SWK 10-K & 10-Q changes, risk factors and insider trading

The following describes management’s beliefs and opinions regarding the material factors that make an investment in our securities speculative or risky, as the Company’s business, operations and financial condition are subject to various risks and uncertainties. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including those risks set forth under the heading entitled "Cautionary Statement Concerning Forward-Looking Statements" in Item 7, and in other documents that the Company files with, or furnishes to, the SEC, before making any investment decision with respect to its securities. IfSome of the risks and uncertainties discussed below may have occurred in the past. The disclosures below are provided by way of example only and are not representations as to whether or not the risks or uncertainties have occurred in the past, but are provided because if any of the risks or uncertainties actually occur or develop, the Company’s business, financial condition, results of operations and future growth prospects could change. Under these circumstances, the trading prices of the Company’s securities could decline, and you could lose all or part of your investment in the Company’s securities.

The Company imports large quantities of finished goods, component parts and raw materials. Lead times for these items vary significantly and may be further impacted by global shortages of critical components. Global tradetrade, inflation, deflation, and supply chain constraints in the wake of geopolitical tensions and conflicts have adversely impacted, and could adversely impact again, the availability, pricing and lead times for products, component parts and raw materials and thus negatively impact the Company’s results of operations. Specifically, the Company sources materials from South Korea, ChinaChina, Taiwan and Taiwan,Israel, among other countries, and any future tensions or conflicts in such regions could cause material disruptions in the Company's supply chain which could, in turn, cause product shortages, delays in delivery and/or increases in the Company's cost incurred to produce and deliver products to its customers. Other potential consequences arising from the further escalation of conflicts and global geopolitical tensions cannot be predicted. Generally, raw materials and components are available from several different suppliers, however, for certain products, such as components requiring rare earth minerals sourced from China and components requiring cobalt, the Company and its suppliers may rely on one or very few suppliers or suppliers concentrated in certain regions. For example, in April 2025, China restricted export of certain rare earth minerals and may in the future continue to restrict, expand restrictions, or stop exporting these or other materials. Any such restrictions or delays on the export of rare earth minerals from China have caused, and may in the future cause, increased costs and/or production disruptions which could materially and adversely impact the Company’s results of operations, cash flow and financial condition.

In addition, the Company’s ability to import these items in a timely and cost-effective manner may be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as fluctuations in freight costs, port and shipping capacity, personnel security, labor disputes and shortages, severe weather, or increased homeland security requirements in the U.S. and other countries. These issues have delayed, and could delay in the future, importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers. These alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on the Company’s business, results of operations, and financial condition.

The Company also relies on its suppliers to provide high quality products and to comply with applicable laws. The Company’s ability to find qualified suppliers who meet its standards, and supply products in a timely, cost-effective and efficient manner is a significant challenge with the increasing demand from customers, especially with respect to goods sourced from non-U.S. suppliers. A supplier’s failure to meet the Company’s standards, provide products in a timely, cost-effective and efficient manner, or comply with applicable laws is beyond the Company’s control. These issues could have a material negative impact on the Company's business and profitability. Poor quality or an insecure supply chain may also adversely affect the reliability and reputation of the Company. ForFurther, certainas products,a result of inflationary or deflationary economic conditions, changes in tariffs or trade policies or otherwise, the Company believes it is possible that a limited number of suppliers may relyeither oncease oneoperations or veryrequire fewadditional suppliers,financial whichassistance mayfrom limitthe Company in order to fulfill their obligations. In a limited number of circumstances, the magnitude of the Company’s abilitypurchases of certain items is of such significance that a change in established relationships with suppliers or increase in the costs of purchased raw materials, component parts or finished goods could result in manufacturing interruptions, delays, inefficiencies or an inability to expeditiouslymarket sourceproducts. alternatives.Changes in value-added tax rebates, currently available to the Company or to its suppliers, could also increase the costs of the Company’s manufactured products, as well as purchased products and components, and could adversely affect the Company’s results.

Changes in governmental policy regarding international trade, including import and export regulation, sanctions, and international trade agreements, have negatively impacted the Company’s business. In 2025, the U.S. government announced a series of tariffs on imported goods into the U.S., which prompted retaliatory actions from some of its trading partners, and in response, the Company introduced strategies to mitigate the impacts of these changes on its results of operations, including price increases and supply chain adjustments. However, there is no assurance that the Company will be able to mitigate the full impact of all such tariffs, retaliatory actions or other changes in trade policies that have or may develop. Similar U.S. actions involving China, Mexico or other countries, and any corresponding retaliatory efforts, could be adopted or modified with little or no advanced notice, and result in disruption to the Company's supply chain and an increase in supply chain costs that the Company may not be able to accurately assess and offset, which could in turn require the Company to increase its prices and, in the event customer demand declines as a result, adversely impact the Company’s results of operations. Moreover, decisions made as part of the Company’s tariff mitigation strategy concerning the rationalization, restructuring or relocation of facilities, production or component sources and any similar actions could also subject the Company to additional or new tariffs or trade regulations and interpretations of those regulations, reputational risks, and other issues relating to the importation of products. For example, in 20182025 the U.S.Company imposedbegan shifting production of certain power tools to Mexico. As a result, these products became subject to additional tariffs on steel and aluminum as well as on goods importedimports from China and certain other countries, which resultedMexico in retaliatory2025. tariffsEven by China and other countries. Diplomatic and trade tensions betweenthough the U.S.Company andis Chinataking remainactions high.to Existingqualify tariffsfor remainan inexemption effectunder andthe United States-Mexico-Canada Agreement to mitigate the additional tariff costs, there is ano possibilityguarantee ofthat furtherthe escalationCompany ofwill tradebe tensionsable orto additionalobtain tradesuch restrictions.qualification.

Certain of the Company’s competitors may be better positioned than the Company to withstand or react to these kinds of changes and other restrictions on global trade and as a result the Company could lose market share to such competitors. While the Company may be able to expand or shift sourcing options,options and has been focused, and continues to focus, on implementing other supply chain adjustments, such efforts are time consumingtime-consuming and wouldare, beor could be, difficult or impracticable for many products and may result in an increase in its manufacturing costs.costs, or otherwise materially and adversely impact the Company's results of operations, cash flow and financial condition.

The Company cannot predict if, and to what extent, other countries in which its products are currently manufactured or will be manufactured in the future, or countries into which its products are imported, will be subject to, or implement, additional or increased tariffs, new trade restrictions or other changes to existing international trade agreements, the impact of which the Company may not be able to accurately assess or effectively mitigate and any of which could have a material adverse impact on its business. In addition, efforts to withdraw from, or substantially modify, such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, import or export licensing requirements (e.g. China’s limitations on exports of rare earth minerals) and exchange controls or new barriers to entry, could limit the Company’s ability to capitalize on current and future growth opportunities in international markets, impair its ability to expand the business by offering new products, and could adversely impact its production costs, customer demand and relationships with customers and suppliers. Any of these consequences could have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

The Company has certain significant customers, particularly home centers and major retailers. In 2024,2025, the two largest customers comprised approximately 28%27% of consolidated net sales, with U.S. and international mass merchants and home centers collectively comprising approximately 43%42% of consolidated net sales. The loss or material reduction of business, the lack of success of sales initiatives, changes in customer business strategies or the Company's inability to support those strategies, customers’ inability to execute on business strategies, or changes in customer or end-user preferences or loyalties for the Company’s products, related to any such significant customer could have a material adverse impact on the Company’s results of operations and cash flows. In addition, the Company’s major customers are volume purchasers, a few of which are much larger than the Company, and have strong bargaining power with suppliers. This factor limits the Company's ability to recover cost increases through higher selling prices. Furthermore, unanticipated inventory adjustments by these customerscustomers, canwhether due to external factors or changes in the price of the Company's products, could have a negative impact on the Company's net sales.

The Company faces active competition and resulting pricing pressures. The Company’s products compete on the basis of, among other things, its reputation for product quality, its well-known brands, price, performance, innovation and customer service capabilities. The Company competes with both larger and smaller companies that offer the same or similar products and services or that produce different products appropriate for the same uses. These companies, especially those with global footprints and low-cost sources of supply, vertically integrated business models and/or highly protected home countries outside the United States, may have lower labor and other production costs than the Company. Also, certain large customers offer house brands that compete with some of the Company’s product offerings as a lower-cost alternative. To remain profitable and maintain or grow market share, the Company must maintain a competitive cost structure, develop new products and services, lead product innovation, successfully execute its platform design innovation and brand prioritization efforts, respond to competitor innovations and enhance its existing products in a timely manner. The Company also competes for labor, particularly in its manufacturing facilities, which can drive higher labor costs and adversely impact its ability to efficiently operate. Any failure to attract and retain employees at the Company’s manufacturing facilities or in other parts of the Company’s operations may adversely affect its business and ability to meet customer demand, which in turn could adversely affect the Company’s liquidity and results of operations. The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on its sales and profits.

Operational Excellence, one element of the supplyCompany's chaincore transformation,imperatives, is a continuous operational improvement process applied to many aspects of the Company’s business such as procurement, quality in manufacturing, maximizing customer fill rates, integratingdriving acquisitionsannual net productivity, and other key business processes. In the event the Company is not successful in effectively applying the various aspects of Operational Excellence principles to its key business processes, including those of acquired businesses, its ability to compete and future earnings could be adversely affected.

In addition, the Company may have to reduce prices on its products and services, or make other concessions, to stay competitive. Price reductions taken by the Company in response to customer and competitive pressures, as well as price reductions and marketing and promotional actions taken to drive demand that may not result in anticipated sales levels, could also negatively impact its business. The Company engages in restructuring actions, sometimes entailing shifts of production to low-cost countries,countries or consolidation of manufacturing sites, as part of its efforts to maintain a competitive cost structure. If the Company does not execute restructuring actions well,effectively, its ability to meet customer demand may decline, or earnings may otherwise be adversely impacted. Similarly, if such efforts to reform the cost structure are delayed relative to competitors or other market factors, the Company may lose market share and profits.

A significant portion of the Company’s products are sold through home centers and mass merchant distribution channels in the U.S. and Europe. A consolidation of retailers in both North America and abroad has occurred over time and the increasing size and importance of individual customers creates risk of exposure to potential volume loss or profitabilityreduced loss.leverage Thein price negotiations, which could have an adverse effect on net sales and profitability. Furthermore, the loss of certain larger home centers as customers would have a material adverse effect on the Company’s business.

Low demand for new products and the inability to develop and introduce new products at favorable margins and on target timelines could adversely impact the Company’s performance and prospects for future growth.

The Company’s competitive advantage is due in part to its ability to develop and introduce new products in a timely manner at favorable margins. The uncertainties associated with developing and introducing new products, such as market demand, the unavailability of raw materials necessary for production of the Company's products and costs of development and production, may impede the successful development and introduction of new products on a consistent or timely basis. Introduction of new technology may result in higher costs to the Company than that of the technology replaced. That increase in costs, which may continue indefinitely or until increased demand and greater availability in the sources of the new technology drive down its cost, could adversely affect the Company’s results of operations. Market acceptance of the new products introduced in recent years and scheduled for introduction in future years may not meet sales expectations due to various factors, such as the failure to accurately predict market demand, end-user preferences, evolving industry standards, or the emergence of new or disruptive technologies. Moreover, the ultimate success and profitability of the new products may depend on the Company’s ability to resolve technical and technological challenges in a timely and cost-effective manner, and to achieve manufacturing efficiencies. The Company’s focus on innovation could result in additional investments into accelerate product development, productive capacity and commitments to fund advertising and product promotions in connection with thesethe new productsinnovative couldproducts. erode profits if thoseIf expectations of the return on these investments are not met.met, future earnings could be adversely affected.

The Company's future growth rate depends upon a number of factors, including its ability to (i) identify and evolve with emerging technological and broader industry trends in its target end-markets, including, but not limited to, artificial intelligence and machine learning and robotics; (ii) defend its market share against an ever-expanding number of competitors, including many new and non-traditional competitors; (iii) monitor disruptive technologies and business models; and (iv) attract, develop, and retain individuals with the requisite technical expertise and understanding of customers’ needs to develop new technologies and introduce new products.

To remain competitive, the Company will need to stay abreast of new technologies, require its employees to continue to learn and adapt to new technologies and be able to integrate them into current and future business models, products, services and processes, comply with evolving regulatory and operational requirements concerning the use of emerging technologiestechnologies, and also guard against existing and new competitors disrupting the marketplace using such technologies. For example, changing market trends, such as increased consumer demand for energy efficient products and technologies in response, in part, to climateenvironmental change,concerns, require the Company to develop and adopt new innovations focused on electrification. The Company may not adequately meet these demands or develop and adapt to the applicable new technologies focused on electrification, which could adversely affect the Company’s reputation and the consumer and customer demand for the Company’s products. The failure of the Company's technologies or products to gain market acceptance due to more attractive offerings by its competitors or the failure to address any of the above factors could negatively impact revenues and adversely affect its competitive standing and prospects.

The Company has significant operations outside of the U.S.U.S., including manufacturing, sales and distribution facilities. Such business operations are subject to political, legal, economic and other risks inherent in operating internationally, such as:

The Company is committed to continuous productivity improvement and evaluating opportunities to reduce fixed costs, simplify or improve processes, and eliminate excess capacity. The Company has undertaken restructuring and cost-reduction actions, such as restructuring of manufacturing and distribution facilities, including relocating production or component sources or closing facilities, workforce reductions and centralization of certain business support functions, the savings of which may bebe, and have been, mitigated by many factors, including economic weakness, inflation, competitive pressures, higher labor costscosts, production volume decline and decisions to increase costs in areas such as sales promotion or research and development above levels that were otherwise assumed.

In mid-2022, the Company initiated a supplyGlobal chainCost transformationReduction Program designed to achieve significant pre-tax run rate cost savings to, in part, help return adjusted gross margins to historical 35%+ levelslevels. byWhile improvingthe fillCompany ratescompleted this program as of the end of 2025, it plans to continue making significant investments in additional productivity improvements and bettersupply matchingchain inventoryfootprint with customer demand. This transformation has involved, and will continue to involve, significant investment from the Company,actions, and the success and anticipated cost savings from thissuch transformationefforts are not assured. Failure to achieve, or delays in achieving, projected levels of efficiencies and cost savings from thisproductivity transformationinvestments and footprint actions, as well as other restructuring or cost reduction actions introduced by the Company, significant increases in the costs related to such actions, or unanticipated inefficiencies resulting from thissuch transformationinvestments (such as delays in ability to fulfil orders as a result of temporary constraints on production and storage of products) and other manufacturing and administrative reorganization actions in progress or contemplated, could adversely affect theany anticipated cost savings as well as the Company’s reputation and financial position.

A material disruption of the Company's operations, particularly at its manufacturing facilities or within its information technology infrastructure, or its supply chain could adversely affect business.

The Company's facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to natural disasters or other disruptions, including hurricanes andhurricanes, floods, droughtsfires, anddroughts, water scarcity, and other adverse weather or environmental conditions (each of which may be worsened by climate change), power outages, energy shortages, fires, explosions, terrorism or other geopolitical tensions, equipment failures, sabotage, cybersecurity incidents, any potential effects of climate change and adverse weather conditions, labor disputes,disputes or shortages, critical supply failure, inaccurate downtime forecast, political disruption, public health crises, like a regional or global pandemic such as COVID-19, and other reasons, which hashave and could again result in undesirable consequences, including financial losses and damaged relationships with customers. The Company employs information technology systems and networks to support the business and relies on them to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Disruptions to the Company's information technology infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, cybersecurity incidents, and other events, including disruptions at its cloud computing server, systems and other third party IT service providers, could interfere with its operations, interrupt production and shipments, damage customer and business partner relationships, and negatively impact its reputation.

The effects of extreme weather conditions could also place capacity constraints on the Company’s supply chain. For example, steelrare andearth copperminerals are critical to the design of the Company's products and some countries from which steelthese and coppermaterials are sourced,sourced have experienced severe weather. A severe weather event in these countries could cause disruptions in the Company's supply chain which could, in turn, cause product shortages, delays in delivery and/or increases in the Company's cost to produce and deliver products to its customers.

As of DecemberJanuary 28,3, 2024,2026, the Company has approximately $7.9$7.3 billion of goodwill, approximately $2.3 billion of indefinite-lived trade names and approximately $1.4$0.8 billion of net definite-lived intangible assets. The Company is required to periodically, at least annually, determine if its goodwill or indefinite-lived trade names have become impaired, in which case it would write down the impaired portion of the asset. The definite-lived intangible assets, including customer relationships, are amortized over their estimated useful lives and are evaluated for impairment when appropriate. Impairment of intangible assets may be triggered by developments outside of the Company’s control, such as worsening economic conditions, technological change, intensified competition or other factors, which could have an adverse effect on the Company’s financial condition and results of operations. During 2025, the Company recognized a $108.4 million pre-tax, non-cash impairment charge driven by updates to the Company’s brand prioritization strategy impacting the Lenox, Troy-Bilt, and Irwin trade names. During 2024, the Company recorded a pre-tax impairment charges of $72.4 million, comprisedcharge of $41.0 million related to the Lenox trade name,name and $25.5 million related to the Infrastructure business, and $5.9 million related to a small business in the Industrial segment.business. During 2023, the Company recorded pre-tax impairment charges of $274.8 million, comprised of $124.0 million related to the Irwin and Troy-Bilt trade names and $150.8 million related to the Infrastructure business. During 2022, the Company recorded an impairment charge of $168.4 million related to the Oil & Gas business. Refer to Note E, Goodwill and Intangible Assets, for additional information on the trade name impairments. Refer to Note S, Divestitures, for additional information on the 2024 divestiture of the Infrastructure business and the 2022 divestiture of the Oil & Gas business.

The Company’s acquisitions, exiting of businesses, divestitures, acquisitions, strategic investments and alliances and joint ventures, as well as general business reorganizations, may result in financial results that are different than expected and certain risks for its business and operations.

As part of the Company's strategy, it may acquiredivest businesses or assets, divestacquire businesses or assets, enter into strategic alliances and joint ventures, and make similar investments to further its business.

•continued post-closing involvement in a divested business, such as through continuing equity ownership, guarantees, indemnities and other financial obligations, or transition services arrangements; and

The Company has taken steps to streamline its portfolio and focus on its core Tools & Outdoor and Engineering Fastening businesses. As a result of recent divestitures, the Company may be subject to increased volatility and vulnerability to market conditions due to its more focused portfolio. In addition, the current and proposed changes to the U.S. and foreign regulatory approval process and requirements in connection with an acquisition or divestiture may jeopardize, delay or reduce the anticipated benefits of the transaction to the Company. Failure to effectively integrate acquired companies, strategic investments and alliances, consummate or manage any future acquisitions, divestitures, or general business reorganizations, may adversely affect the Company’s existing businesses and harm its operational results due to large write-offs, significant restructuring costs, contingent liabilities, substantial depreciation, and/or adverse tax or other consequences. The Company cannot ensure that such integrations and reorganizations will be successfully completed or that all of the planned synergies and other benefits will be realized.

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

As described in Note G, Long-Term Debt and Financing Arrangements, of the Notes to Consolidated Financial Statements in Item 8, the Company has a five-year $2.25 billion committed credit facility and a $1.25 billion syndicated 364-day credit agreement. No amounts were outstanding against any of these facilities on DecemberJanuary 28,3, 2024.2026. As of DecemberJanuary 28,3, 2024,2026, the Company had $6.2$5.3 billion principal amount of indebtedness.

The Company must maintain, for each period of four consecutive fiscal quarters of the Company, an interest coverage ratio of not less than 3.50 to 1.00, provided that the Company is only required to maintain an interest coverage ratio of not less than (i) 1.502.50 to 1.00 for any four fiscal quarter period ending on or before the end of the Company’s second fiscal quarter of 2024, and (ii) 2.50 to 1.00 for any four fiscal quarter period ending after the Company’s second fiscal quarter of 2024 through and including the Company’s second fiscal quarter of 2025.2026. For purposes of calculating the Company’s compliance with the interest coverage ratio, as defined in each credit agreement, the Company is permitted to increase EBITDA to allow for additionalapplicable adjustment addbacksaddbacks, as defined in the 364-day credit agreement, incurred priorin toany thefour end of the Company’s secondconsecutive fiscal quarter of 2025,periods, provided that (A) the sum of the applicable adjustment addbacks incurred throughon andor includingbefore the Company’s second fiscal quarter of 2024 may not exceed $500 million in the aggregate, and (B) the sum of the applicable adjustment addbacks incurred from the Company’s third fiscal quarter of 2024 through and including the Company’s second fiscal quarter of 20252026 may not exceed $250 million in the aggregate; provided, further, that the sum of the applicable adjustment addbacks for any four consecutive fiscal quarter period may not exceed $500 million in the aggregate.

There can be no assurance that the value of the defined benefit plan assets, or the investment returns on those plan assets, will be sufficient in the future. It is therefore possible that the Company may be required to make higher cash contributions to the plans in future years which would reduce the cash available for other business purposes, and that the Company will have to recognize a significant pension liability adjustment which would decrease the net assets of the Company and result in higher expense in future years. The fair value of the defined benefit plan assets on DecemberJanuary 28,3, 20242026 was approximately $1.7 billion.

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

The Company’s information systems and data may be vulnerable to cybersecurity threats and incidents which can include uncoordinated individual attempts to gain unauthorized access to information technology ("IT") systems, sophisticated and targeted measures known as advanced persistent threats, breaches due to human error, malfeasance, or other cybersecurity incidents directed at the Company, its products, services and technologies, including those leveraging “Internet of ThingsThings,” robotics or generative artificial intelligence capabilities, its customers and/or its third-party service providers, including cloud providers. New vulnerabilities may be introduced as cybersecurity threats continue to evolve and if the Company or its third-party vendors increase their use of, or reliance on, emerging technologies, such as generative artificial intelligence and machine learning. The Company deploys measures which it believes leverage industry accepted frameworks to deter, prevent, detect, respond to, and mitigate cybersecurity threats. The Company has invested and continues to invest in risk management and information security and data privacyprotection measures it believes are appropriate to protect its systems and data, including employee and critical service provider training, organizational investments, incident response plans, tabletop exercises, technical defenses and defensive product software designs. The cost and operational consequences of implementing, maintaining and enhancing these measures could increase significantly to overcome increasingly intense, complex, and sophisticated cybersecurity threats.

Despite these efforts, cybersecurity incidents (against the Company or parties with whom the Company contracts), depending on their nature and scope, could potentially result in the misappropriation, disclosure, destruction, corruption or unavailability of critical data and confidential or proprietary information (the Company's or that of third parties) and the disruption of business operations. Additionally, it is possible for security vulnerabilities or a cybersecurity threat to remain undetected for an extended time period, and the prioritization of decisions with respect to security measures and remediation of known vulnerabilities undertaken by the Company, and the vendors and other third parties upon which it relies, may be inadequate to protect against or fully mitigate cybersecurity threats. The potential consequences of a material cybersecurity incident and its effects include financial loss, reputational damage, litigation with third parties, theft of intellectual property, disclosure of confidential or personal customer, supplier and employee information, fines levied by both U.S. and international government agencies, diminution in the value of the Company's investment in research, development and engineering, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect the Company's competitiveness and results of operations. Any of the foregoing can be exacerbated by a delay or failure to detect a cybersecurity incident or the full extent of such incident.

To conduct its operations, the Company regularly collects, stores, and processes data across national borders, and consequently is subject to a variety of continuously evolving and developing laws and regulations in the U.S. and abroad regarding privacy, data governance and data security. The scope of the laws that may be applicable to the Company is often uncertain and may be conflicting, particularly with respect to foreign laws. For example, lawmakingmany bodiescountries withinaround the EU,world United Kingdom, China and India have increased their jurisdictional reach and addedmaintain a broad array of requirements for handling personal data and product data, including the public disclosure of significant data breaches. Similarly, in the U.S., state-specific privacy regulations have created and continue to create new industry requirements, consumer privacy rights and enforcement mechanisms. The Company's reputation and brand and its ability to attract new customers could also be adversely impacted if the Company fails, or is perceived to have failed, to properly respond to breaches or other privacy concerns (even if unfounded) resulting from its management of consumer data or of its third party’s information technology systems. Such failure to properly respond could also result in similar exposure to liability.

All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time. Privacy laws that may be implemented in the future, laws regarding product data portability and governance, generative artificial intelligence, and robotics, and court decisions impacting activities across borders, may require changes to certain business practices,practices and/or products, thereby increasing costs and operational complexity, or may result in negative publicity, require significant management time and attention, and may subject the Company to remedies that may harm its business, including fines or demands or orders that the Company modify or cease existing business practices.

The Company is subject to income taxation in the U.S. as well asand numerous foreign jurisdictions. Significant judgment is required in determining the Company’s worldwide income tax provision and accordingly there are many transactions and computations for which the final income tax determination is uncertain. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. The Company periodically assesses its liabilities and contingencies for all tax years still subject to audit based on the most currently available information, which involves inherent uncertainty. The Company is routinely audited by income tax authorities in manyvarious taxjurisdictions, jurisdictions.and Althoughwhile management believes the recorded tax estimates are reasonable, the ultimate outcome of any audit (or related litigation) could differ materially from amounts reflected in the Company’s income tax accruals. Additionally,Changes in tax laws, regulations, or interpretations and applications of such laws and regulations, including the implementation of global incomeminimum tax provisionrules canby bethe materiallyvarious impactedtaxing duejurisdictions applicable to foreignmulti-national currency fluctuations against the U.S. dollar since a significant amount of the Company’s earnings are generated outside the U.S. Lastly, it is possible that future income tax legislation or changes to existing legislation may be enacted thatcorporations, could have a material impact on the Company’s worldwide income tax provision, cash tax liability, and effective tax rate beginning with the period that such legislation becomes enacted. For instance, the Organization for Economic Cooperation and Development has enacted model rules for a new global minimum tax framework applicable to multi-national corporations, and various governments have enacted, or are in the process of enacting, legislation implementing all or part of these rules.rate.

EnvironmentalChanging legislationlegislation, or regulationsregulations, and changing market trends in response to climate change and other environmental relatedenvironmental-related concerns may adversely affect the Company's business.

A number of governmental bodies have adopted, revised, or proposed legislation and regulation in response to the potential effects of climate change, protection of the environment, human health and safety, and water and energy efficiency. There continues to be a lack of consistent environmentalconsistency and climateharmony relatedin such legislation and regulation,regulation in the regions in which the Company operates, which creates economic and regulatory uncertainty. Increased international,International, regional, state and/or federal requirements or other stakeholder expectations hashave mandated, and could mandate in the future, moredifferent restrictivestandards, timing, or expansive standards or more prescriptive and expansive reporting of environmental, social and governance metrics thancompared to the Company's voluntary commitments and reporting the Company adopted.reporting. In addition, any such requirements or other stakeholder expectations could require changes to be implemented on a more accelerated time frame than the Company anticipates or could result in changes to the Company’s business operations, supply chainchain, manufacturing, and manufacturingreporting processes. A number of governmental bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to the potential effect of climate change, protection of the environment, human health and safety, and water and energy efficiency. Such legislation or regulation has also increased, and may continue to increase, the Company’s compliance burdens and associated costs, including potential increased costs passed along from its suppliers. Additionally, such legislation has and potentially could include provisions for a “cap and trade” system of allowances and credits or a carbon tax or require increased measurement of metrics and disclosure, among other provisions. If carbon tax legislation is changed or adopted, the Company may not be able to mitigate the future impact of carbon tax through its emissions reduction initiatives or other measures. If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements on the Company, they may have a material adverse effect on the Company’s business, access to credit, capital expenditures, operating results and financial condition.

In addition, many of the Company’s products incorporate battery technology. As the worldmarket moves towards a lower-carbon economy and as other industries begin to adopt similar battery technology for use in their products or increase their current consumption of battery technology, the increased demand could place capacity constraints on the Company’s supply chain. Furthermore, increased demand for battery technology may also increase the costs to the Company for both the battery cells as well as the underlying raw materials such as cobalt and lithium, among others. If the Company is unable to mitigate any possible supply constraints or related increased costs or drive alternative technology through innovation, its profitability and financial results could be negatively impacted.

The Company is exposed to and becomes involved in various legal proceedings, claims, disputes and investigations arising out of the conduct of its business, including the matters described in Item 3. Legal Proceedings in Part I of this Annual Report on Form 10-K and other, actual or threatened proceedings, claims, disputes or investigations relating to such items as securities laws, anti-trust laws, commercial transactions, product liability, workers compensation, employment litigation, employee benefits plans, arrangements between the Company and its distributors, franchisees or vendors, intellectual property claims and regulatory actions. Any legal proceedings, claims, disputes or investigations, whether with or without merit, can be time consuming and expensive to defend and can divert management’s attention and resources.

In addition, the Company is subject to environmental laws in each jurisdiction in which business is conducted. Some of the Company’s products incorporate substances that are regulated in some jurisdictions in which it conducts manufacturing operations.operations or distributes its products. The Company has been, and could be in the future, subject to liability if it does not comply with these regulations. In addition, the Company is currently being, and may in the future be, held responsible for remedial investigations and clean-up costs resulting from the discharge of hazardous substances into the environment, including sites that have never been owned or operated by the Company but at which it has been identified as a potentially responsible party under federal and state environmental laws and regulations. Changes in environmental and other laws and regulations in both domestic and foreign jurisdictions could adversely affect the Company’s operations due to increased costs of compliance and potential liability for non-compliance.

The Company maintains an awareness of and responsibility for the potential health and safety impacts of its products on its customers and end users. The Company's product development processes include tollgates forand milestones that incorporate product safety review,and quality reviews and extensive testing is conducted on product safety. Safety reviews are performed at various product development milestones, including a review of product labeling and markingstages to identify potential safety and operational hazards for the customercustomers and end user.users. Product labeling and marking reviews are also conducted.

Despite safety and quality reviews, the Consumer Product Safety Commission or other applicable regulatory bodies have required and may require,require in the future, or the Company has voluntarily instituted and may in the future voluntarily institute, the recall, repair or replacement of the Company’s products if those products are found not to be in compliance with applicable standards or regulations. The Company has also been, and may in the future be, subject to regulatory requirements and penalties concerning the Company’s products. Any recall, repair, replacement or other corrective action could increase the Company's costs and adversely impact its reputation. Refer to Item 3. Legal Proceedings in Part I of this Annual Report on Form 10-K for further information about legal proceedings involving recalled products.

•Mid-single digit organic revenue growth (2 to 3 times the market);

•> 35% to 37% adjusted gross margins with mid to high-teens adjusted Earnings Before Interest, Taxes, Depreciation and Amortization margin ("adjusted EBITDA margin");

•Free cash flow equalapproximating to,100% orof exceeding,GAAP net income over a multi-year period;

•Cash Flow Return On Investment ("CFROI"), computed as cash from operations plus after-tax interest expense, divided by the two-point average of debt and equity, in the low-to-mid-teens by 2028 and greater than or equal to the mid-teens beyond 2028; and

In terms of capital allocation, the Company’s top priority is funding organic growth investments that drive long-term value. The Company also remains committed, over time, to returning excess capital to shareholders throughmaintaining a strong and growing dividend asand well ashas a preference toward opportunisticallyopportunistic repurchasingshare shares.repurchases. In the near term,near-term, the Company intends to direct any capital in excess ofutilize the quarterlynet dividendproceeds onfrom itsthe commonpending stockCAM towarddivestiture debtto reductionreduce anddebt, internalas growthfurther investments.discussed below.

Share Repurchases AndOf Securities Other SecuritiesThan Common Stock

Other Divestitures

The Company has also divested several smaller businesses in recent years that allowed the Company to invest in other areas that fit into its long-term strategy.

In mid-2022, the Company launched a programGlobal Cost Reduction Program comprised of a series of initiatives designed to generate targeted pre-tax run-rate cost savings of $2.0 billion by resizing the organizationorganization, reducing inventory, and reducingtransforming inventoryits supply chain with the ultimate objective of driving long-term growth, improving profitability and generating strong cash flow. These initiatives are expected to optimize the cost base as well as provide a platform to fund investments to accelerate growth in the core businesses. The program consistshas been completed as of a selling, general, and administrative ("SG&A") planned pre-tax run-rate cost savings of $500 million and a supply chain transformation expected to deliver $1.5 billion of pre-tax run-rate cost savings by the end of 2025 and facilitatehas thegenerated achievementapproximately $2.1 billion of projectedpre-tax 35%+run-rate adjustedsavings, grossexceeding margins.its original cost savings target. These savings were partially redeployed to fund over $300 million of innovation and commercial investments through 2025 designed to accelerate organic growth.

The program included selling, general, and administrative ("SG&A") cost savings were generateddriven by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend.spend Theseas well as a supply chain transformation. The savings will help fund $300 millionrelated to $500the millionsupply ofchain innovationtransformation andwere commercialdriven investmentsby throughthe 2025following designedvalue to accelerate organic growth.streams:

•Material Productivity: ImplementingImplemented capabilities to source in a more efficient and integrated manner across all of the Company’s businesses and leveragingleveraged contract manufacturing;

•Operational Excellence: RedesigningRedesigned in-plant operations following footprint rationalization to deliver incremental efficiencies, simplified organizational design and inventory optimization leveraging a standard operating model and LEAN principles;

•Footprint Rationalization: TransformingTransformed the Company’s manufacturing and distribution network from a decentralized and inefficient system of sites built through years of acquisitions to a strategically focused supply chain, inclusive of site closures, transformations of existing sites into manufacturing centers of excellence and re-configuration of the distribution network; and

•Complexity Reduction: ReducingReduced complexity through platforming products and implementingimplemented initiatives to drive a SKU reduction.

The charges associated with the ongoing execution of the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From OperationsOperations." andAlthough the fullbroader yearGlobal estimateCost ofReduction Non-GAAPProgram adjustmentshas detailedbeen below in "2025 Planning Assumptions". In addition, although the program is expected to be completed by the end of 2025,completed, the Company expects to incur additional charges and make cash investments beyondin 20252026 relating to footprint actions to support the ongoing network transformation and reposition its supply chain, as necessary. The expected charges related to these actions are reflected in the Company's full year estimate of Non-GAAP adjustments detailed below in "2026 Planning Assumptions".

Management recognizescontinues thatto invest in these core franchises areto importantdrive foundations that have a proven track record of providing strong cash flowgrowth and growthreturns. prospects.Priorities Management is committed to growing these businesses through accelerating investments into innovativeinclude product development,innovation, brand support,and commercial activation, and acceleratingcontinued thetransformation of operations and supply chain transformationcapabilities to improve fillservice rateslevels, and better matchalign inventory with customer demand, whileand improvingenhance global cost competitiveness.

The Outdoor product line 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, hand-held outdoor power equipment, garden tools, and parts and accessories to professionals and consumers primarily under the DEWALT®, CRAFTSMAN®, CUB CADET®, BLACK+DECKER®, and HUSTLER® brand names.

The IndustrialEngineered Fastening segment is comprised of the Engineered Fastening business and included the Infrastructure business prior to its sale in April 2024.

The risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended January 3, 2026 filed with the Securities and Exchange Commission on February 24, 2026 (the "Form 10-K") should be considered together with information included in this Form 10-Q for the quarter ended AprilJuly 4, 2026, and should not be considered the only risks to which the Company is exposed. Except as set forth below, there have been no material changes to the risk factors as disclosed in the Company’s Form 10-K.

Substantially all of the Company's import operations are subject to customs requirements, trade restrictions and protection measures, and to tariffs, quotas and taxes on imports set by governments through mutual agreements, bilateral actions or, in some casescases, unilateral action, such as tariffs implemented by the U.S. government under Section 301 of the Trade Act of 1974. In addition, the countries in which the Company’s products and materials are manufactured or imported from (including importation into the U.S. of the Company's products manufactured overseas) may from time to time impose additional quotas, duties, tariffs or other restrictions on its imports (including restrictions on manufacturing operations) or adversely modify existing restrictions.restrictions Adverseor international trade agreements the impact of which the Company may be unable to correctly assess or effectively mitigate on a timely basis. Existing restrictions, adverse changes in the Company’s import costs and restrictions, or failure by the Company’sCompany or its suppliers to comply with customs regulations or similar laws, could harmlimit the Company’s business.ability to capitalize on current and future growth opportunities in international markets, impair its ability to expand the business by offering new products, and could adversely impact its production costs, customer demand and relationships with customers and suppliers. Any of these consequences could have a material adverse effect on the Company’s results of operations, financial condition and cash flows.

Changes in governmental policy regarding international trade, including import and export regulation, sanctions, and international trade agreements, have negatively impacted the Company’s business. Beginning in 2025, the U.S. government announced a series of new tariffs on imported goods into the U.S., which prompted retaliatory actions from some of its trading partners, and in response, the Company introduced strategies to mitigate the impacts of these changes on its results of operations, including price increases and supply chain adjustments. While certain of these tariffs have been suspended, modified or invalidated, such as the invalidation of tariffs previously imposed under the International Emergency Economic PowerPowers Act (“IEEPA”) by the U.S. Supreme Court, the trade policy environment continues to evolve. The Company continues to monitor the current tariff landscape, however, there is no assurance that the Company will be able to mitigate the full impact of all such tariffs, retaliatory actions or other changes in trade policies that have or may develop. InWhile addition,the thereCompany has submitted refund claims, and may besubmit ongoingadditional uncertaintyrefund regardingclaims, for eligible IEEPA tariffs paid, the availability,ultimate timingamounts andthe administrationCompany ofmay anyrecover refundremain or review processes associated with tariffs that have been invalidated or otherwise modified,uncertain, and there can be no assurance that the Company will be able to obtain refunds or that any refunds will be available to it in amounts or within timeframes that would meaningfully offset the impact of tariffs or costs associated with tariff mitigation strategies on the Company’s business. Furthermore, the overall impact and timing of any refunds, which if received may be subject to taxes and other adjustments or further legal, regulatory, or administration developments, remain highly uncertain.

In terms of capital allocation, the Company’s top priority is funding organic growth investments that drive long-term value. The Company also remains committed, over time, to maintaining a strong and growing dividend and opportunistically repurchasing shares. The Company has deployed the vast majority of the net proceeds from the Consolidated Aerospace Manufacturing ("CAM") divestiture to reduce debt and repurchase shares in the second quarter of 2026. The Company is now positioned to pursue capital allocation that accelerates shareholder value creation, which it expects to take the form of share repurchases.

On April 23, 2026, the Board terminated the previous share repurchase program (the “April 2022 Program”) and approved a new share repurchase program of up to $500 million in purchase price of shares of the Company's common stock ("the April 2026 Program"). As of July 4, 2026, the authorized amount remaining under the April 2026 Program was approximately $250 million after giving effect to open market repurchases made in the second quarter of 2026, as further discussed below. The April 2026 Program will expire 36 months from April 23, 2026. The Company may repurchase shares under the April 2026 Program through open market purchases, privately negotiated transactions or share repurchase programs, including one or more accelerated share repurchase programs (under which an initial payment for the entire repurchase amount may be made at the inception of the program). Such repurchases may be funded from cash on hand, short-term borrowings or other sources of cash at the Company’s discretion, and the Company is under no obligation to repurchase any shares pursuant to the April 2026 Program. The currently authorized sharesamount available for repurchaseshare repurchases under the April 2026 Program dodoes not include approximately 3.62.4 million shares remaining under a forward share purchase contract entered into in March 2015 as further discussed below, which were reserved and authorized for purchase under the Company’s approved repurchase program in place prior to the April 2026 Program relating to a forward share purchase contract entered into in March 2015.Program.

On April 6, 2026, the Company completedsold the previously announced sale of its CAM business to Howmet Aerospace for $1.8 billion in cash. The Company has deployed the vast majority of the net proceeds to reduce debt and repurchase shares in the second quarter of 2026. ForThrough the threedate monthsof ended April 4, 2026,sale, net sales and segment profit for the Engineered Fastening segment included $117.0 million and $22.0 million, respectively, related to the CAM business. See below for further discussion of the Company's business segments and results.

On April 6, 2026, the Company completed the previously announced sale of its CAM business to Howmet Aerospace. This divestiture does not qualify for discontinued operations and therefore, the results of the CAM business are included in the Company's Consolidated Statements of Operations and Comprehensive Income forthrough allthe periodsdate presented.of sale.

The Company’s operating results at the consolidated level as discussed below include and exclude certain gains and charges impacting gross profit, SG&A, Other, net, and Income taxes. The Company’s business segment results as discussed below include and exclude certain gains and charges impacting gross profit and SG&A. Corporate overhead as discussed below includes and excludes certain gains and charges. These amounts for the firstsecond quartersquarter and year-to-date periods of 2026 and 2025 are as follows:

FirstSecond Quarter 2026

FirstSecond Quarter 2025

Below is a summary of the pre-tax Non-GAAP adjustments for the firstsecond quartersquarter and year-to-date periods of 2026 and 2025.

Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of business segment performance. Organic growth is utilized to describe the Company's results excluding the impacts of foreign currency fluctuations, acquisitions during their initial 12 months of ownership, divestitures, transfers of product lines between segments, and the strategic transition to a licensing model for gas walk-behind outdoor product line exitslines (as previously communicated).

Net Sales: Net sales were $3.846$3.961 billion in the firstsecond three monthsquarter of 2026 compared to $3.745$3.945 billion in the firstsecond three monthsquarter of 2025, anrelatively increaseflat ofyear-over-year, 3%, which was driven byas a 3% increase in pricevolume and a 3%1% increase from foreign currency,currency partiallywere offset by a 3% decrease infrom volume.the CAM business divestiture and a 1% decrease from strategic outdoor product line transitions. Tools & Outdoor net sales increased 2%3% compared to the firstsecond three monthsquarter of 2025 as a 4%3% increase in pricevolume and a 3%1% increase from foreign currency were partially offset by a 1% decrease from strategic outdoor product line transitions. Engineered Fastening net sales decreased 18% compared to the second quarter of 2025 as a 21% decrease from the CAM business divestiture was partially offset by a 5% decrease in volume. Engineered Fastening net sales increased 10% compared to the first three months of 2025, driven by a 6%2% increase in volume, a 3% increase from foreign currency,volume and a 1% increase in price.

Cost of Sales and Gross Profit: The Company reported cost of sales of $2.689$2.655 billion in the firstsecond three monthsquarter of 2026 compared to $2.624$2.879 billion in the firstsecond three monthsquarter of 2025. The year-over-year increasechange in cost of sales was primarily driven by tariff costs, volume deleveraging, and inflation, partially offset by operational cost improvements.improvements and the net benefit related to tariff refunds realized and directly attributable offsetting costs for variable incentive compensation and growth investments. Gross profit, defined as sales less cost of sales, was $1.157$1.306 billion, or 30.1%33.0% of net sales, in the firstsecond three monthsquarter of 2026 compared to $1.121$1.067 billion, or 29.9%27.0% of net sales, in the firstsecond three monthsquarter of 2025. Non-GAAP adjustments, which increased cost of sales and reduced gross profit, were $5.2$28.7 million, or 0.1%0.7% of net sales, for the three months ended AprilJuly 4, 2026, and $16.7$20.0 million, or 0.5% of net sales, for the three months ended MarchJune 29,28, 2025. Excluding these adjustments, gross profit was 30.2%33.7% of net sales for the three months ended AprilJuly 4, 2026, compared to 30.4%27.5% of net sales for the three months ended MarchJune 29,28, 2025. GrossThe year-over-year change in gross profit as a percent of sales and adjusted gross profit as a percent of sales were fairlyprimarily consistentdriven year-over-year asby operational cost improvementsimprovement and higherfavorable pricingproduct weremix, largelyin offsetaddition byto increaseda benefit of approximately 250 basis points related to the net impact of tariff expense,refunds volumerealized deleverage,as anddescribed other inflation.above.

Selling,The generalCompany andreported administrative: SG&A, inclusivecost of sales of $5.344 billion in the provisionfirst forhalf creditof losses,2026 compared to $5.503 billion in the first half of 2025. The year-over-year change in cost of sales was $884.0driven million,by the same factors discussed above that impacted the second quarter of 2026. Gross profit, defined as sales less cost of sales, was $2.463 billion, or 23.0%31.5% of net sales, in the first three monthshalf of 2026,2026 compared to $867.0$2.187 million,billion, or 23.2%28.4% of net sales, in the first three monthshalf of 2025. Within SG&A, Non-GAAP adjustmentsadjustments, totaledwhich $7.7increased cost of sales and reduced gross profit, were $33.9 million, or 0.2%0.5% of net sales, for the threesix months ended AprilJuly 4, 2026.2026, and $22.0$36.7 million, or 0.6%0.5% of net sales, for the threesix months ended MarchJune 29,28, 2025. Excluding these adjustments, SG&Agross profit was 22.8%32.0% of net sales for the threesix months ended AprilJuly 4, 2026, compared to 22.6%28.9% of net sales for the threesix months ended MarchJune 29,28, 2025. SG&AThe year-over-year change in gross profit as a percent of sales and adjusted SG&Agross profit as a percent of sales were fairly consistent year-over-year as strategic growth investments were balanceddriven by disciplinedthe andsame targetedfactors costdiscussed management.above that impacted the second quarter of 2026.

Distribution center costs (i.e. warehousing and fulfillment facility and associated labor costs) are classified within SG&A. This classification may differ from other companies who may report such expenses within cost of sales. Due to diversity in practice, to the extent the classification of these distribution costs differs from other companies, the Company’s gross margins may not be comparable. Such distribution costs classified in SG&A amounted to $135.9$140.5 million and $129.0$276.4 million for the firstthree and six months ended July 4, 2026, respectively, and $131.1 million and $260.1 million for the three and six months ofended 2026June and28, 2025, respectively.

Other, net: Other, net totaled $41.9$52.9 million and $47.5$67.7 million in the firstsecond three monthsquarter of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, Other, net totaled $44.5$52.6 million and $56.2$76.1 million forin the firstsecond three monthsquarter of 2026 and 2025, respectively. The year-over-year decrease in Other, net, both inclusive and exclusive of Non-GAAP adjustments, is primarily driven by lower intangible amortization expense in 2026.2026 and positive impacts from foreign currency.

(Gain) Loss on SaleSales of BusinessBusinesses: During the first three monthshalf of 2026, the Company reported a net pre-tax gain of $270.6 million, driven by a pre-tax gain of $276.7 million from the CAM business divestiture, which was partially offset by a pre-tax loss of $3.1$6.1 million related to the divestituredivestitures of atwo small businessbusinesses in the Tools & Outdoor segment. During the first three months of 2025, the Company reported a pre-tax loss of $0.3 million related to the divestiture of a small business in the Engineered Fastening segment.

Asset Impairment Charges: During the first quarterhalf of 2026,2025, the Company recordedreported a pre-tax impairment chargeloss of $22.7$0.3 million related to a write-down of assets associated with the exitdivestiture of a Toolssmall andbusiness Outdoorin productthe lineEngineered andFastening related plant closure.segment.

Interest, net: Net interest expense was $75.9$59.3 million in the firstsecond quarter of 2026 and $77.2$80.2 million in the firstsecond quarter of 2025. TheOn a year-to-date basis, net interest expense was $135.2 million in 2026 and $157.4 million in 2025.The year-over-year decreasedecreases waswere primarily driven by lower interest expense due to lower debt balances partially offset by lower interest income, both due to lower interest rates.income.

Income Taxes: For the three and six months ended MarchJuly 29,4, 2025,2026, the Company recognized income tax expense of $37.2$147.7 million and $172.9 million, respectively, resulting in an effective tax raterates of 29.2%. Excluding the tax effect on Non-GAAP adjustments29.6% for theboth three months ended March 29, 2025, the Company recognized income tax expense of $44.7 million, resulting in an effective tax rate of 28.1%.periods. These effective tax rates for the three and six months ended MarchJuly 29,4, 20252026 differ from the U.S. statutory tax rate of 21% primarily due to non-deductiblethe expenses,tax losseseffect of certain basis differences associated with the CAM divestiture for which ano corresponding tax benefit iswas not recognized,recognized and U.S.non-deductible tax on foreign earnings,expenses, partially offset by the remeasurement of uncertain tax positionpositions. reservesExcluding the tax effect on Non-GAAP adjustments for the three and six months ended July 4, 2026, the Company recognized income tax credits.expense of $42.0 million and $85.6 million, respectively, resulting in effective tax rates of 15.1% and 19.3%, respectively. These effective tax rates for the three and six months ended July 4, 2026 differ from the U.S. statutory tax rate of 21% primarily due to the remeasurement of uncertain tax positions, partially offset by non-deductible expenses.

Tools & Outdoor net sales increased $54.7$102.9 million, or 2%,3.0%, in the firstsecond three monthsquarter of 2026 compared to the firstsecond three monthsquarter of 2025 as a 4%3% increase in pricevolume and a 3%1% increase from foreign currency waswere partially offset by a 5%1% decrease infrom volume.strategic Toolsoutdoor &product Outdoorline organictransitions. revenuesOrganic decreasedrevenue 1%increased 3%, primarily duedriven toby lowerpower tools strength in U.S. retail volumesand commercial and industrial ("C&I") channels. Total revenue increased 3% in North America, whichremained was mostly offset by increased sell-in ahead of the outdoor product spring season, strong performance in prioritized international markets, and higher rates of professional conversions within the U.S. commercial & industrial channel. Total revenue decreased 1% in North America and increased 11% and 6% in Europe and the rest of the world, respectively. Excluding the impact from foreign currency, organic revenue decreased 2% in North America, increased 1%flat in Europe, and remainedincreased flat8% in the rest of the world. Excluding the impact from foreign currency and strategic outdoor product line transitions, organic revenue increased 4% in North America, decreased 2% in Europe, and increased 3% in the rest of the world.

Tools & Outdoor Segmentsegment profit for the firstsecond three monthsquarter of 2026 was $276.0$389.0 million, or 8.3%10.9% of net sales, compared to $289.2$238.1 million, or 8.8%6.9% of net sales, in the firstsecond three monthsquarter of 2025. Excluding Non-GAAP adjustments, which primarily related to charges associated with footprint actions in both periods,periods and a voluntary retirement program in 2025, of $12.6$30.5 million, or 0.4%0.9% of net sales, in the first three months ofended July 4, 2026, and $25.0$38.4 million, or 0.8%1.1% of net sales, infor the first three months ofended June 28, 2025, segment profit was 8.7%11.8% of net sales in the firstsecond three monthsquarter of 2026 and 9.6%8.0% of net sales in the firstsecond three monthsquarter of 2025. The year-over-year changeschange in segment profit as a percent of sales and adjusted segment profit as a percent of sales were primarily driven by growthnet investmentsproductivity gains and greaterfavorable salesproduct volumemix, as well as a net benefit of lower-marginapproximately outdoor150 products.basis Higherpoints pricingrelated in the first three months of 2026 was largely offset by increasedto tariff expenses.refunds and directly attributable offsetting costs for variable incentive compensation and growth investments.

Engineered Fastening net sales increaseddecreased $47.1$87.4 million, or 10%,18.1%, in the firstsecond three monthsquarter of 2026 compared to the firstsecond three monthsquarter of 2025, drivenas a 21% decrease from the CAM business divestiture was partially offset by a 6%2% increase in volume, a 3% increase from foreign currency,volume and a 1% increase in price. Engineered Fastening organic revenues increased 7%3%, driven by robustindustrial aerospacestrength, growthas andwell as continued automotive outperformingfasteners the market, partially offset by a decline in industrial volume.growth.

Engineered Fastening segment profit for the firstsecond three monthsquarter of 2026 totaled $60.9$51.6 million, or 11.9%13.0% of net sales, compared to $39.0$35.0 million, or 8.4%7.2% of net sales, in the corresponding 2025 period. Excluding Non-GAAP adjustments oftotaled $0.2$0.1 million, or less than 0.1% of net sales, in the firstsecond three monthsquarter of 2026, and $7.7$17.3 million, or 1.7%3.6% of net sales, in the firstsecond three monthsquarter of 2025, which primarily related to costs associated with the supply chain transformation,transformation and a voluntary retirement program. Excluding these Non-GAAP adjustments, segment profit amounted to 12.0%13.0% of net sales in the firstsecond three monthsquarter of 2026 compared to 10.1%10.8% of net sales in the firstsecond three monthsquarter of 2025. The year-over-year changeschange in segment profit as a percent of sales and adjusted segment profit as a percent of sales were driven by improvednet profitabilityproductivity inimprovements, aerospacefavorable and higherautomotive volume and mixmix, inand automotive.a net benefit of approximately 50 basis points related to tariff refunds and directly attributable offsetting variable incentive compensation costs.

Corporate overhead amounted to $63.6$82.7 million and $74.4$79.7 million in the firstsecond three monthsquarter of 2026 and 2025, respectively. Excluding Non-GAAP adjustments of $0.1 million in the first three months of 2026 and $6.0 million in the first three months of 2025,adjustments, which primarily consistedrelated ofto a voluntary retirement program and transition services costs related to previously divested businesses, the corporate overhead element of SG&A was $63.5$81.6 million and $68.4$62.8 million for the three months ended July 4, 2026 and June 28, 2025, respectively. The year-over-year increase was primarily driven by variable incentive compensation costs directly attributable to the tariff refund realized in the firstsecond three monthsquarter of 2026 and 2025, respectively.2026.

A summary of the restructuring reserve activity from January 3, 2026 to AprilJuly 4, 2026 is as follows:

For the three and six months ended AprilJuly 4, 2026, the Company recognized net restructuring charges of $44.9$15.1 million and $60.0 million, respectively, related to severance costs primarily associated with reorganizations of the Company’s supply chain resources and a plant closure,closures, as well as facility exit costs. The Company expects to achieve annual net cost savings of approximately $78$120 million by the end of 2027 related to the restructuring costs incurred during the threesix months ended AprilJuly 4, 2026. The majority of the $70.0$45.0 million of reserves remaining as of AprilJuly 4, 2026 is expected to be utilized within the next twelve months.

The $44.9$60.0 million of net restructuring charges for the threesix months ended AprilJuly 4, 2026 includes: $35.6$50.0 million in the Tools & Outdoor segment; $7.5$6.5 million in the Engineered Fastening segment; and $1.8$3.5 million in Corporate.

The anticipated$15.1 annualmillion of net costrestructuring savingscharges for the three months ended July 4, 2026 includes: $14.4 million of approximately $78 million related to the 2026 restructuring actions include: $63 millioncharges in the Tools & Outdoor segment; $9$1.0 million of net reversals in the Engineered Fastening segment; and $6$1.7 million of charges in Corporate.

On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). The ruling did not address potential refunds. The U.S. Court of International Trade (“CIT”) has ordered the U.S. Customs and Border Protection (“CBP”) to refund the collected IEEPA tariffs. The administrative process for seeking refunds of IEEPA tariffs previously paid remains under development and the CIT’s order may be subject to U.S. government challenge. On April 20, 2026, the CBP launched the Consolidated Administration and Processing of Entries (CAPE) system for IEEPA refunds, which the CBP planscontinues to implement through a phased developmentapproach. approach.The Company has submitted claims relating to Phase 1 and Phase 2 of the CAPE tariff refund process. During the three months ended July 4, 2026, the Company recognized a pre-tax gain of $118 million in cost of sales related to Phase 1 IEEPA tariff refunds realized, which was partially offset by directly attributable costs for variable incentive compensation and growth investments impacting cost of sales and selling, general, and administrative ("SG&A") expenses totaling approximately $83 million, and related tax effects approximating the Company’s marginal tax rate. The Company expects this pre-tax gain to be further offset by additional growth investments deployed in the third and fourth quarters of 2026. There can be no guarantee that aadditional refund,refunds ifin received,excess of the amounts realized in the second quarter of 2026 will be received or that the ultimate amount of refunds received will equal the full amount of IEEPA tariffs paid,paid. Furthermore, any future refund amounts realized will most likely result in additional obligations to the Company, including variable incentive compensation and anytaxes, refundand may be utilized to support incremental growth investments. Refunds may also be subject to taxes and other adjustments or further legal, regulatory, or administration developments. Given these uncertainties, the Company has not recognized any benefit or asset related to potential IEEPA tariff refunds as of April 4, 2026. Following the U.S. Supreme Court's decision, the U.S. administration announced additionaltemporary tariffs under Section 122 of the Trade Act of 1974 (“Section 122 tariffs”), which expired on July 24, 2026. In July 2026, the U.S. administration announced plans to implement additional tariffs under Section 301 of the Trade Act of 1974 (“Section 301 tariffs”) and could take action to implement additional tariffs in the future. The Company will continue to monitor and evaluate developments on tariff policy and the ongoing phased refund process related to IEEPA tariffs as new information becomes available.

This discussion of certain guidance is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company is updating its guidance for 2026 diluted earnings per share on a GAAP basis to be in the range of $4.60 to $5.45, revised from $4.15 to $5.35, which is higher than prior guidance factoring in the expected gain on the recently closed CAM divestiture.$5.35. The Company continuesis toalso expectupdating its guidance for diluted earnings per share excluding Non-GAAP adjustments to be in the range of $5.20 to $5.80, revised from $4.90 to $5.70. These revised diluted earnings per share ranges on a GAAP basis and excluding Non-GAAP adjustments represent year-over-year growth of 79%90% and 13%,18%, respectively, at the midpoint of each range as compared to 2025 performance. The Company is now targeting free cash flow to be in the range of $600 to $800 million, revised from $500 to $700 million, which nowincorporates includesthe tariff refund realized in the second quarter of 2026 and projected taxes and fees associated with the recently closed CAM divestiture. Excluding such payments, free cash flow is expected to be in the range of $700 to $900 million, consistent with prior guidance.

The above guidance ranges exclude the results of the CAM business as of April 6, 2026, and the impacts of any potential future tariff refunds. Furthermore, the above guidance ranges assume that inflationary cost pressures resulting from the Middle East conflict, combined with inflation on battery metals and tungsten, will offset a temporary net tariff tailwind in 2026 driven by the Supreme Court ruling on IEEPA tariffs, which were at higher levels than the Section 122 tariffs that have replaced them for a period of 150 days (through late July).July, will be offset by higher inflation, primarily driven by battery metals, tungsten, and oil derivatives. The revised full year guidance ranges also assume anthat expectationthe thatrecently announced Section 301 tariffs, as well as additional tariffs expected under Section 301, will take effect after the 150-day period atapproximate IEEPA-equivalent levels.

The difference between the guidance for 2026 diluted earnings per share on a GAAP basis and diluted earnings per share excluding Non-GAAP adjustments is approximately $0.35 to $0.75,$0.60, consisting primarily of charges related to footprint actions and other cost actions, largely offset by the estimated gain on the recently closed sale of the CAM business.

Operating Activities: Cash flows usedprovided inby operations were $388.8$763.1 million in the firstsecond quarter of 2026 compared to $420.0$214.3 million in the corresponding period of 2025. The year-over-year change is2025, primarily driven by changes in working capital. Year-to-date cash flows provided by operations were $374.3 million in 2026 compared to cash flows used in operations of $205.7 million in 2025, primarily driven by the same factors discussed above that impacted the second quarter of 2026.

Free Cash Flow: Free cash flow, as defined in the table below, was an outflowinflow of $447.3 million and $485.0$698.2 million in the firstsecond quartersquarter of 2026 and 2025,$134.7 respectively.million in the corresponding period of 2025. On a year-to-date basis, free cash flow was an inflow of $250.9 million in 2026 compared to an outflow of $350.3 million in 2025. The year-over-year change in free cash flow was due to the same factorfactors discussed above in operating activities. Management considers free cash flow an important indicator of its liquidity and capital efficiency, 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 stock and business acquisitions, among other items.

FinancingInvesting Activities: Cash flows provided by financinginvesting activities totaled $508.2$1.753 millionbillion in the firstsecond quarter of 2026, primarily drivendue byto netproceeds short-termfrom commercialthe paper borrowingssale of $1.145the CAM business of $1.815 billion, which was partially offset by paymentscapital onand long-termsoftware debtexpenditures of $500.1 million and cash dividend payments on common stock of $126.0$64.9 million. Cash flows providedused byin financinginvesting activities totaled $502.0$67.2 million in the firstsecond quarter of 2025, primarily drivendue byto netcapital short-termand commercialsoftware paper borrowingsexpenditures of $1.136 billion, partially offset by payments on long-term debt of $500.0 million and cash dividend payments on common stock of $124.5$79.6 million.

The Company maintains investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt (S&P BBB+, Fitch BBB+, Moody's Baa3), as well as its commercial paper program (S&P A-2, Fitch F2, Moody's P-3). There were no changes to any of the Company's credit ratings during the first quarterhalf of 2026. Failure to maintain investment grade rating levels could adversely affect the Company’s cost of funds, liquidity and access to capital markets, but would not have an adverse effect on the Company’s ability to access its existing committed credit facilities.

Cash and cash equivalents totaled $333.7$592.4 million as of July 4, 2026, of which approximately 60% was held in foreign jurisdictions. Cash and cash equivalents totaled $280.1 million as of April 4, 2026 and January 3, 2026, respectively, which was primarily held in foreign jurisdictions.

In March 2026, the Company redeemed its $500 million 3.40% notes, at maturity. The redemption was funded through the issuance of commercial paper.

The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of AprilJuly 4, 2026, the Company had no commercial paper borrowings outstanding of $1.7 billion, of which $547.6 million in Euro denominated commercial paper was designated as a net investment hedge.outstanding. In the second quarter of 2026, the Company utilized the vast majority of the net proceeds from the CAM divestiture to repay commercial paper borrowings. As of January 3, 2026, the Company had $605.6 million of commercial paper borrowings outstanding, of which $555.6 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.