ACQUISITIONS AND INVESTMENTS

9 Months Ended

Oct. 02, 2021

ACQUISITIONS AND INVESTMENTS (as Restated)

PENDING ACQUISITIONS

On August 16, 2021, the Company agreed to acquire the remaining 80 percent ownership stake in MTD, a privately held global manufacturer of outdoor power equipment, for $1.6 billion in cash. The Company previously acquired a 20 percent interest in MTD in January 2019 for $234 million in cash. With over $2.5 billion of revenue in the last twelve months, MTD designs, manufactures and distributes lawn tractors, zero turn mowers, walk behind mowers, snow blowers, residential robotic mowers, handheld outdoor power equipment and garden tools for both residential and professional consumers under well-known brands like Cub Cadet® and Troy-Bilt®. The Company expects the combination of businesses will create a global leader in the $25 billion and growing outdoor category, with strong brands and growth opportunities. Upon closing of the remaining 80 percent ownership stake, the acquisition will be accounted for as a business combination using the acquisition method of accounting and consolidated into the Company's Tools & Storage segment. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter of 2021.

On September 12, 2021, the Company reached an agreement to acquire Excel Industries ("Excel") for $375 million in cash. Excel is a leading designer and manufacturer of premium commercial and residential turf-care equipment under the brands of Hustler Turf Equipment and BigDog Mower Co. The Company believes this is a strategically important bolt-on acquisition as it builds an outdoor products leader. The acquisition will be accounted for as a business combination using the acquisition method of accounting and consolidated into the Company's Tools & Storage segment. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter of 2021.

2020 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 October 2, 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:


(Millions of Dollars)
Cash and cash equivalents	$	35.8
Accounts receivable, net	48.3
Inventories, net	124.3
Prepaid expenses and other assets	2.6
Property, plant and equipment	127.9
Trade names	25.0
Customer relationships	565.0
Accounts payable	(25.9)
Accrued expenses	(26.9)
Deferred taxes	(16.3)
Other liabilities	(0.3)
Total identifiable net assets	$	859.5
Goodwill	632.3
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 $27.9 million, net of cash acquired. The estimated acquisition date value of the identifiable net assets acquired is $13.3 million, which includes $14.8 million of customer relationships. The related goodwill is $14.6 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 substantially complete with the exception of certain tax matters and will be completed within the measurement period. 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 Acquisitions

The Company did not complete any material acquisitions in the first nine months of 2021. As such, there was an immaterial impact from new acquisitions on the Company's Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended October 2, 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.


	Third Quarter		Year-to-Date
	2020		2020
(Millions of Dollars, except per share amounts)	(As Restated)		(As Restated)
Net sales	$	3,854.2	$	10,185.0
Net earnings attributable to common shareowners - Diluted	$	392.6	$	792.5
Diluted earnings per share	$	2.41	$	4.89

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 September 26, 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 for $234 million in cash. The Company is applying the equity method of accounting to the 20% investment in MTD. 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.