STANLEY BLACK & DECKER, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)


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

In this MD&A, references to notes refer to the “Notes to the condensed consolidated financial statements (unaudited)” in Part 1, Item 1 of this Form 10-Q, unless otherwise specified.

BUSINESS OVERVIEW

                                    Strategy

The Company is a diversified global provider of hand tools, power tools, outdoor
products and related accessories, engineered fastening systems and products, and
services and equipment for oil & gas and infrastructure applications. 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 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 ("ESG") targets embodied in its
2030 ESG strategy that include empowering 10 million makers and creators,
enhancing 500 million lives through purpose-driven product innovation, becoming
carbon-neutral, landfill-free across its operations, and reducing water use in
water stressed and scarce areas. The carbon neutrality 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 ESG 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" in Item 1
Business of the Company's Form 10-K for the year ended January 1, 2022 for
additional information regarding the Company's commitment to upskilling its
employees and improving diversity, equity and inclusion.

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

Redemption of shares and other securities

During the first quarter of 2022, the Company repurchased 12,645,371 shares of
common stock for approximately $2.3 billion through a combination of an
accelerated share repurchase ("ASR") and open market share repurchases. The ASR
terms provide for an initial delivery of 85% of the total notional share
equivalent at execution, or 10,756,770 shares. The final delivery of the
remaining shares under the ASR is expected to be completed by the end of the
second quarter of 2022. The Company plans to complete the remaining share
repurchases of its planned $4 billion share repurchase program in 2023. Refer to
Note J, Equity Arrangements, for further discussion.

In addition, on April 23, 2021, the Board of Directors approved repurchases by
the Company of its outstanding securities other than common stock up to an
aggregate amount of $3.0 billion. No repurchases have been executed pursuant to
this authorization to date.
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Mechanical Access Solutions (“MAS”) Pending Sale

In April 2022, the Company announced that it had reached a definitive agreement
for the sale of its automatic doors business to Allegion plc for $900 million in
cash. The sale is subject to regulatory approval and other customary closing
conditions, and is expected to close mid-year.

Converged Security Solutions (“CSS”) Pending Sale

In December 2021, the Company announced that it had reached a definitive
agreement for the sale of most of its Security assets to Securitas AB for $3.2
billion in cash. The proposed transaction includes the Company's CSS business
comprising of commercial electronic security and healthcare businesses. The
transaction does not include the Company's automatic doors business. The sale is
subject to regulatory approvals and other customary closing conditions, and the
Company's current expectation is the transaction will close mid-year.

Net proceeds from the sale of MAS and CSS are expected to be used to fund debt
reduction and to contribute to the Company's previously announced share
repurchase program. The use of net proceeds towards a planned share repurchase
program is consistent with the Company's long-term capital allocation strategy
focused on value maximization.

Acquisitions

On December 1, 2021, the Company acquired the remaining 80 percent ownership
stake in MTD Holdings Inc. ("MTD"), a privately held global manufacturer of
outdoor power equipment. The Company previously acquired a 20 percent interest
in MTD in January 2019. With over $2.6 billion of revenue in 2021, MTD designs,
manufactures and distributes lawn tractors, zero turn ride on 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®.

On November 12, 2021, the Company acquired Excel Industries ("Excel"). 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
that bolsters the presence in the independent dealer network.

The Company expects the combination of MTD, Excel and its existing outdoor
strategic business unit in Tools & Outdoor will create a global leader in the
$25 billion and growing outdoor category, with strong brands and growth
opportunities. As part of the integration of these businesses, the Company plans
to design, develop and manufacture battery and electric-powered solutions for
professional and residential users. This will position the combined businesses
to be a leader as preferences shift from gas powered equipment toward
electrified solutions in outdoor power equipment.

Refer to Note F, Acquisitions and Investments, for further details.

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.

                                    Segments

The Company’s activities are categorized into two reportable business segments: Tools and Outdoor and Industrial.

Tools and exterior

The Tools & Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand
Tools, Accessories & Storage ("HTAS"), and Outdoor Power Equipment ("Outdoor")
businesses. Annual revenues in the Tools & Outdoor segment were $12.8 billion in
2021, representing 82% of the Company's total revenues.
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The PTG 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, 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 Outdoor business primarily sells corded and cordless electric lawn and
garden products, including hedge trimmers, string trimmers, lawn mowers,
pressure washers and related accessories, and gas powered lawn and garden
products, including lawn tractors, zero turn ride on mowers, walk behind mowers,
snow blowers, residential robotic mowers, utility terrain vehicles (UTVs),
handheld outdoor power equipment, garden tools, and parts and accessories to
professionals and consumers under the DEWALT®, CUB CADET®, BLACK+DECKER®,
CRAFTSMAN®, TROY-BILT®, and HUSTLER® brand names.


Industrial

The industrial segment includes technical fastening and infrastructure businesses. The annual revenues of the Industrial segment were $2.5 billion in 2021, representing 16% of the Company’s total revenue.

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.


RESULTS OF OPERATIONS

The Company's results represent continuing operations and exclude the commercial
electronic security, healthcare, and automatic doors businesses, unless
specifically noted. These divestitures represent a single plan to exit the
Security segment and are considered a strategic shift that will have a major
effect on the Company's operations and financial results. Therefore, the
operating results of these businesses have been classified as discontinued
operations.


Certain Items Affecting Revenue

The Company has provided a discussion of its results both inclusive and
exclusive of acquisition-related and other charges. Organic growth is also
utilized to describe results aside from the impacts of foreign currency
fluctuations, acquisitions during their initial 12 months of ownership, and
divestitures. The results and measures, including gross profit, selling,
general, and administrative ("SG&A"), Other, net, and segment profit, on a basis
excluding acquisition-related and other charges, and organic growth are Non-GAAP
financial measures. The Company considers the use of Non-GAAP financial measures
relevant to aid analysis and understanding of the Company's results and business
trends aside from the material impact of these items and ensures appropriate
comparability to operating results of prior periods.

The Company's operating results at the consolidated level as discussed below
include and exclude acquisition-related and other charges impacting gross
profit, SG&A, and Other, net. The Company's business segment results as
discussed below include and exclude acquisition-related and other charges
impacting gross profit and SG&A. These amounts for the first quarters of 2022
and 2021 are as follows:
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First Quarter 2022

                                                                                            Acquisition-
                                                                                          Related Charges &
                                                                           GAAP                 Other               Non-GAAP
      Gross profit                                                     $ 

$1,305.4 $88.8 $1,394.2

      Selling, general and administrative1                                 960.3                   (78.9)             881.4
      Operating profit                                                     345.1                   167.7              512.8

Earnings from continuing operations before income taxes

      and equity interest                                                  178.5                   221.4              399.9
      Income taxes on continuing operations                                 22.9                    29.8               52.7

Net income from continuing operations attributable to

      Common Shareowners - Diluted                                         155.8                   191.6              347.4

Diluted earnings per common share – Continued

      operations                                                       $   

$0.94 1.16 $2.10

1 Includes provision for credit losses

Acquisition-related and other charges in the table above relate to the following items:

•Charges reducing Gross profit primarily pertaining to inventory step-up charges
and the Russia business closure;
•Charges in SG&A primarily related to a voluntary retirement program,
integration-related costs, and the Russia business closure;
•Other charges included in Earnings from continuing operations before income
taxes and equity interest consisting of:
•$1.0 million in Other, net primarily related to deal transaction costs; and
•$52.7 million of restructuring charges pertaining to severance and related
costs;
•Income taxes on continuing operations include the tax effect on the above net
charges.

First Quarter 2021

                                                                                            Acquisition-
                                                                                          Related Charges &
                                                                           GAAP                 Other               Non-GAAP
      Gross profit                                                     $ 

1,387.8 $4.4 $1,392.2

      Selling, general and administrative1                                 719.1                   (15.0)             704.1
      Operating profit                                                     668.7                    19.4              688.1

Earnings from continuing operations before income taxes

      and equity interest                                                  573.3                    23.8              597.1
      Income taxes on continuing operations                                115.5                     6.0              121.5
      Share of net earnings of equity method investment                      1.8                     0.2                2.0

Net income from continuing operations attributable to

      Common Shareowners - Diluted                                         451.0                    18.0              469.0

Diluted earnings per common share – Continued

      operations                                                       $   

$2.74 0.11 $2.85

1 Includes provision for credit losses

Acquisition-related and other charges in the table above relate to the following items:

•Charges reducing Gross profit pertaining to facility-related charges;
•Charges in SG&A primarily for functional transformation initiatives;
•Other charges included in Earnings from continuing operations before income
taxes and equity interest consisting of:
•$1.6 million in Other, net primarily related to deal transactions costs;
•$1.0 million net loss pertaining to a previously divested business; and
•$1.8 million of restructuring charges pertaining to severance and facility
closures;
•Income taxes on continuing operations include the tax effect on the above net
charges.



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

Consolidated results

Net Sales: Net sales were $4.448 billion in the first three months of 2022
compared to $3.721 billion in the first three months of 2021, representing an
increase of 20%, primarily driven by a 23% increase from strategic outdoor power
equipment acquisitions and a 5% increase from price realization, partially
offset by a 6% and 2% decrease from volume and foreign currency, respectively.
Volume was in line with expectations, but constrained by temporary electronic
component supply challenges, which have continued to improve. Tools & Outdoor
net sales increased 24% compared to the first three months of 2021 due to a 27%
increase from the MTD and Excel acquisitions and a 5% increase in price,
partially offset by a 6% decline in volume and a 2% decrease from foreign
currency. Industrial net sales declined 2% compared to the first three months of
2021 as a 5% increase in price was more than offset by a 5% decline in volume
and a 2% impact from foreign currency.

Gross Profit: Gross profit was $1.305 billion, or 29.3% of net sales, in the
first three months of 2022 compared to $1.388 billion, or 37.3% of net sales, in
the first three months of 2021. Acquisition-related and other charges, which
reduced gross profit, were $88.8 million for the three months ended April 2,
2022 and $4.4 million for the three months ended April 3, 2021. Excluding these
charges, gross profit was 31.3% of net sales for the three months ended April 2,
2022, compared to 37.4% for the three months ended April 3, 2021, as price
realization was more than offset by commodity inflation, higher supply chain
costs to serve demand and lower volumes.

SG&A Expenses: SG&A, inclusive of the provision for credit losses, was $960.3
million, or 21.6% of net sales, in the first three months of 2022, compared to
$719.1 million, or 19.3% of net sales, in the first three months of 2021. Within
SG&A, acquisition-related and other charges totaled $78.9 million for the three
months ended April 2, 2022 and $15.0 million for the three months ended April 3,
2021. Excluding these charges, SG&A was 19.8% of net sales for the three months
ended April 2, 2022, compared to 18.9% for the three months ended April 3, 2021,
due to growth investments deployed across the businesses.

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.

Other, net: Other, net amounted to $62.0 million and $48.0 million in the first
three months of 2022 and 2021, respectively. Excluding acquisition-related and
other charges of $1.0 million, Other, net totaled $61.0 million for the three
months ended April 2, 2022. Excluding acquisition-related and other charges of
$1.6 million, Other, net totaled $46.4 million for the three months ended April
3, 2021. The increase in 2022 compared to 2021 is driven by higher intangible
asset amortization due to the MTD and Excel acquisitions.

Loss on sale of business: During the first quarter of 2021, the Company reported a pre-tax loss of $1.0 million related to a previously divested business.

Interest, net: Net interest expense was $51.9 million in the first quarter of
2022 compared to $44.6 million in the first quarter of 2021. The year-over-year
increase was primarily driven by higher U.S. interest rates and higher average
balances relating to the Company's commercial paper borrowings, as well as the
$2.25 billion credit facility and $1.0 billion issuance of debt in the first
quarter of 2022.

Income Taxes: The Company recognized income tax expense of $22.9 million for the
three months ended April 2, 2022, resulting in an effective tax rate of 12.8%.
Excluding the impacts of the acquisition-related and other charges, the
effective tax rate was 13.2% for the three months ended April 2, 2022. These
effective tax rates differ from the U.S. statutory tax rate primarily due to a
benefit associated with the Company's supply chain reorganization, tax on
foreign earnings and the re-measurement of uncertain tax position reserves. The
Company recognized income tax expense of $115.5 million for the three months
ended April 3, 2021, resulting in an effective tax rate of 20.1%. Excluding the
impacts of the acquisition-related and other charges, the effective tax rate was
20.3% for the three months ended April 3, 2021. These effective tax rates differ
from the U.S. statutory tax rate primarily due to tax on foreign earnings, the
re-measurement of uncertain tax position reserves, and the tax benefit of
equity-based compensation.

Business segment results

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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.

The Company’s activities are categorized into two reportable business segments: Tools and Outdoor and Industrial.

Tools & Outdoor:
                                  Year-to-Date
(Millions of Dollars)                     2022            2021
Net sales                             $ 3,801.2       $ 3,062.9
Segment profit                        $   378.5       $   644.7
% of Net sales                             10.0  %         21.0  %



Tools & Outdoor net sales increased $738.3 million, or 24%, in the first three
months of 2022 compared to the first three months of 2021, primarily driven by a
27% increase from the MTD and Excel acquisitions and a 5% increase in price,
partially offset by lower volume of 6% and 2% from unfavorable currency impacts.
Organic growth from pricing improved 60 basis points versus the fourth quarter
as the Company implemented new global price increases in response to commodity
inflation and higher costs to serve. Regional organic revenue was relatively in
line with the anticipated supply-constrained performance with emerging markets
at 5% and Europe at 2%, and North America at a 3% decline. Sales from outdoor
acquisitions were modestly impacted by a later start to the merchandising season
due to colder weather, and are expected to be recovered in the second and third
quarter.

Segment profit for the first three months of 2022 was $378.5 million, or 10.0%
of net sales, compared to $644.7 million, or 21.0% of net sales, in the first
three months of 2021. Excluding acquisition-related and other charges of $153.7
million and $4.2 million for the three months ended April 2, 2022 and April 3,
2021, respectively, segment profit was 14.0% of net sales in the first three
months of 2022 and 21.2% in the first three months of 2021, as the initial
benefit from price realization was more than offset by inflation, higher supply
chain costs, growth investments and lower volume.

Industrial:
                                  Year-to-Date
(Millions of Dollars)                      2022          2021
Net sales                               $ 646.6       $ 657.7
Segment profit                          $  41.3       $  99.8
% of Net sales                              6.4  %       15.2  %



Industrial net sales decreased $11.1 million, or 2%, in the first three months
of 2022 compared to the first three months of 2021, as a 5% increase in price
was more than offset by a 5% decline in volume and 2% from unfavorable currency
impacts. Engineered Fastening organic revenues were down 1% as general
industrial fastener growth was primarily offset by a market driven decline in
automotive. Infrastructure organic revenues were up 4%, as 13% growth in
Attachment Tools was partially offset by lower pipeline project activity in Oil
& Gas.

Industrial segment profit for the first three months of 2022 totaled $41.3
million, or 6.4% of net sales, compared to $99.8 million, or 15.2% of net sales,
in the corresponding 2021 period. Excluding acquisition-related and other
charges of $3.5 million and $3.6 million for the three months ended April 2,
2022 and April 3, 2021, respectively, segment profit amounted to 6.9% of net
sales in the first three months of 2022 compared to 15.7% in the first three
months of 2021 as the initial benefit from price realization was more than
offset by commodity inflation and lower volume in higher-margin automotive and
aerospace fasteners.

Corporate Overhead

Corporate Overhead includes the corporate overhead element of SG&A, which is not
allocated to the business segments. Corporate Overhead amounted to $74.7 million
in 2022 compared to $75.8 million in 2021. Excluding acquisition-related and
other charges of $10.5 million for the three months ended April 2, 2022 and
$11.6 million for the three months ended April 3, 2021, the corporate overhead
element of SG&A was $64.2 million for the three months ended April 2, 2022 and
April 3, 2021.
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RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from January 1, 2022 to April 2,
2022 is as follows:

                                 January 1,                                                                          April 2,
(Millions of Dollars)               2022              Net Additions            Usage             Currency              2022
Severance and related costs    $      28.2          $         51.1          $   (22.8)         $      0.6          $     57.1
Facility closures and asset
impairments                            3.5                     1.6               (2.5)                0.1                 2.7
Total                          $      31.7          $         52.7          $   (25.3)         $      0.7          $     59.8


For the three months ended April 2, 2022, the Company recognized net
restructuring charges of $52.7 million, primarily related to severance and
related costs. The Company expects to achieve annual net cost savings of
approximately $137 million by the end of 2022 related to the restructuring costs
incurred during the three months ended April 2, 2022. The majority of the $59.8
million of reserves remaining as of April 2, 2022 is expected to be utilized
within the next 12 months.

Segments: The $53 million net restructuring charges for the three months ended April 2, 2022 understand : $43 million in the Tools & Outdoor segment; $8 million in the Industrial segment; and $2 million in company.

The expected annual net cost savings of approximately $53 million related to the 2022 restructuring actions include: $110 million in the Tools & Outdoor segment; $14 million in the Industrial segment; and $13 million in company.

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2022 OUTLOOK

This outlook discussion is intended to provide broad insight into the Company's
near-term earnings and cash flow generation prospects. For the full year 2022,
the Company projects mid-twenties total revenue growth year-over-year. The
Company is revising its 2022 diluted earnings per share outlook to $7.20 - $8.30
on a diluted GAAP basis, from $10.10 to $10.70, and on an adjusted diluted EPS
basis to $9.50 to $10.50 from $12.00 to $12.50. Free cash flow is expected to be
approximately $1.0 billion to $1.5 billion as the Company focuses on serving its
customers while leveraging the SBD Operating Model to drive working capital
efficiency. Through the first quarter, $2.3 billion of the planned $4 billion
share repurchase was initiated and the Company expects completion of the total
program in 2023. The Company remains focused on disciplined capital allocation
which aims to balance share repurchase activity with its commitment to dividends
and strong investment grade credit ratings.

The Company has changed the following assumptions for 2022 from its prior
outlook: MAS divestiture will approximate $0.30 of dilution to earnings per
share; Russia business closure will approximate $0.15 of dilution to earnings
per share; an incremental $600 million in commodity and transit inflation will
approximate $3.50 of incremental dilution to earnings per share; and incremental
pricing actions, first quarter out performance and other will approximate $1.70
of incremental accretion per diluted share.

The difference between the 2022 diluted earnings per share outlook and the
diluted earnings per share range, excluding charges, is $2.20 - $2.30,
consisting of acquisition-related and other charges. These forecasted charges
primarily relate to restructuring expenses, a voluntary retirement program, the
Russia business closure, integration costs and non-cash inventory step-up
charges.

FINANCIAL CONDITION

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

Operating Activities: Cash flows used in operations were $1.241 billion in the
first quarter of 2021 compared to $157.8 million in the corresponding period of
2021. The year-over-year change was mainly attributable to higher inventory
levels to meet demand within the Tools & Outdoor segment, coupled with longer
lead times related to the global supply chain, and to a lesser extent, lower
earnings.

Free Cash Flow: Free cash flow, as defined in the table below, was an outflow of
$1.381 billion in the first quarter of 2022 compared to $246.1 million in the
corresponding period of 2021. The year-over-year decrease in free cash flow was
primarily due to increased inventory investments to support the strong demand
outlook. This inventory level is planned to decline sequentially [beginning in
the back half of 2022]. 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, and is useful information for investors. Free
cash flow does not include deductions for mandatory debt service, other
borrowing activity, discretionary dividends on the Company's common and
preferred stock and business acquisitions, among other items.

                                                    Year-to-Date
(Millions of Dollars)                                       2022           

2021

Net cash used in operating activities                   $ (1,241.1)     $ 

(157.8)

Less: capital and software expenditures                     (139.8)        (88.3)
Free cash flow                                          $ (1,380.9)     $ (246.1)


Investing Activities: Cash flows used in investing activities totaled $163.4
million in the first quarter of 2022 primarily due to capital and software
expenditures of $139.8 million and purchase price adjustment payments for
previously acquired businesses of $36.5 million. Cash flows used in investing
activities totaled $147.9 million in the first three months of 2021, primarily
due to capital and software expenditures of $88.3 million and net investment
hedge settlements of $52.6 million.

Financing Activities: Cash flows provided by financing activities totaled $1.425
billion in the first quarter of 2022 primarily driven by net short-term
borrowings of $2.845 billion and proceeds from debt issuances, net of fees, of
$994.8 million, partially offset by share repurchases of $2.313 billion and cash
dividend payments on common stock of $116.3 million. Cash flows used in
financing activities totaled $95.0 million in the first three months of 2021
primarily driven by cash dividend payments on common stock of $110.1 million,
partially offset by proceeds from issuances of common stock of $64.1 million.

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Credit Ratings & 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).
There were no changes to any of the Company's credit ratings during the first
quarter of 2022. Failure to maintain strong investment grade credit 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.

Total cash and cash equivalents $165.8 million and $142.1 million from
April 2, 2022 and January 1, 2022respectively, which was held mainly in the
WE

As a result of the Tax Cuts and Jobs Act (the "Act"), the Company's tax
liability related to the one-time transition tax associated with unremitted
foreign earnings and profits totaled $287 million at April 2, 2022. The Act
permits a U.S. company to elect to pay the net tax liability interest-free over
a period of up to eight years. The Company has considered the implications of
paying the required one-time transition tax and believes it will not have a
material impact on its liquidity.

The Company has a $3.5 billion commercial paper program which includes borrowings denominated in euros in addition to WE dollars. From April 2, 2022 and
January 1, 2022the Company had outstanding loans $2.8 billion and $2.2 billionrespectively.

The Company has a five-year $2.5 billion committed credit facility (the "5-Year
Credit Agreement"). Borrowings under the 5-Year Credit Agreement may be made in
U.S. Dollars, Euros or Pounds Sterling. A sub-limit amount of $814.3 million is
designated for swing line advances which may be drawn in Euros pursuant to the
terms of the 5-Year Credit Agreement. Borrowings bear interest at a floating
rate plus an applicable margin dependent upon the denomination of the borrowing
and specific terms of the 5-Year Credit Agreement. The Company must repay all
advances under the 5-Year Credit Agreement by the earlier of September 8, 2026
or upon termination. The 5-Year Credit Agreement is designated to be a liquidity
back-stop for the Company's $3.5 billion U.S. Dollar and Euro commercial paper
program. As of April 2, 2022 and January 1, 2022, the Company had not drawn on
its five-year committed credit facility.

The Company has a 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 7, 2022 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 $3.5 billion U.S. Dollar and Euro commercial paper program. As of
April 2, 2022 and January 1, 2022, the Company had not drawn on its 364-Day
committed credit facility.

The Company has a second 364-Day $1.0 billion committed credit facility (the
"Second 364-Day Credit Agreement"). Borrowings under the Second 364-Day Credit
Agreement may be made in U.S. Dollars and Euros and bear interest at a base rate
plus an applicable margin determined at the time of the borrowing. The Company
must repay all advances under the Second 364-Day Credit Agreement by the earlier
of November 15, 2022 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. As of April 2, 2022 and January 1, 2022, the Company had
not drawn on its Second 364-Day Credit Agreement.

In January 2022, the Company executed a third 364-Day $2.5 billion committed
credit facility (the "Third 364-Day Credit Agreement"). Borrowings under the
Third 364-Day Credit Agreement shall be made in U.S. Dollars and bear interest
at a base rate plus an applicable margin determined at the time of the
borrowing. The Company must repay all advances under the Third 364-Day Credit
Agreement by the earlier of January 25, 2023 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. As of April 2, 2022,
the Company had $2.3 billion outstanding on its Third 364-Day Credit Agreement.

In February 2022, the Company issued $500.0 million of senior unsecured term
notes maturing February 24, 2025 ("2025 Term Notes") and $500.0 million of
senior unsecured term notes maturing May 15, 2032 ("2032 Term Notes"). The 2025
Term Notes will accrue interest at a fixed rate of 2.3% per annum and the 2032
Term Notes at a fixed rate of 3.0% 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
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unsubordinated debt. The Company received total net proceeds from this offering
of approximately $991.9 million, net of approximately $8.1 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 indebtedness under the commercial paper facilities.

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 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 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. The proceeds were used, together with cash
on hand, to redeem the 2052 Junior Subordinated Debentures in December 2019. 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 a successful remarketing of the Series D
Preferred Stock (the "Remarketed Series D Preferred Stock"), the Company will
receive additional cash proceeds of $750 million and issue shares of Remarketed
Series D Preferred Stock. The Company pays the holders of the 2022 Purchase
Contracts quarterly contract adjustment payments, which commenced February 15,
2020. As of April 2, 2022, the present value of the contract adjustment payments
was approximately $29 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 million, plus an additional amount
related to the forward component of the contract. In February 2022, the Company
amended the settlement date to April 2023, or earlier at the Company's option.

Refer to Note H, Long-Term Debt and Financing Arrangements, and Note J, Equity Arrangements, for a more detailed discussion of the Company’s financing arrangements.

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Contents

OTHER TOPICS

Critical Accounting Estimates: There were no material changes in the Company’s critical accounting estimates during the first quarter of 2022.

Refer to the "Other Matters" section of Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's Form 10-K for the
year ended January 1, 2022 for a discussion of the Company's critical accounting
estimates.

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