swk-20200926

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 26, 2020

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

For the transition period from [ ] to [ ]

Commission File Number 001-05224


STANLEY BLACK & DECKER, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


CT						06-0548860
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)						(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

Name Of Each Exchange On Which Registered

Common Stock

$2.50 Par Value per Share

SWK

New York Stock Exchange

Corporate Units

SWT

New York Stock Exchange

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 ☑ 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 ☐

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. (Check one):

Large Accelerated Filer

Accelerated Filer

Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

160,223,299 shares of the registrant’s common stock were outstanding as of October 16, 2020.

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION			3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			41
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			53
ITEM 4. CONTROLS AND PROCEDURES			53
PART II — OTHER INFORMATION			55
ITEM 1. LEGAL PROCEEDINGS			55
ITEM 1A. RISK FACTORS			55
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			56
ITEM 6. EXHIBITS			57
SIGNATURE			58

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 26, 2020 AND SEPTEMBER 28, 2019

(Unaudited, Millions of Dollars, Except Per Share Amounts)


	Third Quarter						Year-to-Date
	2020		2019		2020		2019
Net Sales	$	3,850.2	$	3,633.1	$	10,127.0	$	10,728.0
Costs and Expenses
Cost of sales	$	2,473.9	$	2,393.6	$	6,714.9	$	7,083.1
Selling, general and administrative	731.3		752.8		2,182.1		2,289.6
Provision for credit losses	7.6		3.3		37.3		27.7
Other, net	74.3		55.0		236.1		182.6
Gain on sale of business	—		—		—		(17.2)
Restructuring charges	42.8		74.0		74.6		91.2
Interest expense	52.7		72.4		169.7		219.2
Interest income	(2.0)		(12.7)		(14.6)		(41.4)
	$	3,380.6	$	3,338.4	$	9,400.1	$	9,834.8
Earnings before income taxes and equity interest	469.6		294.7		726.9		893.2
Income tax expense (benefit)	78.4		59.2		(26.0)		135.5
Net earnings before equity interest	$	391.2	$	235.5	$	752.9	$	757.7
Share of net earnings (losses) of equity method investment	4.0		(4.4)		14.1		1.2
Net earnings	$	395.2	$	231.1	$	767.0	$	758.9
Less: Net earnings attributable to non-controlling interests	0.3		0.6		0.5		2.2
Net earnings attributable to Stanley Black & Decker, Inc.	$	394.9	$	230.5	$	766.5	$	756.7
Less: Preferred stock dividends	9.4		—		14.1		—
Net Earnings Attributable to Common Shareowners	$	385.5	$	230.5	$	752.4	$	756.7
Total Comprehensive Income Attributable to Common Shareowners	$	465.0	$	99.6	$	675.9	$	626.1
Earnings per share of common stock:
Basic	$	2.47	$	1.55	$	4.91	$	5.11
Diluted	$	2.44	$	1.53	$	4.86	$	5.03
Dividends per share of common stock	$	0.70	$	0.69	$	2.08	$	2.01
Weighted-average shares outstanding (in thousands):
Basic	156,370		148,350		153,345		148,111
Diluted	157,971		150,623		154,759		150,299

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 26, 2020 AND DECEMBER 28, 2019

(Unaudited, Millions of Dollars, Except Per Share Amounts)


	September 26, 2020		December 28, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	683.0	$	297.7
Accounts and notes receivable, net	1,764.2		1,454.6
Inventories, net	2,874.7		2,255.0
Other current assets	465.1		449.3
Total Current Assets	5,787.0		4,456.6
Property, plant and equipment, net	2,005.9		1,959.5
Goodwill	9,887.0		9,237.5
Intangibles, net	4,069.0		3,622.0
Other assets	1,292.0		1,321.0
Total Assets	$	23,040.9	$	20,596.6
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Short-term borrowings	$	3.2	$	337.3
Current maturities of long-term debt	3.1		3.1
Accounts payable	2,345.3		2,087.8
Accrued expenses	1,870.2		1,977.5
Total Current Liabilities	4,221.8		4,405.7
Long-term debt	4,658.5		3,176.4
Deferred taxes	590.1		731.2
Post-retirement benefits	592.8		609.4
Other liabilities	2,598.4		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	1,500.0		1,500.0
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	442.3		442.3
Retained earnings	7,200.4		6,772.8
Additional paid in capital	4,785.3		4,492.9
Accumulated other comprehensive loss	(1,961.1)		(1,884.6)
ESOP	—		(2.3)
	11,966.9		11,321.1
Less: cost of common stock in treasury	(1,594.0)		(2,184.8)
Stanley Black & Decker, Inc. Shareowners’ Equity	10,372.9		9,136.3
Non-controlling interests	6.4		5.9
Total Shareowners’ Equity	10,379.3		9,142.2
Total Liabilities and Shareowners’ Equity	$	23,040.9	$	20,596.6

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE AND NINE MONTHS ENDED SEPTEMBER 26, 2020 AND SEPTEMBER 28, 2019

(Unaudited, Millions of Dollars)


	Third Quarter						Year-to-Date
	2020		2019		2020		2019
OPERATING ACTIVITIES
Net earnings	$	395.2	$	231.1	$	767.0	$	758.9
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization of property, plant and equipment	94.1		93.1		281.1		280.8
Amortization of intangibles	51.2		47.8		150.0		139.6
Gain on sale of business	—		—		—		(17.2)
Share of net (earnings) losses of equity method investment	(4.0)		4.4		(14.1)		(1.2)
Changes in working capital	51.6		(278.3)		(667.5)		(859.2)
Changes in other assets and liabilities	89.1		94.6		83.7		(39.3)
Cash provided by operating activities	677.2		192.7		600.2		262.4
INVESTING ACTIVITIES
Capital and software expenditures	(62.1)		(96.7)		(209.5)		(283.5)
Proceeds from sale of business, net of cash sold	—		—		—		76.7
Business acquisitions, net of cash acquired	1.4		(6.2)		(1,300.6)		(682.2)
Purchases of investments	(1.0)		(4.9)		(14.6)		(258.6)
Net investment hedge settlements	—		11.3		41.0		15.2
Other	(2.1)		(3.9)		(0.6)		(7.5)
Cash used in investing activities	(63.8)		(100.4)		(1,484.3)		(1,139.9)
FINANCING ACTIVITIES
Payment on long-term debt	—		—		—		(400.0)
Proceeds from debt issuances, net of fees	—		—		1,482.6		496.2
Stock purchase contract fees	(9.8)		(10.1)		(49.9)		(30.3)
Net short-term (repayments) borrowings	(712.9)		28.6		(341.8)		1,117.9
Proceeds from issuances of common stock	42.5		21.5		843.8		46.1
Purchases of common stock for treasury	(1.9)		(2.7)		(11.2)		(11.9)
Craftsman deferred purchase price	—		—		(250.0)		—
Craftsman contingent consideration	(6.0)		—		(39.0)		—
Termination of interest rate swaps	—		—		(20.5)		(1.0)
Cash dividends on common stock	(109.6)		(102.3)		(321.0)		(297.6)
Cash dividends on preferred stock	(9.4)		—		(9.4)		—
Other	(3.1)		(2.4)		(10.1)		(8.5)
Cash (used in) provided by financing activities	(810.2)		(67.4)		1,273.5		910.9
Effect of exchange rate changes on cash, cash equivalents and restricted cash	16.3		(25.4)		(7.9)		(20.4)
Change in cash, cash equivalents and restricted cash	(180.5)		(0.5)		381.5		13.0
Cash, cash equivalents and restricted cash, beginning of period	876.6		324.9		314.6		311.4
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	696.1	$	324.4	$	696.1	$	324.4

Table of Contents

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of September 26, 2020 and December 28, 2019, as shown above:


	September 26, 2020		December 28, 2019
Cash and cash equivalents	$	683.0	$	297.7
Restricted cash included in Other current assets	13.1		16.9
Cash, cash equivalents and restricted cash	$	696.1	$	314.6

See Notes to (Unaudited) Condensed Consolidated Financial Statements.

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 26, 2020 AND SEPTEMBER 28, 2019

(Unaudited, Millions of Dollars, Except Per Share Amounts)


	Preferred Stock		Common Stock		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		ESOP		Treasury Stock		Non- Controlling Interests		Shareowners’ Equity
Balance December 28, 2019	$	1,500.0	$	442.3	$	4,492.9	$	6,772.8	$	(1,884.6)	$	(2.3)	$	(2,184.8)	$	5.9	$	9,142.2
Net earnings (loss)	—		—		—		133.2		—		—		—		(0.1)		133.1
Other comprehensive loss	—		—		—		—		(258.8)		—		—		—		(258.8)
Cash dividends declared — $0.69 per share	—		—		—		(105.6)		—		—		—		—		(105.6)
Issuance of common stock (744,339 shares)	—		—		(20.5)		—		—		—		65.1		—		44.6
Repurchase of common stock (125,294 shares)	—		—		10.0		—		—		—		(19.0)		—		(9.0)
Preferred stock issuance costs	—		—		(1.2)		—		—		—		—		—		(1.2)
Stock-based compensation related	—		—		15.4		—		—		—		—		—		15.4
ESOP	—		—		—		—		—		2.3		—		—		2.3
Adoption of ASU 2016-13	—		—		—		(3.8)		—		—		—		—		(3.8)
Balance March 28, 2020	$	1,500.0	$	442.3	$	4,496.6	$	6,796.6	$	(2,143.4)	$	—	$	(2,138.7)	$	5.8	$	8,959.2
Net earnings	—		—		—		238.4		—		—		—		0.3		238.7
Other comprehensive income	—		—		—		—		102.8		—		—		—		102.8
Cash dividends declared — $0.69 per common share	—		—		—		(105.8)		—		—		—		—		(105.8)
Cash dividends declared — $50.00 per annum per preferred share	—		—		—		(4.7)		—		—		—		—		(4.7)
Issuance of common stock (5,538,106 shares)	—		—		257.6		—		—		—		499.1		—		756.7
Repurchase of common stock (4,227 shares)	—		—		—		—		—		—		(0.3)		—		(0.3)
Preferred stock issuance costs	—		—		(2.2)		—		—		—		—		—		(2.2)
Stock-based compensation related	—		—		21.2		—		—		—		—		—		21.2
Balance June 27, 2020	$	1,500.0	$	442.3	$	4,773.2	$	6,924.5	$	(2,040.6)	$	—	$	(1,639.9)	$	6.1	$	9,965.6
Net earnings	—		—		—		394.9		—		—		—		0.3		395.2
Other comprehensive income	—		—		—		—		79.5		—		—		—		79.5
Cash dividends declared — $0.70 per share	—		—		—		(109.6)		—		—		—		—		(109.6)
Cash dividends declared —$50.00 per annum per preferred share	—		—		—		(9.4)		—		—		—		—		(9.4)
Issuance of common stock (529,998 shares)	—		—		(5.3)		—		—		—		47.8		—		42.5
Repurchase of common stock (15,403 shares)	—		—		—		—		—		—		(1.9)		—		(1.9)
Preferred stock issuance costs	—		—		(0.5)		—		—		—		—		—		(0.5)
Stock-based compensation related	—		—		17.9		—		—		—		—		—		17.9
Balance September 26, 2020	$	1,500.0	$	442.3	$	4,785.3	$	7,200.4	$	(1,961.1)	$	—	$	(1,594.0)	$	6.4	$	10,379.3

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	Preferred Stock		Common Stock		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		ESOP		Treasury Stock		Non- Controlling Interests		Shareowners’ Equity
Balance December 29, 2018	$	750.0	$	442.3	$	4,621.0	$	6,219.0	$	(1,814.3)	$	(10.5)	$	(2,371.3)	$	3.7	$	7,839.9
Net earnings	—		—		—		169.9		—		—		—		0.5		170.4
Other comprehensive income	—		—		—		—		1.0		—		—		—