis point reduction in the expected rate of return assumption
would increase 2021 net periodic benefit cost by approximately $6 million on a pre-tax basis.

The Company believes that the assumptions used are appropriate; however, differences in actual experience or changes in the
assumptions may materially affect the Company’s financial position or results of operations. To the extent that actual (newly
measured) results differ from the actuarial assumptions, the difference is recognized in accumulated other comprehensive loss,
and, if in excess of a specified corridor, amortized over future periods. The expected return on plan assets is determined using
the expected rate of return and the fair value of plan assets. Accordingly, market fluctuations in the fair value of plan assets can
affect the net periodic benefit cost in the following year. The projected benefit obligation for defined benefit plans exceeded the
fair value of plan assets by $667 million at January 2, 2021. A 25 basis point reduction in the discount rate would have
increased the projected benefit obligation by approximately $108 million at January 2, 2021. The primary Black & Decker U.S.
pension and post employment benefit plans were curtailed in late 2010, as well as the only material Black & Decker
international plan, and in their place the Company implemented defined contribution benefit plans. The vast majority of the
projected benefit obligation pertains to plans that have been frozen; the remaining defined benefit plans that are not frozen are
predominantly small domestic union plans and those that are statutorily mandated in certain international jurisdictions. The
Company recognized approximately $19 million of defined benefit plan expense in 2020, which may fluctuate in future years
depending upon various factors including future discount rates and actual returns on plan assets.

ENVIRONMENTAL — The Company incurs costs related to environmental issues as a result of various laws and regulations
governing current operations as well as the remediation of previously contaminated sites. The Company’s policy is to accrue
environmental investigatory and remediation costs for identified sites when it is probable that a liability has been incurred and
the amount of loss can be reasonably estimated. The amount of liability recorded is based on an evaluation of currently
available facts with respect to each individual site and includes such factors as existing technology, presently enacted laws and
regulations, and prior experience in remediation of contaminated sites. The liabilities recorded do not take into account any
claims for recoveries from insurance or third parties. As assessments and remediation progress at individual sites, the amounts
recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available.

As of January 2, 2021, the Company had reserves of $174 million for remediation activities associated with Company-owned
properties as well as for Superfund sites, for losses that are probable and estimable. The range of environmental remediation
costs that is reasonably possible is $103 million to $245 million which is subject to change in the near term. The Company may
be liable for environmental remediation of sites it no longer owns. Liabilities have been recorded on those sites in accordance
with this policy.

INCOME TAXES — The Company accounts for income taxes under the asset and liability method in accordance with ASC
740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the
differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the
year in which the differences are expected to reverse. Any changes in tax rates on deferred tax assets and liabilities are
recognized in income in the period that includes the enactment date.

loss carryforwards. In the event that it is determined that an asset is not more likely that not to be realized, a valuation
allowance is recorded against the asset. Valuation allowances related to deferred tax assets can be impacted by changes to tax
laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would
not be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged to
earnings in the period in which that determination is made. Conversely, if the Company were to determine that it would be able
to realize deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation
allowance through a favorable adjustment to earnings in the period that the determination was made.

The Company records uncertain tax positions in accordance with ASC 740, which requires a two-step process. First,
management determines whether it is more likely than not that a tax position will be sustained based on the technical merits of
the position and second, for those tax positions that meet the more likely than not threshold, management recognizes the largest
amount of the tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxing
authority. The Company maintains an accounting policy of recording interest and penalties on uncertain tax positions as a
component of Income taxes in the Consolidated Statements of Operations.

The Company is subject to income tax in a number of locations, including many state and foreign jurisdictions. Significant
judgment is required when calculating the worldwide provision for income taxes. Many factors are considered when evaluating
and estimating the Company's tax positions and tax benefits, which may require periodic adjustments, and which may not
accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to
certain of the Company's unrecognized tax positions will significantly increase or decrease within the next twelve months.
These changes may be the result of settlements of ongoing audits, litigation, or other proceedings with taxing authorities. The
Company periodically assesses its liabilities and contingencies for all tax years still subject to audit based on the most current
available information, which involves inherent uncertainty.

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

RISK INSURANCE — To manage its insurance costs efficiently, the Company self insures for certain U.S. business exposures
and generally has low deductible plans internationally. For domestic workers’ compensation, automobile and product liability
(liability for alleged injuries associated with the Company’s products), the Company generally purchases insurance coverage
only for severe losses that are unlikely, and these lines of insurance involve the most significant accounting estimates. While
different self insured retentions, in the form of deductibles and self insurance through its captive insurance company, exist for
each of these lines of insurance, the maximum self insured retention is set at no more than $5 million per occurrence. The
process of establishing risk insurance reserves includes consideration of actuarial valuations that reflect the Company’s specific
loss history, actual claims reported, and industry trends among statistical and other factors to estimate the range of reserves
required. Risk insurance reserves are comprised of specific reserves for individual claims and additional amounts expected for
development of these claims, as well as for incurred but not yet reported claims discounted to present value. The cash outflows
related to risk insurance claims are expected to occur over a period of approximately 15 years. The Company believes the
liabilities recorded for these U.S. risk insurance reserves, totaling $98 million and $87 million as of January 2, 2021, and
December 28, 2019, respectively, are adequate. Due to judgments inherent in the reserve estimation process, it is possible the
ultimate costs will differ from this estimate.

WARRANTY — The Company provides product and service warranties which vary across its businesses. The types of
warranties offered generally range from one year to limited lifetime, and certain branded products carry a lifetime warranty.
There are also certain products with no warranty. Further, the Company sometimes incurs discretionary costs to service its
products in connection with product performance issues. Historical warranty and service claim experience forms the basis for
warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available. The
Company believes the $114 million reserve for expected product warranty claims as of January 2, 2021 is adequate, but due to
judgments inherent in the reserve estimation process, including forecasting future product reliability levels and costs of repair as
well as the estimated age of certain products submitted for claims, the ultimate claim costs may differ from the recorded
warranty liability. The Company also establishes a reserve for product recalls on a product-specific basis during the period in
which the circumstances giving rise to the recall become known and estimable for both company-initiated actions and those
required by regulatory bodies.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements as of January 2, 2021.

CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of

1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements
of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections or
guidance of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for
future operations; any statements concerning proposed new products, services or developments; any statements regarding future
economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the
foregoing. Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “continue,”
“believe,” “expect,” “anticipate” or any other similar words.

Although the Company believes that the expectations reflected in any of its forward-looking statements are reasonable,
actual results could differ materially from those projected or assumed in any of its forward-looking statements. The Company's
future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to
inherent risks and uncertainties, such as those disclosed or incorporated by reference in the Company's filings with the
Securities and Exchange Commission.

Important factors that could cause the Company's actual results, performance and achievements, or industry results to

differ materially from estimates or projections contained in its forward-looking statements include, among others, the
following: (i) successfully developing, marketing and achieving sales from new products and services and the continued
acceptance of current products and services; (ii) macroeconomic factors, including global and regional business conditions
(such as Brexit), commodity prices, inflation and deflation, and currency exchange rates; (iii) laws, regulations and
governmental policies affecting the Company's activities in the countries where it does business, including those related to
tariffs, taxation, data privacy, anti-bribery, anti-corruption, government contracts and trade controls such as section 301 tariffs
and section 232 steel and aluminum tariffs; (iv) the economic, political, cultural and legal environment of emerging markets,
particularly Latin America, Russia, China and Turkey; (v) realizing the anticipated benefits of mergers, acquisitions, joint
ventures, strategic alliances or divestitures, including the successful integration of the CAM acquisition into the Company; (vi)
pricing pressure and other changes within competitive markets; (vii) availability and price of raw materials, component parts,
freight, energy, labor and sourced finished goods; (viii) the impact the tightened credit markets and change to LIBOR and other
benchmark rates may have on the Company or its customers or suppliers; (ix) the extent to which the Company has to write off
accounts receivable or assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or
suppliers; (x) the Company's ability to identify and effectively execute productivity improvements and cost reductions; (xi)
potential business and distribution disruptions, including those related to physical security threats, information technology or
cyber-attacks, epidemics, pandemics, sanctions, political unrest, war, terrorism or natural disasters; (xii) the continued
consolidation of customers, particularly in consumer channels and the Company’s continued reliance on significant customers;
(xiii) managing franchisee relationships; (xiv) the impact of poor weather conditions and climate change; (xv) maintaining or
improving production rates in the Company's manufacturing facilities, responding to significant changes in customer
preferences, product demand and fulfilling demand for new and existing products, and learning, adapting and integrating new
technologies into products, services and processes; (xvi) changes in the competitive landscape in the Company's markets; (xvii)
the Company's non-U.S. operations, including sales to non-U.S. customers; (xviii) the impact from demand changes within
world-wide markets associated with homebuilding and remodeling; (xix) potential adverse developments in new or pending
litigation and/or government investigations; (xx) the incurrence of debt and changes in the Company's ability to obtain debt on
commercially reasonable terms and at competitive rates; (xxi) substantial pension and other postretirement benefit obligations;
(xxii) potential regulatory liabilities, including environmental, privacy, data breach, workers compensation and product
liabilities; (xxiii) attracting and retaining key employees, managing a workforce in many jurisdictions, work stoppages or other
labor disruptions; (xxiv) the Company's ability to keep abreast with the pace of technological change; (xxv) changes in
accounting estimates; (xxvi) the Company’s ability to protect its intellectual property rights and associated reputational impacts;
and (xxvii) the continued adverse effects of the COVID-19 pandemic and an indeterminate recovery period.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in

this Annual Report on Form 10-K, including under the heading “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and in the Consolidated Financial Statements and the related Notes.

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and forward-

looking statements in documents attached that are incorporated by reference speak only as of the date of those documents. The
Company does not undertake any obligation to update or release any revisions to any forward-looking statement or to report
any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 for an index to Financial Statements and Financial Statement Schedule. Such Financial Statements and Financial
Statement Schedule are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The management of Stanley Black & Decker, Inc. (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting
purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements.

In February 2020, the Company acquired Consolidated Aerospace Manufacturing, LLC ("CAM") for approximately $1.4
billion. Since Stanley Black & Decker, Inc. has not yet fully incorporated the internal controls and procedures of CAM into
Stanley Black & Decker, Inc.'s internal control over financial reporting, management excluded this business from its assessment
of the effectiveness of internal control over financial reporting as of January 2, 2021. CAM accounted for 6% of Stanley Black
& Decker, Inc.'s total assets as of January 2, 2021 and 2% of Stanley Black & Decker, Inc.'s net sales for the year then ended.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of January 2, 2021. In
making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of
the Treadway Commission in Internal Control — Integrated Framework (2013 Framework). Management concluded that based
on its assessment, the Company’s internal control over financial reporting was effective as of January 2, 2021. Ernst & Young
LLP, the auditor of the financial statements included in this annual report, has issued an attestation report on the registrant’s
internal control over financial reporting, a copy of which appears on page 65.

Under the supervision and with the participation of management, including the Company’s President and Chief Executive
Officer and its Executive Vice President and Chief Financial Officer, the Company has, pursuant to Rule 13a-15(b) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the
Company’s President and Chief Executive Officer and its Executive Vice President and Chief Financial Officer have concluded
that, as of January 2, 2021, the Company’s disclosure controls and procedures are effective. There has been no change in the
Company’s internal control over financial reporting that occurred during the fiscal year ended January 2, 2021 that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting aside
from the previously mentioned acquisition of CAM. As part of the ongoing integration activities, the Company will complete
an assessment of existing controls and incorporate its controls and procedures into CAM.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT

The information required by this Item, except for certain information with respect to the Company’s Code of Ethics, the
identification of the executive officers of the Company and any material changes to the procedures by which security holders
may recommend nominees to the Company’s Board of Directors, as set forth below, is incorporated herein by reference to the
information set forth in the section of the Company’s definitive proxy statement (which will be filed pursuant to
Regulation 14A under the Exchange Act within 120 days after the close of the Company’s fiscal year) under the headings
“Information Concerning Nominees for Election as Directors,” and “Board of Directors".

Available on the Company's website at http://www.stanleyblackanddecker.com on the “Corporate Governance” section which
appears under the “Investors” heading is the Code of Business Ethics applicable to all of its directors, officers and employees
worldwide and a Code of Ethics for the Chief Executive Officer and senior financial officers including the Chief Financial
Officer and principal accounting officer. The Company intends to post on its website required information regarding any
amendment to, or waiver from, the Code of Business Ethics that applies to our Chief Executive Officer and senior financial
officers within four business days after any such amendment or waiver.

The following is a list of the executive officers of the Company as of February 18, 2021:

Name and Age
James M. Loree (62)

Office

President & Chief Executive Officer since August 2016. President &
Chief Operating Officer (2013); Executive Vice President and Chief
Operating Officer (2009); Executive Vice President Finance and Chief
Financial Officer (1999).

Donald Allan, Jr. (56)

Executive Vice President & Chief Financial Officer since October 2016.
Senior Vice President & Chief Financial Officer (2010); Vice President
& Chief Financial Officer (2009); Vice President & Corporate Controller
(2002); Corporate Controller (2000); Assistant Controller (1999).

Jeffery D. Ansell (53)

Janet M. Link (51)

Jaime A. Ramirez (53)

Executive Vice President, Stanley Black & Decker since July 2020.
Executive Vice President & President, Tools & Storage (2016); Senior
Vice President and Group Executive, Global Tools & Storage (2015);
Senior Vice President and Group Executive, Construction & DIY (2010);
Vice President & President, Stanley Consumer Tools Group (2006);
President - Consumer Tools and Storage (2004); President of Industrial
Tools & Storage (2002); Vice President - Global Consumer Tools
Marketing (2001); Vice President Consumer Sales America (1999).

Senior Vice President, General Counsel and Secretary since July 2017.
Executive Vice President, General Counsel, JC Penney Company, Inc.
(2015); Vice President, Deputy General Counsel, JC Penney Company,
Inc. (2014); Vice President, Deputy General Counsel, Clear Channel
Companies (2013).

Executive Vice President & President, Global Tools & Storage since July
2020. Senior Vice President & Chief Operating Officer, Tools & Storage
(2019); Senior Vice President & President, Global Emerging Markets
(2012); President, Construction & DIY, Latin America (2010); Vice
President and General Manager - Latin America, Power Tools &
Accessories, The Black & Decker Corporation (2008); Vice President
and General Manager - Andean Region The Black & Decker Corporation
(2007).

Date Elected to
Office
7/19/1999

10/24/2006

2/22/2006

7/19/2017

3/12/2010

John H. Wyatt (62)

Senior Vice President & President, Stanley Outdoor since January 2021.
Senior Vice President & President, Stanley Outdoor and Aerospace
(2020); President, Stanley Engineered Fastening (2016); President, Sales
& Marketing - Global Tools & Storage (2015); President, Construction
& DIY, Europe and ANZ (2012); President, Construction & DIY, EMEA
(2010); President-Europe, Middle East, and Africa, Power Tools and
Accessories, The Black & Decker Corporation (2008); Vice President-
Consumer Products (Europe, Middle East and Africa), The Black &
Decker Corporation (2006).

3/12/2010

Robert H. Raff (54)

President, Stanley Security since November 2016. President, Stanley
Electronic Security North America (2015); President, North America
Sales, Construction & DIY (2010); President, Stanley National Hardware
(2007); Vice President of Latin America, Construction & DIY (2005);
General Manager, Construction & DIY (2002).

4/19/2018

Robert Blackburn (52)

Senior Vice President of Global Operations since May 2019. Hoffman
Group, CEO and Chairman of the Executive Board (2017); BASF S.E.,
President of Supply Chain Operations & Information Services (2007).

5/6/2019

Graham N. Robinson (52)

Stephen Subasic (52)

Senior Vice President & President, Stanley Industrial since April 2020.
President, Honeywell Industrial Safety (Honeywell International) (2018);
President, Honeywell Sensing and Internet of Things (Honeywell
International) (2016); Chief Marketing Officer and Vice President,
Global Strategy & Marketing, Automation and Control Solutions
(Honeywell International) (2014).

Senior Vice President, Chief Human Resources Officer since January
2021. Vice President, Human Resources & Corporate Talent
Management (2019); Vice President, Human Resources, Global Tools &
Storage (2015); Vice President, Human Resources, Construction & DIY
(2011).

4/17/2020

2/18/2021

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the information set forth under the sections entitled
"Compensation Discussion & Analysis" and “2020 Executive Compensation” of the Company’s definitive proxy statement,
which will be filed pursuant to Regulation 14A under the Exchange Act within 120 days after the end of the fiscal year covered
by this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by Item 403 of Regulation S-K is incorporated herein by reference to the information set forth under
the sections entitled "Security Ownership of Certain Beneficial Owners," "Security Ownership of Directors and Officers,"
"Compensation Discussion & Analysis" and “2020 Executive Compensation” of the Company’s definitive proxy statement,
which will be filed pursuant to Regulation 14A under the Exchange Act within 120 days after the end of the fiscal year covered
by this Annual Report on Form 10-K.

EQUITY COMPENSATION PLAN INFORMATION

Compensation plans under which the Company’s equity securities are authorized for issuance at January 2, 2021 follow:

Plan Category
Equity compensation plans approved by security
holders....................................................................
Equity compensation plans not approved by
security holders (4)...................................................
Total........................................................................

(A)

(B)

(C)

Number
of securities to be
issued upon exercise of
outstanding options and
stock awards

Weighted-
average exercise
price of outstanding
options

Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (A))

8,004,647 (1) $

138.84 (2)

9,594,743 (3)

—
8,004,647

—
138.84

—

9,594,743

(1) Consists of 5,875,246 shares underlying outstanding stock options (whether vested or unvested) with a weighted-

average exercise price of $138.84 and a weighted-average term of 7.13 years; 2,033,157 shares underlying time-vesting
restricted stock units that have not yet vested and the maximum number of shares that will be issued pursuant to
outstanding performance awards if all established goals are met; and 96,244 of shares earned but related to which
participants elected deferral of delivery. All stock-based compensation plans are discussed in Note J, Capital Stock, of
the Notes to Consolidated Financial Statements in Item 8.

(2) There is no cost to the recipient for shares issued pursuant to time-vesting restricted stock units or performance awards.
Because there is no strike price applicable to these stock awards they are excluded from the weighted-average exercise
price which pertains solely to outstanding stock options.

(3) Consists of 1,480,962 of shares available for purchase under the employee stock purchase plan ("ESPP") at the election

of employees and 8,113,781 securities available for future grants by the Board of Directors under stock-based
compensation plans. On January 22, 2018, the Board of Directors adopted the 2018 Omnibus Award Plan (the "2018
Plan") and authorized the issuance of 16,750,000 shares of the Company's common stock in connection with the awards
pursuant to the 2018 Plan. No further awards will be issued under the Company's 2013 Long-Term Incentive Plan.
(4) U.S. employees are eligible to contribute from 1% to 25% of their salary to a qualified tax deferred savings plan as

described in the Employee Stock Ownership Plan ("ESOP") section of Note L, Employee Benefit Plans, of the Notes to
the Consolidated Financial Statements in Item 8. The Company contributes an amount equal to one half of the
employee contribution up to the first 7% of salary. There is a non-qualified tax deferred savings plan for highly
compensated salaried employees which mirrors the qualified plan provisions, but was not specifically approved by
security holders. Eligible highly compensated salaried U.S. employees are eligible to contribute from 1% to 50% of
their salary to the non-qualified tax deferred savings plan. The same matching arrangement was provided for highly
compensated salaried employees in the non-qualified plan, to the extent the match was not fully met in the qualified
plan, except that the arrangement for these employees is outside of the ESOP, and is not funded in advance of
distributions. Effective January 1, 2019, the Company, at its discretion, will determine whether matching and core
contributions will be made for the non-qualified tax deferred savings plan for a particular year. If the Company decides
to make matching contributions for a year, it will make contributions, in an amount determined in its discretion, that
may constitute part or all of or more than the matching contributions that would have been made pursuant to the
provisions of the Stanley Black & Decker Supplemental Retirement Account Plan that were in effect prior to 2019. For

both qualified and non-qualified plans, the investment of the employee’s contribution and the Company’s contribution
is controlled by the employee and may include an election to invest in Company stock. Shares of the Company’s
common stock may be issued at the time of a distribution from the qualified plan. The number of securities remaining
available for issuance under the plans at January 2, 2021 is not determinable, since the plans do not authorize a
maximum number of securities.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Items 404 and 407(a) of Regulation S-K is incorporated by reference to the information set forth
under the sections entitled "Corporate Governance," "Director Independence" and "Related Party Transactions" of the
Company’s definitive proxy statement, which will be filed pursuant to Regulation 14A under the Exchange Act within 120 days
after the end of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 9(e) of Schedule 14A is incorporated herein by reference to the information set forth under
the section entitled “Fees of Independent Auditors” of the Company’s definitive proxy statement, which will be filed pursuant
to Regulation 14A under the Exchange Act within 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) Index to documents filed as part of this report:

1. and 2. Financial Statements and Financial Statement Schedule.

The response to this portion of Item 15 is submitted as a separate section of this report beginning with an index thereto on
page 57.

3. Exhibits

See Exhibit Index in this Form 10-K on page 122.

(b) See Exhibit Index in this Form 10-K on page 122.

(c) The response in this portion of Item 15 is submitted as a separate section of this Form 10-K with an index thereto beginning
on page 57.

FORM 10-K
ITEM 15(a) (1) AND (2)
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Schedule II — Valuation and Qualifying Accounts is included in Item 15 (page 60).
Management’s Report on Internal Control Over Financial Reporting (page 61).
Report of Independent Registered Public Accounting Firm — Financial Statement Opinion (page 62).
Report of Independent Registered Public Accounting Firm — Internal Control Opinion (page 65).
Consolidated Statements of Operations — fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(page 66).
Consolidated Statements of Comprehensive Income — fiscal years ended January 2, 2021, December 28, 2019, and December
29, 2018 (page 67).
Consolidated Balance Sheets — January 2, 2021 and December 28, 2019 (page 68).
Consolidated Statements of Cash Flows — fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(page 69).
Consolidated Statements of Changes in Shareowners’ Equity — fiscal years ended January 2, 2021, December 28, 2019, and
December 29, 2018 (page 71).
Notes to Consolidated Financial Statements (page 72).
Selected Quarterly Financial Data (Unaudited) (page 121).
Consent of Independent Registered Public Accounting Firm (Exhibit 23).

All other schedules are omitted because either they are not applicable or the required information is shown in the financial
statements or the notes thereto.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

STANLEY BLACK & DECKER, INC.

By:

/s/ James M. Loree

James M. Loree, President and Chief Executive Officer

Date:

February 18, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.

Signature

/s/ James M. Loree
James M. Loree

/s/ Donald Allan, Jr.

Donald Allan, Jr.

Title

President and Chief Executive Officer

Date

February 18, 2021

Executive Vice President and Chief Financial Officer

February 18, 2021

/s/ Jocelyn S. Belisle

Vice President and Chief Accounting Officer

February 18, 2021

Jocelyn S. Belisle

Director

Andrea J. Ayers

Director

George W. Buckley

Director

Patrick D. Campbell

Director

Carlos M. Cardoso

Director

Robert B. Coutts

Director

Debra A. Crew

Director

Michael D. Hankin

Dmitri L. Stockton

Irving Tan

Director

*By: /s/ Janet M. Link
Janet M. Link
(As Attorney-in-Fact)

Schedule II — Valuation and Qualifying Accounts
Stanley Black & Decker, Inc. and Subsidiaries
Fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(Millions of Dollars)

Beginning
Balance

ADDITIONS

Charged To
Costs And
Expenses

Charged
To Other
Accounts (b)

(a)
Deductions

Ending
Balance

Allowance for Credit Losses:
Year Ended 2020................................................ $
Year Ended 2019................................................ $
Year Ended 2018................................................ $
Tax Valuation Allowance:
Year Ended 2020 (c).......................................... $
Year Ended 2019................................................ $
Year Ended 2018................................................ $

112.4 $
102.0 $
80.4 $

41.1 $
33.0 $
28.0 $

1,065.0 $
626.7 $
516.7 $

312.0 $
461.5 $
146.2 $

23.7 $
5.9 $
12.5 $

(8.6) $
(0.5) $
(6.4) $

(36.1) $
(28.5) $
(18.9) $

141.1
112.4
102.0

(309.5) $
(22.7) $
(29.8) $

1,058.9
1,065.0
626.7

(a) With respect to the allowance for credit losses, deductions represent amounts charged-off less recoveries of accounts

previously charged-off.

(b) Amounts represent the impact of foreign currency translation, acquisitions and net transfers to/from other accounts.
(c) Refer to Note Q, Income Taxes, of the Notes to Consolidated Financial Statements in Item 8 for further discussion.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Stanley Black & Decker, Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements.

Management has assessed the effectiveness of Stanley Black & Decker, Inc.’s internal control over financial reporting as of
January 2, 2021. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission in Internal Control — Integrated Framework (2013 Framework).
Management concluded that based on its assessment, Stanley Black & Decker, Inc.’s internal control over financial reporting
was effective as of January 2, 2021. Ernst & Young LLP, Registered Public Accounting Firm included in this annual report, has
issued an attestation report on the registrant’s internal control over financial reporting, a copy of which appears on page 65.

/s/ James M. Loree
James M. Loree, President and Chief Executive Officer

/s/ Donald Allan, Jr.
Donald Allan, Jr., Executive Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Shareowners and Board of Directors of Stanley Black & Decker, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stanley Black & Decker, Inc. (the Company) as of January
2, 2021 and December 28, 2019, the related consolidated statements of operations, comprehensive income, shareowners’ equity
and cash flows for each of the three years in the period ended January 2, 2021, and the related notes and the financial statement
schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2,
2021 and December 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended
January 2, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of January 2, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 18, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.

Description of
the Matter

Accounting for Acquisition of Consolidated Aerospace Manufacturing, LLC
As discussed in Note E of the consolidated financial statements, the Company acquired the specialty
fasteners and components manufacturer, Consolidated Aerospace Manufacturing, LLC, on February 24,
2020 for a total purchase price of approximately $1.46 billion, net of cash acquired. The Company
allocated the purchase price, on a preliminary basis, to the assets acquired and liabilities assumed based on
their respective fair values, including identified intangible assets of $590 million and resulting goodwill of
approximately $633 million.

Auditing the Company's accounting for the acquired intangible assets involved subjective auditor judgment
due to the significant estimation required in management’s determination of the fair value of customer
relationships. The significant estimation was primarily due to the sensitivity of the significant assumptions
in determining fair value, including discount rates, projected revenue growth rates and profit margins.
These assumptions related to the future performance of the acquired business, are forward-looking and
could be affected by future economic and market conditions.

How We
Addressed the
Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls
over the Company’s accounting for business combinations. Our audit procedures included, among other
procedures, testing controls over the valuation of customer relationships, including the valuation models
and underlying assumptions used to develop such estimates.

To test the estimated fair value of the customer relationships, we performed audit procedures that included,
among other procedures, evaluating the appropriateness of the valuation methodologies and testing the
significant assumptions used in the model, as described above, including the completeness and accuracy of
the underlying data. We compared the significant assumptions to current industry, market and economic
trends, to the historical results of the acquired business and to other guideline companies within the same
industry. We performed sensitivity analyses to evaluate the change in the fair value of the customer
relationships that would result from changes in the discount rates, projected revenue growth rates and profit
margins. We involved our internal valuation specialists to assist with our evaluation of the methodology
used by the Company as well as certain assumptions within the valuation.

Description of
the Matter

Annual Test of Impairment of Goodwill in the Infrastructure Reporting Unit
At January 2, 2021, the Company’s goodwill balance was approximately $10,038 million. As discussed in
Note A of the consolidated financial statements, goodwill is not amortized but rather is tested for
impairment at least annually at the reporting unit level. The Company’s goodwill is initially assigned to its
reporting units as of the relevant acquisition date.

Auditing management’s annual goodwill impairment test for the Infrastructure reporting unit was
challenging and highly judgmental due to the significant estimation required. In particular, the fair value
estimate was sensitive to the significant assumption of revenue growth, which is affected by expected
future market or economic conditions. A substantial portion of the revenues of the Infrastructure reporting
unit are derived from customers’ investments in cyclical industries that typically are subject to severe
economic cycles, partially driven by the prices of oil and of scrap metal, which could have an impact on
the goodwill impairment analysis for the Infrastructure reporting unit.

How We
Addressed the
Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the determination of fair value, including the significant assumption of revenue growth discussed above,
used in the Infrastructure goodwill impairment analysis. Our audit procedures included, among other
procedures, testing controls over the Company’s budgetary process and management’s review of that
information.

To test the estimated fair value of the Infrastructure reporting unit, we performed audit procedures that
included, among other procedures, assessing the Company’s methodologies and testing the revenue
growth assumption discussed above and the underlying data used by the Company in its analysis. We
compared the revenue growth rates used by management to current industry and economic trends,
including, among other factors, the price of oil and scrap metal, and considering the Company’s business
model, customer base, product mix and other relevant factors. We assessed the historical accuracy of
management’s estimates and performed sensitivity analyses to evaluate the change in the fair value of the
reporting unit that would result from changes in the revenue growth assumption. In addition, we evaluated
the reconciliation of the combined estimated fair value of the Company’s reporting units to the market
capitalization of the Company and assessed the resulting control premium. Further, we involved our
internal valuation specialists to assist in the evaluation of the methodology and certain assumptions used to
estimate the fair value of the Infrastructure reporting unit.

Uncertain Tax Positions
At January 2, 2021, the Company had recorded a liability for uncertain tax positions of approximately
$444 million. As discussed in Notes A and Q of the consolidated financial statements, the Company
conducts business globally and, as a result, is subject to income tax in a number of locations, including
many state and foreign jurisdictions. Uncertainty in a tax position may arise as tax laws are subject to
interpretation. The Company uses significant judgment in (1) determining whether a tax position’s
technical merits are more likely than not to be sustained and (2) measuring the amount of tax benefit that
qualifies for recognition. The Company considers many factors when evaluating and estimating its tax
positions such as, but not limited to, the settlements of on-going audits.

Auditing the measurement and determination of whether a tax position is more likely than not to be upheld
under examination is challenging and subjective due to the Company’s global operations, the many tax
jurisdictions in which it operates, the distinctive nature and unique facts and circumstances of each tax
position and the interpretations of tax law and legal rulings. Many of these same factors also make it
challenging to audit the completeness of the uncertain tax reserves.

Description of
the Matter

How We
Addressed the
Matter in Our
Audit

We identified and tested controls around the Company’s judgments and determinations on tax positions,
including the Company’s process to verify that all uncertain tax positions are identified and considered as
part of the analysis, controls addressing completeness of the uncertain tax positions and the determination
of the more-likely-than-not amount of the positions to be upheld.

With the support of our tax professionals, we performed an evaluation of the Company’s estimates with
respect to uncertain tax positions including the technical merits of the Company’s tax positions. This
included assessing the Company’s analysis of jurisdictions with potential tax liabilities and other
international tax considerations. We considered the Company’s judgments and the factors involved with
each significant tax position. To support our evaluation, we used our knowledge of, and experience with,
the application of international and local income tax laws by the relevant income tax authorities to
evaluate the Company’s accounting for those tax positions. We analyzed the Company’s assumptions and
data used to determine the amount of tax benefit to recognize and tested the completeness and accuracy of
the data used to determine the amount of tax benefits recognized and tested the accuracy of such
calculations. We also evaluated the Company’s income tax disclosures included in Note Q to the
consolidated financial statements in relation to these matters.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1932.
Hartford, Connecticut
February 18, 2021

Report of Independent Registered Public Accounting Firm

To the Shareowners and the Board of Directors of Stanley Black & Decker, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Stanley Black & Decker, Inc.’s internal control over financial reporting as of January 2, 2021, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Stanley Black & Decker, Inc. (the Company) maintained, in
all material respects, effective internal control over financial reporting as of January 2, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment
of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of
Consolidated Aerospace Manufacturing, LLC (“CAM”), which is included in the 2020 consolidated financial statements of the
Company and constituted 6% of total assets as of January 2, 2021 and 2% of net sales for the fiscal year then ended. Our audit of
internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial
reporting of CAM.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of January 2, 2021 and December 28, 2019, the related consolidated
statements of operations, comprehensive income, shareowners' equity and cash flows for each of the three fiscal years in the
period ended January 2, 2021, and the related notes and schedule listed in the Index at Item 15(a) and our report dated February
18, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP
Hartford, Connecticut
February 18, 2021

Consolidated Statements of Operations
Fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(Millions of Dollars, Except Per Share Amounts)

Net Sales.................................................................................................. $
Costs and Expenses
Cost of sales............................................................................................. $
Selling, general and administrative..........................................................

Provision for credit losses........................................................................

Other, net..................................................................................................

Loss (gain) on sales of businesses...........................................................

Restructuring charges...............................................................................

Loss on debt extinguishments..................................................................

Interest income.........................................................................................

Interest expense........................................................................................

2020

2019

2018

14,534.6 $

14,442.2 $

13,982.4

9,566.7 $

9,636.7 $

3,048.5

41.1

262.8

13.5

83.0

46.9

(18.0)

223.1

3,008.0

33.0

249.1

(17.0)

154.1

17.9

(53.9)

284.3

9,131.3

3,143.7

28.0

287.0

0.8

160.3

—

(68.7)

277.9

13,267.6 $

13,312.2 $

12,960.3

Earnings before income taxes and equity interest....................................

Income taxes............................................................................................
Net earnings before equity interest.......................................................... $
Share of net earnings (losses) of equity method investment....................
Net earnings............................................................................................. $
Less: Net earnings attributable to non-controlling interests....................

1,267.0

41.4

1,225.6 $

9.1

1,234.7 $

0.9

1,130.0

160.8

969.2 $

(11.2)

958.0 $

2.2

Net earnings attributable to Stanley Black & Decker, Inc....................... $

1,233.8 $

955.8 $

Less: Preferred stock dividends...............................................................

23.4

—

Net Earnings Attributable to Common Shareowners........................ $

1,210.4 $

955.8 $

Earnings per share of common stock:

Basic ......................................................................................... $
Diluted ...................................................................................... $

7.85 $

7.77 $

6.44 $

6.35 $

1,022.1

416.3

605.8

—

605.8

0.6

605.2

—

605.2

4.06

3.99

See Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income
Fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(Millions of Dollars)

Net Earnings Attributable to Common Shareowners................................ $

1,210.4 $

955.8 $

605.2

2020

2019

2018

Other comprehensive income (loss):

Currency translation adjustment and other...........................................

(Losses) gains on cash flow hedges, net of tax.....................................

(Losses) gains on net investment hedges, net of tax.............................

Pension (losses) gains, net of tax..........................................................

281.9

(48.8)

(24.5)

(37.7)

Other comprehensive income (loss).......................................................... $

170.9 $

Comprehensive income attributable to common shareowners.................. $

1,381.3 $

(36.0)

(27.4)

34.0

(40.9)

(70.3) $

885.5 $

(373.0)

85.8

59.9

2.1

(225.2)

380.0

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheets
January 2, 2021 and December 28, 2019
(Millions of Dollars)

2020

2019

ASSETS

Current Assets

Cash and cash equivalents....................................................................................................................... $

1,381.0 $

Accounts and notes receivable, net..........................................................................................................

Inventories, net.........................................................................................................................................

Prepaid expenses......................................................................................................................................

Other current assets..................................................................................................................................

Total Current Assets..............................................................................................................................

Property, Plant and Equipment, net....................................................................................................

Goodwill..................................................................................................................................................

Customer Relationships, net.................................................................................................................

Trade Names, net...................................................................................................................................

Other Intangible Assets, net..................................................................................................................

Other Assets............................................................................................................................................

1,512.2

2,737.4

370.7

34.7

6,036.0

2,053.8

10,038.1

1,735.1

2,277.3

43.0

1,383.0

Total Assets............................................................................................................................................. $
LIABILITIES AND SHAREOWNERS' EQUITY

23,566.3 $

Current Liabilities

Short-term borrowings............................................................................................................................. $

Current maturities of long-term debt.......................................................................................................

Accounts payable.....................................................................................................................................

Accrued expenses....................................................................................................................................

Total Current Liabilities.......................................................................................................................

Long-Term Debt....................................................................................................................................

Deferred Taxes.......................................................................................................................................

Post-Retirement Benefits.......................................................................................................................

Other Liabilities.....................................................................................................................................

1.5 $

—

2,446.4

2,110.4

4,558.3

4,245.4

568.0

642.6

2,485.6

297.7

1,454.6

2,255.0

395.4

53.9

4,456.6

1,959.5

9,237.5

1,317.3

2,253.6

51.1

1,321.0

20,596.6

337.3

3.1

2,087.8

1,977.5

4,405.7

3,176.4

731.2

609.4

2,531.7

Commitments and Contingencies (Notes R and S)

Shareowners’ Equity

Stanley Black & Decker, Inc. Shareowners’ Equity

Preferred stock, without par value:
Authorized 10,000,000 shares in 2020 and 2019
Issued and outstanding 1,500,000 shares in 2020 and 2019....................................................................

Common stock, par value $2.50 per share:
Authorized 300,000,000 shares in 2020 and 2019
Issued 176,902,738 shares in 2020 and 2019..........................................................................................

Retained earnings.....................................................................................................................................

Additional paid in capital.........................................................................................................................

Accumulated other comprehensive loss..................................................................................................

ESOP........................................................................................................................................................

Less: cost of common stock in treasury (16,150,476 shares in 2020 and 23,396,329 shares in 2019)...

Stanley Black & Decker, Inc. Shareowners’ Equity...........................................................................

Non-controlling interests.........................................................................................................................

Total Shareowners’ Equity...................................................................................................................

Total Liabilities and Shareowners’ Equity.......................................................................................... $

23,566.3 $

See Notes to Consolidated Financial Statements.

1,500.0

442.3

7,547.6

4,832.7

(1,713.7)

—

12,608.9

(1,549.3)

11,059.6

6.8

11,066.4

442.3

6,772.8

4,492.9

(1,884.6)

(2.3)

11,321.1

(2,184.8)

9,136.3

5.9

9,142.2

20,596.6

Consolidated Statements of Cash Flows
Fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(Millions of Dollars)

2020

2019

2018

Operating Activities:
Net earnings.................................................................................................................. $
Adjustments to reconcile net earnings to net cash provided by operating activities:

1,234.7 $

958.0 $

Depreciation and amortization of property, plant and equipment.......................
Amortization of intangibles.................................................................................
Inventory step-up amortization............................................................................
Loss (gain) on sales of businesses.......................................................................
Loss on debt extinguishments..............................................................................
Stock-based compensation expense.....................................................................
Provision for credit losses....................................................................................
Share of net (earnings) losses of equity method investment...............................
Deferred tax (benefit) expense.............................................................................
Other non-cash items...........................................................................................

Changes in operating assets and liabilities:

Accounts receivable.............................................................................................
Inventories...........................................................................................................
Accounts payable.................................................................................................
Deferred revenue..................................................................................................
Other current assets..............................................................................................
Other long-term assets.........................................................................................
Accrued expenses................................................................................................
Defined benefit liabilities....................................................................................
Other long-term liabilities....................................................................................
Net cash provided by operating activities....................................................................
Investing Activities:
Capital and software expenditures...............................................................................
Sales of assets...............................................................................................................
Business acquisitions, net of cash acquired.................................................................
Sales of businesses, net of cash sold............................................................................
Purchases of investments.............................................................................................
Net investment hedge settlements................................................................................
Other.............................................................................................................................
Net cash used in investing activities............................................................................
Financing Activities:
Payments on long-term debt.........................................................................................
Proceeds from debt issuances, net of fees....................................................................
Net short-term (repayments) borrowings.....................................................................
Stock purchase contract fees........................................................................................
Purchases of common stock for treasury......................................................................
Proceeds from issuances of preferred stock.................................................................
Premium paid on equity options...................................................................................
Premium paid on debt extinguishment.........................................................................
Proceeds from issuances of common stock..................................................................
Craftsman deferred purchase price...............................................................................
Craftsman contingent consideration.............................................................................
CAM contingent consideration....................................................................................
Termination of interest rate swaps...............................................................................
Cash dividends on common stock................................................................................
Cash dividends on preferred stock...............................................................................
Other.............................................................................................................................
Net cash provided by (used in) financing activities.....................................................
Effect of exchange rate changes on cash and cash equivalents...................................
Change in cash, cash equivalents and restricted cash............................................
Cash, cash equivalents and restricted cash, beginning of year..............................
Cash, cash equivalents and restricted cash, end of year......................................... $

376.5
201.6
29.0
13.5
46.9
109.1
41.1
(9.1)
(241.7)
44.7

(39.6)
(401.5)
310.4
(0.3)
(100.2)
(14.0)
381.7
(40.2)
79.5
2,022.1

(348.1)
19.9
(1,324.4)
59.1
(18.7)
41.0
(5.9)
(1,577.1)

(1,154.3)
2,222.5
(342.6)
(59.8)
(26.2)
—
—
(48.7)
897.0
(250.0)
(45.9)
(94.4)
(20.5)
(431.8)
(18.8)
(10.6)
615.9
22.8
1,083.7
314.6
1,398.3 $

372.8
187.4
7.4
(17.0)
17.9
88.8
33.0
11.2
(17.9)
(13.8)

137.8
137.7
(169.1)
8.5
(183.6)
(37.3)
123.6
(47.6)
(92.1)
1,505.7

(424.7)
100.1
(685.4)
76.6
(260.6)
8.0
(22.6)
(1,208.6)

(1,150.0)
496.2
(18.1)
(40.3)
(27.5)
735.0
(19.2)
—
146.0
—
—
—
(1.0)
(402.0)
—
(11.6)
(292.5)
(1.4)
3.2
311.4
314.6 $

605.8

331.2
175.3
9.6
0.8
—
76.5
28.0
—
191.1
10.1

(48.8)
(401.6)
211.0
1.5
(4.4)
28.9
70.1
(44.7)
20.5
1,260.9

(492.1)
45.2
(524.6)
(3.0)
(21.7)
25.7
(18.6)
(989.1)

(977.5)
990.0
433.2
(40.3)
(527.1)
—
(57.3)
—
38.5
—
—
—
(22.7)
(384.9)
—
(13.5)
(561.6)
(53.9)
(343.7)
655.1
311.4

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of January 2, 2021
and December 28, 2019, as shown above:

Cash and cash equivalents.................................................................................................................. $
Restricted cash included in Other current assets................................................................................
Cash, cash equivalents and restricted cash.................................................................................... $

1,381.0 $
17.3
1,398.3 $

297.7
16.9
314.6

January 2, 2021

December 28, 2019

See Notes to Consolidated Financial Statements.

Consolidated Statements of Changes in Shareowners’ Equity
Fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
(Millions of Dollars, Except Per Share Amounts)

Balance December 30, 2017....................................... $

750.0 $ 442.3 $ 4,643.2 $ 5,998.7 $

(1,589.1) $ (18.8) $ (1,924.1) $

2.8 $

8,305.0

Preferred
Stock

Common
Stock

Additional
Paid In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

ESOP

Treasury
Stock

Non-
Controlling
Interests

Shareowners’
Equity

Net earnings..................................................................

Other comprehensive loss.............................................

Cash dividends declared — $2.58 per share................

Issuance of common stock (941,854 shares)................

Repurchase of common stock (3,677,435 shares)........

Non-controlling interest buyout...................................

Premium paid on equity option....................................

Stock-based compensation related...............................

ESOP............................................................................
Balance December 29, 2018....................................... $

Net earnings..................................................................

Other comprehensive loss.............................................

Cash dividends declared — $2.70 per share................

Issuance of common stock (2,391,336 shares).............

Repurchase of common stock (187,377 shares)...........
Issuance of preferred stock (750,000 shares)..........
Equity units - stock contract fees.............................
Premium paid on equity option...............................
Stock-based compensation related...............................

605.2

(384.9)

(225.2)

(41.4)

(57.3)

76.5

0.6

0.3

605.8

(225.2)

(384.9)

38.5

(527.1)

0.3

(57.3)

76.5

8.3

79.9

(527.1)

8.3

750.0 $ 442.3 $ 4,621.0 $ 6,219.0 $

(1,814.3) $ (10.5) $ (2,371.3) $

3.7 $

7,839.9

955.8

(402.0)

(70.3)

2.2

214.0

(27.5)

750.0

(68.0)

(15.5)

(114.2)

(19.2)

88.8

ESOP............................................................................
Balance December 28, 2019....................................... $ 1,500.0 $ 442.3 $ 4,492.9 $ 6,772.8 $

Net earnings..................................................................

Other comprehensive income.......................................

Cash dividends declared — $2.78 per common share..

Cash dividends declared — $50.00 per annum per
preferred share..............................................................

Issuance of common stock (7,474,394 shares).............

Repurchase of common stock (228,541 shares)...........

Preferred stock issuance costs......................................

Stock-based compensation related...............................

ESOP ...........................................................................

1,233.8

(431.8)

(23.4)

225.3

10.0

(4.6)

109.1

Adoption of ASU 2016-13...........................................
Balance January 2, 2021............................................ $ 1,500.0 $ 442.3 $ 4,832.7 $ 7,547.6 $

(3.8)

8.2

(1,884.6) $ (2.3) $ (2,184.8) $

5.9 $

0.9

170.9

671.7

(36.2)

2.3

(1,713.7) $ — $ (1,549.3) $

6.8 $

11,066.4

958.0

(70.3)

(402.0)

146.0

(27.5)
734.5

(114.2)

(19.2)

88.8

8.2

9,142.2

1,234.7

170.9

(431.8)

(23.4)

897.0

(26.2)

(4.6)

109.1

2.3

(3.8)

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

A. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION — The Consolidated Financial Statements include the accounts of Stanley Black & Decker,
Inc. and its majority-owned subsidiaries (collectively the “Company”) which require consolidation, after the elimination of
intercompany accounts and transactions. The Company’s fiscal year ends on the Saturday nearest to December 31. There were
53 weeks in fiscal year 2020 and 52 weeks in the fiscal years 2019 and 2018.

In February 2020, the Company acquired Consolidated Aerospace Manufacturing, LLC ("CAM"), an industry-leading
manufacturer of specialty fasteners and components for the aerospace and defense markets. The acquisition is being accounted
for as a business combination using the acquisition method of accounting and the results have been consolidated into the
Company's Industrial segment. In March 2019, the Company acquired International Equipment Solutions Attachments
businesses, Paladin and Pengo, ("IES Attachments"). In April 2018, the Company acquired the industrial business of Nelson
Fastener Systems ("Nelson"), which excluded Nelson's automotive stud welding business. The results of IES Attachments and
Nelson have been consolidated into the Company's Industrial segment. The 2019 and 2018 acquisitions were accounted for as
business combinations using the acquisition method of accounting.

In January 2019, the Company acquired a 20 percent interest in MTD Holdings Inc. ("MTD"), a privately held global
manufacturer of outdoor power equipment. MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers,
walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the
terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and
ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on
MTD’s 2018 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), with an equitable sharing
arrangement for future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment.

Refer to Note E, Acquisitions and Investments, for further discussion on these transactions.

In November 2020, the Company sold its commercial electronic operations in five countries in Europe and emerging markets
within the Security segment. In October 2020, the Company sold a product line in Oil & Gas within the Industrial segment. The
operating results of these businesses have been reported in the Consolidated Financial Statements through the date of sale in
2020 and for the years ended December 28, 2019 and December 29, 2018.

In the second quarter of 2019, the Company sold its Sargent & Greenleaf mechanical locks business within the Security
segment. The operating results of this business have been reported in the Consolidated Financial Statements through the date of
sale in 2019 and for the year ended December 29, 2018.

Refer to Note T, Divestitures, for further discussion.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the amounts reported in the financial statements.
While management believes that the estimates and assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from these estimates. Certain amounts reported in previous years have been reclassified
to conform to the 2020 presentation.

FOREIGN CURRENCY — For foreign operations with functional currencies other than the U.S. dollar, asset and liability
accounts are translated at current exchange rates, while income and expenses are translated using average exchange rates.
Translation adjustments are reported in a separate component of shareowners’ equity and exchange gains and losses on
transactions are included in earnings.

CASH EQUIVALENTS — Highly liquid investments with original maturities of three months or less are considered cash
equivalents.

ACCOUNTS AND FINANCING RECEIVABLE — Trade receivables are stated at gross invoice amounts less discounts,
other allowances and provisions for credit losses. Financing receivables are initially recorded at fair value, less impairments or
provisions for credit losses. Interest income earned from financing receivables that are not delinquent is recorded on the
effective interest method. The Company considers any financing receivable that has not been collected within 90 days of
original billing date as past-due or delinquent. The Company's payment terms are generally consistent with the industries in
which its businesses operate and typically range from 30-90 days globally. Additionally, the Company considers the credit

quality of all past-due or delinquent financing receivables as nonperforming. The Company does not adjust the promised
amount of consideration for the effects of a significant financing component when the period between transfer of the product
and receipt of payment is less than one year. Any significant financing components for contracts greater than one year are
included in revenue over time.

ALLOWANCE FOR CREDIT LOSSES — The Company maintains an allowance for credit losses, which represents an
estimate of expected losses over the remaining contractual life of its receivables. The allowance is determined using two
methods. The amounts calculated from each of these methods are combined to determine the total amount reserved. First, a
specific reserve is established for individual accounts where information indicates the customers may have an inability to meet
financial obligations. Second, a reserve is determined for all customers based on a range of percentages applied to aging
categories. These percentages are based on historical collection rates, write-off experience, and forecasts of future economic
conditions. Actual write-offs are charged against the allowance when collection efforts have been unsuccessful.

INVENTORIES — U.S. inventories are primarily valued at the lower of Last-In First-Out (“LIFO”) cost or market because the
Company believes it results in better matching of costs and revenues. Other inventories are primarily valued at the lower of
First-In, First-Out (“FIFO”) cost and net realizable value because LIFO is not permitted for statutory reporting outside the U.S.
Refer to Note C, Inventories, for a quantification of the LIFO impact on inventory valuation.

PROPERTY, PLANT AND EQUIPMENT — The Company generally values property, plant and equipment (“PP&E”),
including capitalized software, at historical cost less accumulated depreciation and amortization. Costs related to maintenance
and repairs which do not prolong the asset's useful life are expensed as incurred. Depreciation and amortization are provided
using straight-line methods over the estimated useful lives of the assets as follows:

Land improvements....................................................................................................................................
Buildings.....................................................................................................................................................
Machinery and equipment..........................................................................................................................
Computer software.....................................................................................................................................

Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease.

Useful Life
(Years)
10 — 20
40
3 — 15
3 — 7

The Company reports depreciation and amortization of property, plant and equipment in cost of sales and selling, general and
administrative expenses based on the nature of the underlying assets. Depreciation and amortization related to the production of
inventory and delivery of services are recorded in cost of sales. Depreciation and amortization related to distribution center
activities, selling and support functions are reported in selling, general and administrative expenses.

The Company assesses its long-lived assets for impairment when indicators that the carrying amounts may not be recoverable
are present. In assessing long-lived assets for impairment, the Company groups its long-lived assets with other assets and
liabilities at the lowest level for which identifiable cash flows are generated (“asset group”) and estimates the undiscounted
future cash flows that are directly associated with, and expected to be generated from, the use of and eventual disposition of the
asset group. If the carrying value is greater than the undiscounted cash flows, an impairment loss must be determined and the
asset group is written down to fair value. The impairment loss is quantified by comparing the carrying amount of the asset
group to the estimated fair value, which is generally determined using weighted-average discounted cash flows that consider
various possible outcomes for the disposition of the asset group.

GOODWILL AND INTANGIBLE ASSETS — Goodwill represents costs in excess of values assigned to the underlying net
assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill and intangible assets
deemed to have indefinite lives are not amortized, but are tested for impairment annually during the third quarter, and at any
time when events suggest an impairment more likely than not has occurred.

To assess goodwill for impairment, the Company, depending on relevant facts and circumstances, performs either a qualitative
assessment or a quantitative analysis utilizing a discounted cash flow valuation model. In performing a qualitative assessment,
the Company first assesses relevant factors to determine whether it is more likely than not that the fair value of a reporting unit
is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment
test. The Company identifies and considers the significance of relevant key factors, events, and circumstances that could affect
the fair value of each reporting unit. These factors include external factors such as macroeconomic, industry, and market
conditions, as well as entity-specific factors, such as actual and planned financial performance. The Company also considers
changes in each reporting unit's fair value and carrying amount since the most recent date a fair value measurement was
performed. In performing a quantitative analysis, the Company determines the fair value of a reporting unit using

management’s assumptions about future cash flows based on long-range strategic plans. This approach incorporates many
assumptions including discount rates, future growth rates and expected profitability. In the event the carrying amount of a
reporting unit exceeded its fair value, an impairment loss would be recognized.

Indefinite-lived intangible assets are tested for impairment utilizing either a qualitative assessment or a quantitative analysis.
For a qualitative assessment, the Company identifies and considers relevant key factors, events, and circumstances to determine
whether it is necessary to perform a quantitative impairment test. The key factors considered include macroeconomic, industry,
and market conditions, as well as the asset's actual and forecasted results. For the quantitative impairment tests, the Company
compares the carrying amounts to the current fair market values, usually determined by the estimated royalty savings
attributable to owning the intangible assets. Intangible assets with definite lives are amortized over their estimated useful lives
to reflect the pattern over which the economic benefits of the intangible assets are consumed. Definite-lived intangible assets
are also evaluated for impairment when impairment indicators are present. If the carrying amount exceeds the total
undiscounted future cash flows, a discounted cash flow analysis is performed to determine the fair value of the asset. If the
carrying amount of the asset was to exceed the fair value, it would be written down to fair value. No significant goodwill or
other intangible asset impairments were recorded during 2020, 2019 or 2018.

FINANCIAL INSTRUMENTS — Derivative financial instruments are employed to manage risks, including foreign currency,
interest rate exposures and commodity prices and are not used for trading or speculative purposes. As part of the Company’s
risk management program, a variety of financial instruments such as interest rate swaps, currency swaps, purchased currency
options, foreign exchange contracts and commodity contracts, may be used to mitigate interest rate exposure, foreign currency
exposure and commodity price exposure. The Company recognizes all derivative instruments on the balance sheet at fair value.

Changes in the fair value of derivatives are recognized periodically either in earnings or in shareowners’ equity as a component
of other comprehensive income (loss) ("OCI"), depending on whether the derivative financial instrument is undesignated or
qualifies for hedge accounting, and if so, whether it represents a fair value, cash flow, or net investment hedge. Changes in the
fair value of derivatives accounted for as fair value hedges are recorded in earnings in the same caption as the changes in the
fair value of the hedged items. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in
the assessment of effectiveness, are recorded in OCI and subsequently reclassified to earnings to offset the impact of the hedged
items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not
occur, the derivative would be terminated and the amount in accumulated other comprehensive income (loss) would be
recognized in earnings. Changes in the fair value of derivatives that are designated and qualify as a hedge of the net investment
in foreign operations, to the extent they are included in the assessment of effectiveness, are reported in OCI and are deferred
until disposal of the underlying assets. Gains and losses representing components excluded from the assessment of effectiveness
for cash flow and fair value hedges are recognized in earnings on a straight-line basis in the same caption as the hedged item
over the term of the hedge. Gains and losses representing components excluded from the assessment of effectiveness for net
investment hedges are recognized in earnings on a straight-line basis in Other, net over the term of the hedge.

The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the
early termination of interest rate swap agreements are deferred and amortized as adjustments to interest expense over the
remaining period of the debt originally covered by the terminated swap.

Changes in the fair value of derivatives not designated as hedges are reported in Other, net in the Consolidated Statements of
Operations. Refer to Note I, Financial Instruments, for further discussion.

REVENUE RECOGNITION — The Company’s revenues result from the sale of goods or services and reflect the
consideration to which the Company expects to be entitled. The Company records revenue based on a five-step model in
accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"). For
its contracts with customers, the Company identifies the performance obligations (goods or services), determines the transaction
price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the
performance obligation is transferred to the customer. A good or service is transferred when (or as) the customer obtains control
of that good or service. The majority of the Company’s revenues are recorded at a point in time from the sale of tangible
products.

A portion of the Company’s revenues within the Security and Infrastructure businesses is generated from equipment leased to
customers. Customer arrangements are identified as leases if they include transfer of a tangible asset which is provided to the
customer in exchange for payments typically at fixed rates payable monthly, quarterly or annually. Customer leases may
include terms to allow for extension of leases for a short period of time, but typically do not provide for customer termination
prior to the initial term. Some customer leases include terms to allow the customer to purchase the underlying asset, which
occurs occasionally, and virtually no customer leases include residual value guarantee clauses. Within the Security business, the

underlying asset typically has no value at termination of the customer lease, so no residual value asset is recorded in the
financial statements. For Infrastructure business leases, underlying assets are assessed for functionality at termination of the
lease and, if necessary, an impairment to the leased asset value is recorded.

Provisions for customer volume rebates, product returns, discounts and allowances are variable consideration and are recorded
as a reduction of revenue in the same period the related sales are recorded. Such provisions are calculated using historical
averages adjusted for any expected changes due to current business conditions. Consideration given to customers for
cooperative advertising is recognized as a reduction of revenue except to the extent that there is a distinct good or service and
evidence of the fair value of the advertising, in which case the expense is classified as selling, general, and administrative
expense.

The Company’s revenues can be generated from contracts with multiple performance obligations. When a contract involves
multiple performance obligations, each obligation is separately identified and the transaction price is allocated based on the
amount of consideration the Company expects to be entitled to in exchange for transferring the promised good or service to the
customer.

Sales of security monitoring systems may have multiple performance obligations, including equipment, installation and
monitoring or maintenance services. In most instances, the Company allocates the appropriate amount of consideration to each
performance obligation based on the standalone selling price ("SSP") of the distinct goods or services performance obligation.
In circumstances where SSP is not observable, the Company allocates the consideration for the performance obligations by
utilizing one of the following methods: expected cost plus margin, the residual approach, or a mix of these estimation methods.

For performance obligations that the Company satisfies over time, revenue is recognized by consistently applying a method of
measuring progress toward complete satisfaction of that performance obligation. The Company utilizes the method that most
accurately depicts the progress toward completion of the performance obligation.

The Company’s contract sales for the installation of security intruder systems and other construction-related projects are
generally recorded under the input method. The input method recognizes revenue on the basis of the Company’s efforts or
inputs to the satisfaction of a performance obligation relative to the total inputs expected to satisfy that performance obligation.
Revenue recognized on security contracts in process are based upon the allocated contract price and related total inputs of the
project at completion. The extent of progress toward completion is generally measured using input methods based on labor
metrics. Revisions to these estimates as contracts progress have the effect of increasing or decreasing profits each period.
Provisions for anticipated losses are made in the period in which they become determinable. The revenues for monitoring and
monitoring-related services are recognized as services are rendered over the contractual period.

The Company utilizes the output method for contract sales in the Oil & Gas product line. The output method recognizes
revenue based on direct measurements of the customer value of the goods or services transferred to date relative to the
remaining goods or services promised under the contract. The output method includes methods such as surveys of performance
completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced or units delivered.

Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights
exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the
measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract
liability.

Incremental costs of obtaining or fulfilling a contract with a customer that are expected to be recovered are recognized and
classified in Other current assets or Other assets in the Consolidated Balance Sheets and are typically amortized over the
contract period. The Company recognizes the incremental costs of obtaining or fulfilling a contract as expense when incurred if
the amortization period of the asset is one year or less.

Customer billings for services not yet rendered are deferred and recognized as revenue as the services are rendered. The
associated deferred revenue is included in Accrued expenses or Other liabilities, as appropriate, in the Consolidated Balance
Sheets.

Refer to Note B, Accounts and Notes Receivable, for further discussion.

COST OF SALES AND SELLING, GENERAL & ADMINISTRATIVE — Cost of sales includes the cost of products and
services provided, reflecting costs of manufacturing and preparing the product for sale. These costs include expenses to acquire
and manufacture products to the point that they are allocable to be sold to customers and costs to perform services pertaining to

service revenues (e.g. installation of security systems, automatic doors, and security monitoring costs). Cost of sales is primarily
comprised of freight, direct materials, direct labor as well as overhead which includes indirect labor and facility and equipment
costs. Cost of sales also includes quality control, procurement and material receiving costs as well as internal transfer costs.
Selling, general & administrative costs ("SG&A") include the cost of selling products as well as administrative function costs.
These expenses generally represent the cost of selling and distributing the products once they are available for sale and
primarily include salaries and commissions of the Company’s sales force, distribution costs, notably salaries and facility costs,
as well as administrative expenses for certain support functions and related overhead.

ADVERTISING COSTS — Television advertising is expensed the first time the advertisement airs, whereas other advertising
is expensed as incurred. Advertising costs are classified in SG&A and amounted to $76.8 million in 2020, $90.4 million in 2019
and $101.3 million in 2018. Expense pertaining to cooperative advertising with customers reported as a reduction of Net Sales
was $357.3 million in 2020, $323.2 million in 2019 and $315.8 million in 2018. Cooperative advertising with customers
classified as SG&A expense amounted to $17.8 million in 2020, $6.9 million in 2019 and $5.4 million in 2018.

SALES TAXES — Sales and value added taxes collected from customers and remitted to governmental authorities are
excluded from Net Sales reported in the Consolidated Statements of Operations.

SHIPPING AND HANDLING COSTS — The Company generally does not bill customers for freight. Shipping and handling
costs associated with inbound and outbound freight are reported in Cost of sales. Distribution costs are classified in SG&A and
amounted to $347.8 million, $326.7 million and $316.0 million in 2020, 2019 and 2018, respectively.

STOCK-BASED COMPENSATION — Compensation cost relating to stock-based compensation grants is recognized on a
straight-line basis over the vesting period, which is generally four years. The expense for stock options and restricted stock
units awarded to retirement-eligible employees (those aged 55 and over, and with 10 or more years of service) is recognized on
the grant date, or (if later) by the date they become retirement-eligible.

POSTRETIREMENT DEFINED BENEFIT PLAN — The Company uses the corridor approach to determine expense
recognition for each defined benefit pension and other postretirement plan. The corridor approach defers actuarial gains and
losses resulting from variances between actual and expected results (based on economic estimates or actuarial assumptions) and
amortizes them over future periods. For pension plans, these unrecognized gains and losses are amortized when the net gains
and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the
beginning of the year. For other postretirement benefits, amortization occurs when the net gains and losses exceed 10% of the
accumulated postretirement benefit obligation at the beginning of the year. For ongoing, active plans, the amount in excess of
the corridor is amortized on a straight-line basis over the average remaining service period for active plan participants. For
plans with primarily inactive participants, the amount in excess of the corridor is amortized on a straight-line basis over the
average remaining life expectancy of inactive plan participants.

INCOME TAXES — The Company accounts for income taxes under the asset and liability method in accordance with ASC
740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the
differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the
year in which the differences are expected to reverse. Any changes in tax rates on deferred tax assets and liabilities are
recognized in earnings in the period that includes the enactment date. The Company recognizes the tax on global intangible
low-taxed income as a period expense in the period the tax is incurred.

The Company records net deferred tax assets to the extent that it is more likely than not that these assets will be realized. In
making this determination, management considers all available positive and negative evidence, including future reversals of
existing temporary differences, estimates of future taxable income, tax-planning strategies, and the realizability of net operating
loss carryforwards. In the event that it is determined that an asset is not more likely that not to be realized, a valuation
allowance is recorded against the asset. Valuation allowances related to deferred tax assets can be impacted by changes to tax
laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would
not be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged to
earnings in the period in which that determination is made. Conversely, if the Company were to determine that it would be able
to realize deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation
allowance through a favorable adjustment to earnings in the period that the determination was made. The Company records
uncertain tax positions in accordance with ASC 740, which requires a two-step process. First, management determines whether
it is more likely than not that a tax position will be sustained based on the technical merits of the position and second, for those
tax positions that meet the more likely than not threshold, management recognizes the largest amount of the tax benefit that is
greater than 50 percent likely to be realized upon ultimate settlement with the related taxing authority. The Company maintains

an accounting policy of recording interest and penalties on uncertain tax positions as a component of Income taxes in the
Consolidated Statements of Operations.

Refer to Note Q, Income Taxes, for further discussion.

EARNINGS PER SHARE — Basic earnings per share equals net earnings attributable to common shareowners divided by
weighted-average shares outstanding during the year. Diluted earnings per share include the impact of common stock
equivalents using the treasury stock method when the effect is dilutive.

NEW ACCOUNTING STANDARDS ADOPTED — In August 2018, the FASB issued Accounting Standards Update
("ASU") 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The standard aligns the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted
this standard in the first quarter of 2020 and it did not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic
715-20). The standard modifies disclosure requirements for employers that sponsor defined benefit pension or other
postretirement plans. The Company adopted this standard in the fourth quarter of 2020 and it did not have a material impact on
its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The standard modifies disclosure
requirements of fair value measurements. The Company adopted this standard in the first quarter of 2020 and it did not have a
material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The new standard simplifies the
subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The Company adopted
this standard in the first quarter of 2020 and it did not have an impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The new standard amends the
impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses
to estimate credit losses on certain types of financial instruments, including accounts and notes receivable. The Company
adopted this standard in the first quarter of 2020 and recognized a $3.8 million cumulative-effect adjustment to opening
retained earnings related to the Company's allowance for credit losses on accounts and notes receivable. Refer to Note B,
Accounts and Notes Receivable, Net, for further discussion.

RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED — In August 2020, the FASB issued ASU
2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in
Entity’s Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt
instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an
entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The
ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
fiscal years. The standard allows for either modified or full retrospective transition methods. The Company is currently
evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting. The new standard provides optional expedients and exceptions that companies can apply
during a limited time period to account for contracts, hedging relationships, and other transactions affected by reference rate
reform, if certain criteria are met. Companies may elect to apply these optional expedients and exceptions beginning March 12,
2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848). The
objective of the new reference rate reform standard is to clarify the scope of Topic 848 and provide explicit guidance to help

companies applying optional expedients and exceptions. This ASU is effective immediately for all entities that have applied
optional expedients and exceptions. The Company is currently evaluating these standards to determine the impact they may
have on it consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and
Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The new standard clarifies the interaction of accounting
for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain
purchased options and forward contracts to acquire investments. The ASU is effective for fiscal years beginning after December
15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim
period. The Company will adopt this guidance in the first quarter of 2021 and does not expect it to have a material impact on
its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). The new standard simplifies the accounting for
income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation
and calculating income taxes in interim periods. The new standard also adds guidance to reduce complexity in certain areas,
including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The ASU is
effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company
will adopt this guidance in the first quarter of 2021 and does not expect it to have a material impact on its consolidated financial
statements.

B. ACCOUNTS AND NOTES RECEIVABLE

(Millions of Dollars)
Trade accounts receivable............................................................................................ $
Trade notes receivable..................................................................................................
Other accounts receivable............................................................................................
Gross accounts and notes receivable............................................................................
Allowance for credit losses..........................................................................................
Accounts and notes receivable, net.............................................................................. $
Long-term receivable, net............................................................................................. $

2020

2019

1,345.7 $
156.1
151.5
1,653.3
(141.1)

1,512.2 $

139.9 $

1,284.0
156.7
126.3
1,567.0
(112.4)

1,454.6

146.1

Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries.
Adequate reserves have been established to cover anticipated credit losses. Long-term receivables, net of $139.9 million and
$146.1 million at January 2, 2021 and December 28, 2019, respectively, are reported within Other Assets in the Consolidated
Balance Sheets. The Company's financing receivables are predominantly related to certain security equipment sales-type leases
with commercial businesses. As of January 2, 2021, the current portion of finance receivables within Trade notes receivable
approximated $80.3 million. Generally, the Company retains legal title to any equipment under lease and holds the right to
repossess such equipment in an event of default. All financing receivables are interest-bearing and the Company has not
classified any financing receivables as held-for-sale. Interest income earned from financing receivables that are not delinquent
are recorded on the effective interest method.

The changes in the allowance for credit losses at January 2, 2021 are as follows:

(Millions of Dollars)

Accounts receivable

Notes receivable

Total

Balance
December 28,
2019

Cumulative
Effect
Adjustment
(a)

Charged To
Costs and
Expenses

Charged To
Other
Accounts
(b)

Deductions
(c)

Balance
January 2,
2021

99.3 $

13.1 $

112.4 $

2.9 $

0.9 $

3.8 $

41.1 $

— $

41.1 $

15.3 $

(31.9) $

4.6 $

(4.2) $

19.9 $

(36.1) $

126.7

14.4

141.1

(a) Represents the cumulative-effect adjustment to opening retained earnings due to the adoption of ASU 2016-13. Refer to Note A, Significant Accounting
Policies, for further discussion.
(b) Amounts represent the impacts of foreign currency translation, acquisitions and net transfers to/from other accounts.
(c) Amounts represent charge-offs less recoveries of accounts previously charged-off.

The Company considers any financing receivable that has not been collected within 90 days of original billing date as past-due
or delinquent. The Company's payment terms are generally consistent with the industries in which their businesses operate and
typically range from 30-90 days globally. Additionally, the Company considers the credit quality of all past-due or delinquent

financing receivables as nonperforming. The Company does not adjust the promised amount of consideration for the effects of a
significant financing component when the period between transfer of the product and receipt of payment is less than one year.
Any significant financing components for contracts greater than one year are included in revenue over time.

The following is a summary of the expected timing of receipt of payments from customers on an undiscounted basis as of
January 2, 2021 relating to the Company's lease receivables:

(Millions of Dollars)

Total

Within 1
Year

2 Years

3 Years

4 Years

5 Years

Thereafter

Finance receivables..........................

Operating leases...............................

209.5 $

80.3 $

56.5 $

38.9 $

21.4 $

39.7 $

38.5 $

0.9 $

0.3 $

— $

8.1 $

— $

4.3

—

The following is a summary of lease revenue and sales-type lease profit for the years ended January 2, 2021 and December 28,
2019:

(Millions of Dollars)

2020

2019

Sales-type lease revenue................................................................................. $

Lease interest revenue.....................................................................................

Operating lease revenue..................................................................................

Total lease revenue......................................................................................... $

Sales-type lease profit..................................................................................... $

113.0 $

13.3

131.5

257.8 $

45.0 $

88.9

12.7

148.9

250.5

35.3

The Company has an accounts receivable sale program. According to the terms, the Company sells certain of its trade accounts
receivables at fair value to a wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS"). The BRS, in
turn, can sell such receivables to a third-party financial institution (“Purchaser”) for cash. The Purchaser’s maximum cash
investment in the receivables at any time is $110.0 million. The purpose of the program is to provide liquidity to the Company.
These transfers qualify as sales under ASC 860, Transfers and Servicing, and receivables are derecognized from the Company’s
Consolidated Balance Sheets when the BRS sells those receivables to the Purchaser. The Company has no retained interests in
the transferred receivables, other than collection and administrative responsibilities. At January 2, 2021, the Company did not
record a servicing asset or liability related to its retained responsibility based on its assessment of the servicing fee, market
values for similar transactions and its cost of servicing the receivables sold.

At January 2, 2021 and December 28, 2019, net receivables of approximately $86.8 million and $100.0 million, respectively,
were derecognized. Proceeds from transfers of receivables to the Purchaser totaled $259.6 million and $495.4 million for the
years ended January 2, 2021 and December 28, 2019, respectively, and payments to the Purchaser totaled $272.8 million and
$495.5 million, respectively. The program resulted in a pre-tax loss of $1.7 million and $3.6 million for the years ended
January 2, 2021 and December 28, 2019, respectively, which included service fees of $0.6 million and $0.9 million,
respectively. All cash flows under the program are reported as a component of changes in accounts receivable within operating
activities in the Consolidated Statements of Cash Flows since all the cash from the Purchaser is received upon the initial sale of
the receivable.

As of January 2, 2021 and December 28, 2019, the Company's deferred revenue totaled $207.6 million and $209.8 million,
respectively, of which $108.7 million and $108.9 million, respectively, was classified as current. Revenue recognized for the
years ended January 2, 2021 and December 28, 2019 that was previously deferred as of December 28, 2019 and December 29,
2018 totaled $96.8 million and $96.4 million, respectively.

As of January 2, 2021, approximately $1.107 billion of revenue from long-term contracts primarily in the Security segment was
unearned related to customer contracts which were not completely fulfilled and will be recognized on a decelerating basis over
the next 5 years. This amount excludes any of the Company's contracts with an original expected duration of one year or less.

C. INVENTORIES

(Millions of Dollars)
Finished products......................................................................................................... $
Work in process............................................................................................................
Raw materials...............................................................................................................
Total............................................................................................................................. $

2020

2019

1,922.5 $
222.3
592.6
2,737.4 $

1,526.0
162.0
567.0
2,255.0

Net inventories in the amount of $1.3 billion at January 2, 2021 and $1.1 billion at December 28, 2019 were valued at the lower
of LIFO cost or market. If the LIFO method had not been used, inventories would have been higher than reported by $52.5
million at January 2, 2021 and $78.1 million at December 28, 2019.

As part of the CAM acquisition in the first quarter of 2020, the Company acquired net inventory with an estimated fair value of
$124.3 million. Refer to Note E, Acquisitions and Investments, for further discussion of the CAM acquisition.

D. PROPERTY, PLANT AND EQUIPMENT

(Millions of Dollars)
Land........................................................................................................................... $
Land improvements...................................................................................................
Buildings....................................................................................................................
Leasehold improvements...........................................................................................
Machinery and equipment..........................................................................................
Computer software.....................................................................................................
Property, plant & equipment, gross........................................................................... $
Less: accumulated depreciation and amortization.....................................................
Property, plant & equipment, net............................................................................... $

2020

2019

140.5 $
56.4
655.2
192.6
3,077.5
557.7
4,679.9 $

(2,626.1)
2,053.8 $

112.2
52.6
630.3
172.1
2,812.8
510.8
4,290.8

(2,331.3)
1,959.5

Depreciation and amortization expense associated with property, plant and equipment was as follows:

(Millions of Dollars)
Depreciation........................................................................................... $
Amortization..........................................................................................
Depreciation and amortization expense................................................. $

2020

2019

2018

332.6 $
43.9
376.5 $

325.2 $
47.6
372.8 $

288.4
42.8
331.2

E. ACQUISITIONS AND INVESTMENTS

2020 ACQUISITION

CAM

On February 24, 2020, the Company acquired CAM for a total estimated purchase price of approximately $1.46 billion, net of
cash acquired. The purchase price consists of an initial cash payment of approximately $1.30 billion, net of cash acquired, and
future payments up to $200.0 million contingent on The Boeing Company ("Boeing") 737 MAX Airplanes receiving Federal
Aviation Administration ("FAA") authorization to return to service and Boeing achieving certain production levels, which were
valued at $155.3 million as of the acquisition date.

In November 2020, the FAA rescinded the 737 MAX grounding order and as a result of the subsequent return to revenue
service of the 737 MAX in December 2020, the Company paid $100 million to the former owners of CAM. The remaining
contingent consideration was remeasured at January 2, 2021 and the Company concluded the achievement of certain production
levels based on Boeing’s future forecast is remote and released the remaining $55.3 million contingent consideration liability to
the Consolidated Statements of Operations in Other, net.

CAM is an industry-leading manufacturer of specialty fasteners and components for the aerospace and defense markets. The
acquisition further diversifies the Company's presence in the industrial markets and expands its portfolio of specialty fasteners
in the aerospace and defense markets. The results of CAM subsequent to the date of acquisition are included in the Company's
Industrial segment.

The CAM acquisition is being accounted for as a business combination using the acquisition method of accounting, which
requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the
acquisition date. The following table summarizes the estimated acquisition date value of identifiable net assets acquired and
liabilities assumed:

(Millions of Dollars)
Cash and cash equivalents....................................................................................................................... $
Accounts receivable, net..........................................................................................................................

Inventories, net.........................................................................................................................................

Prepaid expenses and other assets............................................................................................................

Property, plant and equipment.................................................................................................................

Trade names.............................................................................................................................................

Customer relationships.............................................................................................................................

Accounts payable.....................................................................................................................................

Accrued expenses.....................................................................................................................................

Deferred taxes..........................................................................................................................................

Other liabilities.........................................................................................................................................
Total identifiable net assets...................................................................................................................... $
Goodwill..................................................................................................................................................

Contingent consideration.........................................................................................................................

Total consideration paid........................................................................................................................... $

35.8

48.3

124.3

2.6

127.0

25.0

565.0

(25.9)

(26.9)

(16.3)

(0.3)

858.6
633.2

(155.3)

1,336.5

The weighted-average useful life assigned to the intangible assets is 20 years.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected
cost synergies of the combined business and assembled workforce. It is estimated that $569.8 million of goodwill will be
deductible for tax purposes.

The acquisition accounting for CAM is substantially complete with the exception of certain tax matters. The Company will
complete its acquisition accounting in the first quarter of 2021. Any measurement period adjustments resulting from the
finalization of the Company’s acquisition accounting are not expected to be material.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies
heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each
class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from
operations.

Other 2020 Acquisition

During 2020, the Company completed one smaller acquisition for $28.2 million, net of cash acquired. The estimated acquisition
date value of the identifiable net assets acquired is $13.4 million, which includes $14.8 million of customer relationships. The
related goodwill is $14.8 million. The useful life assigned to the customer relationships is 8 years. The results of this acquisition
subsequent to the date of acquisition are included in the Company's Security segment.

The acquisition accounting for this acquisition is preliminary in certain respects. During the measurement period, the Company
expects to record adjustments relating to working capital accounts and various opening balance sheet contingencies, amongst
others. These adjustments are not expected to have a material impact on the Company’s Consolidated Financial Statements.

2019 ACQUISITIONS

IES Attachments

On March 8, 2019, the Company acquired IES Attachments for $653.5 million, net of cash acquired. IES Attachments is a
manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The
acquisition further diversified the Company's presence in the industrial markets, expanded its portfolio of attachment solutions

and provided a meaningful platform for growth. The results of IES Attachments subsequent to the date of acquisition are
included in the Company's Industrial segment.

The IES Attachments acquisition was accounted for as a business combination using the acquisition method of accounting,
which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the
acquisition date. The estimated acquisition date value of identifiable net assets acquired, which included $77.8 million of
working capital (primarily inventory), $78.3 million of deferred tax liabilities, and $328.0 million of intangible assets, was
$342.2 million. The related goodwill was $311.3 million. The amount allocated to intangible assets included $304.0 million for
customer relationships. The weighted-average useful life assigned to the intangible assets was 14 years.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the
expected cost synergies of the combined business and assembled workforce. It is estimated that $2.4 million of goodwill,
relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes.

The acquisition accounting for IES Attachments is complete. The measurement period adjustments recorded in 2020 did not
have a material impact to the Company's Consolidated Financial Statements.

Other 2019 Acquisitions

During 2019, the Company completed five smaller acquisitions for $40.8 million, net of cash acquired. The estimated
acquisition date value of the identifiable net assets acquired, which included $5.9 million of working capital and $8.8 million of
customer relationships, was $19.0 million. The related goodwill was $21.8 million. The useful lives assigned to the customer
relationships ranged from 8 to 10 years. The results of these acquisitions subsequent to the dates of acquisition are included in
the Company's Industrial and Security segments. The acquisition accounting for these acquisitions is complete. The
measurement period adjustments recorded in 2020 did not have a material impact to the Company's Consolidated Financial
Statements.

2018 ACQUISITIONS

Nelson Fastener Systems

On April 2, 2018, the Company acquired Nelson for $424.2 million, net of cash acquired. Nelson was complementary to the
Company's product offerings, enhanced its presence in the general industrial end markets, and expanded its portfolio of highly-
engineered fastening solutions. The results of Nelson are included in the Company's Industrial segment.

The Nelson acquisition was accounted for as a business combination using the acquisition method of accounting. The
acquisition date value of identifiable net assets acquired, which included $64.2 million of working capital and $167.0 million of
intangible assets, was $211.8 million. The related goodwill was $216.9 million. The amount allocated to intangible assets
included $149.0 million for customer relationships. The useful lives assigned to the intangible assets ranged from 12 to 15
years.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the
expected cost synergies of the combined business, assembled workforce, and the going concern nature of Nelson. Goodwill is
not expected to be deductible for tax purposes.

Other 2018 Acquisitions

During 2018, the Company completed six smaller acquisitions for a total purchase price of $104.5 million, net of cash acquired.
The acquisition date value of the identifiable net assets acquired, which included $13.4 million of working capital and $35.5
million of intangible assets, was $38.1 million. The related goodwill was $66.4 million. The amount allocated to intangible
assets included $32.0 million for customer relationships. The useful lives assigned to intangible assets ranged from 10 to 14
years.

ACTUAL AND PRO-FORMA IMPACT FROM ACQUISITIONS

Actual Impact from Acquisitions

The net sales and net loss from the 2020 acquisitions included in the Company's Consolidated Statements of Operations for the
year ended January 2, 2021 are shown in the table below. The net loss includes amortization expense relating to intangible
assets recorded upon acquisition, inventory step-up charges, transaction costs, and other integration-related costs.

(Millions of Dollars)
Net sales............................................................................................................................................................... $
Net loss attributable to common shareowners..................................................................................................... $

2020

233.9

(89.4)

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the 2020 acquisitions had occurred on December 30,
2018 and the 2019 acquisitions had occurred on December 31, 2017. The pro-forma consolidated results are not necessarily
indicative of what the Company’s consolidated net sales and net earnings would have been had the Company completed the
acquisitions on the aforementioned dates. In addition, the pro-forma consolidated results do not purport to project the future
results of the Company.

(Millions of Dollars, except per share amounts)
Net sales ....................................................................................................................................... $
Net earnings attributable to common shareowners.......................................................................
Diluted earnings per share............................................................................................................. $

2020
14,592.6 $
1,256.7

8.06 $

2019
14,903.7
923.0
6.13

2020 Pro-forma Results

The 2020 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of
the 2020 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:

•

Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset
amortization expense related to intangibles valued as part of the acquisition accounting that would have been incurred
from December 29, 2019 to the acquisition dates.

Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been
incurred from December 29, 2019 to the acquisition date of CAM.

Because the 2020 acquisitions were assumed to occur on December 30, 2018, there were no acquisition-related costs
or inventory step-up charges factored into the 2020 pro-forma year, as such expenses would have occurred in the first
year following the assumed acquisition date.

2019 Pro-forma Results

The 2019 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of
the 2019 and 2020 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:

•

Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been
incurred from December 30, 2018 to the acquisition date of IES attachments and for the year ended December 28,
2019 for CAM.

Additional expense for acquisition-related costs and inventory step-up charges relating to the 2020 acquisitions, as
such expenses would have been incurred during the year ended December 28, 2019.

Because the 2019 acquisitions were assumed to occur on December 31, 2017, there were no acquisition-related costs
or inventory step-up charges factored into the 2019 pro-forma period, as such expenses would have occurred in the
first year following the assumed acquisition date.

INVESTMENTS

On January 2, 2019, the Company acquired a 20 percent interest in MTD, a privately held global manufacturer of outdoor
power equipment, for $234 million in cash. With annual revenues of approximately $2.6 billion, MTD manufactures and
distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility
vehicles and other outdoor power equipment. Under the terms of the agreement, the Company has the option to acquire the
remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised,
the companies have agreed to a valuation multiple based on MTD’s 2018 EBITDA, with an equitable sharing arrangement for
future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment.

During 2020, 2019 and 2018, the Company made additional immaterial investments in new and emerging start-up companies
focused on innovation, breakthrough products and advanced technologies. These investments, which are included in Other
assets in the Consolidated Balance Sheets, do not qualify for equity method accounting as the Company acquired less than 20
percent interest in each investment and does not have the ability to significantly influence the operating or financial decisions of
any of the investees.

F. GOODWILL AND INTANGIBLE ASSETS

GOODWILL — The changes in the carrying amount of goodwill by segment are as follows:

Tools &
Storage

(Millions of Dollars)
Balance December 29, 2018................................................................ $ 5,154.3 $ 1,679.7 $ 2,122.7 $ 8,956.7
327.4
Acquisitions...........................................................................................
(46.6)
Foreign currency translation and other..................................................
Balance December 28, 2019................................................................ $ 5,161.8 $ 1,995.5 $ 2,080.2 $ 9,237.5
650.7
Acquisitions...........................................................................................
149.9
Foreign currency translation and other..................................................
Balance January 2, 2021..................................................................... $ 5,247.7 $ 2,646.5 $ 2,143.9 $ 10,038.1

8.2
(50.7)

(1.3)
8.8

635.7
15.3

0.1
85.8

14.9
48.8

(4.7)

Industrial

320.5

Security

Total

The goodwill amount for the CAM acquisition is subject to change based upon the finalization of the acquisition accounting
during the measurement period. Refer to Note E, Acquisitions and Investments, for further discussion.

In accordance with ASC 350, Intangibles - Goodwill and Other, a portion of the goodwill associated with the Security segment
was allocated to the aforementioned commercial electronic security divestiture based on the relative fair value of the business
disposed of and the portion of the reporting unit that was retained. Accordingly, goodwill for the Security segment was reduced
by $31.3 million and included in the gain on sale of this divestiture in 2020. Refer to Note T, Divestitures, for further
discussion.

As required by the Company's policy, goodwill and indefinite-lived trade names were tested for impairment in the third quarter
of 2020. The Company assessed the fair values of its reporting units utilizing a discounted cash flow valuation model. The key
assumptions used were discount rates and perpetual growth rates applied to cash flow projections. Also inherent in the
discounted cash flow valuations were near-term revenue growth rates over the next six years. These assumptions contemplated
business, market and overall economic conditions. Based on the results of the annual impairment testing performed in the third
quarter of 2020, the Company determined that the fair values of each of its reporting units exceeded their respective carrying
amounts.

INTANGIBLE ASSETS — Intangible assets at January 2, 2021 and December 28, 2019 were as follows:

(Millions of Dollars)
Amortized Intangible Assets — Definite lived

2020

2019

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

Patents and copyrights............................................ $
Trade names............................................................
Customer relationships...........................................
Other intangible assets............................................
Total............................................................................... $

45.5 $
220.8
3,369.1
232.4
3,867.8 $

(44.0) $
(141.1)
(1,634.0)
(190.9)
(2,010.0) $

42.4 $
194.5
2,739.0
233.1
3,209.0 $

(41.5)
(127.2)
(1,421.7)
(182.9)
(1,773.3)

Indefinite-lived trade names totaled $2.198 billion at January 2, 2021 and $2.186 billion at December 28, 2019. The year-over-
year change is primarily due to currency fluctuations.

The fair values of the Company's indefinite-lived trade names were assessed using quantitative analyses, which utilized
discounted cash flow valuation models taking into consideration appropriate discount rates, royalty rates and perpetual growth
rates applied to projected sales. With the exception of an immaterial trade name, the Company determined that the fair values of
its indefinite-lived trade names exceeded their respective carrying amounts.

Intangible assets amortization expense by segment was as follows:

(Millions of Dollars)
Tools & Storage...................................................................................... $
Industrial.................................................................................................
Security...................................................................................................
Consolidated........................................................................................... $

2020

2019

2018

61.5 $
96.6
43.5
201.6 $

73.1 $
69.6
44.7
187.4 $

75.5
50.7
49.1
175.3

Future amortization expense in each of the next five years amounts to $201.8 million for 2021, $192.7 million for 2022, $183.9
million for 2023, $175.4 million for 2024, $156.9 million for 2025 and $947.1 million thereafter.

G. ACCRUED EXPENSES

Accrued expenses at January 2, 2021 and December 28, 2019 were as follows:

(Millions of Dollars)
Payroll and related taxes............................................................................................... $
Income and other taxes ................................................................................................
Customer rebates and sales returns .............................................................................
Insurance and benefits..................................................................................................
Restructuring costs.......................................................................................................
Derivative financial instruments..................................................................................
Warranty costs .............................................................................................................
Deferred revenue .........................................................................................................

Freight costs.................................................................................................................

Environmental costs.....................................................................................................

Deferred purchase price ...............................................................................................

Current lease liability...................................................................................................

2020

2019

324.2 $
241.0
229.6
80.4
90.2
185.3
81.5

108.7

93.5

46.7

—

138.8

262.4
243.9
112.0
69.8
147.8
22.4
69.6

108.9

72.9

57.8

249.2

141.3

Other.............................................................................................................................
Total............................................................................................................................. $

490.5
2,110.4 $

419.5
1,977.5

H. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-term debt and financing arrangements at January 2, 2021 and December 28, 2019 were as follows:

(Millions of Dollars)

Interest
Rate

Original
Notional

Unamortized
Discount

January 2, 2021

December 29,
2019

Unamortized
Gain (Loss)
Terminated
Swaps1

Purchase
Accounting
FV
Adjustment

Deferred
Financing
Fees

Carrying
Value

Notes payable due 2021.............

3.40% $

— $

Notes payable due 2022.............

2.90%

Notes payable due 2026.............

3.40%

Notes payable due 2028.............

7.05%

Notes payable due 2028.............

4.25%

Notes payable due 2030.............

2.30%

Notes payable due 2040.............

5.20%

Notes payable due 2048.............

4.85%

Notes payable due 2050.............

2.75%

—

500.0

150.0

500.0

750.0

400.0

500.0

750.0

— $

—

(0.5)

—

(0.3)

(2.3)

(0.2)

(0.5)

(2.0)

4.00%

750.0

—

— $

—

8.2

—

(29.0)

—

7.9

—

— $

—

(2.3)

—

(3.5)

(4.8)

(2.7)

(5.2)

(8.1)

497.2

166.1

496.2

742.9

368.1

494.3

739.9

(9.3)

740.7

406.0

752.3

496.5

168.3

495.8

—

366.5

494.1

—

Notes payable due 2060 (junior
subordinated).............................

Total long-term debt, including
current maturities.......................

Less: Current maturities of
long-term debt............................

Long-term debt..........................

4,300 $

(5.8) $

(20.8) $

7.9 $

(35.9) $

4,245.4

3,179.5

—

(3.1)

4,245.4

3,176.4

1 Unamortized gain (loss) associated with interest rate swaps are more fully discussed in Note I, Financial Instruments.

As of January 2, 2021, the total aggregate annual principal maturities of long-term debt for the next five years and thereafter are
as follows: no principal maturities from 2021 to 2025, and $4.3 billion thereafter. These maturities represent the principal
amounts to be paid and accordingly exclude the remaining $7.9 million of unamortized fair value adjustments made in purchase
accounting, which increased the Black & Decker note payable due 2028, as well as a net loss of $26.6 million pertaining to
unamortized termination gains and losses on interest rate swaps and unamortized discounts on the notes as described in Note I,
Financial Instruments, and $35.9 million of unamortized deferred financing fees. Interest paid during 2020, 2019 and 2018
amounted to $192.1 million, $252.9 million and $249.6 million, respectively.

In November 2020, the Company issued $750.0 million of senior unsecured term notes maturing November 15, 2050 ("2050
Term Notes"). The 2050 Term Notes will accrue interest at a fixed rate of 2.75% per annum, with interest payable semi-
annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured
unsubordinated debt. The Company received total net proceeds from this offering of approximately $739.9 million, net of
approximately $10.1 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 other borrowings.

Contemporaneously with the issuance of the 2050 Term Notes, the Company redeemed the 3.4% senior unsecured term notes
due 2021 (“2021 Term Notes”) and the 2.9% senior unsecured term notes due 2022 (“2022 Term Notes”) for approximately
$1.2 billion representing the outstanding principal amounts, accrued and unpaid interest, and a make-whole premium. The
Company recognized a net pre-tax loss of $46.9 million from the extinguishment, which was comprised of the $48.7 million
make-whole premium payment and a $1.7 million loss related to the write-off of deferred financing fees, partially offset by a
$3.5 million gain relating to the write-off of unamortized fair value swap terminations. The Company also recognized a pre-tax
loss of $19.6 million relating to the unamortized loss on cash flow swap terminations related to the 2022 Term Notes. Refer to
Note I, Financial Instruments, for further discussion.

In February 2020, the Company issued $750.0 million of senior unsecured term notes maturing March 15, 2030 ("2030 Term
Notes") and $750.0 million of fixed-to-fixed reset rate junior subordinated debentures maturing March 15, 2060 (“2060 Junior
Subordinated Debentures”). The 2030 Term Notes accrue interest at a fixed rate of 2.3% per annum, with interest payable semi-
annually in arrears, and rank equally in right of payment with all of the Company's existing and future unsecured and
unsubordinated debt. The 2060 Junior Subordinated Debentures bear interest at a fixed rate of 4.0% per annum, payable semi-
annually in arrears, up to but excluding March 15, 2025. From and including March 15, 2025, the interest rate will be reset for
each subsequent five-year reset period equal to the Five-Year Treasury Rate plus 2.657%. The Five-Year Treasury Rate is
based on the average yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities.
On each five-year reset date, the 2060 Junior Subordinated Debentures can be called at 100% of the principal amount, plus
accrued interest, if any. The 2060 Junior Subordinated Debentures are unsecured and rank subordinate and junior in right of
payment to all of the Company’s existing and future senior debt. The Company received total net proceeds from these offerings

of approximately $1.483 billion, net of underwriting expenses and other fees associated with the transactions. The net proceeds
from these offerings were used for general corporate purposes, including acquisition funding.

In March 2019, the Company issued $500.0 million of senior unsecured notes maturing on March 1, 2026 ("2026 Term
Notes"). The 2026 Term Notes accrue interest at a fixed rate of 3.40% per annum with interest payable semi-annually in arrears.
The 2026 Term Notes rank equally in right of payment with all of the Company's existing and future unsecured and
unsubordinated debt. The Company received net cash proceeds of $496.2 million which reflected the notional amount offset by
a discount, 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 other borrowings.

In November 2018, the Company issued $500.0 million of senior unsecured notes maturing on November 15, 2028 ("2028
Term Notes") and $500.0 million of senior unsecured notes maturing on November 15, 2048 ("2048 Term Notes"). The 2028
Term Notes and 2048 Term Notes accrue interest at fixed rates of 4.25% per annum and 4.85% per annum, respectively, with
interest payable semi-annually in arrears on both notes. The notes are unsecured and rank equally with all of the Company's
existing and future unsecured and unsubordinated debt. The Company received net proceeds of $990.0 million which reflected
a discount of $0.9 million and $9.1 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 other borrowings.

Contemporaneously with the issuance of the 2028 Term Notes and 2048 Term Notes, the Company paid $977.5 million to settle
its remaining obligations of two unsecured notes which matured in November 2018.

In December 2013, the Company issued $400.0 million aggregate principal amount of 5.75% fixed-to-floating rate junior
subordinated debentures maturing December 15, 2053 (“2053 Junior Subordinated Debentures”). The 2053 Junior Subordinated
Debentures bore interest at a fixed rate of 5.75% per annum, payable semi-annually in arrears to, but excluding December 15,
2018. From and including December 15, 2018, the 2053 Junior Subordinated Debentures bore interest at an annual rate equal to
three-month LIBOR plus 4.304%, payable quarterly in arrears. In February 2019, the Company redeemed all of the outstanding
2053 Junior Subordinated Debentures for $405.7 million, which represented 100% of the principal amount plus accrued and
unpaid interest to the redemption date. The Company recognized a net pre-tax loss of $3.2 million from the redemption, which
was comprised of a $7.8 million loss related to the write-off of deferred financing fees partially offset by a $4.6 million gain
relating to an unamortized terminated interest rate swap as described in more detailed in Note I, Financial Instruments.

In July 2012, the Company issued $750.0 million of junior subordinated debentures, maturing on July 25, 2052 (“2052 Junior
Subordinated Debentures”) with fixed interest payable quarterly, in arrears, at a rate of 5.75% per annum. In December 2019,
the Company redeemed all of the outstanding 2052 Junior Subordinated Debentures for $760.5 million, which represented
100% of the principal amount plus accrued and unpaid interest. The Company recognized a pre-tax loss of $17.9 million from
the redemption related to the write-off of unamortized deferred financing fees.

Commercial Paper and Credit Facilities

The Company has a $3.0 billion commercial paper program which includes Euro denominated borrowings in addition to U.S.
Dollars. As of January 2, 2021, the Company had no borrowings outstanding. As of December 28, 2019, the Company had
$335.5 million of borrowings outstanding representing Euro denominated commercial paper, which was designated as a net
investment hedge. Refer to Note I, Financial Instruments, for further discussion.

The Company has a five-year $2.0 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 $653.3 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 12, 2023 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop
for the Company's $3.0 billion U.S. Dollar and Euro commercial paper program. As of January 2, 2021 and December 28,
2019, the Company had not drawn on its five-year committed credit facility.

the account of each lender. The 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.0
billion U.S. Dollar and Euro commercial paper program. As of January 2, 2021 and December 28, 2019, the Company had not
drawn on its 364-Day committed credit facility.

In addition, the Company has other short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating
to $469.1 million, of which $373.4 million was available at January 2, 2021. Short-term arrangements are reviewed annually for
renewal.

At January 2, 2021, the aggregate amount of committed and uncommitted lines of credit, long-term and short-term, was
approximately $3.5 billion. At January 2, 2021, $1.5 million was recorded as short-term borrowings relating to amounts
outstanding against uncommitted lines. In addition, $95.6 million of the short-term credit lines was utilized primarily pertaining
to outstanding letters of credit for which there are no required or reported debt balances. The weighted-average interest rates on
U.S. dollar denominated short-term borrowings for the years ended January 2, 2021 and December 28, 2019 were 1.3% and
2.3%, respectively. The weighted-average interest rates on Euro denominated short-term borrowings for the years ended
January 2, 2021 and December 28, 2019 were negative 0.2% and 0.3%, respectively.

I. FINANCIAL INSTRUMENTS

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and
commodity prices. As part of the Company’s risk management program, a variety of financial instruments such as interest rate
swaps, currency swaps, purchased currency options, foreign exchange contracts and commodity contracts, may be used to
mitigate interest rate exposure, foreign currency exposure and commodity price exposure.

If the Company elects to do so and if the instrument meets the criteria specified in ASC 815, management designates its
derivative instruments as cash flow hedges, fair value hedges or net investment hedges. Generally, commodity price exposures
are not hedged with derivative financial instruments and instead are actively managed through customer pricing initiatives,
procurement-driven cost reduction initiatives and other productivity improvement projects. Financial instruments are not
utilized for speculative purposes.

A summary of the fair values of the Company’s derivatives recorded in the Consolidated Balance Sheets at January 2, 2021 and
December 28, 2019 follows:

(Millions of Dollars)
Derivatives designated as hedging
instruments:

Balance Sheet
Classification

2020

2019

Balance Sheet
Classification

2020

2019

Interest Rate Contracts Cash Flow.... Other current assets..........

$ — $ — Accrued expenses.............

$ 90.9 $ —

LT other assets..................

Foreign Exchange Contracts Cash
Flow.................................................. Other current assets..........
Net Investment Hedge....................... Other current assets..........

LT other assets..................

—

3.5

—

— LT other liabilities

—

40.5

7.0 Accrued expenses.............

18.6 Accrued expenses.............

— LT other liabilities............

23.7

55.1

5.7

7.8

8.5

2.6

Non-derivative designated as
hedging instrument:

Net Investment Hedge.......................

Total Designated as hedging
instruments

Derivatives not designated as
hedging instruments:

—

— Short-term borrowings......

—

335.5

3.5 $ 25.6

$ 175.4 $ 394.9

Foreign Exchange Contracts............. Other current assets..........
Total.................................................

$ 10.5 $

3.7 Accrued expenses.............

$ 15.6 $

6.1

$ 14.0 $ 29.3

$ 191.0 $ 401.0

The counterparties to all of the above mentioned financial instruments are major international financial institutions. The
Company is exposed to credit risk for net exchanges under these agreements, but not for the notional amounts. The credit risk is
limited to the asset amounts noted above. The Company limits its exposure and concentration of risk by contracting with
diverse financial institutions and does not anticipate non-performance by any of its counterparties. Further, as more fully
discussed in Note M, Fair Value Measurements, the Company considers non-performance risk of its counterparties at each
reporting period and adjusts the carrying value of these assets accordingly. The risk of default is considered remote. As of
January 2, 2021 and December 28, 2019, there were no assets that had been posted as collateral related to the above mentioned
financial instruments.

In 2020, 2019 and 2018, cash flows related to derivatives, including those that are separately discussed below, resulted in net
cash received of $33.4 million, $69.9 million and $2.4 million, respectively.

CASH FLOW HEDGES — There were after-tax mark-to-market losses of $103.0 million and $54.2 million as of January 2,
2021 and December 28, 2019, respectively, reported for cash flow hedge effectiveness in Accumulated other comprehensive
loss. An after-tax loss of $20.1 million is expected to be reclassified to earnings as the hedged transactions occur or as amounts
are amortized within the next twelve months. The ultimate amount recognized will vary based on fluctuations of the hedged
currencies and interest rates through the maturity dates.

The tables below detail pre-tax amounts of derivatives designated as cash flow hedges in Accumulated other comprehensive
loss during the periods in which the underlying hedged transactions affected earnings for 2020, 2019 and 2018:

2020 (Millions of Dollars)

Interest Rate Contracts...............................

Foreign Exchange Contracts......................

2019 (Millions of Dollars)

Interest Rate Contracts...............................

Foreign Exchange Contracts......................

Gain (Loss)
Recorded in OCI

Classification of
Gain (Loss)
Reclassified from
OCI to Income

Gain (Loss)
Reclassified from
OCI to Income

Gain (Loss)
Recognized in
Income on Amounts
Excluded from
Effectiveness Testing

(70.9) Interest expense

(16.1) Cost of sales

Gain (Loss)
Recorded in OCI

Classification of
Gain (Loss)
Reclassified from
OCI to Income

(40.5) Interest expense

(16.7) Cost of sales

(16.3) $

12.4 $

—

Gain (Loss)
Reclassified from
OCI to Income

Gain (Loss)
Recognized in
Income on Amounts
Excluded from
Effectiveness Testing

(16.2) $

(6.5) $

—

2018 (Millions of Dollars)

Gain (Loss)
Recorded in OCI

Classification of
Gain (Loss)
Reclassified from
OCI to Income

Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion)

Gain (Loss)
Recognized in
Income
(Ineffective Portion)

Interest Rate Contracts...............................

Foreign Exchange Contracts......................

33.1

Interest expense

35.9 Cost of sales

(15.3) $

(17.9) $

—

A summary of the pre-tax effect of cash flow hedge accounting on the Consolidated Statements of Operations for 2020, 2019
and 2018 is as follows:

(Millions of dollars)

2020

2019

2018

Cost of
Sales

Interest
Expense

Cost of
Sales

Interest
Expense

Cost of
Sales

Interest
Expense

Total amount in the Consolidated Statements of
Operations in which the effects of the cash flow hedges are
recorded................................................................................ $ 9,566.7 $ 223.1 $ 9,636.7 $ 284.3 $ 9,131.3 $ 277.9

Gain (loss) on cash flow hedging relationships:

Foreign Exchange Contracts:

Hedged Items..................................................................... $

(12.4) $ — $

6.5 $ — $

17.9 $ —

Gain (loss) reclassified from OCI into Income.................. $

12.4 $ — $

(6.5) $ — $

(17.9) $ —

Interest Rate Swap Agreements:

Gain (loss) reclassified from OCI into Income 1................ $ — $

(16.3) $ — $

(16.2) $ — $

(15.3)

1 Inclusive of the gain/loss amortization on terminated derivative financial instruments.

For 2020, 2019 and 2018 after-tax losses of $15.4 million, $13.1 million, and $15.4 million, respectively, were reclassified from
Accumulated other comprehensive loss into earnings (inclusive of the gain/loss amortization on terminated derivative financial
instruments) during the periods in which the underlying hedged transactions affected earnings.

Interest Rate Contracts: The Company enters into interest rate swap agreements in order to obtain the lowest cost source of
funds within a targeted range of variable to fixed-rate debt proportions. During 2020, the Company entered into forward starting
interest rate swaps totaling $1.0 billion to offset expected variability on future interest rate payments associated with debt
instruments expected to be issued in the future. The Company terminated these swaps in 2020 resulting in a loss of $20.5
million, which was recorded in Accumulated other comprehensive loss and is being amortized to interest expense over future
periods. The cash flows stemming from the maturity of such interest rate swaps designated as cash flow hedges are presented
within other financing activities in the Consolidated Statements of Cash Flows.

During 2019, the Company entered into forward starting interest rate swaps totaling $650.0 million to offset expected
variability on future interest rate payments associated with debt instruments expected to be issued in the future. During 2019,
swaps with a notional amount of $250.0 million matured resulting in a loss of $1.0 million, which was recorded in Accumulated
other comprehensive loss and is being amortized to earnings as interest expense over future periods. The cash flows stemming
from the maturity of such interest rate swaps designated as cash flow hedges are presented within other financing activities in
the Consolidated Statements of Cash Flows.

In 2018, forward starting interest rate swaps with an aggregate notional amount of $400 million fixing 10 years of interest
payments ranging from 4.25%-4.85% matured. The objective of the hedges was to offset the expected variability on future
payments associated with the interest rate on debt instruments. This resulted in a loss of $22.7 million, which was recorded in
Accumulated other comprehensive loss and is being amortized to earnings as interest expense over future periods. The cash
flows stemming from the maturity of such interest rate swaps designated as cash flow hedges are presented within other
financing activities in the Consolidated Statements of Cash Flows.

In December 2020, the Company redeemed all of the outstanding 2021 Term Notes and 2022 Term Notes, as further discussed
in Note H, Long-Term Debt and Financing Arrangements. As a result, the Company recorded a pre-tax loss of $19.6 million
relating to the remaining unamortized loss on cash flow swap terminations related to the 2022 Term Notes.

As of January 2, 2021 and December 28, 2019, the Company had $400 million of forward starting swaps outstanding.

Foreign Currency Contracts

Forward Contracts: Through its global businesses, the Company enters into transactions and makes investments denominated
in multiple currencies that give rise to foreign currency risk. The Company and its subsidiaries regularly purchase inventory
from subsidiaries with functional currencies different than their own, which creates currency-related volatility in the Company’s
results of operations. The Company utilizes forward contracts to hedge these forecasted purchases and sales of inventory. Gains
and losses reclassified from Accumulated other comprehensive loss are recorded in Cost of sales as the hedged item affects
earnings. There are no components excluded from the assessment of effectiveness for these contracts. At January 2, 2021, and
December 28, 2019, the notional values of the forward currency contracts outstanding was $595.8 million and $518.2 million,
respectively, maturing on various dates through 2021.

Purchased Option Contracts: The Company and its subsidiaries have entered into various intercompany transactions whereby
the notional values are denominated in currencies other than the functional currencies of the party executing the trade. In order
to better match the cash flows of its intercompany obligations with cash flows from operations, the Company enters into
purchased option contracts. Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Cost of
sales as the hedged item affects earnings. There are no components excluded from the assessment of effectiveness for these
contracts. At January 2, 2021 and December 28, 2019 there were no outstanding option contracts.

FAIR VALUE HEDGES

Interest Rate Risk: In an effort to optimize the mix of fixed versus floating rate debt in the Company’s capital structure, the
Company enters into interest rate swaps. In prior years, the Company entered into interest rate swaps related to certain of its
notes payable which were subsequently terminated. Amortization of the gain/loss on previously terminated swaps is reported as
a reduction of interest expense. Prior to termination, the changes in fair value of the swaps and the offsetting changes in fair
value related to the underlying notes were recognized in earnings. The Company did not have any active fair value interest rate
swaps at January 2, 2021 or December 28, 2019.

A summary of the pre-tax effect of fair value hedge accounting on the Consolidated Statements of Operations for 2020, 2019
and 2018 is as follows:

2020

2019

2018

(Millions of dollars)
Total amount in the Consolidated Statements of Operations in which the
effects of the fair value hedges are recorded.................................................... $

Interest Expense

223.1 $

284.3 $

277.9

(3.2)

Amortization of gain on terminated swaps....................................................... $

(3.0) $

(7.7) $

In December 2020, the Company redeemed all of the outstanding 2021 Term Notes and 2022 Term Notes, as further discussed
in Note H, Long-Term Debt and Financing Arrangements. As a result, the Company recorded a pre-tax gain of $3.5 million
relating to the remaining unamortized gain on fair value swap terminations related to the 2021 Term Notes.

In February 2019, the Company redeemed all of the outstanding 2053 Junior Subordinated Debentures, as further discussed in
Note H, Long-Term Debt and Financing Arrangements. As a result, the Company recorded a pre-tax gain of $4.6 million
relating to the remaining unamortized gain on swap termination related to this debt.

A summary of the amounts recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value
hedges as of 2020 and 2019 is as follows:

(Millions of dollars)

2020 Carrying
Amount of Hedged
Liability1

2020 Cumulative Amount of Fair Value Hedging
Adjustment Included in the Carrying Amount of
the Hedged Liability

Current maturities of long-term debt..................................... $

—

Terminated Swaps $

Long-Term Debt.................................................................... $
1Represents hedged items no longer designated in qualifying fair value hedging relationships.

4,245.4

Terminated Swaps $

—

(20.8)

(Millions of dollars)

2019 Carrying
Amount of Hedged
Liability1

2019 Cumulative Amount of Fair Value Hedging
Adjustment Included in the Carrying Amount of
the Hedged Liability

Current maturities of long-term debt..................................... $

3.1

Terminated Swaps $

Long-Term Debt.................................................................... $

3,176.4

Terminated Swaps $

3.1

(17.5)

1Represents hedged items no longer designated in qualifying fair value hedging relationships.

NET INVESTMENT HEDGES

Foreign Exchange Contracts: The Company utilizes net investment hedges to offset the translation adjustment arising from re-
measurement of its investment in the assets and liabilities of its foreign subsidiaries. The total after-tax amounts in Accumulated
other comprehensive gains of $72.8 million and $97.3 million at January 2, 2021 and December 28, 2019, respectively.

As of January 2, 2021, the Company had cross currency swaps with a notional value totaling $839.4 million maturing on
various dates through 2023 hedging a portion of its Japanese yen, Euro and Swiss franc denominated net investments. As of
January 2, 2021, the Company had no Euro denominated commercial paper designated as a net investment hedge.

As of December 28, 2019, the Company had cross currency swaps with a notional value totaling $1.1 billion maturing on
various dates through 2023 hedging a portion of its Japanese yen, Euro and Swiss franc denominated net investments and Euro
denominated commercial paper with a value of $335.5 million maturing in 2020 hedging a portion of its Euro denominated net
investments.

Maturing foreign exchange contracts resulted in net cash received of $41.0 million, $8.0 million, and $25.7 million during
2020, 2019 and 2018, respectively.

Gains and losses on net investment hedges remain in Accumulated other comprehensive loss until disposal of the underlying
assets. Gains and losses representing components excluded from the assessment of effectiveness are recognized in earnings in
Other, net on a straight-line basis over the term of the hedge. Gains and losses after a hedge has been de-designated are
recorded directly to the Consolidated Statements of Operations in Other, net.

The pre-tax gains and losses from fair value changes during 2020, 2019 and 2018 were as follows:

2020

Total Gain
(Loss)
Reclassified
from OCI to
Income

Excluded
Component
Amortized
from OCI to
Income

$
$
$

— $
18.2 $
— $

—
18.2
—

— $

—

Total Gain
(Loss)
Reclassified
from OCI to
Income

Excluded
Component
Amortized
from OCI to
Income

$
$
$

4.3 $
29.9 $
— $

4.3
29.9
—

— $

—

(Millions of Dollars)
Forward Contracts.........................................
Cross Currency Swap....................................
Option Contracts...........................................

Total Gain
(Loss)
Recorded in
OCI

Excluded
Component
Recorded in
OCI

$
$
$

0.8 $
(5.4) $
— $

—
60.7
—

Income
Statement
Classification
Other, net
Other, net
Other, net

Non-derivative designated as Net
Investment Hedge.......................................... $

(8.5) $

—

Other, net

(Millions of Dollars)
Forward Contracts......................................... $
Cross Currency Swap.................................... $
$
Option Contracts...........................................

Total Gain
(Loss)
Recorded in
OCI

Excluded
Component
Recorded in
OCI

6.4 $
54.8 $
(3.7) $

4.6
48.8
—

2019

Income
Statement
Classification
Other, net
Other, net
Other, net

Non-derivative designated as Net
Investment Hedge.........................................

21.7 $

—

Other, net

Total Gain
(Loss)
Recorded in
OCI

Excluded
Component
Recorded in
OCI

37.1 $
(2.3) $
(2.0) $

8.6
5.8
—

2018

Income
Statement
Classification
Other, net
Other, net
Other, net

Non-derivative designated as Net
Investment Hedge.........................................

61.8 $

—

Other, net

Total Gain
(Loss)
Reclassified
from OCI to
Income

Excluded
Component
Amortized
from OCI to
Income

$
$
$

8.2 $
6.8 $
— $

— $

8.2
6.8
—

—

As discussed in Note H, Long-Term Debt and Financing Arrangements, the Company has a commercial paper program which
authorizes Euro denominated borrowings in addition to U.S. Dollars. Euro denominated borrowings against this commercial
paper program are designated as a net investment hedge against a portion of its Euro denominated net investment. As of
January 2, 2021 the Company had no Euro denominated borrowings outstanding against this commercial paper program and as
of December 28, 2019, the Company had $335.5 million in Euro denominated borrowings outstanding against this commercial
paper program.

UNDESIGNATED HEDGES

Foreign Exchange Contracts: Currency swaps and foreign exchange forward contracts are used to reduce risks arising from the
change in fair value of certain foreign currency denominated assets and liabilities (such as affiliate loans, payables and
receivables). The objective of these practices is to minimize the impact of foreign currency fluctuations on operating results.
The total notional amount of the forward contracts outstanding at January 2, 2021 was $1.3 billion maturing on various dates
through 2021. The total notional amount of the forward contracts outstanding at December 28, 2019 was $946.8 million
maturing on various dates through 2020. The gain (loss) recorded in the income statement from changes in the fair value related
to derivatives not designated as hedging instruments under ASC 815 for 2020, 2019 and 2018 are as follows:

(Millions of Dollars)
Foreign Exchange Contracts..............................

Income Statement
Classification

2020

2019

2018

Other-net

(15.7) $

(4.1) $

17.0

J. CAPITAL STOCK

EARNINGS PER SHARE — The following table reconciles net earnings attributable to common shareowners and the
weighted-average shares outstanding used to calculate basic and diluted earnings per share for the fiscal years ended January 2,
2021, December 28, 2019, and December 29, 2018.

Numerator (in millions):
Net Earnings Attributable to Common Shareowners.............................. $

1,210.4 $

955.8 $

605.2

2020

2019

2018

Denominator (in thousands):

Basic weighted-average shares outstanding....................................

Dilutive effect of stock contracts and awards..................................

Diluted weighted-average shares outstanding.................................

154,176

1,685

155,861

148,365

2,193

150,558

148,919

2,724

151,643

Earnings per share of common stock:

Basic......................................................................................... $
Diluted...................................................................................... $

7.85 $

7.77 $

6.44 $

6.35 $

4.06

3.99

The following weighted-average stock options were not included in the computation of weighted-average diluted shares
outstanding because the effect would be anti-dilutive (in thousands):

Number of stock options..........................................................................

2,376

2,151

1,339

2020

2019

2018

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2019 Equity
Units”). Each unit initially consists of 750,000 shares of convertible preferred stock ("Series D Preferred Stock") and forward
stock purchase contracts. On and after November 15, 2022, the Series D Preferred Stock may be converted into common stock
at the option of the holder. At the election of the Company, upon conversion, the Company may deliver cash, common stock,
or a combination thereof. The conversion rate is initially 5.2263 shares of common stock per one share of Series D Preferred
Stock, which was equivalent to an initial conversion price of approximately $191.34 per share of common stock. As of
January 2, 2021, due to customary anti-dilution provisions, the conversion rate was 5.2269, equivalent to a conversion price of
approximately $191.32 per share of common stock. The Series D Preferred Stock is excluded from the denominator of the
diluted earnings per share calculation on the basis that the convertible preferred stock will be settled in cash except to the extent
that the conversion value of the convertible preferred stock exceeds its liquidation preference. Therefore, before any redemption
or conversion, the common shares that would be required to settle the applicable conversion value in excess of the liquidation
preference, if the Company elects to settle such excess in common shares, are included in the denominator of diluted earnings
per share in periods in which they are dilutive. The shares related to the Series D Preferred Stock were anti-dilutive during 2020
and during November and December of 2019.

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2017 Equity Units”).
Each unit initially consisted of 750,000 shares of convertible preferred stock ("Series C Preferred Stock") and forward stock
purchase contracts. In May 2020, the Company successfully remarketed the Series C Preferred Stock, generating cash proceeds
of $750.0 million which were applied to settle the holders' stock purchase contract obligations, resulting in the Company issuing
5,463,750 common shares. Holders of the remarketed Series C Preferred Stock are entitled to receive cumulative dividends, if
declared by the Board of Directors, at an initial fixed rate equal to 5.0% per annum of the $1,000 per share liquidation
preference (equivalent to $50.00 per annum per share). In addition, holders have the option to convert the Series C Preferred
Stock into common stock. At the election of the Company, upon conversion, the Company may deliver cash, common stock, or
a combination thereof. In connection with the remarketing described above, the conversion rate was reset to 6.7352 shares of
the Company's common stock per one share of Series C Preferred Stock, which was equivalent to a conversion price of
approximately $148.47 per share of common stock. As of January 2, 2021, due to customary anti-dilution provisions, the
conversion rate was 6.7504, equivalent to a conversion price of approximately $148.14 per share of common stock. The Series
C Preferred Stock is excluded from the denominator of the diluted earnings per share calculation on the basis that the
convertible preferred stock will be settled in cash except to the extent that the conversion value of the convertible preferred
stock exceeds its liquidation preference. Therefore, before any redemption or conversion, the common shares that would be
required to settle the applicable conversion value in excess of the liquidation preference, if the Company elects to settle such
excess in common shares, are included in the denominator of diluted earnings per share in periods in which they are dilutive.
The shares related to the Series C Preferred Stock were anti-dilutive during certain months in 2020 and most of 2019.

See "Other Equity Arrangements" below for further details of the above transactions.

COMMON STOCK ACTIVITY — Common stock activity for 2020, 2019 and 2018 was as follows:

2020

2019

2018

Outstanding, beginning of year.....................................................

153,506,409

151,302,450

154,038,031

Issued from treasury......................................................................

7,474,394

2,391,336

941,854

Returned to treasury......................................................................

(228,541)

(187,377)

(3,677,435)

Outstanding, end of year...............................................................

160,752,262

153,506,409

151,302,450

Shares subject to the forward share purchase contract..................

(3,645,510)

Outstanding, less shares subject to the forward share purchase
contract..........................................................................................

157,106,752

149,860,899

147,656,940

In May 2020, the Company issued 5,463,750 shares of common stock to settle the purchase contracts related to the 2017 Equity
Units.

In April 2018, the Company repurchased 1,399,732 shares of common stock for approximately $200.0 million. In July 2018,
the Company repurchased 2,086,792 shares of common stock for approximately $300.0 million.

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 $350.0 million, plus an additional amount
related to the forward component of the contract. In February 2020, the Company amended the settlement date to April 2022, or
earlier at the Company's option. The reduction of common shares outstanding was recorded at the inception of the forward
share purchase contract in March 2015 and factored into the calculation of weighted-average shares outstanding at that time.

COMMON STOCK RESERVED — Common stock shares reserved for issuance under various employee and director stock
plans at January 2, 2021 and December 28, 2019 are as follows:

Employee stock purchase plan........................................................................................................

Other stock-based compensation plans...........................................................................................
Total shares reserved.......................................................................................................................

2020

2019

1,480,962
8,113,781
9,594,743

1,593,759
11,330,531
12,924,290

STOCK-BASED COMPENSATION PLANS — The Company has stock-based compensation plans for salaried employees
and non-employee members of the Board of Directors. The plans provide for discretionary grants of stock options, restricted
stock units and other stock-based awards.

The plans are generally administered by the Compensation and Talent Development Committee of the Board of Directors,
consisting of non-employee directors.

Stock Option Valuation Assumptions:

Stock options are granted at the fair market value of the Company’s stock on the date of grant and have a 10-year term.
Generally, stock option grants vest ratably over 4 years from the date of grant.

The following describes how certain assumptions affecting the estimated fair value of stock options are determined: the
dividend yield is computed as the annualized dividend rate at the date of grant divided by the strike price of the stock option;
expected volatility is based on an average of the market implied volatility and historical volatility for the 5.25 year expected
life; the risk-free interest rate is based on U.S. Treasury securities with maturities equal to the expected life of the option; and a
seven percent forfeiture rate is assumed. The Company uses historical data in order to estimate forfeitures and holding period
behavior for valuation purposes.

The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The
following weighted-average assumptions were used to value grants made in 2020, 2019 and 2018:

Average expected volatility..................................................................
Dividend yield.......................................................................................
Risk-free interest rate............................................................................
Expected life.........................................................................................
Fair value per option............................................................................. $
Weighted-average vesting period.........................................................

35.0 %
1.6 %
0.4 %
5.3 years
48.36
2.8 years

25.0 %
1.8 %
1.5 %
5.3 years
30.09
2.8 years

23.0 %
2.0 %
2.9 %
5.3 years
26.54
2.9 years

2020

2019

2018

Stock Options:

The number of stock options and weighted-average exercise prices as of January 2, 2021 are as follows:

Outstanding, beginning of year.....................................................................................
Granted..........................................................................................................................
Exercised.......................................................................................................................
Forfeited........................................................................................................................
Outstanding, end of year................................................................................................
Exercisable, end of year................................................................................................

6,454,671 $
1,103,538
(1,419,699)
(263,264)
5,875,246 $
3,289,889 $

122.42
179.85
94.24
148.68
138.84
121.65

Options

Price

At January 2, 2021, the range of exercise prices on outstanding stock options was $64.79 to $179.85. Stock option expense was
$31.6 million, $27.7 million and $23.9 million for the years ended January 2, 2021, December 28, 2019 and December 29,
2018, respectively. At January 2, 2021, the Company had $70.8 million of unrecognized pre-tax compensation expense for
stock options. This expense will be recognized over the remaining vesting periods which are 1.9 years on a weighted-average
basis.

During 2020, the Company received $133.8 million in cash from the exercise of stock options. The related tax benefit from the
exercise of these options was $24.6 million. During 2020, 2019 and 2018, the total intrinsic value of options exercised was
$104.3 million, $143.7 million and $18.3 million, respectively. When options are exercised, the related shares are issued from
treasury stock.

An excess tax benefit is generated on the extent to which the actual gain, or spread, an optionee receives upon exercise of an
option exceeds the fair value determined at the grant date; that excess spread over the fair value of the option times the
applicable tax rate represents the excess tax benefit. During 2020, 2019 and 2018, the excess tax benefit arising from tax
deductions in excess of recognized compensation cost totaled $17.6 million, $25.8 million and $2.3 million, respectively, and
was recorded in income tax expense.

Outstanding and exercisable stock option information at January 2, 2021 follows:

Outstanding Stock Options

Exercisable Stock Options

Exercise Price Ranges
$75.00 and below......................
$75.01 — $125.00....................
$125.01 and higher...................

Options

427,354
1,483,536
3,964,356
5,875,246

Weighted-
Average
Remaining
Contractual Life

Weighted-
Average
Exercise Price
67.96
108.40
157.87
138.84

1.47 $
4.97
8.55
7.13 $

Weighted-
Average
Remaining
Contractual Life

Weighted-
Average
Exercise Price
67.96
108.40
152.56
121.65

1.47 $
4.97
7.70
5.66 $

Options

427,354
1,483,536
1,378,999
3,289,889

Compensation cost for new grants is recognized on a straight-line basis over the vesting period. The expense for retirement
eligible employees (those aged 55 and over and with 10 or more years of service) is recognized by the date they become
retirement eligible, as such employees may retain their options for the 10 year contractual term in the event they retire prior to
the end of the vesting period stipulated in the grant.

As of January 2, 2021, the aggregate intrinsic value of stock options outstanding and stock options exercisable was $234.8
million and $187.2 million, respectively.

Employee Stock Purchase Plan:

The Employee Stock Purchase Plan (“ESPP”) enables eligible employees in the United States, Canada and Israel to purchase
shares of the Company's common stock at the lower of 85.0% of the fair market value of the shares on the grant date ($123.83
per share for fiscal year 2020 purchases) or 85.0% of the fair market value of the shares on the last business day of each month.
A maximum of 1,600,000 shares are authorized for subscription. In conjunction with the Company’s cost savings initiatives, the
ESPP was temporarily suspended in 2019 and was subsequently reinstated in 2020. During 2020, 2019 and 2018, 119,038
shares, 12,465 shares and 139,715 shares, respectively, were issued under the plan at average prices of $110.97, $103.02, and
$121.00 per share, respectively, and the intrinsic value of the ESPP purchases was $3.3 million, $0.3 million and $3.1 million,
respectively. For 2020, the Company received $13.2 million in cash from ESPP purchases, and there was no related tax benefit.
The fair value of ESPP shares was estimated using the Black-Scholes option pricing model. ESPP compensation cost is
recognized ratably over the one year term based on actual employee stock purchases under the plan. The fair value of the
employees’ purchase rights under the ESPP was estimated using the following assumptions for 2020, 2019 and 2018,
respectively: dividend yield of 1.7%, 2.2% and 1.6%; expected volatility of 28.0%, 28.0% and 16.0%; risk-free interest rates of
1.6%, 2.5%, and 1.6%; and expected lives of one year. The weighted-average fair value of those purchase rights granted in
2020, 2019 and 2018 was $41.02, $27.75 and $43.69, respectively. Total compensation expense recognized for ESPP was $3.9
million in 2020, de minimus in 2019 and $6.6 million in 2018.

Restricted Share Units and Awards:

Compensation cost for restricted share units and awards, including restricted shares granted to French employees in lieu of
RSUs, (collectively “RSUs”) granted to employees is recognized ratably over the vesting term, which varies but is generally
4 years. RSU grants totaled 325,448 shares, 282,598 shares and 413,838 shares in 2020, 2019 and 2018, respectively. The

weighted-average grant date fair value of RSUs granted in 2020, 2019 and 2018 was $165.44, $149.14 and $133.90 per share,
respectively.

Total compensation expense recognized for RSUs amounted to $35.6 million, $41.2 million and $40.1 million in 2020, 2019
and 2018, respectively. The actual tax benefit received related to the shares that were delivered in 2020 was $9.0 million. The
excess tax benefit recognized was $2.3 million, $3.2 million, and $1.8 million in 2020, 2019 and 2018, respectively. As of
January 2, 2021, unrecognized compensation expense for RSUs amounted to $85.6 million and will be recognized over a
weighted-average period of 2 years.

A summary of non-vested restricted stock unit and award activity as of January 2, 2021, and changes during the twelve month
period then ended is as follows:

Non-vested at December 28, 2019........................................................................
Granted..................................................................................................................
Vested....................................................................................................................
Forfeited................................................................................................................
Non-vested at January 2, 2021..............................................................................

Restricted Share
Units & Awards

Weighted-Average
Grant
Date Fair Value

866,520 $
325,448
(291,523)
(69,061)
831,384 $

139.23
165.44
134.48
137.98
151.26

The total fair value of shares vested (market value on the date vested) during 2020, 2019 and 2018 was $58.5 million, $56.7
million and $46.8 million, respectively.

Prior to 2020, non-employee members of the Board of Directors received annual restricted share-based grants which must be
cash settled and accordingly mark-to-market accounting is applied. The Company recognized $1.6 million and $6.8 million of
expense for these awards in 2020 and 2019, respectively, and $3.4 million of income in 2018. Beginning in 2020, the annual
grant issued to non-employee members of the Board of Directors will be stock settled. The expense related to the 2020 annual
grant was $1.4 million in 2020. Additionally, members of the Board of Directors were granted restricted share units for which
compensation expense of $1.0 million, $1.2 million, and $1.2 million was recognized for 2020, 2019 and 2018, respectively.

Management Incentive Compensation Plan Performance Stock Units:

In 2020 and 2019, the Company granted Performance Stock Units (collectively "MICP-PSUs") under the Management
Incentive Compensation Plan ("MICP") to participating employees. Awards are payable in shares of common stock and
generally no award is made if the employee terminates employment prior to the settlement dates. The ultimate delivery of the
shares related to the 2020 and 2019 MICP-PSU grant will occur ratably in 2021, 2022, and 2023 for the 2020 plan and in 2020,
2021, and 2022 for the 2019 plan. The total shares to be delivered are based on actual 2020 and 2019 performance in relation to
the established goals.

A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:

Non-vested at December 28, 2019...........................................................................
Granted.....................................................................................................................
Vested......................................................................................................................
Forfeited...................................................................................................................
Non-vested at January 2, 2021.................................................................................

Share Units

Weighted-Average
Grant
Date Fair Value

346,011 $
508,860
(62,613)
(199,223)
593,035 $

127.27
93.58
127.27
122.60
99.93

Compensation cost for these performance awards is recognized ratably over the vesting term of 3 years. Total expense
recognized in 2020 and 2019 related to these MICP-PSUs approximated $18.5 million and $9.5 million, respectively. The
actual tax benefit received related to the shares that were delivered in 2020 was $1.9 million.

Long-Term Performance Awards:

The Company has granted Long-Term Performance Awards (“LTIP”) under its 2018 Omnibus Award Plan and 2013 Long
Term Incentive Plan to senior management employees for achieving Company performance measures. Awards are payable in
shares of common stock, which may be restricted if the employee has not achieved certain stock ownership levels, and
generally no award is made if the employee terminates employment prior to the settlement date. LTIP grants were made in

2018, 2019 and 2020. Each grant has separate annual performance goals for each year within the respective three year
performance period. Earnings per share and cash flow return on investment represent 75% of the grant value. There is a third
market-based metric, representing 25% of the total grant, which measures the Company’s common stock return relative to peers
over the performance period. The ultimate delivery of shares will occur in 2021, 2022 and 2023 for the 2018, 2019 and 2020
grants, respectively. Share settlements are based on actual performance in relation to these goals.

Expense recognized for these performance awards amounted to $17.1 million in 2020, $9.0 million in 2019, and $4.7 million in
2018. With the exception of the market-based metric comprising 25% of the award, in the event performance goals are not met,
compensation cost is not recognized and any previously recognized compensation cost is reversed. The actual tax benefit
received related to the shares that were delivered in 2020 was $3.9 million. The excess tax benefit recognized was $0.7 million
and $1.5 million in 2020 and 2019, respectively. There was no excess tax benefit recognized in 2018.

A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:

Share Units

Weighted-Average
Grant
Date Fair Value

607,532 $
205,964
(97,560)
(107,198)
608,738 $

131.46
154.07
119.34
122.78
142.58

OTHER EQUITY ARRANGEMENTS

2019 Equity Units and Capped Call Transactions

In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2019 Equity
Units”). Each unit has a stated amount of $100 and initially consists of a three-year forward stock purchase contract (“2022
Purchase Contracts”) for the purchase of a variable number of shares of common stock, on November 15, 2022, for a price of
$100, and a 10% beneficial ownership interest in one share of 0% Series D Cumulative Perpetual Convertible Preferred Stock,
without par, with a liquidation preference of $1,000 per share (“Series D Preferred Stock”). The Company received
approximately $735.0 million in cash proceeds from the 2019 Equity Units net of offering expenses and underwriting costs and
commissions, and issued 750,000 shares of Series D Preferred Stock, recording $750.0 million in preferred stock. The proceeds
were used for general corporate purposes, including repayment of short-term borrowings. The Company also used $19.2 million
of the proceeds to enter into capped call transactions utilized to hedge potential economic dilution as described in more detail
below.

Convertible Preferred Stock

In November 2019, the Company issued 750,000 shares of Series D Preferred Stock, without par, with a liquidation preference
of $1,000 per share. The convertible preferred stock will initially not bear any dividends and the liquidation preference of the
convertible preferred stock will not accrete. The convertible preferred stock has no maturity date and will remain outstanding
unless converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock will generally
have no voting rights.

The Series D Preferred Stock is pledged as collateral to support holders’ purchase obligations under the 2022 Purchase
Contracts and can be remarketed. In connection with any successful remarketing, the Company may (but is not required to)
modify certain terms of the convertible preferred stock, including the dividend rate, the conversion rate, and the earliest
redemption date. After any successful remarketing in connection with which the dividend rate on the convertible preferred stock
is increased, the Company will pay cumulative dividends on the convertible preferred stock, if declared by the Board of
Directors, quarterly in arrears from the applicable remarketing settlement date.

On and after November 15, 2022, the Series D Preferred Stock may be converted into common stock at the option of the holder.
The conversion rate was initially 5.2263 shares of common stock per one share of Series D Preferred Stock, which was
equivalent to an initial conversion price of approximately $191.34 per share of common stock. As of January 2, 2021, due to
customary anti-dilution provisions, the conversation rate was 5.2269, equivalent to a conversion price of approximately $191.32

per share of common stock. At the election of the Company, upon conversion, the Company may deliver cash, common stock,
or a combination thereof.

The Company may not redeem the Series D Preferred Stock prior to December 22, 2022. At the election of the Company, on or
after December 22, 2022, the Company may redeem for cash, all or any portion of the outstanding shares of the Series D
Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid dividends.
If the Company calls the Series D Preferred Stock for redemption, holders may convert their shares immediately preceding the
redemption date.

2022 Purchase Contracts

The 2022 Purchase Contracts obligate the holders to purchase, on November 15, 2022, for a price of $100 in cash, a maximum
number of 4.7 million shares of the Company’s common stock (subject to customary anti-dilution adjustments). The 2022
Purchase Contract holders may elect to settle their obligation early, in cash. The Series D Preferred Stock is pledged as
collateral to guarantee the holders’ obligations to purchase common stock under the terms of the 2022 Purchase Contracts. The
initial settlement rate determining the number of shares that each holder must purchase will not exceed the maximum settlement
rate, and is determined over a market value averaging period immediately preceding November 15, 2022.

The initial maximum settlement rate of 0.6272 was calculated using an initial reference price of $159.45, equal to the last
reported sale price of the Company's common stock on November 7, 2019. As of January 2, 2021, due to the customary anti-
dilution provisions, the maximum settlement rate was 0.6272, equivalent to a reference price of $159.43. If the applicable
market value of the Company's common stock is less than or equal to the reference price, the settlement rate will be the
maximum settlement rate; and if the applicable market value of the Company's common stock is greater than the reference
price, the settlement rate will be a number of shares of the Company's common stock equal to $100 divided by the applicable
market value. Upon settlement of the 2022 Purchase Contracts, the Company will receive additional cash proceeds of $750
million.

The Company pays the holders of the 2022 Purchase Contracts quarterly payments (“Contract Adjustment Payments”) at a rate
of 5.25% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, which commenced on
February 15, 2020. The $114.2 million present value of the Contract Adjustment Payments reduced Shareowners’ Equity at
inception. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between
the cash payment and the present value will accrete to interest expense, approximately $1.3 million per year over the three-year
term. As of January 2, 2021, the present value of the Contract Adjustment Payments was $76.3 million.

The holders can settle the purchase contracts early, for cash, subject to certain exceptions and conditions in the prospectus
supplement. Upon early settlement of any purchase contracts, the Company will deliver the number of shares of its common
stock equal to 85% of the number of shares of common stock that would have otherwise been deliverable.

Capped Call Transactions

In order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series D
Preferred Stock, to the extent that the conversion value of the convertible preferred stock exceeds its liquidation preference, the
Company entered into capped call transactions with three major financial institutions.

The capped call transactions have a term of approximately three years and are intended to cover the number of shares issuable
upon conversion of the Series D Preferred Stock. Subject to customary anti-dilution adjustments, the capped call has an initial
lower strike price of $191.34, which corresponds to the minimum 5.2263 settlement rate of the Series D Preferred Stock, and an
upper strike price of $207.29, which is approximately 30% higher than the closing price of the Company's common stock on
November 7, 2019. As of January 2, 2021, due to the customary anti-dilution provisions, the capped call transactions were at an
adjusted lower strike price of $191.32 and an adjusted upper strike price of $207.26.

The capped call transactions may be settled by net share settlement (the default settlement method) or, at the Company’s option
and subject to certain conditions, cash settlement, physical settlement or modified physical settlement. The number of shares the
Company will receive will be determined by the terms of the contracts using a volume-weighted average price calculation for
the market value of the Company's common stock, over an averaging period. The market value determined will then be
measured against the applicable strike price of the capped call transactions. The Company expects the capped call transactions
to offset the potential dilution upon conversion of the Series D Preferred Stock if the calculated market value is greater than the
lower strike price but less than or equal to the upper strike price of the capped call transactions. Should the calculated market

value exceed the upper strike price of the capped call transactions, the dilution mitigation will be limited based on such capped
value as determined under the terms of the contracts.

With respect to the impact on the Company, the capped call transactions and 2019 Equity Units, when taken together, result in
the economic equivalent of having the conversion price on the 2019 Equity Units at $207.26, the upper strike price of the
capped call as of January 2, 2021.

The Company paid $19.2 million, or an average of $4.90 per option, to enter into capped call transactions on 3.9 million shares
of common stock. The $19.2 million premium paid was recorded as a reduction of Shareowners’ Equity. The aggregate fair
value of the options at January 2, 2021 was $22.3 million.

2017 Equity Units and Capped Call Transactions

In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million (“2017 Equity Units”).
Each unit has a stated amount of $100 and initially consists of a three-year forward stock purchase contract (“2020 Purchase
Contracts”) for the purchase of a variable number of shares of common stock, on May 15, 2020, for a price of $100, and a 10%
beneficial ownership interest in one share of 0% Series C Cumulative Perpetual Convertible Preferred Stock, without par, with
a liquidation preference of $1,000 per share (“Series C Preferred Stock”). The Company received approximately $726.0 million
in net cash proceeds from the 2017 Equity Units net of offering expenses and underwriting costs and commissions, and issued
750,000 shares of Series C Preferred Stock, recording $750.0 million in preferred stock. The proceeds were used for general
corporate purposes, including repayment of short-term borrowings. The Company also used $25.1 million of the proceeds to
enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below.

Convertible Preferred Stock

In May 2017, the Company issued 750,000 shares of Series C Preferred Stock, without par, with a liquidation preference of
$1,000 per share. The convertible preferred stock initially did not bear any dividends and the liquidation preference of the
convertible preferred stock did not accrete. The convertible preferred stock has no maturity date and remains outstanding unless
converted by holders or redeemed by the Company. Holders of shares of the convertible preferred stock generally have no
voting rights. The Series C Preferred Stock was pledged as collateral to support holders' purchase obligations under the 2020
Purchase Contracts.

In May 2020, the Company successfully remarketed the Series C Preferred Stock. In connection with the remarketing, the
conversation rate was reset to 6.7352 shares of the Company's common stock, which is equivalent to a conversion price of
approximately $148.47 per share. Beginning on May 15, 2020, the holders have the option to convert the Series C Preferred
Stock into common stock. At the election of the Company, upon conversion, the Company may delivery cash, common stock,
or a combination thereof. As of January 2, 2021 due to the customary anti-dilution provisions, the conversion rate was 6.7504,
equivalent to a conversion price of approximately $148.14 per share of common stock.

Subsequent to the remarketing, holders of the convertible preferred stock will be entitled to receive, if declared by the Board of
Directors, cumulative dividends (i) from, and including May 15, 2020 to, but excluding, May 15, 2023 (the "dividend step-up
date") at a fixed rate equal to 5.0% per annum of the $1,000 per share liquidation preference (equivalent to $50.00 per annum
per share) and (ii) from, and including, the dividend step-up date at a fixed rate equal to 10.0% per annum of the $1,000 per
share liquidation preference (equivalent to $100.00 per annum per share). Dividends will be cumulative on the $1,000
liquidation preference per share and will be payable, if declared by the Board of Directors, quarterly in arrears on February 15,
May 15, August 15 and November 15 of each year, beginning on August 15, 2020. Dividends accrued on the Series C Preferred
Stock reduce net earnings for purposes of calculating earnings per share.

The Company does not have the right to redeem the Series C Preferred Stock prior to May 15, 2021. At the election of the
Company, on or after May 15, 2021, the Company may redeem for cash, all or any portion of the outstanding shares of the
Series C Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid
dividends. If the Company calls the Series C Preferred Stock for redemption, holders may convert their shares immediately
preceding the redemption date.

2020 Purchase Contracts

The remarketing resulted in cash proceeds of $750.0 million, which were automatically applied to satisfy in full the related unit
holders' obligations to purchase common shares under their 2020 Purchase Contracts. In May 2020, the Company issued

100

5,463,750 common shares, settling all 2020 Purchase Contracts using the maximum settlement rate of 0.7285 (equivalent to a
reference price of $137.26 per common share).

The Company paid the holders of the 2020 Purchase Contracts quarterly payments (“Contract Adjustment Payments”) at a rate
of 5.375% per annum, payable quarterly in arrears on February 15, May 15, August 15 and November 15, which commenced
August 15, 2017. The $117.1 million initial present value of these Contract Adjustment Payments reduced Shareowners’ Equity
at inception. As each quarterly Contract Adjustment Payment was made, the related liability was reduced and the difference
between the cash payment and the present value accreted to interest expense, approximately $1.3 million per year over the
three-year term. On May 15, 2020, the Company paid the final contract adjustment payment related to the 2020 Purchase
Contracts.

Capped Call Transactions

In May 2017, the Company entered into capped call transactions with three major financial institutions (the "counterparties") in
order to offset the potential economic dilution associated with the common shares issuable upon conversion of the Series C
preferred Stock, to the extent that the conversion value of the conversion preferred stock exceeds its liquidation preference. The
Company paid $25.1 million, or an average of $5.43 per option, to enter into capped call transactions on 4.6 million shares of
common stock. The $25.1 million paid was recorded as a reduction of Shareowners' Equity.

The capped call transactions had a term of approximately three years and were intended to cover the number of shares issuable
upon conversion of the Series C preferred Stock. Subject to customary anti-dilution adjustments, the capped call had an initial
lower strike price of $162.27, which corresponded to the minimum 6.1627 settlement rate of the Series C Preferred Stock at
inception, and an upper strike price of $179.53, which was approximately 30% higher than the closing price of the Company's
common stock on May 11, 2017. In June 2020, the capped call options expired out of the money.

2018 Capped Call Transactions

In March 2018, the Company purchased from a financial institution "at-the money" capped call options with an approximate
term of three years, on 3.2 million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate
premium of $57.3 million, or an average of $17.96 per share. The premium paid was recorded as reduction of Shareowners'
Equity. The purpose of the capped call options was to hedge the risk of stock price appreciation between the lower and upper
strike prices of the capped call options for a future share repurchase.

In February 2020, the Company net-share settled 0.6 million of the 3.2 million capped call options on its common stock and
received 61,767 shares using an average reference price of $162.26 per common share.

On June 9, 2020, the Company amended the 2018 capped call options to align with and offset the potential economic dilution
associated with the common shares issuable upon conversion of the remarketed Series C Preferred Stock, as further discussed
above. Subsequent to the amendment, the capped call options, subject to anti-dilution, had an initial lower strike price of
$148.34 and an upper strike price of $165.00, which was approximately 30% higher than the closing price of the Company's
common stock on June 9, 2020. As of January 2, 2021, due to the customary anti-dilution provisions, the capped call
transactions had adjusted lower and upper strike prices of $148.14 and $164.77, respectively. The aggregate fair value of the
options at January 2, 2021 was $53.4 million.

With the respect to the impact on the Company, the capped call transactions and Series C Preferred Stock, when taken together,
result in the economic equivalent of having the conversion price on the Series C Preferred Stock at $164.77, the upper strike
price of the capped call as of January 2, 2021.

The capped call transactions may be settled by net share settlement (the default settlement method) or, at the Company's option
and subject to certain conditions, cash settlement, physical settlement or modified physical settlement. The number of shares the
Company will receive will be determined by the terms of the contracts using a volume-weighted average price calculation for
the market value of the Company's common stock, over an averaging period. The market value determined will then be
measured against the applicable strike price of the capped call transactions.

K. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the accumulated balances for each component of Accumulated other
comprehensive loss:

101

(Millions of Dollars)

Currency
translation
adjustment and
other

(Losses) gains
on cash flow
hedges, net of
tax

Gains (losses)
on net
investment
hedges, net of
tax

Pension (losses)
gains, net of tax

Total

Balance - December 29, 2018.................... $
Other comprehensive (loss) income before
reclassifications............................................

Reclassification adjustments to earnings.....

Net other comprehensive (loss) income.......

Balance - December 28, 2019.................... $
Other comprehensive income (loss) before
reclassifications............................................

Adjustments related to sales of businesses

Reclassification adjustments to earnings.....

Net other comprehensive income (loss).......

(1,481.2) $

(26.8) $

63.3

(369.6) $

(1,814.3)

(36.0)

—

(36.0)

(40.5)

13.1

(27.4)

(1,517.2) $

(54.2) $

266.2

15.7

—

281.9

(64.2)

—

15.4

(48.8)

60.0

(26.0)

34.0

97.3

(38.3)

—

13.8

(24.5)

(53.3)

12.4

(40.9)

(69.8)

(0.5)

(70.3)

(410.5) $

(1,884.6)

(53.4)

0.6

15.1

(37.7)

110.3

16.3

44.3

170.9

Balance - January 2, 2021......................... $

(1,235.3) $

(103.0) $

72.8

(448.2) $

(1,713.7)

The reclassifications out of Accumulated other comprehensive loss for the twelve months ended January 2, 2021 and December
28, 2019 were as follows:

(Millions of Dollars)

2020

2019

Components of accumulated other comprehensive loss

Reclassification
adjustments

Affected line item in Consolidated
Statements of Operations

Realized gains (losses) on cash flow hedges................

12.4 $

Realized losses on cash flow hedges............................

(19.6)

(16.3)

Total before taxes..........................................................

(23.5) $

Tax effect......................................................................

Realized losses on cash flow hedges, net of tax...........

Realized (losses) gains on net investment hedges........

Tax effect......................................................................

Realized (losses) gains on net investment hedges, net
of tax.............................................................................

8.1

(15.4) $

(18.2) $

4.4

(6.5)

—

(16.2)

(22.7)

9.6

(13.1)

34.2

(8.2)

(13.8) $

26.0

Actuarial losses and prior service costs / credits..........
Settlement losses ..........................................................
Total before taxes..........................................................

Tax effect......................................................................
Amortization of defined benefit pension items, net of
tax..................................................................................

L. EMPLOYEE BENEFIT PLANS

(19.5)
(0.6)

(20.1)

5.0

(15.1) $

(15.3)
(1.0)

(16.3)

3.9

(12.4)

Cost of sales

Other, net

Interest expense

Income taxes

Other, net

Income taxes

Other, net
Other, net

Income taxes

EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) — Most U.S. employees may make contributions that do not exceed
25% of their eligible compensation to a tax-deferred 401(k) savings plan, subject to restrictions under tax laws. Employees
generally direct the investment of their own contributions into various investment funds. An employer match benefit is provided
under the plan equal to one-half of each employee’s tax-deferred contribution up to the first 7% of their compensation.
Participants direct the entire employer match benefit such that no participant is required to hold the Company’s common stock
in their 401(k) account. The employer match benefit, which was suspended in the second quarter of 2020, totaled $10.9 million,
$28.8 million and $28.0 million in 2020, 2019 and 2018, respectively. In addition to the regular employer match, $0.7 million
was allocated to the employee's accounts for forfeitures and a surplus resulting from appreciation of the Company's share value
in 2018. There was no additional employer match allocated to employee's accounts in 2020 and 2019.

102

In addition, approximately 9,300 U.S. salaried and non-union hourly employees are eligible to receive a non-contributory
benefit under the Core benefit plan. Core benefit allocations range from 2% to 6% of eligible employee compensation based on
age. Allocations for benefits earned under the Core plan, which were suspended in the second quarter of 2020, were $5.6
million, $28.8 million, and $29.0 million in 2020, 2019 and 2018, respectively. Assets held in participant Core accounts are
invested in target date retirement funds which have an age-based allocation of investments.

Shares of the Company's common stock held by the ESOP were purchased with the proceeds of borrowings from the Company
in 1991 ("1991 internal loan"). Shareowners' equity reflects a reduction equal to the cost basis of unearned (unallocated) shares
purchased with the internal borrowings. In 2019 and 2018, the Company made additional contributions to the ESOP for $7.2
million, and $7.0 million, respectively, which were used by the ESOP to make additional payments on the 1991 internal loan.
These payments triggered the release of 226,212 and 207,049 shares of unallocated stock in 2019 and 2018, respectively.

Net ESOP activity recognized is comprised of the cost basis of shares released, the cost of the aforementioned Core and 401(k)
match defined contribution benefits, less the fair value of shares released and dividends on unallocated ESOP shares. The
Company’s net ESOP activity resulted in expense of $6.3 million in 2020, income of $0.5 million in 2019 and expense of $0.4
million in 2018. ESOP expense is affected by the market value of the Company’s common stock on the monthly dates when
shares are released. The weighted-average market value of shares released was $146.08 per share in 2020, $138.67 per share in
2019 and $139.45 per share in 2018.

Unallocated shares are released from the trust based on current period debt principal and interest payments as a percentage of
total future debt principal and interest payments. Dividends on both allocated and unallocated shares may be used for debt
service and to credit participant accounts for dividends earned on allocated shares. Dividends paid on the shares acquired with
the 1991 internal loan were used solely to pay internal loan debt service in all periods. Dividends on ESOP shares, which are
charged to shareowners’ equity as declared, were $1.3 million, $6.3 million and $7.7 million in 2020, 2019, and 2018,
respectively, net of the tax benefit which is recorded in earnings. Dividends on ESOP shares were utilized entirely for debt
service in all years. Interest costs incurred by the ESOP on the 1991 internal loan, which have no earnings impact, were $0.1
million, $0.5 million and $1.6 million for 2020, 2019 and 2018, respectively. Both allocated and unallocated ESOP shares are
treated as outstanding for purposes of computing earnings per share. As of January 2, 2021, the cumulative number of ESOP
shares allocated was 15,541,357, of which participants held 1,638,044 shares. There are no unallocated shares remaining as of
January 2, 2021, as all shares in the ESOP trust holding account have been released. The Company made cash contributions
totaling $9.2 million in 2020, $2.2 million in 2019 and $2.3 million in 2018, excluding additional contributions of $7.2 million
and $7.0 million in 2019 and 2018, respectively, as discussed previously.

PENSION AND OTHER BENEFIT PLANS — The Company sponsors pension plans covering most domestic hourly and
certain executive employees, and approximately 12,500 foreign employees. Benefits are generally based on salary and years of
service, except for U.S. collective bargaining employees whose benefits are based on a stated amount for each year of service.

The Company contributes to a number of multi-employer plans for certain collective bargaining U.S. employees. The risks of
participating in these multi-employer plans are different from single-employer plans in the following aspects:

a. Assets contributed to the multi-employer plan by one employer may be used to provide benefit to employees of other

participating employers.

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be inherited by the
remaining participating employers.

If the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to
pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

In addition, the Company also contributes to a number of multi-employer plans outside of the U.S. The foreign plans are
insured, therefore, the Company’s obligation is limited to the payment of insurance premiums.

The Company has assessed and determined that none of the multi-employer plans to which it contributes are individually
significant to the Company’s Consolidated Financial Statements. The Company does not expect to incur a withdrawal liability
or expect to significantly increase its contributions over the remainder of the contract period.

In addition to the multi-employer plans, various other defined contribution plans are sponsored worldwide.

103

The expense for defined contribution plans, aside from the earlier discussed ESOP plans, is as follows:

(Millions of Dollars)
Multi-employer plan expense
Other defined contribution plan expense

2020

2019

2018

$
$

7.8 $
29.7 $

7.2 $
36.2 $

7.3
12.9

The components of net periodic pension expense (benefit) are as follows:

(Millions of Dollars)
Service cost..................................................... $
Interest cost.....................................................
Expected return on plan assets.......................
Amortization of prior service cost (credit).....

Actuarial loss amortization.............................
Special termination benefit.............................
Settlement / curtailment loss...........................
Net periodic pension (benefit) expense.......... $

2020

U.S. Plans

2019

2018

2020

2019

2018

Non-U.S. Plans

6.8 $
35.3
(58.7)

1.0
8.5
—
—
(7.1) $

12.3 $
47.1
(61.7)

1.0
8.0
—
—
6.7 $

7.5 $
42.8
(68.7)

1.1
7.8
—
—
(9.5) $

16.1 $
22.5
(41.2)

(0.7)
11.7
0.2
0.6
9.2 $

14.6 $
30.3
(45.6)

(0.6)
8.6
—
1.0
8.3 $

15.2
28.6
(46.5)

(1.3)
8.5
—
0.7
5.2

The Company provides medical and dental benefits for certain retired employees in the United States, Brazil, and Canada.
Approximately 16,100 participants are covered under these plans. Net periodic post-retirement benefit expense was comprised
of the following elements:

(Millions of Dollars)
Service cost................................................................................................ $
Interest cost................................................................................................
Amortization of prior service credit..........................................................
Actuarial loss amortization........................................................................
Special termination benefit........................................................................
Net periodic post-retirement expense........................................................ $

Other Benefit Plans

2020

2019

2018

0.6 $
1.5
(1.3)
0.3
16.1
17.2 $

0.3 $
1.6
(1.4)
(0.3)
—
0.2 $

0.5
1.6
(1.3)
—
—
0.8

The components of net periodic benefit cost other than the service cost component are included in Other, net in the
Consolidated Statements of Operations.

Changes in plan assets and benefit obligations recognized in Accumulated other comprehensive loss in 2020 are as follows:

(Millions of Dollars)
Current year actuarial loss.......................................................................................................................... $
Amortization of actuarial loss.....................................................................................................................
Prior service cost from plan amendments...................................................................................................
Settlement / curtailment loss.......................................................................................................................
Currency / other..........................................................................................................................................
Total loss recognized in Accumulated other comprehensive loss (pre-tax)............................................... $

2020

51.9
(19.5)
0.2
(0.6)
18.4
50.4

The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit costs
during 2021 total $22.3 million, representing amortization of actuarial losses.

The changes in the pension and other post-retirement benefit obligations, fair value of plan assets, as well as amounts
recognized in the Consolidated Balance Sheets, are shown below.

104

2020

2019

52.2 $

44.8

0.6

1.5

16.1

—

(2.9)

—

(1.8)

—

(4.5)

0.3

1.6

—

8.6

—

2.4

(5.5)

61.2 $

52.2

— $

—

4.5

—

— $

—

5.5

—

(5.5)

—

(61.2) $

(52.2)

(0.6)

(3.2)

(2.0)

1.1

U.S. Plans

Non-U.S. Plans

Other Benefits

(Millions of Dollars)
Change in benefit obligation
Benefit obligation at end of prior year.................. $ 1,325.4 $ 1,260.9 $ 1,449.9 $ 1,305.3 $
Service cost............................................................

2020

2019

14.6

12.3

16.1

6.8

Interest cost............................................................

Special termination benefit....................................

Settlements/curtailments........................................

35.3

—

47.1

—

22.5

0.2

30.3

—

(5.5)

(6.0)

Actuarial loss (gain)..............................................

123.3

130.4

112.0

140.6

Plan amendments...................................................

Foreign currency exchange rate changes...............

Participant contributions........................................

0.1

—

1.4

—

0.1

84.9

0.3

0.7

25.8

0.3

Acquisitions, divestitures, and other.....................

(4.0)

(10.0)

(6.5)

(2.2)

Benefits paid..........................................................
(59.5)
Benefit obligation at end of year........................... $ 1,404.3 $ 1,325.4 $ 1,622.3 $ 1,449.9 $
Change in plan assets
Fair value of plan assets at end of prior year......... $ 1,103.5 $ 1,020.7 $ 1,093.5 $
Actual return on plan assets...................................

974.3 $

(116.7)

(51.7)

(82.6)

133.2

190.0

119.3

160.9

Participant contributions........................................

Employer contributions.........................................

Settlements............................................................

Foreign currency exchange rate changes...............

—

13.7

—

19.5

—

0.3

22.0

0.3

22.6

(5.2)

(5.6)

55.6

30.4

Acquisitions, divestitures, and other.....................

(4.0)

(10.0)

(4.2)

(2.2)

Benefits paid..........................................................

(82.6)

(116.7)

(51.7)

(59.5)

(4.5)

Fair value of plan assets at end of plan year.......... $ 1,191.5 $ 1,103.5 $ 1,229.6 $ 1,093.5 $
Funded status — assets less than benefit
obligation............................................................... $
Unrecognized prior service cost (credit)...............

(392.7) $

(356.4) $

(221.9) $

(212.8) $

(17.4)

(17.5)

4.7

3.8

Unrecognized net actuarial loss (gain)..................
Net amount recognized.......................................... $

(Millions of Dollars)
Amounts recognized in the Consolidated
Balance Sheets

278.7

266.2

360.3

318.7

69.7 $

49.0 $

(49.8) $

(55.2) $

(65.0) $

(53.1)

U.S. Plans

Non-U.S. Plans

Other Benefits

2020

2019

2020

2019

2020

2019

Prepaid benefit cost (non-current)......................... $
Current benefit liability.........................................

Non-current benefit liability..................................
Net liability recognized......................................... $

— $

0.2 $

0.1 $

— $

(7.3)

(7.6)

(10.2)

(9.1)

(6.8)

—

(4.5)

(205.5)

(214.3)

(382.7)

(347.4)

(54.4)

(47.7)

(212.8) $

(221.9) $

(392.7) $

(356.4) $

(61.2) $

(52.2)

Accumulated other comprehensive loss (pre-tax):

Prior service cost (credit)...................................... $
Actuarial loss (gain)..............................................

3.8 $

4.7 $

(17.4) $

(17.5) $

(0.6) $

278.7

282.5

266.2

270.9

360.3

342.9

318.7

301.2

(3.2)

(3.8)

(2.0)

1.1

(0.9)

Net amount recognized.......................................... $

69.7 $

49.0 $

(49.8) $

(55.2) $

(65.0) $

(53.1)

105

Actuarial losses and gains reflected in the table above are driven by changes in demographic experience, changes in
assumptions, and differences in actual returns on investments compared to estimated returns. For the year ended January 2,
2021, the increase in the benefit obligation as a result of actuarial losses was primarily driven by the decline in the single
equivalent discount rate used to measure these obligations. These actuarial losses were partially offset by an improved funded
position, as the actual return on plan assets during the year exceeded the estimated return, and an updated mortality
improvement scale which slightly reduced the projected obligation.

The accumulated benefit obligation for all defined benefit pension plans was $3.022 billion at January 2, 2021 and $2.768
billion at December 28, 2019. Information regarding pension plans in which accumulated benefit obligations exceed plan assets
follows:

(Millions of Dollars)
Accumulated benefit obligation......................................... $
Fair value of plan assets..................................................... $

U.S. Plans

Non-U.S. Plans

2020

2019

2020

2019

1,401.5 $
1,191.5 $

1,323.7 $
1,103.5 $

1,531.8 $
1,201.3 $

1,390.1
1,090.8

Information regarding pension plans in which projected benefit obligations (inclusive of anticipated future compensation
increases) exceed plan assets follows:

(Millions of Dollars)
Projected benefit obligation................................................ $
Fair value of plan assets..................................................... $

U.S. Plans

Non-U.S. Plans

2020

2019

2020

2019

1,404.3 $
1,191.5 $

1,325.4 $
1,103.5 $

1,619.9 $
1,227.0 $

1,448.6
1,092.0

The major assumptions used in valuing pension and post-retirement plan obligations and net costs were as follows:

Pension Benefits

U.S. Plans

Non-U.S. Plans

Other Benefits

2020

2019

2018

2020

2019

2018

2020

2019

2018

Weighted-average
assumptions used to
determine benefit obligations
at year end:

Discount rate.............................
Rate of compensation increase..
Weighted-average
assumptions used to
determine net periodic
benefit cost:
Discount rate - service cost.......
Discount rate - interest cost.......
Rate of compensation increase..
Expected return on plan assets..

2.39 % 3.20 % 4.20 % 1.31 % 1.80 % 2.62 % 2.19 % 3.64 % 4.03 %
3.00 % 3.50 % 3.00 % 3.29 % 3.30 % 3.44 % 3.50 % 3.50 % 3.50 %

3.58 % 4.43 % 3.72 % 1.57 % 2.37 % 2.15 % 5.62 % 5.22 % 5.11 %
2.75 % 3.86 % 3.16 % 1.61 % 2.37 % 2.20 % 3.36 % 4.04 % 3.77 %
3.00 % 3.00 % 3.00 % 3.30 % 3.44 % 3.45 % 3.50 % 3.50 % 3.50 %
5.25 % 6.25 % 6.25 % 3.90 % 4.73 % 4.37 % —

—

The expected rate of return on plan assets is determined considering the returns projected for the various asset classes and the
relative weighting for each asset class. The Company will use a 3.16% weighted-average expected rate of return assumption to
determine the 2021 net periodic benefit cost.

PENSION PLAN ASSETS — Plan assets are invested in equity securities, government and corporate bonds and other fixed
income securities, money market instruments and insurance contracts. The Company’s worldwide asset allocations at January 2,
2021 and December 28, 2019 by asset category and the level of the valuation inputs within the fair value hierarchy established
by ASC 820, Fair Value Measurement, are as follows:

106

Asset Category (Millions of Dollars)
Cash and cash equivalents..................................................................... $
Equity securities
U.S. equity securities............................................................................
Foreign equity securities......................................................................
Fixed income securities
Government securities..........................................................................
Corporate securities..............................................................................
Insurance contracts...............................................................................
Other.....................................................................................................
Total..................................................................................................... $

2020

Level 1

Level 2

83.2 $

69.0 $

14.2

329.4
234.1

821.6
867.6
41.7
43.5
2,421.1 $

91.2
65.7

285.8
—
—
—
511.7 $

238.2
168.4

535.8
867.6
41.7
43.5
1,909.4

2019

Level 1

Level 2

35.8 $

16.1 $

19.7

Asset Category (Millions of Dollars)
Cash and cash equivalents.................................................................... $
Equity securities
U.S. equity securities............................................................................
Foreign equity securities.......................................................................
Fixed income securities
Government securities..........................................................................
Corporate securities..............................................................................

321.4
259.4

741.6

751.5

Insurance contracts................................................................................

Other.....................................................................................................
Total...................................................................................................... $

39.0
48.3
2,197.0 $

111.1
95.8

271.5

—

—
—
494.5 $

210.3
163.6

470.1

751.5

39.0
48.3
1,702.5

U.S. and foreign equity securities primarily consist of companies with large market capitalizations and to a lesser extent mid
and small capitalization securities. Government securities primarily consist of U.S. Treasury securities and foreign government
securities with de minimus default risk. Corporate fixed income securities include publicly traded U.S. and foreign investment
grade and to a small extent high yield securities. Assets held in insurance contracts are invested in the general asset pools of the
various insurers, mainly debt and equity securities with guaranteed returns. Other investments include diversified private equity
holdings. The level 2 investments are primarily comprised of institutional mutual funds that are not publicly traded; the
investments held in these mutual funds are generally level 1 publicly traded securities.

The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking
place over a period of many years. The Company utilizes the current funded status to transition the portfolio toward
investments that better match the duration and cash flow attributes of the underlying liabilities. Assets approximating 50% of
the Company's current pension liabilities have been invested in fixed income securities, using a liability / asset matching
duration strategy, with the primary goal of mitigating exposure to interest rate movements and preserving the overall funded
status of the underlying plans. Plan assets are broadly diversified and are invested to ensure adequate liquidity for immediate
and medium term benefit payments. The Company’s target asset allocations include approximately 20%-40% in equity
securities, approximately 50%-70% in fixed income securities and approximately 10% in other securities. In 2020, the funded
status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 80%, which is
consistent with 79% in 2019 and 78% in 2018.

CONTRIBUTIONS — The Company’s funding policy for its defined benefit plans is to contribute amounts determined
annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations.
The Company expects to contribute approximately $41 million to its pension and other post-retirement benefit plans in 2021.

EXPECTED FUTURE BENEFIT PAYMENTS — Benefit payments, inclusive of amounts attributable to estimated future
employee service, are expected to be paid as follows over the next 10 years:

(Millions of Dollars)
Future payments...........................

Total

Year 1

Year 2

Year 3

Year 4

Year 5

$ 1,440.2 $

146.5 $

146.4 $

148.6 $

146.4 $

144.6 $

Years 6-10
707.7

These benefit payments will be funded through a combination of existing plan assets, the returns on those assets, and amounts
to be contributed in the future by the Company.

107

HEALTH CARE COST TRENDS — The weighted-average annual assumed rate of increase in the per-capita cost of covered
benefits (i.e., health care cost trend rate) is assumed to be 6.0% for 2021, reducing gradually to 4.6% by 2028 and remaining at
that level thereafter.

M. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement, defines, establishes a consistent framework for measuring, and expands disclosure
requirements about fair value. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value
hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations whose inputs and significant value drivers are observable.

Level 3 — Instruments that are valued using unobservable inputs.

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and
commodity prices. The Company holds various financial instruments to manage these risks. These financial instruments are
carried at fair value and are included within the scope of ASC 820. The Company determines the fair value of these financial
instruments through the use of matrix or model pricing, which utilizes observable inputs such as market interest and currency
rates. When determining fair value for which Level 1 evidence does not exist, the Company considers various factors including
the following: exchange or market price quotations of similar instruments, time value and volatility factors, the Company’s own
credit rating and the credit rating of the counterparty.

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis
for each of the hierarchy levels:

(Millions of Dollars)
January 2, 2021
Money market fund..................................................................... $
Derivative assets.......................................................................... $
Derivative liabilities.................................................................... $
Contingent consideration liability............................................... $
December 28, 2019
Money market fund..................................................................... $
Derivative assets.......................................................................... $
Derivative liabilities.................................................................... $
Non-derivative hedging instrument............................................. $
Contingent consideration liability............................................... $

Total
Carrying
Value

Level 1

Level 2

Level 3

10.3 $
14.0 $
191.0 $
187.0 $

1.2 $
29.3 $
65.5 $
335.5 $
196.1 $

10.3 $
— $
— $
— $

1.2 $
— $
— $
— $
— $

— $
14.0 $
191.0 $
— $

— $
29.3 $
65.5 $
335.5 $
— $

—
—
—
187.0

—
—
—
—
196.1

The following table provides information about the Company's financial assets and liabilities not carried at fair value:

(Millions of Dollars)
Other investments............................................................ $
Long-term debt, including current portion...................... $

January 2, 2021

December 28, 2019

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

13.3 $
4,245.4 $

13.9 $
4,934.5 $

14.4 $
3,179.5 $

14.8
3,601.0

The money market fund and other investments related to the West Coast Loading Corporation ("WCLC") trust are considered
Level 1 instruments within the fair value hierarchy. The long-term debt instruments are considered Level 2 instruments and are
measured using a discounted cash flow analysis based on the Company’s marginal borrowing rates. The differences between
the carrying values and fair values of long-term debt are attributable to the stated interest rates differing from the Company's
marginal borrowing rates. The fair values of the Company's variable rate short-term borrowings approximate their carrying
values at January 2, 2021 and December 28, 2019. The fair values of derivative financial instruments in the table above are
based on current settlement values.

108

As part of the Craftsman® brand acquisition in March 2017, the Company recorded a contingent consideration liability
representing the Company's obligation to make future payments to Transform Holdco, LLC, which operates Sears and Kmart
retail locations, of between 2.5% and 3.5% on sales of Craftsman products in new Stanley Black & Decker channels through
March 2032. During the year ended January 2, 2021, the Company paid $45.9 million, which included a $33.0 million payment
in the second quarter of 2020 relating to royalties owed for the first twelve quarters. The Company will continue making future
payments quarterly through the second quarter of 2032. The estimated fair value of the contingent consideration liability is
determined using a discounted cash flow analysis taking into consideration future sales projections, forecasted payments to
Transform Holdco, LLC, based on contractual royalty rates, and the related tax impacts. The estimated fair value of the
contingent consideration liability was $187.0 million and $196.1 million as of January 2, 2021 and December 28, 2019,
respectively. Adjustments to the contingent consideration liability, with the exception of cash payments, are recorded in SG&A
in the Consolidated Statements of Operations. A 100 basis point reduction in the discount rate would result in an increase to the
liability of approximately $7.4 million as of January 2, 2021.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies
heavily on estimates and assumptions. The Company's judgments used to determine the estimated contingent consideration
liability discussed above, including estimated future sales projections, can materially impact the Company's results of
operations.

The Company had no significant non-recurring fair value measurements, nor any other financial assets or liabilities measured
using Level 3 inputs, during 2020 or 2019.

Refer to Note I, Financial Instruments, for more details regarding derivative financial instruments, Note S, Contingencies, for
more details regarding the other investments related to the WCLC trust, and Note H, Long-Term Debt and Financing
Arrangements, for more information regarding the carrying values of the Company's long-term debt.

N. OTHER COSTS AND EXPENSES

During 2020, the Company recognized pre-tax charges of approximately $185.0 million related to the comprehensive cost
reduction and efficiency program in response to the impact of the COVID-19 pandemic. The charges were primarily related to
costs associated with a voluntary retirement program as well as restructuring costs related to headcount actions, as further
discussed in Note O, Restructuring Charges.

Other, net is primarily comprised of intangible asset amortization expense (see Note F, Goodwill and Intangible Assets),
currency-related gains or losses, environmental remediation expense, acquisition-related transaction and consulting costs, and
certain pension gains or losses. Acquisition-related transaction and consulting costs of $28.6 million, $30.2 million, and
$30.4 million were included in Other, net for the years ended January 2, 2021, December 28, 2019, and December 29, 2018,
respectively. In 2020, Other, net also included a $16.1 million special termination benefit charge associated with the voluntary
retirement program, a $19.6 million loss relating to the unamortized loss on cash flow swap terminations, and a $55.3 million
release of a contingent consideration liability relating to the CAM acquisition. Refer to Note E, Acquisitions and Investments,
for further discussion of the CAM contingent consideration. In addition, Other, net included a $77.7 million environmental
remediation charge recorded in 2018 related to a settlement with the Environmental Protection Agency ("EPA"). Refer to Note
S, Contingencies, for further discussion of the EPA settlement.

Research and development costs, which are classified in SG&A, were $211.0 million, $255.2 million and $275.8 million for
fiscal years 2020, 2019 and 2018, respectively.

O. RESTRUCTURING CHARGES

A summary of the restructuring reserve activity from December 28, 2019 to January 2, 2021 is as follows:

(Millions of Dollars)
Severance and related costs....................................... $
Facility closures and asset impairments....................
Total.......................................................................... $

December 28,
2019

Net
Additions

Usage

Currency

January 2,
2021

140.3 $
7.5
147.8 $

63.9 $
19.1
83.0 $

(111.0) $
(23.9)
(134.9) $

(5.7) $
—
(5.7) $

87.5
2.7
90.2

During 2020, the Company recognized net restructuring charges of $83.0 million, primarily related to severance costs
associated with a cost reduction program announced in the second quarter of 2020.

109

The majority of the $90.2 million of reserves remaining as of January 2, 2021 is expected to be utilized within the next 12
months.

Segments: The $83 million of net restructuring charges for the year ended January 2, 2021 includes: $40 million pertaining to
the Tools & Storage segment; $29 million pertaining to the Industrial segment; $9 million pertaining to the Security segment;
and $5 million pertaining to Corporate.

P. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

The Company's operations are classified into three reportable segments, which also represent its operating segments: Tools &
Storage, Industrial and Security.

The Security segment is comprised of the Convergent Security Solutions ("CSS") and Mechanical Access Solutions ("MAS")
businesses. The CSS business designs, supplies and installs commercial electronic security systems and provides electronic
security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system
maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the
time of initial equipment installation. The business also sells healthcare solutions, which include asset tracking, infant
protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The
MAS business primarily sells automatic doors.

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. Segment profit excludes the corporate overhead expense element of SG&A, other, net (inclusive of intangible
asset amortization expense), gain or loss on sales of businesses, restructuring charges, loss on debt extinguishments, interest
income, interest expense, income taxes and share of net earnings or losses of equity method investment. Corporate overhead is
comprised of world headquarters facility expense, cost for the executive management team and expenses pertaining to certain
centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and
corporate finance functions. Refer to Note F, Goodwill and Intangible Assets, and Note O, Restructuring Charges, for the
amount of intangible asset amortization expense and net restructuring charges, respectively, attributable to each segment.
Transactions between segments are not material. Segment assets primarily include cash, accounts receivable, inventory, other
current assets, property, plant and equipment, right-of-use lease assets and intangible assets. Net sales and long-lived assets are
attributed to the geographic regions based on the geographic locations of the end customer and the Company subsidiary,
respectively.

110

BUSINESS SEGMENTS

(Millions of Dollars)
Net Sales
Tools & Storage................................................................................ $
Industrial............................................................................................
Security..............................................................................................
Consolidated...................................................................................... $
Segment Profit
Tools & Storage................................................................................ $
Industrial............................................................................................
Security..............................................................................................
Segment Profit...................................................................................
Corporate overhead...........................................................................

Other, net...........................................................................................

(Loss) gain on sales of businesses.....................................................
Restructuring charges........................................................................
Loss on debt extinguishments...........................................................
Interest income..................................................................................
Interest expense.................................................................................
Earnings before income taxes and equity interest............................. $
Capital and Software Expenditures
Tools & Storage................................................................................ $
Industrial............................................................................................
Security .............................................................................................
Consolidated...................................................................................... $
Depreciation and Amortization
Tools & Storage................................................................................ $
Industrial............................................................................................
Security..............................................................................................
Consolidated...................................................................................... $
Segment Assets
Tools & Storage................................................................................ $
Industrial............................................................................................
Security..............................................................................................

Corporate assets.................................................................................
Consolidated...................................................................................... $

2020

2019

2018

10,329.7 $
2,352.7
1,852.2
14,534.6 $

10,062.1 $
2,434.7
1,945.4
14,442.2 $

9,814.0
2,187.8
1,980.6
13,982.4

1,841.7 $
225.6
108.7
2,176.0

(297.7)

(262.8)
(13.5)
(83.0)
(46.9)
18.0
(223.1)
1,267.0 $

225.6 $
101.6
20.9
348.1 $

308.5 $
199.4
70.2
578.1 $

1,533.3 $
334.1
126.6
1,994.0

(229.5)

(249.1)
17.0
(154.1)
(17.9)
53.9
(284.3)
1,130.0 $

297.2 $
89.6
37.9
424.7 $

327.8 $
159.3
73.1
560.2 $

1,393.1
319.8
169.3
1,882.2

(202.8)

(287.0)
(0.8)
(160.3)
—
68.7
(277.9)
1,022.1

353.7
95.8
42.6
492.1

300.1
125.9
80.5
506.5

14,294.9 $
5,621.4
3,493.5
23,409.8
156.5
23,566.3 $

13,642.4 $
4,207.0
3,448.6
21,298.0

(701.4)
20,596.6 $

13,122.6
3,620.5
3,413.6
20,156.7
(748.7)
19,408.0

Corporate assets primarily consist of cash, equity method investment, deferred taxes, property, plant and equipment and right-
of-use lease assets. The increase in Corporate assets at January 2, 2021 compared to December 28, 2019 and December 29,
2018 is due to the increase in the Company's cash position. Based on the nature of the Company's cash pooling arrangements,
at times corporate-related cash accounts will be in a net liability position.

Sales to Lowe's were approximately 21% of the Tools & Storage segment net sales in 2020 and 2019, and 17% in 2018. Sales
to The Home Depot were approximately 17%, 15%, and 14% of the Tools & Storage segment net sales in 2020, 2019 and 2018,
respectively.

As described in Note A, Significant Accounting Policies, the Company recognizes revenue at a point in time from the sale of
tangible products or over time depending on when the performance obligation is satisfied. For the years ended January 2, 2021,
December 28, 2019, and December 29, 2018, the majority of the Company’s revenue was recognized at the time of sale. The

111

following table provides the percent of total segment revenue recognized over time for the Industrial and Security segments for
the years ended January 2, 2021, December 28, 2019 and December 29, 2018:

Industrial............................................................................................

Security..............................................................................................

9.2 %

44.4 %

10.9 %

45.8 %

11.9 %

44.9 %

2020

2019

2018

The following table is a further disaggregation of the Industrial segment revenue for the years ended January 2, 2021,
December 28, 2019 and December 29, 2018:

(Millions of Dollars)

2020

2019

2018

Engineered Fastening......................................................................... $

1,717.8 $

1,738.5 $

Infrastructure......................................................................................

634.9

696.2

Industrial............................................................................................ $

2,352.7 $

2,434.7 $

1,766.6

421.2

2,187.8

GEOGRAPHIC AREAS

(Millions of Dollars)
Net Sales
United States...................................................................................... $
Canada................................................................................................
Other Americas..................................................................................
France.................................................................................................
Other Europe......................................................................................
Asia....................................................................................................
Consolidated....................................................................................... $
Property, Plant & Equipment, net
United States...................................................................................... $
Canada................................................................................................
Other Americas..................................................................................
France.................................................................................................
Other Europe......................................................................................
Asia....................................................................................................
Consolidated....................................................................................... $

2020

2019

2018

8,800.5 $
687.0
595.5
581.3
2,791.0
1,079.3
14,534.6 $

1,156.7 $
25.5
121.0
54.9
349.2
346.5
2,053.8 $

8,472.1 $
609.9
717.9
610.2
2,870.8
1,161.3
14,442.2 $

1,046.8 $
27.4
117.9
57.3
352.3
357.8
1,959.5 $

7,700.3
628.3
801.5
627.8
2,989.9
1,234.6
13,982.4

1,018.3
25.5
112.7
63.9
356.9
337.9
1,915.2

Q. INCOME TAXES

Significant components of the Company’s deferred tax assets and liabilities at the end of each fiscal year were as follows:

112

(Millions of Dollars)
Deferred tax liabilities:

Depreciation............................................................................................................ $
Intangible assets......................................................................................................
Liability on undistributed foreign earnings.............................................................
Lease right-of-use asset...........................................................................................
Other.......................................................................................................................
Total deferred tax liabilities.................................................................................... $

Deferred tax assets:

Employee benefit plans........................................................................................... $
Basis differences in liabilities.................................................................................
Operating loss, capital loss and tax credit carryforwards.......................................
Lease liability .........................................................................................................
Intangible assets......................................................................................................
Capitalized research and development costs...........................................................
Other.......................................................................................................................
Total deferred tax assets................................................................................................. $
Net Deferred Tax Asset before Valuation Allowance............................................... $
Valuation Allowance...................................................................................................... $
Net Deferred Tax Liability after Valuation Allowance............................................ $

2020

2019

148.9 $
741.4
29.7
126.5
128.3
1,174.8 $

244.2 $
89.7
808.7
129.6
301.3
52.6
217.4
1,843.5 $
668.7 $
(1,058.9) $
(390.2) $

144.9
737.1
159.3
129.7
89.5
1,260.5

235.4
82.0
1,100.3
129.6
5.3
—
149.2
1,701.8
441.3
(1,065.0)
(623.7)

The increase in intangible deferred tax assets relates to the intra-entity asset transfer of certain intangible assets between two of
the Company's foreign subsidiaries. The recognized deferred tax benefit represents the difference between the basis of the
intellectual property for financial statement purposes and the basis of the intellectual property for tax purposes.

A valuation allowance is recorded on certain deferred tax assets if it has been determined it is more likely than not that all or a
portion of these assets will not be realized. The Company recorded a valuation allowance of $1,058.9 million and $1,065.0
million on deferred tax assets existing as of January 2, 2021 and December 28, 2019, respectively. The valuation allowance in
2020 is primarily attributable to foreign and state net operating loss carryforwards, intangible assets, and foreign capital loss
carryforwards. The valuation allowance in 2019 was primarily attributable to foreign and state net operating loss carryforwards
and foreign capital loss carryforwards.

Beginning in 2022, the Tax Cuts and Jobs Act ("Act") eliminates the option to deduct research and development expenditures
and requires taxpayers to amortize domestic expenditures over five years and foreign expenditures over fifteen years. While it is
possible that Congress may modify or repeal this provision before it becomes effective, the Company has no assurance that
these provisions will be modified or repealed. Therefore, based on current assumptions, this would decrease the Company's
cash from operations beginning in 2022 and continue over the five year amortization period.

As of January 2, 2021, the Company has approximately $5.3 billion of unremitted foreign earnings and profits. Of the total
amount, the Company has provided for deferred taxes of $29.7 million on approximately $2.2 billion, which is not indefinitely
reinvested primarily due to the changes brought about by the Act. The Company otherwise continues to consider the remaining
undistributed earnings of its foreign subsidiaries to be permanently reinvested based on its current plans for use outside of the
U.S. and accordingly no taxes have been provided on such earnings. The cash that the Company’s non-U.S. subsidiaries hold
for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. The income
taxes applicable to such earnings are not readily determinable or practicable to calculate.

Net operating loss carryforwards of $3.2 billion as of January 2, 2021 are available to reduce future tax obligations of certain
U.S. and foreign companies. The net operating loss carryforwards have various expiration dates beginning in 2021 with certain
jurisdictions having indefinite carryforward periods. The foreign capital loss carryforwards of $38.8 million as of January 2,
2021 have indefinite carryforward periods.

The components of earnings before income taxes and equity interest consisted of the following:

(Millions of Dollars)
United States.......................................................................................... $
Foreign...................................................................................................
Earnings before income taxes and equity interest.................................. $

2020

2019

2018

181.2 $

1,085.8
1,267.0 $

214.5 $
915.5
1,130.0 $

444.1
578.0
1,022.1

113

Income tax expense (benefit) consisted of the following:

(Millions of Dollars)
Current:

2020

2019

2018

Federal.................................................................................................. $
Foreign.................................................................................................
State......................................................................................................
Total current......................................................................................... $

Deferred:

Federal.................................................................................................. $
Foreign.................................................................................................
State......................................................................................................
Total deferred.......................................................................................
Income taxes........................................................................................... $

62.7 $
199.8
20.6
283.1 $

(29.4) $
(208.8)
(3.5)
(241.7)

41.4 $

(23.7) $
195.9
6.5
178.7 $

5.7 $
(32.9)
9.3
(17.9)

160.8 $

25.4
175.0
24.8
225.2

29.7
132.7
28.7
191.1

416.3

Net income taxes paid during 2020, 2019 and 2018 were $206.9 million, $250.1 million and $339.4 million, respectively. The
2020, 2019 and 2018 amounts include refunds of $90.2 million, $72.5 million and $43.7 million, respectively, primarily related
to prior year overpayments and settlement of tax audits.

The reconciliation of the U.S. federal statutory income tax provision to Income taxes in the Consolidated Statements of
Operations is as follows:

(Millions of Dollars)
Tax at statutory rate................................................................................ $
State income taxes, net of federal benefits.............................................
Foreign tax rate differential....................................................................
Uncertain tax benefits............................................................................
Change in valuation allowance..............................................................
Change in deferred tax liabilities on undistributed foreign earnings.....
Stock-based compensation.....................................................................
U.S. Federal tax reform..........................................................................
Capital loss.............................................................................................
U.S. federal tax on foreign earnings.......................................................
Intra-entity asset transfer of intellectual property..................................
Other.......................................................................................................
Income taxes .......................................................................................... $

2020

2019

2018

266.1 $
13.0
(41.9)
20.3
(26.8)
(118.8)
(9.8)
—
(40.4)
(17.7)
(27.7)
25.1
41.4 $

237.3 $
22.1
(53.3)
(53.1)
10.5
—
(24.1)
—
—
4.1
—
17.3
160.8 $

214.6
24.7
(33.2)
4.5
5.1
—
(4.1)
199.6
—
2.7
—
2.4
416.3

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various
state and foreign jurisdictions. In the normal course, the Company is subject to examinations by taxing authorities throughout
the world. The Internal Revenue Service is currently examining the Company's consolidated U.S. income tax returns for the
2015 and 2016 tax years. With few exceptions, as of January 2, 2021, the Company is no longer subject to U.S. federal, state,
local, or foreign examinations by tax authorities for years before 2012.

The Company’s liabilities for unrecognized tax benefits relate to U.S. and various foreign jurisdictions. The following table
summarizes the activity related to the unrecognized tax benefits:

(Millions of Dollars)
Balance at beginning of year................................................................... $
Additions based on tax positions related to current year.........................
Additions based on tax positions related to prior years...........................
Reductions based on tax positions related to prior years........................
Settlements..............................................................................................
Statute of limitations expirations.............................................................
Balance at end of year............................................................................. $

2020

2019

2018

406.3 $
29.1
35.8
(19.3)
(0.5)
(7.9)
443.5 $

406.3 $
48.6
78.5
(91.1)
(0.3)
(35.7)
406.3 $

387.8
28.3
103.0
(91.5)
(2.5)
(18.8)
406.3

114

The gross unrecognized tax benefits at January 2, 2021 and December 28, 2019 include $433.3 million and $398.2 million,
respectively, of tax benefits that, if recognized, would impact the effective tax rate. The liability for potential penalties and
interest related to unrecognized tax benefits increased by $2.3 million in 2020 and decreased by $4.3 million in 2019 and $15.8
million in 2018. The liability for potential penalties and interest totaled $50.1 million as of January 2, 2021, $47.8 million as of
December 28, 2019, and $52.1 million as of December 29, 2018. The Company classifies all tax-related interest and penalties
as income tax expense.

The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense,
which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that
the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly
increase or decrease within the next twelve months. However, based on the uncertainties associated with finalizing audits with
the relevant tax authorities including formal legal proceedings, it is not possible to reasonably estimate the impact of any such
change.

R. COMMITMENTS AND GUARANTEES

COMMITMENTS — The Company has numerous assets, predominantly real estate, vehicles and equipment, under various
lease arrangements. At inception of arrangements with vendors, the Company determines whether the contract is or contains a
lease based on each party’s rights and obligations under the arrangement. If the lease arrangement also contains non-lease
components, the lease and non-lease elements are separately accounted for in accordance with the appropriate accounting
guidance for each item. From time to time, lease arrangements allow for, and the Company executes, the purchase of the
underlying leased asset. Lease arrangements may also contain renewal options or early termination options. As part of its lease
liability and right-of-use asset calculation, consideration is given to the likelihood of exercising any extension or termination
options. The present value of the Company’s lease liability was calculated using a weighted-average incremental borrowing rate
of approximately 3.6%. The Company determined its incremental borrowing rate based on interest rates from its debt issuances
and taking into consideration adjustments for collateral, lease terms and foreign currency. As a result of acquiring right-of-use
assets from new leases entered into during the year ended January 2, 2021, the Company's lease liability increased
approximately $117.5 million. As of January 2, 2021, the Company recognized a lease liability of approximately $534.4 million
and a right-of-use asset of approximately $522.8 million. The right-of-use asset is included within Other assets in the
Consolidated Balance Sheets, while the lease liability is included within Accrued expenses and Other liabilities, as appropriate.
Leases with expected durations of less than 12 months from inception (i.e. short-term leases) were excluded from the
Company’s calculation of its lease liability and right-of-use asset, as permitted by ASC 842, Leases.

The Company is a party to leases for one of its major distribution centers and two of its office buildings in which the periodic
rental payments vary based on interest rates (i.e. LIBOR). The leases qualify as operating leases for accounting purposes.

The following is a summary of the Company's total lease cost for the year ended January 2, 2021 and December 28, 2019:

(Millions of Dollars)

2020

2019

Operating lease cost................................................................................. $
Short-term lease cost...............................................................................

Variable lease cost...................................................................................

Sublease income......................................................................................

Total lease cost........................................................................................ $

155.4 $
26.3

7.0

(0.8)

187.9 $

151.6
26.6

8.5

(2.8)

183.9

During 2020 and 2019, the Company paid approximately $149.8 million and $154.4 million, respectively, relating to leases
included in the measurement of its lease liability and right-of-use asset. The weighted-average remaining term for the
Company's leases is approximately 7 years.

The following is a summary of the Company's future lease obligations on an undiscounted basis at January 2, 2021:

(Millions of Dollars)
Lease obligations............................... $

Total

2021

2022

2023

2024

2025

599.3 $

141.4 $

109.6 $

82.3 $

68.3 $

115

Thereafter
147.6

50.1 $

In 2019, the Company completed many actions within the Margin Resiliency Program and one rooftop footprint initiative
resulting in a sale-leaseback arrangement related to one of its distribution centers, which resulted in cash proceeds of $93.0
million, a pre-tax gain of $69.5 million and a twelve-year lease obligation.

The Company's rental expense, exclusive of sublease income, for operating leases was $177.6 million in 2018.

The following is a summary of the Company’s future marketing commitments at January 2, 2021:

(Millions of Dollars)
Marketing commitments.................... $

Total

2021

2022

2023

2024

39.4 $

27.2 $

11.8 $

0.4 $

— $

2025

Thereafter
—

— $

GUARANTEES — The Company's financial guarantees at January 2, 2021 are as follows:

(Millions of Dollars)
Guarantees on the residual values of leased properties.......

Term

Maximum
Potential
Payment

Carrying
Amount of
Liability

One to five years

89.6 $

Standby letters of credit.......................................................

Up to three years

Commercial customer financing arrangements...................
Total.....................................................................................

Up to six years

162.3

64.7

316.6 $

—

7.9

The Company has guaranteed a portion of the residual values of certain leased assets including the previously discussed leases
for one of its major distribution centers and two of its office buildings. The lease guarantees are for an amount up to $89.6
million while the fair value of the underlying assets is estimated at $116.1 million. The related assets would be available to
satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these
guarantees.

The Company has issued $162.3 million in standby letters of credit that guarantee future payments which may be required
under certain insurance programs and in relation to certain environmental remediation activities described more fully in Note S,
Contingencies.

The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and
Canadian Mac Tool distributors and franchisees for their initial purchase of the inventory and truck necessary to function as a
distributor and franchisee. In addition, the Company provides limited and full recourse guarantees to financial institutions that
extend credit to certain end retail customers of its U.S. Mac Tool distributors and franchisees. The gross amount guaranteed in
these arrangements is $64.7 million and the $7.9 million carrying value of the guarantees issued is recorded in Other liabilities
in the Consolidated Balance Sheets.

The Company provides warranties on certain products across its businesses. The types of product warranties offered generally
range from one year to limited lifetime. There are also certain products with no warranty. Further, the Company sometimes
incurs discretionary costs to service its products in connection with product performance issues. Historical warranty and service
claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new
information becomes available.

The changes in the carrying amount of product warranties for the years ended January 2, 2021, December 28, 2019, and
December 29, 2018:

(Millions of Dollars)
Balance beginning of period.................................................................. $
Warranties and guarantees issued..........................................................

Warranty payments and currency..........................................................
Balance end of period............................................................................ $

2020

2019

2018

100.1 $

128.5
(114.8)
113.8 $

102.1 $

128.1
(130.1)
100.1 $

108.5

110.4
(116.8)
102.1

S. CONTINGENCIES

116

The Company is involved in various legal proceedings relating to environmental issues, employment, product liability, workers’
compensation claims and other matters. The Company periodically reviews the status of these proceedings with both inside and
outside counsel, as well as an actuary for risk insurance. Management believes that the ultimate disposition of these matters will
not have a material adverse effect on operations or financial condition taken as a whole.

On January 25, 2019, IPS Worldwide, LLC ("IPS"), a third-party provider of freight payment processing services for the
Company, filed for Chapter 11 bankruptcy protection and listed the Company as an unsecured creditor. As of December 29,
2018, there were outstanding obligations of approximately $50.8 million owed to certain of the Company's freight carriers.
Such amounts had previously been remitted to IPS through a third-party financing program for ultimate payment to these
freight carriers. However, due to nonperformance of IPS with respect to processing these payments and the Company's
obligation to its freight carriers, an incremental $50.8 million charge was recorded in the fourth quarter of 2018. This charge did
not include any amounts that the Company will attempt to recover from insurance and/or through the bankruptcy proceedings,
which could ultimately reduce the loss exposure recorded.

In the normal course of business, the Company is a party to administrative proceedings and litigation, before federal and state
regulatory agencies, relating to environmental remediation with respect to claims involving the discharge of hazardous
substances into the environment, generally at current and former manufacturing facilities. In addition, some of these claims
assert that the Company is responsible for damages and liability, for remedial investigation and clean-up costs, with respect to
sites that have never been owned or operated by the Company, but the Company has been identified as a potentially responsible
party ("PRP").

In connection with the 2010 merger with Black & Decker, the Company assumed certain commitments and contingent
liabilities. Black & Decker is a party to litigation and administrative proceedings with respect to claims involving the discharge
of hazardous substances into the environment at current and former manufacturing facilities and has also been named as a PRP
in certain administrative proceedings.

The Company, along with many other companies, has been named as a PRP in numerous administrative proceedings for the
remediation of various waste sites, including 28 active Superfund sites. Current laws potentially impose joint and several
liabilities upon each PRP. In assessing its potential liability at these sites, the Company has considered the following: whether
responsibility is being disputed, the terms of existing agreements, experience at similar sites, and the Company’s volumetric
contribution at these sites.

The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable
that a liability has been incurred and the amount of loss can be reasonably estimated. If no amount in the range of probable loss
is considered most likely, the minimum loss in the range is accrued. The amount of liability recorded is based on an evaluation
of currently available facts with respect to each individual site and includes such factors as existing technology, presently
enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities recorded do not take into
account any claims for recoveries from insurance or third parties. As assessments and remediation progress at individual sites,
the amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes
available. As of January 2, 2021 and December 28, 2019, the Company had reserves of $174.2 million and $213.8 million,
respectively, for remediation activities associated with Company-owned properties, as well as for Superfund sites, for losses
that are probable and estimable. Of the 2020 amount, $46.7 million is classified as current and $127.5 million as long-term
which is expected to be paid over the estimated remediation period. As of January 2, 2021, the range of environmental
remediation costs that is reasonably possible is $102.9 million to $245.3 million which is subject to change in the near term.
The Company may be liable for environmental remediation of sites it no longer owns. Liabilities have been recorded on those
sites in accordance with the Company's policy.

As of January 2, 2021, the Company has recorded $15.9 million in other assets related to funding received by the
Environmental Protection Agency (“EPA”) and placed in a trust in accordance with the final settlement with the EPA,
embodied in a Consent Decree approved by the United States District Court for the Central District of California on July 3,
2013. Per the Consent Decree, Emhart Industries, Inc. (a dissolved and liquidated former indirectly wholly-owned subsidiary of
The Black & Decker Corporation) (“Emhart”) has agreed to be responsible for an interim remedy at a site located in Rialto,
California and formerly operated by West Coast Loading Corporation (“WCLC”), a defunct company for which Emhart was
alleged to be liable as a successor. The remedy will be funded by (i) the amounts received from the EPA as gathered from
multiple parties, and, to the extent necessary, (ii) Emhart's affiliate. The interim remedy requires the construction of a water
treatment facility and the filtering of ground water at or around the site for a period of approximately 30 years or more. As of
January 2, 2021, the Company's net cash obligation associated with remediation activities, including WCLC assets, is $158.3
million.

117

The EPA also asserted claims in federal court in Rhode Island against Black & Decker and Emhart related to environmental
contamination found at the Centredale Manor Restoration Project Superfund Site ("Centredale"), located in North Providence,
Rhode Island. The EPA discovered a variety of contaminants at the site, including but not limited to, dioxins, polychlorinated
biphenyls, and pesticides. The EPA alleged that Black & Decker and Emhart are liable for site clean-up costs under the
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") as successors to the liability of
Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the EPA’s costs related to this site. Black &
Decker and Emhart contested the EPA's allegation that they are responsible for the contamination, and asserted contribution
claims, counterclaims and cross-claims against a number of other PRPs, including the federal government as well as insurance
carriers. The EPA released its Record of Decision ("ROD") in September 2012, which identified and described the EPA's
selected remedial alternative for the site. Black & Decker and Emhart contested the EPA's selection of the remedial alternative
set forth in the ROD on the grounds that the EPA's actions were arbitrary and capricious and otherwise not in accordance with
law, and proposed other equally-protective, more cost-effective alternatives. On June 10, 2014, the EPA issued an
Administrative Order under Sec. 106 of CERCLA, instructing Black & Decker and Emhart to perform the remediation of
Centredale pursuant to the ROD. Black & Decker and Emhart disputed the factual, legal and scientific bases cited by the EPA
for such an administrative order and provided the EPA with numerous good-faith bases for their declination to comply with the
administrative order. Black & Decker and Emhart then vigorously litigated the issue of their liability for environmental
conditions at the Centredale site, including completing trial on Phase 1 of the proceedings in late July 2015 and completing trial
on Phase 2 of the proceedings in April 2017. Following the Phase I trial, the Court found that dioxin contamination at the
Centredale site was not "divisible" and that Black & Decker and Emhart were jointly and severally liable for dioxin
contamination at the site. Following the Phase 2 trial, the Court found that certain components of the EPA's selected remedy
were arbitrary and capricious, and remanded the matter to the EPA while retaining jurisdiction over the ongoing remedy
selection and implementation process. The Court also held in Phase 2 that Black & Decker and Emhart had sufficient cause for
their declination to comply with the EPA's June 10, 2014 administrative order and that no associated civil penalties or fines
were warranted. The United States filed a Motion for Reconsideration concerning the Court's Phase 2 rulings and appealed the
ruling to the United States Court of Appeals for the First Circuit. Black & Decker and Emhart's Motion to Dismiss the Appeal
was denied without prejudice for consideration with the merits. On July 9, 2018, a Consent Decree was lodged with the United
States District Court documenting the terms of a settlement between the Company and the United States for reimbursement of
EPA's past costs and remediation of environmental contamination found at the Centredale site. The terms of the Consent Decree
were subject to public comment and Court approval. After a full hearing on March 19, 2019, the Court approved and entered
the Consent Decree on April 8, 2019. The settlement resolves outstanding issues relating to Phase 1 and 2 of the litigation with
the United States. The Company is complying with the terms of the settlement while several PRPs at the site have appealed the
District Court's entry of the Consent Decree to the United States Court of Appeals for the First Circuit. Phase 3 of the litigation,
is addressing the potential allocation of liability to other PRPs who may have contributed to contamination of the Centredale
site with dioxins, polychlorinated biphenyls and other contaminants of concern. Based on the Company's estimated remediation
and response cost obligations arising out of the settlement reached with the United States (including the EPA’s past costs as
well as costs of additional investigation, remediation, and related costs such as EPA’s oversight costs), the Company has
increased its reserve for this site. Accordingly, in 2018, a $77.7 million increase was recorded in Other, net in the Consolidated
Statements of Operations. As of January 2, 2021, the Company has a remaining reserve of $74.2 million for this site.

The Company and approximately 47 other companies comprise the Lower Passaic Cooperating Parties Group (the “CPG”). The
CPG members and other companies are parties to a May 2007 Administrative Settlement Agreement and Order on Consent
(“AOC”) with the EPA to perform a remedial investigation/feasibility study (“RI/FS”) of the lower seventeen miles of the
Lower Passaic River in New Jersey (the “River”). The Company’s potential liability stems from former operations in Newark,
New Jersey. As an interim step related to the 2007 AOC, on June 18, 2012, the CPG members voluntarily entered into an AOC
with the EPA for remediation actions focused solely at mile 10.9 of the River. The Company’s estimated costs related to the RI/
FS and focused remediation action at mile 10.9, based on an interim allocation, are included in its environmental reserves. On
April 11, 2014, the EPA issued a Focused Feasibility Study (“FFS”) and proposed plan which addressed various early action
remediation alternatives for the lower 8.3 miles of the River. The EPA received public comment on the FFS and proposed plan
(including comments from the CPG and other entities asserting that the FFS and proposed plan do not comply with CERCLA)
which public comment period ended on August 20, 2014. The CPG submitted to the EPA a draft RI report in February 2015
and draft FS report in April 2015 for the entire lower seventeen miles of the River. On March 4, 2016, the EPA issued a Record
of Decision ("ROD") selecting the remedy for the lower 8.3 miles of the River. The cleanup plan adopted by the EPA is now
considered a final action for the lower 8.3 miles of the River and will include the removal of 3.5 million cubic yards of
sediment, placement of a cap over the entire lower 8.3 miles of the River, and, according to the EPA, will cost approximately
$1.4 billion and take 6 years to implement after the remedial design is completed. The Company and 105 other parties received
a letter dated March 31, 2016 from the EPA notifying such parties of potential liability for the costs of the cleanup of the lower
8.3 miles of the River and a letter dated March 30, 2017 stating that the EPA had offered 20 of the parties (not including the
Company) an early cash out settlement. In a letter dated May 17, 2017, the EPA stated that these 20 parties did not discharge
any of the eight hazardous substances identified as the contaminants of concern in the lower 8.3 mile ROD. In the March 30,

118

2017 letter, the EPA stated that other parties who did not discharge dioxins, furans or polychlorinated biphenyls (which are
considered the contaminants of concern posing the greatest risk to human health or the environment) may also be eligible for
cash out settlement, but expects those parties' allocation to be determined through a complex settlement analysis using a third-
party allocator. The EPA subsequently clarified this statement to say that such parties would be eligible to be "funding parties"
for the lower 8.3 mile remedial action with each party's share of the costs determined by the EPA based on the allocation
process and the remaining parties would be "work parties" for the remedial action. The Company is participating in the
allocation process. The allocator selected by the EPA issued a confidential financial report on December 28, 2020, which is
under review by the EPA. The Company asserts that it did not discharge dioxins, furans or polychlorinated biphenyls and
should be eligible to be a "funding party" for the lower 8.3 mile remedial action. On September 30, 2016, Occidental Chemical
Corporation ("OCC") entered into an agreement with the EPA to perform the remedial design for the cleanup plan for the lower
8.3 miles of the River. The remedial design is expected to be substantially completed in May 2021. On June 30, 2018, OCC
filed a complaint in the United States District Court for the District of New Jersey against over 100 companies, including the
Company, seeking CERCLA cost recovery or contribution for past costs relating to various investigations and cleanups OCC
has conducted or is conducting in connection with the River. According to the complaint, OCC has incurred or is incurring
costs which include the estimated cost ($165 million) to complete the remedial design for the cleanup plan for the lower 8.3
miles of the River. OCC also seeks a declaratory judgment to hold the defendants liable for their proper shares of future
response costs for OCC's ongoing activities in connection with the River. The Company and other defendants have answered
the complaint and currently are engaged in discovery with OCC. On October 10, 2018, the EPA issued a letter directing the
CPG to prepare a streamlined feasibility study for the upper 9 miles of the River based on an iterative approach using adaptive
management strategies. The CPG submitted a revised draft Interim Remedy Feasibility Study to the EPA on December 4, 2020,
which identifies various targeted dredge and cap alternatives with costs that range from $420 million to $468 million (net
present value). The EPA approved the Interim Remedy Feasibility Study on December 11, 2020. The EPA announced that it
intends to issue the Interim Remedy ROD in the Winter of 2020/2021. At this time, the Company cannot reasonably estimate its
liability related to the litigation and remediation efforts, excluding the RI/FS and remediation actions at mile 10.9, as the RI/FS
is ongoing, the ultimate remedial approach and associated cost for the upper portion of the River has not yet been determined,
and the parties that will participate in funding the remediation and their respective allocations are not yet known.

Per the terms of a Final Order and Judgment approved by the United States District Court for the Middle District of Florida on
January 22, 1991, Emhart is responsible for a percentage of remedial costs arising out of the Kerr McGee Chemical Corporation
Superfund Site located in Jacksonville, Florida. On March 15, 2017, the Company received formal notification from the EPA
that the EPA had issued a ROD selecting the preferred alternative identified in the Proposed Cleanup Plan. As of January 2,
2021, the Company has reserved $24.7 million for this site.

The environmental liability for certain sites that have cash payments beyond the current year that are fixed or reliably
determinable have been discounted using a rate of 0.1% to 1.8%, depending on the expected timing of disbursements. The
discounted and undiscounted amount of the liability relative to these sites is $42.6 million and $45.9 million, respectively. The
payments relative to these sites are expected to be $1.4 million in 2021, $2.9 million in 2022, $2.9 million in 2023, $3.1 million
in 2024, $2.8 million in 2025, and $32.8 million thereafter.

T. DIVESTITURES

On November 2, 2020, the Company sold its commercial electronic security businesses in five countries in Europe and
emerging markets within the Security segment, which resulted in net proceeds of $60.9 million. The Company also sold a
product line within Oil & Gas in the Industrial segment during the fourth quarter of 2020. As a result of these sales, the
Company recognized a net pre-tax loss of $13.5 million in 2020, consisting of a $17.7 million loss on the sale of a product line
within Oil & Gas partially offset by a $4.2 million gain on the sale of the commercial electronic security businesses. These
divestitures allow the Company to invest in other areas of the Company that fit into its long-term growth strategy. These
disposals do not qualify as discontinued operations and are included in the Company's Consolidated Statements of Operations
for all periods presented through their respective dates of sale in 2020.

Following is the pre-tax income for these businesses for the years ended January 2, 2021, December 28, 2019, and
December 29, 2018:

119

(Millions of Dollars)
Pre-tax income.....................................................................................................

2020

2019

2018

4.1 $

3.0 $

4.0

On May 30, 2019, the Company sold its Sargent & Greenleaf mechanical locks business within the Security segment, which
resulted in net proceeds of $79.0 million and a pre-tax gain of $17.0 million. This divestiture did not qualify as a discontinued
operation and is included in the Company's Consolidated Statements of Operations through the date of sale in 2019. Pre-tax
income for this business was $4.6 million and $11.7 million for the years ended December 28, 2019 and December 29, 2018,
respectively.

120

SELECTED QUARTERLY FINANCIAL DATA (unaudited)

(Millions of Dollars, except per share amounts)
2020
Net Sales............................................................
Gross profit........................................................
Selling, general and administrative (1)................
Net earnings.......................................................
Less: Net earnings attributable to non-
controlling interest.............................................
Less: Preferred stock dividends
Net Earnings Attributable to Common
Shareowners
Earnings per share of common stock:

First

Second

Third

Fourth

Year

Quarter

3,129.4 $
1,023.1
748.5
133.1

3,147.4 $
1,012.7
732.0
238.7

3,850.2 $
1,376.3
738.9
395.2

4,407.6 $
1,555.8
870.2
467.7

14,534.6
4,967.9
3,089.6
1,234.7

(0.1)
—

0.3
4.7

0.3
9.4

0.4
9.3

0.9
23.4

133.2 $

233.7 $

385.5 $

458.0 $

1,210.4

Basic ...................................................... $
Diluted.................................................... $

0.89 $
0.88 $

1.52 $
1.52 $

2.47 $
2.44 $

2.92 $
2.88 $

7.85
7.77

2019
Net Sales............................................................
Gross profit........................................................
Selling, general and administrative (1)................
Net earnings.......................................................
Less: Net earnings attributable to non-
controlling interest.............................................
Net Earnings Attributable to Common
Shareowners....................................................... $
Earnings per share of common stock:

3,333.6 $
1,105.6
778.9
170.4

3,761.3 $
1,299.8
782.3
357.4

3,633.1 $
1,239.5
756.1
231.1

3,714.2 $
1,160.6
723.7
199.1

14,442.2
4,805.5
3,041.0
958.0

0.5

1.1

0.6

—

2.2

169.9 $

356.3 $

230.5 $

199.1 $

955.8

Basic....................................................... $
Diluted.................................................... $

1.15 $
1.13 $

2.41 $
2.37 $

1.55 $
1.53 $

1.34 $
1.32 $

6.44
6.35

(1) Includes provision for credit losses.

The 2020 year-to-date results above include $400 million of pre-tax acquisition-related and other charges, a $211 million tax
benefit related to the pre-tax acquisition-related and other charges and a one-time tax benefit related to a supply chain
reorganization, as well as $10 million of after-tax charges related to the Company's share of equity method investment earnings.
The net impact of the above items and effect on diluted earnings per share by quarter was as follows:

Acquisition-Related Charges & Other
• Q1 2020 — $62 million loss ($50 million after-tax and equity interest)...................................
• Q2 2020 — $169 million loss ($13 million after-tax and equity interest).................................
• Q3 2020 — $89 million loss ($71 million after-tax and equity interest)...................................
• Q4 2020 — $80 million loss ($65 million after-tax and equity interest)...................................

Diluted EPS Impact
$(0.32) per diluted share
$(0.08) per diluted share
$(0.45) per diluted share
$(0.41) per diluted share

The 2019 year-to-date results above include $363 million of pre-tax acquisition-related and other charges, a $78 million tax
benefit of the pre-tax acquisition-related and other charges, as well as $24 million of after-tax charges related to the Company's
share of equity method investment earnings. The net impact of the above items and effect on diluted earnings per share by
quarter was as follows:

Acquisition-Related Charges & Other
• Q1 2019 — $52 million loss ($43 million after-tax and equity interest)...................................
• Q2 2019 — $33 million loss ($44 million after-tax and equity interest)...................................
• Q3 2019 — $114 million loss ($91 million after-tax and equity interest).................................
• Q4 2019 — $164 million loss ($131 million after-tax and equity interest)...............................

Diluted EPS Impact
$(0.29) per diluted share
$(0.29) per diluted share
$(0.60) per diluted share
$(0.86) per diluted share

121

EXHIBIT INDEX
STANLEY BLACK & DECKER, INC.
EXHIBIT LIST

Some of the agreements included as exhibits to this Annual Report on Form 10-K (whether incorporated by reference to earlier
filings or otherwise) may contain representations and warranties, recitals or other statements that appear to be statements of
fact. These agreements are included solely to provide investors with information regarding their terms and are not intended to
provide any other factual or disclosure information about the Company or the other parties to the agreements. Representations
and warranties, recitals, and other common disclosure provisions have been included in the agreements solely for the benefit of
the other parties to the applicable agreements and often are used as a means of allocating risk among the parties. Accordingly,
such statements (i) should not be treated as categorical statements of fact; (ii) may be qualified by disclosures that were made to
the other parties in connection with the negotiation of the applicable agreements, which disclosures are not necessarily reflected
in the agreement or included as exhibits hereto; (iii) may apply standards of materiality in a way that is different from what may
be viewed as material by or to investors in or lenders to the Company; and (iv) were made only as of the date of the applicable
agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, representations and warranties, recitals or other disclosures contained in agreements may not describe the actual
state of affairs as of the date they were made or at any other time and should not be relied on by any person other than the
parties thereto in accordance with their terms. Additional information about the Company may be found in this Annual Report
on Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://
www.sec.gov.

3.1

(a) Restated Certificate of Incorporation dated September 15, 1998 (incorporated by reference to Exhibit 3(i) to the

Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).

(b) Certificate of Amendment to the Restated Certificate of Incorporation dated December 21, 2009 (incorporated
by reference to Exhibit 3(ii) to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).

reference to Exhibit 3(iii) to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).

(d) Certificate of Amendment to the Restated Certificate of Incorporation dated November 5, 2010 (incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 9, 2010).

(e) Certificate of Amendment to the Restated Certificate of Incorporation dated April 17, 2012 (incorporated by

reference to Exhibit 3(i) to the Company’s Quarterly Report on Form 10-Q filed on May 2, 2012).

(f) Certificate of Amendment to the Restated Certificate of Incorporation dated May 17, 2017 (incorporated by

reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 17, 2017).

(g) Certificate of Amendment to the Restated Certificate of Incorporation dated November 13, 2019 (incorporated
by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 13, 2019).

(h) Certificate of Amendment to the Restated Certificate of Incorporation dated May 15, 2020 (incorporated by

reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 15, 2020).

3.2

(a) Amended & Restated ByLaws (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on

Form 8-K filed on January 21, 2020).

4.1

(a)

Indenture, dated as of June 26, 1998, by and among Black & Decker Holdings Inc., as Issuer, The Black &
Decker Corporation, as Guarantor, and The First National Bank of Chicago, as Trustee (incorporated by
reference to Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on March 12, 2010).

4.2

(a) Senior Indenture, dated as of November 1, 2002 between The Stanley Works and The Bank of New York
Mellon Trust Company, N.A., as successor trustee to JPMorgan Chase Bank (incorporated by reference to
Exhibit 4(vi) to the Company’s Annual Report on Form 10-K for the year ended December 28, 2002).

122

(b) Third Supplemental Indenture dated as of September 3, 2010, to the Indenture dated as of November 1, 2002,

among Stanley Black & Decker, Inc., The Black & Decker Corporation and The Bank of New York Mellon
Trust Company, N.A., as successor trustee to JPMorgan Chase Bank, N.A. (formerly known as JPMorgan
Chase Bank), as trustee (incorporated by reference to the Company’s Current Report on Form 8-K filed on
September 7, 2010).

(c) Fourth Supplemental Indenture, dated as of November 22, 2011, among Stanley Black & Decker, Inc., The
Black & Decker Corporation, as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as
Trustee, relating to the 3.40% Notes due 2021 (incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed on November 22, 2011).

(d) Fifth Supplemental Indenture, dated as of November 6, 2012, among Stanley Black & Decker, Inc., The Black
& Decker Corporation, as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee,
relating to the 2.90% Notes due 2022 (incorporated by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K filed on November 6, 2012).

(e) Sixth Supplemental Indenture, dated as of November 6, 2018, between the Company and the Bank of New

York Mellon Trust Company, N.A., as trustee, relating to the 4.250% Notes due 2028 and the 4.850% Notes
due 2048 (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K dated November 6, 2018).

(f) Seventh Supplemental Indenture, dated as of March 1, 2019, between the Company and the Bank of New York

Mellon Trust Company, N.A., as trustee, relating to the 3.400% Notes due 2026 (incorporated by reference to
Exhibit 4.2 to the Company's Form 8-K dated March 1, 2019).

(g) Eight Supplemental Indenture, dated as of February 10, 2020, between Stanley Black & Decker, Inc. and The

Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 2.300% Notes due 2030
(incorporated by reference to Exhibit 4.2 to the Company's Form 8-K dated February 10, 2020).

(h) Ninth Supplemental Indenture, dated as of November 2, 2020, between Stanley Black & Decker, Inc. and The

Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 2.750% Notes due 2050
(incorporated by reference to Exhibit 4.2 to the Company's Form 8-K dated November 2, 2020).

4.3

(a)

Indenture, dated November 22, 2005, between The Stanley Works and HSBC Bank USA, National Association,
as indenture trustee (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K
dated November 29, 2005).

4.4

4.5

4.6

4.7

4.8

4.9

(b) Sixth Supplemental Indenture, dated February 10, 2020, between Stanley Black & Decker, Inc. and HSBC
Bank USA, National Association, as trustee, relating to the 4.000% Fixed-to-Fixed Reset Rate Junior
Subordinated Debentures due 2060 (incorporated by reference to Exhibit 4.5 to the Company’s Form 8-K
dated February 10, 2020).

0% Series C Cumulative Perpetual Preferred Stock Certificate (incorporated by reference to Exhibit 4.5 of the
Company’s Current Report on Form 8-K filed May 17, 2017).

Purchase Contract and Pledge Agreement, dated November 13, 2019, among the Company, The Bank of New
York Mellon Trust Company, National Association, as Purchase Contract Agent, and HSBC Bank USA,
National Association, as Collateral Agent, Custodial Agent and Securities Intermediary (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed November 13, 2019).

Form of Corporate Unit (incorporated by reference as part of Exhibit 4.1 of the Company's Current Report on
Form 8-K filed November 13, 2019).

Form of Treasury Unit (incorporated by reference as part of Exhibit 4.1 of the Company's Current Report on
Form 8-K filed November 13, 2019).

Form of Cash Settled Unit (incorporated by reference as part of Exhibit 4.1 of the Company's Current Report on
Form 8-K filed November 13, 2019).

4.10

0% Series D Cumulative Perpetual Preferred Stock Certificate (incorporated by reference to Exhibit 4.5 of the
Company's Current Report on Form 8-K filed November 13, 2019).

123

4.11

Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of
1934.

10.1

(a) Amended and Restated Five Year Credit Agreement, made as of September 12, 2018 among Stanley Black &
Decker, Inc., the initial lenders named therein and Citibank, N.A. as administrative agent for the Lenders
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September
14, 2018).

(b) 364-Day Credit Agreement, made as of September 11, 2019 among Stanley Black & Decker, Inc., the initial

lenders named therein and Citibank, N.A. as administrative agent for the Lenders (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 11, 2019).

10.2

(a) Letter Agreement, dated July 21, 2016, between Stanley Black & Decker, Inc. and James M. Loree

(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 25,
2016).*

(b) Second Amended and Restated Change in Control Severance Agreement dated July 21, 2016, between Stanley
Black & Decker, Inc. and James M. Loree (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on July 25, 2016).*

10.3

Letter Agreement between Stanley Black & Decker, Inc. and John H. Wyatt effective December 22, 2014, as
amended February 17, 2016 (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on
Form 10-K filed on February 19, 2016).*

10.4

(a) Change in Control Severance Agreement, dated December 4, 2018 between Stanley Black & Decker, Inc. and

Jeffery D. Ansell (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the period ended December 29, 2018).*

(b) Letter Agreement, dated January 23, 2020, between Stanley Black & Decker, Inc. and Jeffery D. Ansell

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on From 8-K, filed January 29,
2020).*

10.5

Change in Control Severance Agreement, dated December 4, 2018 between Stanley Black & Decker, Inc. and
Donald Allan Jr. (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the period ended December 29, 2018.*

10.6

Form of Change in Control Severance Agreement (John H. Wyatt and Jamie A. Ramirez) (filed herewith).*

10.7

10.8

Deferred Compensation Plan for Non-Employee Directors, as amended through October 1, 2020 (filed
herewith).*

Deferred Compensation Plan for Participants in Stanley’s Management Incentive Plan amended and restated as
of December 11, 2007 (incorporated by reference to Exhibit 10(ix) to the Company’s Annual Report on Form
10-K for the year ended December 29, 2007).*

10.9

(a) Stanley Black & Decker Supplemental Retirement Account Plan (as in effect, January 1, 2011, except as

otherwise provided therein) (incorporated by reference to the Company’s Annual Report on Form 10-K for the
period ended January 1, 2011).*

(b) Stanley Black & Decker Supplemental Retirement Plan (effective, January 1, 2011, except as otherwise

provided therein) (incorporated by reference to the Company’s Annual Report on Form 10-K for the period
ended January 1, 2011).*

10.10

10.11

Stanley Black & Decker, Inc. Supplemental Executive Retirement Program as amended and restated effective
October 15, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on October 16, 2015).*

New 1991 Loan Agreement, dated June 30, 1998, between The Stanley Works, as lender, and Citibank, N.A. as
trustee under the trust agreement for the Stanley Account Value Plan, to refinance the 1991 Salaried Employee
ESOP Loan and the 1991 Hourly ESOP Loan and their related promissory notes (incorporated by reference to
Exhibit 10(ii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 1998).

124

10.12

The Stanley Works Non-Employee Directors’ Benefit Trust Agreement dated December 27, 1989 and amended
as of January 1, 1991 by and between The Stanley Works and Fleet National Bank, as successor trustee
(incorporated by reference to Exhibit (10)(xvii)(a) to the Company’s Annual Report on Form 10-K for year
ended December 29, 1990). P

10.13

(a) The Stanley Works 2009 Long-Term Incentive Plan (as amended March 12, 2010) (incorporated by reference

Exhibit 4.7 to the Company’s Registration Statement on Form S-8 Reg. No. 333-165454 filed on March 12,
2010).*

(b) Form of award letter for restricted stock unit grants to executive officers pursuant to the Company’s 2009 Long
Term Incentive Plan (as amended March 12, 2010) (incorporated by reference to Exhibit 10(vi)(b) to the
Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).*

Plan (as amended March 12, 2010) (incorporated by reference to Exhibit 10(vi)(c) to the Company’s Quarterly
Report on Form 10-Q filed on May 13, 2010).*

10.14

(a) The Stanley Black & Decker 2013 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the

Company’s Quarterly Report on Form 10-Q for the period ended March 30, 2013).*

(b) Form of Award Document for Performance Awards granted to Executive Officers under 2013 Long Term

Incentive Plan, updated 2018 (incorporated by reference to Exhibit 10.16(b) to the Company's Annual Report
on Form 10-K for the period ended December 30, 2017).*

Incentive Plan (incorporated by reference to Exhibit 10.18(c) to the Company’s Annual Report on Form 10-K
for the period ended December 28, 2013).*

(d) Form of restricted stock unit award certificate for grants of restricted stock units to executive officers pursuant
to the Company’s 2013 Long Term Incentive Plan (incorporated by reference to Exhibit 10.18(d) to the
Company’s Annual Report on Form 10-K for the period ended December 28, 2013).*

(e) Form of restricted stock unit retention award certificate for grants of restricted stock units to executive officers
pursuant to the Company’s 2013 Long Term Incentive Plan (incorporated by reference to the Company’s
Annual Report on Form 10-K for the period ended December 31, 2016).*

10.15

(a) The Stanley Black & Decker 2018 Omnibus Award Plan (incorporated by reference to Exhibit 10.1 to the

Company’s Quarterly Report on Form 10-Q filed on July 20, 2018).*

(b) Form of stock option certificate for grants to executive officers pursuant to the Company’s 2018 Omnibus

Award Plan (incorporated by reference to Exhibit 10.16(b) on the Company's Annual Report on Form 10-K for
the year ended December 28, 2019).*

(c) Form of restricted stock unit award certificate for grants to executive officers pursuant to the Company’s 2018
Omnibus Award Plan (incorporated by reference to Exhibit 10.16(c) on the Company's Annual Report on Form
10-K for the year ended December 28, 2019).*

(d) Form of restricted stock unit retention award certificate for grants to executive officers pursuant to the

Company’s 2018 Omnibus Award Plan (incorporated by reference to Exhibit 10.16(d) on the Company's
Annual Report on Form 10-K for the year ended December 28, 2019).*

(e) Form of Award Document for Performance Award granted to Executive Officers under the 2018 Omnibus

Award (incorporated by reference to Exhibit 10.16(e) to the Company's Annual Report on Form 10-K for the
period ended December 29, 2018).*

(f) Form of Award Document granted to Executive Officers under the 2019 and 2020 Management Incentive

Compensation Plan (incorporated by reference to Exhibit 10.16(f) to the Company's Annual Report on Form
10-K for the period ended December 29, 2018).*

10.16

The Stanley Black & Decker, Inc. Deferred Compensation Plan Relating to Long-Term Performance Awards
(incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the period
ended December 29, 2018). *

125

10.17

10.18

10.19

10.20

10.21

10.22

10.23

The Stanley Black & Decker, Inc. Restricted Stock Unit Plan for Non-Employee Directors, as amended and
restated through October 1, 2020 (filed herewith).*

The Stanley Black & Decker, Inc. 2020 Restricted Stock Unit Deferral Plan For Non-Employee Directors
(incorporated by reference to Exhibit 10.19 on the Company's Annual Report on Form 10-K for the year ended
December 28, 2019).*

The Stanley Black & Decker, Inc. 2017 Management Incentive Compensation Plan (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended April 1, 2017).*

Special Severance Policy for Management Incentive Compensation Plan Participants Levels 1-5 as amended
effective October 17, 2008 (incorporated by reference to Exhibit 10(xxi) to the Company’s Annual Report on
Form 10-K for the period ended January 3, 2009).*

Global Omnibus Employee Stock Purchase Plan approved by shareholders of the Company on April 17, 2019
(incorporated by reference to Exhibit 99.1(a) to the Company’s Registration Statement on Form S-8 filed on
November 13, 2019).*

The Black & Decker 2003 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed on March 12, 2010).*

Form of Nonqualified Stock Option Agreement relating to The Black & Decker Corporation’s stock option
plans (incorporated by reference to Exhibit 10(xix) to the Company’s Quarterly Report on Form 10-Q filed on
May 13, 2010).*

10.24

(a) The Black & Decker Supplemental Pension Plan, as amended and restated (incorporated by reference to Exhibit

10(xx) to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).*

(b) First Amendment to The Black & Decker Supplemental Pension Plan (incorporated by reference to Exhibit

10(xxi) to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).*

10.25

10.26

10.27

The Black & Decker Supplemental Executive Retirement Plan, as amended and restated (incorporated by
reference to Exhibit 10(xxii) to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2010).*

Employment Offer Letter, dated June 12, 2017, between Stanley Black & Decker, Inc. and Janet M. Link
(incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the period
ended December 30, 2017).*

Employment Offer Letter, dated April 1, 2019, between Stanley Black & Decker, Inc. and Robert Blackburn
(incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the period
ended December 28, 2019).*

10.28

Employment Offer Letter, dated February 24, 2020, between Stanley Black & Decker, Inc. and Graham
Robinson (filed herewith).*

10.29

Change in Control Severance Agreement (all other executive officers) (filed herewith).*

Subsidiaries of Registrant.

Consent of Independent Registered Public Accounting Firm.

Power of Attorney.

31.1

(a) Certification by Chief Executive Officer pursuant to Rule 13a-14(a).

31.1

(b) Certification by Chief Financial Officer pursuant to Rule 13a-14(a).

32.1

32.2

99.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

Policy on Confidential Proxy Voting and Independent Tabulation and Inspection of Elections as adopted by
The Board of Directors October 23, 1991 (incorporated by reference to Exhibit (28)(i) to the Quarterly Report
on Form 10-Q for the quarter ended September 28, 1991). P

126

101

The following materials from Stanley Black & Decker Inc.'s Annual Report on Form 10-K for the year ended
January 2, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated
Statements of Operations for the fiscal years ended January 2, 2021, December 28, 2019, and December 29,
2018; (ii) Consolidated Statements of Comprehensive Income for the fiscal years ended January 2, 2021,
December 28, 2019, and December 29, 2018; (iii) Consolidated Balance Sheets at January 2, 2021 and
December 28, 2019; (iv) Consolidated Statements of Cash Flows for the fiscal years ended January 2, 2021,
December 28, 2019, and December 29, 2018; (v) Consolidated Statements of Changes in Shareowners' Equity
for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018; and (v) Notes to
Consolidated Financial Statements**.

104

The cover page of Stanley Black & Decker Inc.'s Annual Report on Form 10-K for the year ended January 2,
2021, formatted in iXBRL (included within Exhibit 101).

* Management contract or compensation plan or arrangement.
P Paper Filing
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part
of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and
otherwise are not subject to liability under those sections.

127

Financial and Investor Communications

Cautionary Statements Under the Private Securities Litigation Reform Act of 1995

Statements in this Annual Report that are not historical, including, but not limited to, those
that often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,”
“see,” or “will,” are “forward-looking statements” and subject to risk and uncertainty.
The results that are expressed or implied in such statements involve inherent risks and
uncertainty that could cause actual outcomes and results to differ materially from those
expectations, including, but not limited to, the risks, uncertainties and other factors set forth
or referred to under Risk Factors and the cautionary statements in the MD&A of
the Company’s Annual Report on Form 10-K that is part of this Annual Report, and any
material changes thereto set forth in any subsequent Quarterly Reports on Form 10-Q, as
well as those contained in the Company’s other filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or circumstances that may arise after the
date hereof.

NOTE ON IMAGES: Some images in this report predate the pandemic and may not reflect
our current COVID-19 protocols such as face masks and social distancing.

DEWALT Outdoor (front cover top): Part of the recent DEWALT outdoor product expansion,
the 2X20V MAX* 21-1/2 in. Brushless Cordless Push Mower is Made in the USA with global
materials and built tough for the most demanding yards.

Consumer Reconnection with the Home (front cover second from top): Expertly
designed, the 7.0 Amp 3-in. x 21-in. CRAFTSMAN Belt Sander gets in close to adjoining
surfaces to quickly complete woodworking jobs.

Industry 4.0 (front cover third from top): In the Ft. Mill, South Carolina, facility, an
Integration Technician wires a collaborative robot to be used for automatic palletizing.

Aerospace Manufacturing (front cover bottom): In the new state-of the-art Cleveland,
Ohio, facility, an assembler works with a specialty fastener for the aerospace and defense
market within the Consolidated Aerospace Manufacturing business.

Empower Makers (inside back cover left): A WorldSkills competitor participates in the
Kazan 2019 Finals event.

USA Manufacturing (inside back cover right): In the Ft. Mill, South Carolina, facility,
a Motors Technician troubleshoots automated brushless motor winding equipment for
DEWALT Power Tools that are Made in the USA with global materials.

Electrification in Automotive (back cover top): Stanley Engineered Fastening’s
hydro-pneumatic POP rivet tool installs blind rivets on the automotive vehicle body
and is used in EV applications to install sealing rivets in the battery system.

DEWALT FLEXVOLT Innovation (back cover bottom): Capable of working in even
the most remote locations, the DEWALT SDS MAX Combination Rotary Hammer and
Extractor break ground in Outer Hebrides, Scotland.

The Stanley Black & Decker investor relations department provides information to
shareowners and the financial community. We encourage inquiries and will provide services
that include:

• Fulfilling requests for annual reports, proxy statements, forms 10-Q and 10-K, copies of

press releases and other Company information

• Meetings with securities analysts and fund managers

Contact the investor relations department at our corporate offices by calling
Dennis Lange, VP, Investor Relations at (860) 827-3833 or by mail at
1000 Stanley Drive, New Britain, CT 06053. We make earnings releases
available online on the day that results are released to the news media.
Stanley Black & Decker releases and a variety of shareowner information
can be found at the Company’s website: www.stanleyblackanddecker.com.

Financial Scorecard Footnotes

(b) The Company has excluded $199 million of after-tax charges ($1.27 of diluted EPS)
related to a cost reduction program, charges related to the extinguishment of debt,
acquisitions, Security business transformation, margin resiliency initiatives, a net loss
on the sales of businesses, and a charge related to the Company’s share of equity
method investment earnings, partially offset by a release of a contingent consideration
liability relating to the CAM acquisition and a one-time tax benefit related to a supply
chain reorganization, in the 2020 calculation of diluted EPS. The Company has
excluded $309 million of after-tax charges ($2.05 of diluted EPS) related to
restructuring, acquisitions, charges related to the extinguishment of debt, Security
business transformation, margin resiliency initiatives, a gain on a sale of a business,
and a charge related to the Company’s share of equity method investment earnings,
in the 2019 calculation of diluted EPS. The Company has excluded $631 million of
after-tax charges ($4.16 of diluted EPS) related to acquisitions, an environmental
remediation settlement, a non-cash fair value adjustment, a cost reduction program,
an incremental freight charge related to a supplier’s bankruptcy, a loss related to a
previously divested business, and tax charges primarily related to the Tax Cuts and
Jobs Act (“the Act”), in the 2018 calculation of diluted EPS. The Company has
excluded $91 million of after-tax income ($0.59 of diluted EPS) related to the gain on
sales of businesses, partially offset by acquisition-related charges and a one-time net
tax charge related to the Act, in the 2017 calculation of diluted EPS. These amounts were
excluded because the Company believes doing so provides a better indicator of
operating trends when analyzing diluted EPS, due to the unusually large magnitude
of these amounts and the fact that they are expected to be non-recurring. Therefore,
the Company has provided these measures both including and excluding such amounts.

expenditures. Cash flow from operating activities for 2016–2017 represent as previously
reported amounts, which excludes the impacts from the 2018 adoption of ASU 2016-15
and ASU 2016-18.

(d) Working Capital Turns are computed as annualized fourth-quarter sales divided by
year-end working capital (accounts receivable, inventory, accounts payable, and
deferred revenue).

(e) Average Capital Employed is computed as the 2-point average of debt and equity.

(f) Cash Flow Return on Investment is computed as cash from operations plus after-tax

interest expense, divided by the 2-point average of debt and equity.

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