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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 April 3, 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)
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 ClassTrading SymbolName Of Each Exchange On Which Registered
Common Stock$2.50 Par Value per ShareSWKNew York Stock Exchange
Corporate UnitsSWTNew 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.
Large Accelerated Filerþ  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
161,494,767 shares of the registrant’s common stock were outstanding as of April 21, 2021.



TABLE OF CONTENTS
 


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 (LOSS)
THREE MONTHS ENDED APRIL 3, 2021 AND MARCH 28, 2020
(Unaudited, Millions of Dollars, Except Per Share Amounts)
 
 Year-to-Date
 20212020
Net Sales$4,197.1 $3,129.4 
Costs and Expenses
Cost of sales$2,632.8 $2,106.3 
Selling, general and administrative847.4 737.8 
Provision for credit losses5.5 10.7 
Other, net59.0 74.9 
Loss on sale of business1.0  
Restructuring charges2.3 3.9 
Interest expense47.5 59.7 
Interest income(2.9)(10.1)
$3,592.6 $2,983.2 
Earnings before income taxes and equity interest604.5 146.2 
Income taxes119.5 12.9 
Net earnings before equity interest$485.0 $133.3 
Share of net earnings (losses) of equity method investment1.8 (0.2)
Net earnings$486.8 $133.1 
Less: Net losses attributable to non-controlling interests(0.6)(0.1)
Net earnings attributable to Stanley Black & Decker, Inc.$487.4 $133.2 
Less: Preferred stock dividends9.4  
Net Earnings Attributable to Common Shareowners$478.0 $133.2 
Total Comprehensive Income (Loss) Attributable to Common Shareowners$380.3 $(125.6)
Earnings per share of common stock:
Basic$3.04 $0.89 
Diluted$2.98 $0.88 
Dividends per share of common stock$0.70 $0.69 
Weighted-average shares outstanding (in thousands):
Basic157,490 150,330 
Diluted160,220 151,903 
See Notes to (Unaudited) Condensed Consolidated Financial Statements.


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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 3, 2021 AND JANUARY 2, 2021
(Unaudited, Millions of Dollars, Except Per Share Amounts) 
April 3,
2021
January 2,
2021
ASSETS
Current Assets
Cash and cash equivalents$949.2 $1,381.0 
Accounts and notes receivable, net1,994.8 1,512.2 
Inventories, net3,137.4 2,737.4 
Prepaid expenses419.7 370.7 
Other current assets21.9 34.7 
Total Current Assets6,523.0 6,036.0 
Property, plant and equipment, net2,016.5 2,053.8 
Goodwill9,975.1 10,038.1 
Intangibles, net3,990.1 4,055.4 
Other assets1,371.3 1,383.0 
Total Assets$23,876.0 $23,566.3 
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Short-term borrowings$0.8 $1.5 
Accounts payable2,653.2 2,446.4 
Accrued expenses1,924.4 2,110.4 
Total Current Liabilities4,578.4 4,558.3 
Long-term debt4,245.7 4,245.4 
Deferred taxes576.3 568.0 
Post-retirement benefits615.2 642.6 
Other liabilities2,455.6 2,485.6 
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 2021 and 2020
      Issued and outstanding 1,500,000 shares in 2021 and 2020
1,500.0 1,500.0 
Common stock, par value $2.50 per share:
      Authorized 300,000,000 shares in 2021 and 2020
      Issued 176,902,738 shares in 2021 and 2020
442.3 442.3 
Retained earnings7,915.5 7,547.6 
Additional paid in capital4,842.8 4,832.7 
Accumulated other comprehensive loss(1,811.4)(1,713.7)
12,889.2 12,608.9 
Less: cost of common stock in treasury(1,487.4)(1,549.3)
Stanley Black & Decker, Inc. Shareowners’ Equity11,401.8 11,059.6 
Non-controlling interests3.0 6.8 
Total Shareowners’ Equity11,404.8 11,066.4 
Total Liabilities and Shareowners’ Equity$23,876.0 $23,566.3 
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 MONTHS ENDED APRIL 3, 2021 AND MARCH 28, 2020
(Unaudited, Millions of Dollars)
 
Year-to-Date
 20212020
OPERATING ACTIVITIES
Net earnings$486.8 $133.1 
Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation and amortization of property, plant and equipment93.5 92.8 
Amortization of intangibles50.5 48.3 
Loss on sale of business1.0  
Share of net (earnings) losses of equity method investment(1.8)0.2 
Changes in working capital(720.4)(512.7)
Changes in other assets and liabilities(67.4)(166.9)
Cash used in operating activities(157.8)(405.2)
INVESTING ACTIVITIES
Capital and software expenditures(88.3)(82.9)
Business acquisitions, net of cash acquired(0.2)(1,302.4)
Purchases of investments(7.0)(6.5)
   Net investment hedge settlements(52.6)24.4 
Other0.2 3.7 
Cash used in investing activities(147.9)(1,363.7)
FINANCING ACTIVITIES
Proceeds from debt issuances, net of fees 1,486.4 
Stock purchase contract fees(9.8)(20.1)
Net short-term (repayments) borrowings (0.7)1,351.9 
Proceeds from issuances of common stock64.1 44.6 
Purchases of common stock for treasury(14.9)(9.0)
Craftsman deferred purchase price (250.0)
Craftsman contingent consideration(7.0) 
Termination of interest rate swaps (20.5)
Cash dividends on common stock(110.1)(105.6)
Cash dividends on preferred stock(9.4) 
Other(7.2)(2.5)
Cash (used in) provided by financing activities(95.0)2,475.2 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(38.9)(22.6)
Change in cash, cash equivalents and restricted cash(439.6)683.7 
Cash, cash equivalents and restricted cash, beginning of period1,398.3 314.6 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$958.7 $998.3 

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The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of April 3, 2021 and January 2, 2021, as shown above:
April 3, 2021January 2, 2021
Cash and cash equivalents$949.2 $1,381.0 
Restricted cash included in Other current assets9.5 17.3 
Cash, cash equivalents and restricted cash$958.7 $1,398.3 
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 MONTHS ENDED APRIL 3, 2021 AND MARCH 28, 2020
(Unaudited, Millions of Dollars, Except Per Share Amounts)


Preferred
Stock
Common
Stock
Additional
Paid In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Non-
Controlling
Interests
Shareowners’
Equity
Balance January 2, 2021$1,500.0 $442.3 $4,832.7 $7,547.6 $(1,713.7)$(1,549.3)$6.8 $11,066.4 
Net earnings (loss)— — — 487.4 — — (0.6)486.8 
Other comprehensive loss— — — — (97.7)— — (97.7)
Cash dividends declared — $0.70 per share
— — — (110.1)— — — (110.1)
Cash dividends declared —$50.00 per annum per preferred share
— — — (9.4)— — — (9.4)
Issuance of common stock (848,275 shares)
— — (12.7)— — 76.8 — 64.1 
Repurchase of common stock (80,310 shares)
— — — — — (14.9)— (14.9)
Non-controlling interest buyout— — (2.8)— — — (3.2)(6.0)
Stock-based compensation related— — 25.6 — — — — 25.6 
Balance April 3, 2021$1,500.0 $442.3 $4,842.8 $7,915.5 $(1,811.4)$(1,487.4)$3.0 $11,404.8 
Preferred
Stock
Common
Stock
Additional
Paid In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
ESOPTreasury
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 
See Notes to (Unaudited) Condensed Consolidated Financial Statements.

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 3, 2021

A.    SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereinafter referred to as “generally accepted accounting principles”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the interim periods have been included and are of a normal, recurring nature. Operating results for the three months ended April 3, 2021 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes included in Stanley Black & Decker, Inc.’s (the “Company”) Form 10-K for the year ended January 2, 2021, and subsequent related filings with the Securities and Exchange Commission ("SEC").

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 CAM acquisition was accounted for as a business combination using the acquisition method of accounting and the results subsequent to the date of acquisition are included in the Company's Industrial segment.

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.

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 dates of sale in 2020.

Refer to Note F, Acquisitions and Investments, and Note T, Divestitures, for further discussion of these transactions.

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Accounts And Notes Receivable, Net
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
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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. 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.

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 in 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 customer contracts, 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
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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 sales agreement involves multiple performance obligations, each obligation is separately identified (including equipment lease obligations) 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, as appropriate, in the consolidated balance sheet 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 sheet.

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

B.    NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS ADOPTED —In January 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. The Company adopted this guidance in the first quarter of 2021 and it did not have a material impact on its consolidated financial statements.
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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 adopted this standard in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements.
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), 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 whether it will apply the optional expedients and exceptions.

C.    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 three months ended April 3, 2021 and March 28, 2020:
Year-to-Date
20212020
Numerator (in millions):
Net Earnings Attributable to Common Shareowners$478.0 $133.2 
Denominator (in thousands):
Basic weighted-average shares outstanding157,490 150,330 
Dilutive effect of stock contracts and awards2,730 1,573 
Diluted weighted-average shares outstanding160,220 151,903 
Earnings per share of common stock:
Basic$3.04 $0.89 
Diluted$2.98 $0.88 
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):
Year-to-Date
20212020
Number of stock options1,096 2,943 
In November 2019, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million. Each unit initially consists of 750,000 shares of convertible preferred stock ("Series D Preferred Stock") and forward stock purchase contracts. On
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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 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 April 3, 2021, due to customary anti-dilution provisions, the conversion rate was 5.2272, equivalent to a conversion price of approximately $191.31 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 January and February of 2021 and during the first three months of 2020.
In May 2017, the Company issued 7,500,000 Equity Units with a total notional value of $750.0 million. 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, as described more fully in Note J, Equity Arrangements. The remarketing generated 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 April 3, 2021, due to customary anti-dilution provisions, the conversion rate was 6.7548, equivalent to a conversion price of approximately $148.04 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 February and March of 2020.
On April 28, 2021, the Company informed holders that it will redeem all outstanding shares of the Series C Preferred Stock on June 3, 2021 (the “Redemption Date”) at $1,002.50 per share in cash (the “Redemption Price”), which is equal to 100% of the liquidation preference of a share of Series C Preferred Stock, plus accumulated and unpaid dividends to, but excluding, the Redemption Date. If a holder elects to convert its shares of Series C Preferred Stock prior to the Redemption Date, the Company has elected a combination settlement with a specified cash amount of $1,000 per share.

Refer to Note J, Equity Arrangements, for further discussion of the above transactions.

D.    ACCOUNTS AND NOTES RECEIVABLE, NET
(Millions of Dollars)April 3, 2021January 2, 2021
Trade accounts receivable$1,826.0 $1,345.7 
Trade notes receivable154.8 156.1 
Other accounts receivable158.1 151.5 
Gross accounts and notes receivable$2,138.9 $1,653.3 
Allowance for credit losses(144.1)(141.1)
Accounts and notes receivable, net$1,994.8 $1,512.2 
Long-term receivables, net$140.9 $139.9 
Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. Adequate reserves have been established to cover expected credit losses. Long-term receivables, net, of $140.9 million and $139.9 million at April 3, 2021 and January 2, 2021, respectively, are reported within Other assets in the Condensed Consolidated Balance Sheets. The Company's financing receivables are predominantly related to certain security equipment sales-type leases with commercial businesses. As of April 3, 2021, the current portion of financing receivables within Trade
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notes receivable approximated $77.3 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 is recorded on the effective interest method.

The changes in the allowance for credit losses for the three months ended April 3, 2021 and March 28, 2020 are as follows:
(Millions of Dollars)Balance
January 2, 2021
Cumulative Effect Adjustment (a)Charged To Costs and ExpensesCharged To Other Accounts
(b)
Deductions (c)Balance
April 3, 2021
Accounts receivable$126.7 $ $5.5 $1.5 $(4.2)$129.5 
Notes receivable$14.4 $ $ $0.2 $ $14.6 
Total$141.1 $ $5.5 $1.7 $(4.2)$144.1 

(Millions of Dollars)Balance
December 28, 2019
Cumulative Effect Adjustment (a)Charged To Costs and ExpensesCharged To Other Accounts
(b)
Deductions (c)Balance
March 28, 2020
Accounts receivable$99.3 $2.9 $10.7 $(2.8)$(2.0)$108.1 
Notes receivable$13.1 $0.9 $ $(0.2)$(0.2)$13.6 
Total$112.4 $3.8 $10.7 $(3.0)$(2.2)$121.7 

(a) Represents the cumulative-effect adjustment to opening retained earnings due to the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), in the first quarter of 2020.
(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 following is a summary of the expected timing of receipt of payments from customers on an undiscounted basis as of April 3, 2021 relating to the Company’s lease receivables:
(Millions of Dollars)TotalWithin 1 Year2 Years3 Years4 Years5 YearsThereafter
Financing receivables$204.3 $77.3 $55.1 $38.0 $21.4 $9.1 $3.4 
Operating leases$31.8 $30.7 $0.8 $0.3 $ $ $ 
The following is a summary of lease revenue and sales-type lease profit for the three months ended April 3, 2021 and March 28, 2020:
Year-to-Date
(Millions of Dollars)20212020
Sales-type lease revenue$34.6 $23.0 
Lease interest revenue3.0 3.1 
Operating lease revenue24.2 36.3 
Total lease revenue$61.8 $62.4 
Sales-type lease profit$13.8 $9.1 

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 sheet 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 April 3, 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.

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At April 3, 2021 and January 2, 2021, approximately $64.3 million and $86.8 million of net receivables were derecognized, respectively. For the three months ended April 3, 2021, proceeds from transfers of receivables to the Purchaser totaled $63.4 million, and payments to the Purchaser totaled $85.9 million. For the three months ended March 28, 2020, proceeds from transfers of receivables to the Purchaser totaled $49.1 million, and payments to the Purchaser totaled $94.1 million. The program resulted in a pre-tax loss of $0.4 million for the three months ended April 3, 2021, which included service fees of $0.2 million. The program resulted in a pre-tax loss of $0.7 million for the three months ended March 28, 2020, which included service fees of $0.2 million. All cash flows under the program are reported as a component of changes in working capital within operating activities in the Condensed Consolidated Statements of Cash Flows since all the cash from the Purchaser is received upon the initial sale of the receivable.

As of April 3, 2021 and January 2, 2021, the Company's deferred revenue totaled $207.7 million and $207.6 million, respectively, of which $108.6 million and $108.7 million, respectively, was classified as current within Accrued expenses in the Condensed Consolidated Balance Sheets. Revenue recognized for the three months ended April 3, 2021 and March 28, 2020 that was previously deferred as of January 2, 2021 and December 28, 2019 totaled $48.0 million and $49.7 million, respectively.

As of April 3, 2021, approximately $1.112 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 five years. This amount excludes any of the Company's contracts with an original expected duration of one year or less.

E.    INVENTORIES
The components of Inventories, net at April 3, 2021 and January 2, 2021 are as follows:
(Millions of Dollars)April 3, 2021January 2, 2021
Finished products$2,170.2 $1,922.5 
Work in process251.0 222.3 
Raw materials716.2 592.6 
Total$3,137.4 $2,737.4 

F.    ACQUISITIONS AND INVESTMENTS

ACQUISITIONS

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 consisted 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 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 was remote and released the remaining $55.3 million contingent consideration liability to the Consolidated Statements of Operations in Other, net. As of April 3, 2021, the Company continues to consider the achievement of certain production levels based on Boeing’s future forecast as remote.
CAM is an industry-leading manufacturer of specialty fasteners and components for the aerospace and defense markets. The acquisition further diversified the Company's presence in the industrial markets and expanded 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 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 following table summarizes the acquisition date value of identifiable net assets acquired and liabilities assumed:
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(Millions of Dollars)
Cash and cash equivalents$35.8 
Accounts receivable, net48.3 
Inventories, net124.3 
Prepaid expenses and other assets2.6 
Property, plant and equipment127.9 
Trade names25.0 
Customer relationships565.0 
Accounts payable(25.9)
Accrued expenses(26.9)
Deferred taxes(16.3)
Other liabilities(0.3)
Total identifiable net assets$859.5 
Goodwill632.3 
Contingent consideration(155.3)
Total consideration paid$1,336.5 
The weighted-average useful life assigned to the intangible assets was 20 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 $569.8 million of goodwill will be deductible for tax purposes.
The acquisition accounting for CAM is complete. The measurement period adjustments recorded in 2021 did not have a material impact to the Company's consolidated financial statements.
Other 2020 Acquisition

During 2020, the Company completed one smaller acquisition for $27.8 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 $14.4 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 tax matters, amongst others. These adjustments are not expected to have a material impact on the Company’s consolidated financial statements.

ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISITIONS

Actual Impact from Acquisition

The Company did not complete any material acquisitions in the first quarter of 2021. As such, there was an immaterial impact from new acquisitions on the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended April 3, 2021.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the 2020 acquisitions had occurred on December 30, 2018. 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 December 30, 2018. In addition, the pro-forma consolidated results do not purport to project the future results of the Company.
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(Millions of Dollars, except per share amounts)First Quarter 2020
Net sales$3,179.4 
Net earnings attributable to common shareowners$147.9 
Diluted earnings per share$0.97 

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 period. 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 date of CAM and from December 29, 2019 to March 28, 2020 for the other 2020 acquisition.

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 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 2021 and 2020, 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 Condensed 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.


G.    GOODWILL
Changes in the carrying amount of goodwill by segment are as follows:
(Millions of Dollars)Tools & StorageIndustrialSecurityTotal
Balance January 2, 2021$5,247.7 $2,646.5 $2,143.9 $10,038.1 
Acquisitions (0.5)(0.4)(0.9)
Foreign currency translation(15.7)(15.8)(30.6)(62.1)
Balance April 3, 2021$5,232.0 $2,630.2 $2,112.9 $9,975.1 

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H.    LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-term debt and financing arrangements at April 3, 2021 and January 2, 2021 are as follows:
April 3, 2021January 2, 2021
(Millions of Dollars)Interest RateOriginal NotionalUnamortized Discount
Unamortized Gain/(Loss) Terminated Swaps 1
Purchase Accounting FV AdjustmentDeferred Financing FeesCarrying Value
Carrying Value
Notes payable due 20263.40%$500.0 $(0.5)$— $— $(2.3)$497.2 $497.2 
Notes payable due 20287.05%150.0  7.9 7.6  165.5 166.1 
Notes payable due 20284.25%500.0 (0.3)— — (3.4)496.3 496.2 
Notes payable due 20302.30%750.0 (2.2)— — (4.7)743.1 742.9 
Notes payable due 20405.20%400.0 (0.2)(28.6)— (2.6)368.6 368.1 
Notes payable due 20484.85%500.0 (0.5)— — (5.0)494.5 494.3 
Notes payable due 20502.75%750.0 (2.0)— — (8.3)739.7 739.9 
Notes payable due 2060 (junior subordinated)4.00%750.0  — — (9.2)740.8 740.7 
Long-term debt2
$4,300.0 $(5.7)$(20.7)$7.6 $