SWK Stanley Black & Decker, Inc. - 10-K

ITEM 1A. RISK FACTORS

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. Some 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.

Business and Operational Risks

The Company’s business is subject to risks associated with sourcing, manufacturing and maintaining appropriate inventory levels.

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 trade, 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, China, Taiwan and 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 ability to maintain inventory levels appropriate to meet consumer and customer demand. The Company is focused on optimizing inventory levels via improved supply chain conditions and strategic inventory management. Any failure to optimize inventory levels or otherwise maintain appropriate inventory levels to meet consumer and customer demand, may expose the Company to risks of excess inventory and less marketable or obsolete inventory and could require the Company to sell excess or obsolete inventory at a discount, which could result in inventory write-offs that would negatively impact the Company’s results of operations.

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. Further, as 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 either cease operations or require additional financial assistance from the Company in order to fulfill their obligations. In a limited number of circumstances, the magnitude of the Company’s purchases 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 market products. 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.

The Company’s business is subject to risks associated with the global trade environment, including customs and trade regulations, tariffs, quotas, import taxes and international trade agreements.

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 cases 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. Adverse changes in the Company’s import costs and restrictions, or failure by the Company’s suppliers to comply with customs regulations or similar laws, could harm the Company’s business.

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 2025 the Company began shifting production of certain power tools to Mexico. As a result, these products became subject to additional tariffs on imports from Mexico in 2025. Even though the Company is taking actions to qualify for an exemption under the United States-Mexico-Canada Agreement to mitigate the additional tariff costs, there is no guarantee that the Company will be able to obtain such qualification.

There is a possibility of further escalation of trade tensions, tariffs or additional trade restrictions. For example, in April 2025, China imposed export restrictions on certain rare earth minerals that are used in certain components of the Company’s products, which resulted in delays and shortages of certain components. If China were to further restrict exporting, or implement burdensome and lengthy licensing processes for the export of, these materials or components, or pressure other countries to do so, the Company’s and its suppliers' ability to obtain such materials or components may be disrupted and the Company may not be able to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost.

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 and has been focused, and continues to focus, on implementing other supply chain adjustments, such efforts are time-consuming and are, or could be, difficult or impracticable for many products and may result in an increase in its manufacturing costs, or otherwise materially and adversely impact the Company's results of operations, cash flow and financial condition.

The Company’s operations are also subject to the effects of international trade agreements and regulations such as the United States-Mexico-Canada Agreement, and the activities and regulations of the World Trade Organization. Although these trade agreements generally have, and the Company has benefited from, positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements, however, can also impose requirements that adversely affect the Company’s business, such as setting quotas on products that may be imported from a particular country into key markets including the U.S. or the European Union ("EU"), or making it easier for other companies to compete, by eliminating restrictions on products from countries where the Company’s competitors source products.

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.

Changes in customer or end-user preferences, the inability to maintain mutually beneficial relationships with large customers, inventory reductions by customers, and the inability to penetrate new channels of distribution could adversely affect the Company’s business.

The Company has certain significant customers, particularly home centers and major retailers. In 2025, the two largest customers comprised approximately 27% of consolidated net sales, with U.S. and international mass merchants and home centers collectively comprising approximately 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 customers, whether 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.

In times of tough economic conditions, the Company has experienced significant distributor inventory corrections reflecting de-stocking of the supply chain associated with difficult credit markets. Such distributor de-stocking exacerbated sales volume declines pertaining to weak end-user demand and the broader economic recession. The Company’s results may be adversely impacted in future periods by such customer inventory adjustments. Further, the inability to continue to penetrate new channels of distribution may have a negative impact on the Company’s future results.

The Company faces active global competition and if it does not compete effectively, its business may suffer.

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 of the Company's core 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, driving annual net productivity, and other key business processes. In the event the Company is not successful in effectively applying the various aspects of Operational Excellence to its key business processes, 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 or consolidation of manufacturing sites, as part of its efforts to maintain a competitive cost structure. If the Company does not execute restructuring actions 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.

Customer consolidation could have a material adverse effect on the Company’s business.

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 reduced leverage in 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 to accelerate product development, productive capacity and advertising and product promotions in connection with the new innovative products. If expectations of the return on these investments are not met, future earnings could be adversely affected.

The pace of technological change continues to accelerate and the Company's ability to react effectively to such change may present significant competitive risks.

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 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 technologies, 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 environmental 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., which are subject to political, legal, economic and other risks arising from international operations.

The Company has significant operations outside of the 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 difficulty of enforcing agreements and protecting assets through legal systems outside the U.S. including intellectual property rights, which may not be recognized, and which the Company may not be able to protect outside the U.S. to the same extent as under U.S. law;

• managing widespread operations and enforcing internal controls, policies and procedures designed to deter prohibited practices under U.S. and foreign anti-bribery, anti-corruption, and anti-money laundering regulations and sanctions, such as the U.S. Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010;

• import or export licensing requirements and controls and economic and trade sanctions administered by the Office of Foreign Assets Control;

• the application of certain labor regulations outside of the U.S.;

• compliance with a wide variety of complex and evolving non-U.S. laws and regulations, which may conflict with U.S. laws and regulations or those of other countries;

• instability or changes in the general political and economic conditions in the countries where the Company operates (such as the conflicts between Russia and Ukraine, and in the Middle East and tensions in South Korea, China and Taiwan);

• the threat of nationalization and expropriation;

• increased costs and risks of doing business and managing a workforce in a wide variety of jurisdictions;

• the increased possibility of cyber threats in certain jurisdictions;

• government controls limiting importation of goods;

• government controls limiting payments to suppliers for imported goods;

• limitations on, or impacts from, the repatriation of foreign earnings; and

• exposure to wage, price and capital controls.

Changes in the political or economic environments in the countries in which the Company operates or violations or perceived violations of the laws and regulations of such countries could have a material adverse effect on its financial condition, results of operations or cash flows. Additionally, compliance with international and U.S. laws and regulations that apply to the Company’s international operations increases the cost of doing business in foreign jurisdictions. Violations of such laws and regulations may result in severe fines and penalties, criminal sanctions, administrative remedies or restrictions on business conduct, and any such violations, or perceived violations, could have a material adverse effect on the Company’s reputation, its ability to attract and retain employees, and its business, operating results and financial condition.

The Company’s success depends on its ability to improve productivity and streamline operations to control or reduce costs.

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 be, and have been, mitigated by many factors, including economic weakness, inflation, competitive pressures, higher labor costs, 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 Global Cost Reduction Program designed to achieve significant pre-tax run rate cost savings to, in part, help return adjusted gross margins to historical 35%+ levels. While the Company completed this program as of the end of 2025, it plans to continue making significant investments in additional productivity improvements and supply chain footprint actions, and the success and anticipated cost savings from such efforts are not assured. Failure to achieve, or delays in achieving, projected levels of efficiencies and cost savings from productivity investments 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 such investments (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 any 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, floods, fires, droughts, water scarcity, and other adverse weather or environmental conditions (each of which may be worsened by climate change), power outages, energy shortages, explosions, terrorism or other geopolitical tensions, equipment failures, sabotage, cybersecurity incidents, labor 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 have 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, rare earth minerals are critical to the design of the Company's products and some countries from which these materials are 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.

If the Company were required to write-down all or part of its goodwill, indefinite-lived trade names, or other definite-lived intangible assets, its net income and net worth could be materially adversely affected.

As of January 3, 2026, the Company has approximately $7.3 billion of goodwill, approximately $2.3 billion of indefinite-lived trade names and approximately $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 charge of $41.0 million related to the Lenox trade name and $25.5 million related to the Infrastructure 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. 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.

Strategic Risks

The successful execution of the Company’s business strategy depends on its ability to recruit, retain, train, motivate, and develop employees and execute effective succession planning.

The Company’s business success depends, in part, on the contributions and abilities of key executives and management personnel, its sales force and other personnel, including the ability of its sales force to adapt to any changes made in the sales organization and achieve adequate customer coverage. The failure to recruit, retain, develop, engage, and motivate qualified management, sales and other personnel and successfully execute organizational change and management transitions at leadership levels could adversely impact the Company’s reputation, business, results of operations and financial condition.

A shortage of key employees, whether as a result of difficulty in recruiting, insufficient training or employee turnover, might jeopardize the Company’s ability to implement its business strategy, and changes in the key management team can result in loss of continuity, loss of accumulated knowledge, decreased morale, departure of other key employees, disruptions to the Company’s operations and inefficiency during transitional periods.

The Company’s 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 divest businesses or assets, acquire businesses or assets, enter into strategic alliances and joint ventures, and make similar investments to further its business .

Risks associated with such transactions include the following, any of which could adversely affect the Company's financial results, including its effective tax rate:

• difficulty in finding buyers or alternative exit strategies in connection with divestitures in a timely manner, and on price and terms that are acceptable to the Company;

• the failure to identify the most suitable target candidates for acquisitions and to close on such acquisitions within desired time frames, at a reasonable cost and on desirable terms;

• the ability to conduct and evaluate the results of due diligence with respect to acquisitions and investment transactions, including the failure to identify significant issues with a target company’s product quality, financial disclosures, accounting practices or internal control deficiencies; or the failure to identify, or accurately assess the risks of, historical practices of target companies that would create liability or other exposures for the Company if they continue post-completion or as a result of successor liability;

• the difficulties and cost in obtaining any necessary regulatory or government approvals on acceptable terms and any delay from the inability to satisfy pre-closing conditions;

• the anticipated additional revenues from the acquired companies do not materialize, despite extensive due diligence;

• the acquired businesses may lose market acceptance or profitability;

• difficulties in retaining existing or attracting new business and operational relationships, including with customers, suppliers and other counterparties;

• the impact of divestitures on the Company's revenue growth and profitability may be larger than projected, as the Company may experience greater dis-synergies than expected;

• the diversion of Company management’s attention and other resources;

• incurring significant restructuring charges and amortization expense, assuming liabilities, ongoing or new lawsuits related to the transaction or otherwise or pre-closing regulatory violations of the acquired business, potential impairment of acquired goodwill and other intangible assets, and increasing the Company's expenses and working capital requirements;

• 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 loss of key personnel, distributors, clients or customers of acquired companies and difficulty in maintaining employee morale.

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.

Industry and Economic Risks

Uncertainty about the financial stability of economies outside the U.S. could have a significant adverse effect on the Company's business, results of operations and financial condition.

The Company generates approximately 38% of its revenues outside the U.S., including 16% from Europe and 13% from various emerging market countries. Each of the Company’s segments generates sales in these marketplaces. While the Company believes any volatility in the European or emerging marketplaces might be offset to some degree by the relative stability in North America, the Company’s future growth, profitability and financial liquidity could be affected, in several ways, including, but not limited to, the following:

• depressed consumer and business confidence may decrease demand for products and services;

• customers may implement cost reduction initiatives or delay purchases to address inventory levels;

• significant declines in foreign currency values in countries where the Company operates could impact both the revenue growth and overall profitability in those geographies;

• a devaluation of foreign currencies could have an effect on the creditworthiness (as well as the availability of funds) of customers in those regions impacting the collectability of receivables;

• a devaluation of foreign currencies could have an adverse effect on the value of financial assets of the Company in the effected countries; and

• the impact of an event or changes to political and economic conditions (individual country default, or break up of the Euro) could have an adverse impact on the global credit markets and global liquidity potentially impacting the Company’s ability to access these credit markets and to raise capital or disrupting global energy supply or supply chains.

Negative economic conditions and outlooks in the markets the Company serves may weaken demand for the Company’s products.

Demand for the Company’s products depends, in part, on the general economic conditions affecting the industries and markets in which it does business, including, but not limited to, construction and housing, general industrial, automotive, aerospace and outdoor, and can be significantly reduced in an economic environment characterized by high unemployment, high interest rates, cautious consumer spending, inflation, lower corporate earnings, and lower business investment. From time to time, the Company has been adversely impacted by negative economic conditions within the markets it serves, including labor and raw material shortages, inflation, high interest rates and declines in consumer confidence and housing demand. Any decrease in demand for the Company’s products as a result of these and other negative economic factors may have a material adverse effect on the Company’s business, financial condition, cash flows and results of operations and its ability to execute capital allocation plans, fund capital expenditures and investments, pay dividends and meet debt obligations and other liabilities.

The Company is exposed to market risk from changes in foreign currency exchange rates which could negatively impact profitability.

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.

The Company sources many products from China and other low-cost countries for resale in other regions. The Company may experience cost increases on such purchases and increases to its costs of goods sold to the extent the RMB or other currencies appreciate, or other foreign currency changes occur. The Company may not be successful at implementing customer pricing or other actions in an effort to mitigate the related cost increases and thus its profitability may be adversely impacted.

Financing Risks

The Company has incurred, and may incur in the future, significant indebtedness, and may in the future issue additional equity or debt securities, including in connection with mergers or acquisitions, which may impact the manner in which it conducts business or the Company’s access to external sources of liquidity. The potential issuance of such securities may limit the Company’s ability to implement elements of its business strategy and may have a dilutive effect on earnings.

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 January 3, 2026. As of January 3, 2026, the Company had $5.3 billion principal amount of indebtedness.

The instruments and agreements governing certain of the Company’s current indebtedness contain requirements or restrictive covenants that include, among other things:

• a limitation on creating liens on certain property of the Company and its subsidiaries;

• a restriction on entering into certain sale-leaseback transactions;

• customary events of default, including repayment of all amounts outstanding in the event of the occurrence and continuance of an event of default; and

• maintenance of a specified financial ratio.

The Company has an interest coverage covenant in each of its 364-day credit agreement and five-year credit agreement that must be maintained to permit continued access to its committed credit facilities. The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted net Interest Expense ("Adjusted EBITDA"/"Adjusted Net Interest Expense").

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 2.50 to 1.00 for any four fiscal quarter period on or before the end of the Company’s second fiscal quarter of 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 applicable adjustment addbacks, as defined in the 364-day credit agreement, incurred in any four consecutive fiscal quarter periods, provided that the sum of the applicable adjustment addbacks incurred on or before the Company’s second fiscal quarter of 2026 may not exceed $250 million in the aggregate.

The Company was compliant with its debt covenant requirements during its 2025 fiscal year. Management does not believe it is reasonably likely the Company will breach this covenant. Failure to maintain these ratios could adversely affect further access to liquidity.

Future instruments and agreements governing indebtedness may impose other restrictive conditions or covenants. Such covenants could restrict the Company in the manner in which it conducts business and operations as well as in the pursuit of its business strategy.

The Company is exposed to counterparty risk in its hedging arrangements.

From time to time, the Company enters into arrangements with financial institutions to hedge exposure to fluctuations in currency and interest rates, including forward contracts, options and swap agreements. The Company may incur significant losses from hedging activities due to factors such as demand volatility. The failure of one or more counterparties to the Company’s hedging arrangements to fulfill their obligations could adversely affect the Company’s results of operations.

Tight capital and credit markets or the failure to maintain credit ratings could adversely affect the Company by limiting the Company’s ability to borrow or otherwise access liquidity.

The Company’s long-term growth plans are dependent on, among other things, the availability of funding to support corporate initiatives and the ability to increase sales of existing product lines. While the Company has not encountered financing difficulties to date, the capital and credit markets have experienced extreme volatility and disruption in the past and may again in the future. Market conditions could make it more difficult for the Company to borrow or otherwise obtain the cash required for significant new corporate initiatives. Additionally, the Company’s business could be adversely affected if its customers, suppliers or financial institutions experience difficulty accessing capital markets in order to fulfill their commitments to the Company.

Furthermore, there could be a number of follow-on effects from a credit crisis on the Company’s businesses, including insolvency of key suppliers resulting in product delays, inability of customers to obtain credit to finance purchases of the Company’s products and services and/or customer insolvencies.

In addition, the major rating agencies regularly evaluate the Company for purposes of assigning credit ratings. The Company’s ability to access the credit markets, and the cost of these borrowings, is affected by the strength of its credit ratings and current market conditions. Failure to maintain credit ratings that are acceptable to investors may adversely affect the cost and other terms upon which the Company is able to obtain financing, as well as its access to the capital markets.

The Company is exposed to credit risk on its accounts receivable.

The Company’s outstanding trade receivables are not generally covered by collateral or credit insurance. While the Company has procedures to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses, which could have an adverse effect on the Company’s financial condition and operating results.

If the investments in employee benefit plans do not perform as expected, the Company may have to contribute additional amounts to these plans, which would otherwise be available to cover operating expenses or other business purposes.

The Company sponsors pension and other post-retirement defined benefit plans. The Company’s defined benefit plan assets are currently invested in equity securities, government and corporate bonds and other fixed income securities, money market instruments and insurance contracts. The Company’s funding policy is generally to contribute amounts determined annually on an actuarial basis to provide for current and future benefits in accordance with applicable law which require, among other things, that the Company make cash contributions to under-funded pension plans. During 2025, the Company made cash contributions to its defined benefit plans of approximately $34 million and expects to contribute approximately $29 million to its pension and other post-retirement benefit plans in 2026.

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 January 3, 2026 was approximately $1.7 billion.

Legal, Tax, Regulatory and Compliance Risks

The Company’s brands are important assets of its businesses and violation of its trademark rights by imitators, or the failure of its licensees or vendors to comply with the Company’s product quality, manufacturing requirements, marketing standards, and other requirements could negatively impact revenues and brand reputation. Any inability to protect the Company's other intellectual property rights could also reduce the value of its products and services or diminish its competitiveness.

The Company considers its intellectual property rights, including patents, trademarks, copyrights and trade secrets, and licenses held, to be a significant part and valuable aspect of its business. The Company attempts to protect its intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements; however, there can be no assurances that these resources will adequately protect the Company’s intellectual property rights and deter misappropriation or improper use of its technology.

The Company’s trademarks have a reputation for quality and value and are important to the Company's success and competitive position. Unauthorized use of the Company’s trademark rights may not only erode sales of the Company’s products but may also cause significant damage to its brand name and reputation, interfere with its ability to effectively represent the Company to its customers, contractors, suppliers, and/or licensees, and increase litigation costs. Similarly, failure by licensees or vendors to adhere to the Company’s standards of quality and other contractual requirements could result in loss of revenue, increased litigation, and/or damage to the Company’s reputation and business. There can be no assurance that the Company’s ongoing efforts to protect its brand and trademark rights and ensure compliance with its licensing and vendor agreements will prevent all violations.

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 may be unaware of intellectual property rights of others that may cover some of its technology, brands, or products. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming and could divert the attention of the Company’s management and key personnel from its business operations. Allegations of intellectual property infringement may also require the Company to enter into costly license agreements or necessitate redesigns of its products at substantial cost. The Company also may be subject to significant damages or injunctions against development and sale of certain products.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact the Company's reputation, operating results, and financial condition.

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 Things,” 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 protection 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.

In addition, cybersecurity laws and regulations continue to evolve, and are increasingly demanding, both in the U.S. and globally, which adds compliance complexity and may increase costs of compliance and expose the Company to reputational damage or litigation, monetary damages, regulatory enforcement actions, penalties, or fines in one or more jurisdictions. While the Company carries cyber insurance, it cannot be certain that coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to the Company on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

The report, rumor, assumption, or perception of a potential or suspected cybersecurity incident may have similar results, even if no such incident has been attempted or occurred. Any of the foregoing may have a material adverse effect on the Company’s reputation, operating results and financial condition.

The Company is exposed to risks related to compliance with data privacy and governance laws.

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, many countries around the world maintain 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.

Additionally, other countries have enacted or are enacting data localization laws that require data to stay within their borders. In many cases, these laws and regulations apply not only to transfers between unrelated third parties but also to transfers between the Company and its subsidiaries.

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 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 use of artificial intelligence in the Company’s business operations, products and services could expose it to legal and compliance risks as well as brand or reputational harm and competitive harm, any of which may adversely affect its results of operations.

The Company’s businesses increasingly leverage artificial intelligence solutions to optimize their operations, improve customer experiences, and enhance their products and services. While the Company believes the use of artificial intelligence can offer significant benefits and opportunities, it also introduces a range of risks and challenges and there can be no assurances that the use of such technology will result in improved operational efficiencies, cost reductions or other anticipated benefits.

The regulatory landscape surrounding artificial intelligence is rapidly evolving and the Company’s use of artificial intelligence may be subject to new legal or regulatory requirements, which may impose prohibitions or additional compliance burdens on the Company. For example, the Company’s artificial intelligence efforts may subject it to heightened compliance and legal as well as other risks related to technology integration, accuracy, program bias, data sourcing, intellectual property infringement or misappropriation, data privacy, and cybersecurity, among others. Moreover, the Company may experience brand or reputational harm if it fails to appropriately manage its use of artificial intelligence in compliance with applicable laws and regulations or successfully execute on strategies leveraging artificial intelligence.

Additionally, the Company’s competitors or other third parties may incorporate artificial intelligence into their products, services or operations more quickly, cost-effectively or successfully than the Company, or develop superior products and services with the aid of artificial intelligence, which could impair the Company’s ability to compete effectively and adversely affect its results of operations.

Significant judgment and certain estimates are required in determining the Company’s worldwide provision for income taxes. Future tax law changes and audit results may materially increase the Company’s prospective income tax expense.

The Company is subject to income taxation in the U.S. and 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 various jurisdictions, and while 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. Changes in tax laws, regulations, or interpretations and applications of such laws and regulations, including the implementation of global minimum tax rules by the various taxing jurisdictions applicable to multi-national corporations, could have a material impact on the Company’s worldwide income tax provision, cash tax liability, and effective tax rate.

Changing legislation, regulations, and market trends in response to climate change and other environmental-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 consistency and harmony in such legislation and regulation in the regions in which the Company operates, which creates economic and regulatory uncertainty. International, regional, state and/or federal requirements or other stakeholder expectations have mandated, and could mandate in the future, different standards, timing, or reporting of environmental, social and governance metrics compared to the Company's voluntary commitments and 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 chain, manufacturing, and reporting processes. 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.

The Company also faces risks related to the transition to a lower-carbon economy, such as its ability to successfully adopt new technology, meet market-driven demands for low carbon, carbon neutral and renewable energy technology, or to comply with more stringent and increasingly complex environmental regulations or requirements for the Company's manufacturing facilities and business operations, increased prices related to freight and shipping costs and other permitting requirements.

In addition, many of the Company’s products incorporate battery technology. As the market 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’s failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could negatively impact its results of operations or cash flows.

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 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 manufactures products and performs various services that create exposure to product and professional liability claims and litigation. The failure of the Company’s products and services to be properly manufactured, configured, installed, designed or delivered, resulting in personal injuries, property damage or business interruption could subject the Company to

claims for damages. The Company has defended, and is currently defending, product liability claims, some of which have resulted in settlements or monetary judgments against the Company. The costs associated with defending ongoing or future product liability claims and payment of damages could be substantial. The Company’s reputation could also be adversely affected by such claims, whether or not successful.

There can be no assurance that the Company will be able to continue to successfully avoid, manage and defend such matters. In addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary from the Company’s estimates for such contingent liabilities. Refer to Note R, Contingencies , of the Notes to Consolidated Financial Statements in Item 8 for further information about legal proceedings and other loss contingencies.

The Company’s products could be recalled.

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 and milestones that incorporate product safety and quality reviews and extensive testing at various stages to identify potential safety and operational hazards for customers and end 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 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.

Other Risks

The Company’s results of operations and earnings may not meet guidance, planning assumptions or expectations.

The Company’s results of operations and earnings may not meet guidance, planning assumptions or expectations. The Company may provide public planning assumptions or guidance on expected results of operations for future periods. Such statements are comprised of forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in this Annual Report on Form 10-K and in the Company’s other public filings and public statements, and are based necessarily on assumptions the Company makes at the time it provides such statements, and may not always be accurate. The Company may also choose to withdraw planning assumptions or guidan c e, as it did in response to the uncertainty of the COVID-19 pandemic in 2020, or lower planning assumptions or guidance in future periods. If, in the future, the Company’s results of operations for a particular period do not meet its planning assumptions or guidance or the expectations of investment analysts, the Company reduces its planning assumptions or guidance for future periods, or the Company withdraws planning assumptions or guidance, the market price of the Company’s common stock could decline significantly.

The Company’s failure to maintain its reputation and the image of its brands could adversely impact its business.

The Company’s brands and reputation are important assets, which contribute to its business success. Maintaining, promoting and growing the Company’s brands and reputation depends upon maintaining positive customer and other stakeholder perception of the Company’s business. Negative claims or publicity, whether on social media platforms or otherwise, involving the Company, its products or services, its culture and values, its progress against its sustainability and other related goals, its stance on environmental, social, and governance topics, customer data and privacy, or any of its key employees or suppliers, regardless of whether such claims are accurate, could damage its reputation and brand image and adversely impact the Company’s ability to attract new and maintain existing customers, employees, suppliers, and business relationships. Any failure, or perceived failure, by the Company to manage diverging stakeholder expectations with respect to any such matters could adversely affect the Company’s reputation, its brands and its relationships with customers, investors and employees and other stakeholders.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. This financial and business analysis should be read in conjunction with the Consolidated Financial Statements and related notes. All references to “ Notes ” in this Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The following discussion also references a number of financial measures that are not defined under U.S. GAAP. Refer to the section titled "Certain Items Impacting Earnings and Non-GAAP Financial Measures" for additional information on such measures.

The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates as well as management’s beliefs and assumptions. Any statements contained herein (including without limitation statements to the effect that the Company or its management “believes,” “expects,” “anticipates,” “plans” and similar expressions) that are not statements of historical fact should be considered forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth, or referenced therein, below under the heading “Cautionary Statement Concerning Forward-Looking Statements.” The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

Strategic Objectives

The Company is guided by its mission to build a world-class branded industrial company, by solving end users’ most pressing and complex challenges. The strategy to achieve this mission is anchored by three core imperatives: activating our brands with purpose, driving operational excellence, and accelerating innovation.

Activating our brands with purpose is rooted by the Company's brands standing for quality, safety and productivity. The Company is investing resources to continue to deepen connections with end users, with every product, solution and service aligned with their evolving needs.

Driving operational excellence is centered on continuous improvement to deliver stronger results, including more effective resource allocation with higher return on investment. The focus on driving annual net productivity will contribute to continued margin expansion and reinvestment into brand health and innovation.

Accelerating innovation is required to advance and expand the end-to-end workflow solutions that end users demand. The Company's platforming method enables faster speed to market and leverages modularity combined with specialization to deliver uncompromised productivity and value.

With a strengthened foundation and a more streamlined, focused organization, the Company is positioned to drive performance towards its long-term financial targets. The following targets, which are based on the tariff landscape as of January 2026, are expected to be reflected in the Company's 2028 financial results and assume that the Company's markets are growing by low-single digits and inflation approximates 2% per year.

• Mid-single digit organic revenue growth;

• 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 approximating 100% of 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

• Solid investment grade credit rating.

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 has a preference toward opportunistic share repurchases. In the near-term, the Company intends to utilize the net proceeds from the pending CAM divestiture to reduce debt, as further discussed below.

Repurchases Of Securities Other Than Common Stock

In April 2021, the Board of Directors approved repurchases by the Company of its outstanding securities, other than its common stock, up to an aggregate amount of $3.0 billion (the “April 2021 Authorization”). Repurchases of $1.1 billion were made under the April 2021 Authorization. In October 2025, the Board of Directors terminated the April 2021 Authorization including any amounts remaining available for repurchase thereunder, and approved repurchases by the Company of its outstanding securities, other than its common stock, up to an aggregate amount of $3.0 billion. No repurchases have been executed pursuant to this authorization to date.

Refer to Note I, Capital Stock , for further discussion.

Pending Sale of Consolidated Aerospace Manufacturing ("CAM") Business

In December 2025, the Company announced that it had entered into a definitive agreement to sell its CAM business to Howmet Aerospace for $1.8 billion in cash. The sale is subject to regulatory approvals and other customary closing conditions and is expected to close in the first half of 2026. Cash proceeds, net of tax and fees, are expected to be in the range of $1.525 billion to $1.6 billion, which the Company expects to utilize to reduce debt. For the year ended January 3, 2026, net sales and segment profit for the Engineered Fastening segment included $413.9 million and $31.3 million, respectively, related to the CAM business. See below for further discussion of the Company's business segments and results.

Refer to Note S, Divestitures, for further discussion of the pending CAM divestiture.

Other Divestitures

On April 1, 2024, the Company sold its Infrastructure business comprised of the attachment and handheld hydraulic tools business to Epiroc AB for net proceeds of $728.5 million. The Company used the net proceeds to reduce debt in the second quarter of 2024.

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

Refer to Note S, Divestitures, for further discussion of the Company's divestitures.

Global Cost Reduction Program

In mid-2022, the Company launched a Global 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 organization, reducing inventory, and transforming its supply chain with the ultimate objective of driving long-term growth, improving profitability and generating strong cash flow. The program has been completed as of the end of 2025 and has generated approximately $2.1 billion of pre-tax run-rate savings, exceeding 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 driven by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend as well as a supply chain transformation. The savings related to the supply chain transformation were driven by the following value streams:

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

• Operational Excellence: Redesigned 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: Transformed the Company’s manufacturing and distribution network from 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: Reduced complexity through platforming products and implemented initiatives to drive a SKU reduction.

In addition, the Company has reduced inventory by over $2 billion since the end of the second quarter of 2022 and expects further working capital reductions to support free cash flow generation in 2026.

The cash investment required to achieve the pre-tax run-rate supply chain cost savings was approximately $0.6 billion. Of the total cash investment, approximately 30% related to capital expenditures.

The charges associated with the execution of the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations." Although the broader Global Cost Reduction Program has been completed, the Company expects to incur additional charges and make cash investments in 2026 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".

Driving Profitable Growth Through Core Franchises and Brand-Led Commercial Execution

The Company’s core franchises operate in markets which the Company believes possess attractive long-term growth characteristics, competitive structures where brand and innovation influence outcomes, and the ability to scale globally while generating strong cash flow. These franchises provide the foundation for sustained value creation through disciplined investment, operational execution, and customer focus.

• The Tools & Outdoor segment is a global growth platform anchored by leading brands, differentiated innovation, and broad channel reach. The segment offers a comprehensive portfolio of power tools, hand tools, outdoor products, accessories, storage, and digital solutions designed to improve productivity for professional and consumer end users. Global scale, innovation cadence, and brand strength are expected to support competitive positioning across regions and contribute to margin improvement over time. The Company’s priority global brands within the Tools & Outdoor segment include DEWALT®, CRAFTSMAN®, and STANLEY®, supported by a broader portfolio of complementary brands.

• The Engineered Fastening segment serves end markets with GDP-plus growth profiles. The segment provides highly engineered components and automation systems in the automotive, general industrial and aerospace markets. The business benefits from recurring revenue characteristics, durable customer relationships, and global scale, supporting attractive profitability and cash generation.

Management continues to invest in these core franchises to drive growth and returns. Priorities include product innovation, brand and commercial activation, and continued transformation of operations and supply chain capabilities to improve service levels, align inventory with demand, and enhance global cost competitiveness.

Investing in Brands to Drive Demand and Long-Term Value

The Company's portfolio of trusted, globally recognized brands is central to its commercial strategy, particularly within the Tools & Outdoor segment. Brand investment is focused on driving demand, supporting effective product commercialization, and strengthening customer loyalty across channels and geographies.

Brand spending is managed as part of an integrated commercial approach that connects innovation, marketing, sales execution, and customer insights. Investments are directed toward product launch support, in-market and promotional execution, retail and digital activation, sales force effectiveness, and selective partnerships that extend brand reach and relevance.

Select global sports and professional partnerships represent one element of this broader approach and are used to amplify brand visibility and engage priority end-user audiences. These partnerships are intended to reinforce brand positioning and support demand generation, rather than function as standalone marketing activities. The Company is proud to partner with globally-recognized organizations including the McLaren F1 Team, English Premier League, PGA Tour, and NASCAR.

Management remains focused on allocating brand and advertising spend with discipline, guided by data, performance insights, and return-oriented decision making. Looking forward, brand investment will continue to prioritize alignment with end-user insights, effective in-market execution, and the use of technology to strengthen engagement, supporting sustainable growth and long-term shareholder value.

Segments

The Company’s operations are classified into two reportable business segments: Tools & Outdoor and Engineered Fastening. In the first quarter of 2025, the Industrial segment was renamed “Engineered Fastening” as a result of a more focused portfolio following recent divestitures. The Engineered Fastening segment name change is to the name only and had no impact on the Company’s consolidated financial statements or segment results. Both reportable segments have significant international operations and are exposed to translational and transactional impacts from fluctuations in foreign currency exchange rates.

Tools & Outdoor

The Tools & Outdoor segment is comprised of the Power Tools Group ("PTG"), Hand Tools, Accessories & Storage ("HTAS"), and Outdoor Power Equipment ("Outdoor") product lines.

The PTG product line includes both professional and consumer products. Professional products, primarily under the DEWALT® brand, include professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers, sanders, and concrete prep and placement tools as well as pneumatic tools and fasteners including nail guns, nails, staplers and staples, and concrete and masonry anchors. DIY and tradesperson focused products include corded and cordless electric power tools sold primarily under the CRAFTSMAN® and STANLEY® brands, and consumer home products such as household power tools, hand-held vacuums, and small appliances primarily under the BLACK+DECKER® brand.

The HTAS product line sells hand tools, power tool accessories and storage products primarily under the DEWALT®, CRAFTSMAN® and STANLEY® brands. Hand tools include measuring, leveling and layout tools, planes, hammers, demolition tools, clamps, vises, knives, saws, chisels, material handling, 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, cabinets and engineered storage solution products.

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.

Engineered Fastening

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

The Engineered Fastening business primarily sells highly engineered components such as fasteners, fittings and various engineered products, which are designed for specific applications 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.

RESULTS OF OPERATIONS

The following is a discussion and analysis of changes in the results of operations and financial condition for the year ended January 3, 2026 compared to the year ended December 28, 2024. The discussion and analysis of the year ended December 30, 2023 and changes in the results of operations and financial condition for the year ended December 28, 2024 compared to the year ended December 30, 2023, is omitted from this Form 10-K and can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 28, 2024, filed with the U.S. Securities and Exchange Commission ("SEC") on February 18, 2025.

The Company’s results represent continuing operations and include the results of the divested Infrastructure business within the Engineered Fastening segment through the date of sale in the second quarter of 2024, as the divestiture of this business did not qualify for discontinued operations. The pending divestiture of the CAM business did not qualify for discontinued operations and therefore, its results are included in the Company's continuing operations within the Engineered Fastening segment for all periods presented.

Certain Items Impacting Earnings and Non-GAAP Financial Measures

The Company has provided a discussion of its results both inclusive and exclusive of certain gains and charges. The results and measures, including gross profit, SG&A, Other, net, Income taxes, segment profit, and corporate overhead, on a basis excluding certain gains and charges, free cash flow, organic revenue and organic growth are Non-GAAP financial measures. These Non-GAAP financial measures are defined and reconciled to their most directly comparable GAAP financial measures below. The Company considers the use of Non-GAAP financial measures relevant to aid analysis and understanding of the Company’s results, business trends and outlook measures aside from the material impact of certain gains and charges and ensures appropriate comparability to operating results of prior periods. Supplemental Non-GAAP information should not be considered in isolation or as a substitute for the related GAAP financial measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

The Company provides expectations for the non-GAAP financial measures of full-year 2026 adjusted EPS, presented on a basis excluding certain gains and charges, as well as 2026 free cash flow. Forecasted full-year 2026 adjusted EPS is reconciled to forecasted full-year 2026 GAAP EPS under the section entitled "2026 Planning Assumptions" below. Consistent with past methodology, forecasted full-year 2026 GAAP EPS excludes the impacts of potential acquisitions and divestitures (unless otherwise noted), future regulatory changes or strategic shifts that could impact the Company's contingent liabilities or intangible assets, respectively, potential future cost actions in response to external factors that have not yet occurred, and any other items not specifically referenced under “2026 Planning Assumptions.” A reconciliation of forecasted 2026 free cash flow to its most directly comparable GAAP estimate is not available without unreasonable effort due to high variability and difficulty in predicting items that impact cash flow from operations, which could be material to the Company’s results in accordance with U.S. GAAP. The Company believes such a reconciliation would also imply a degree of precision that is inappropriate for this forward-looking measure.

The Company also provides multi-year strategic goals for the non-GAAP financial measures of adjusted gross margin and adjusted EBITDA margin, presented on a basis excluding certain gains and charges, as well as organic revenue growth, free cash flow, and CFROI. A reconciliation for these non-GAAP measures is not available without unreasonable effort due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred, including the high variability and low visibility with respect to certain gains or charges that would generally be excluded from non-GAAP financial measures and which could be material to the Company’s results in accordance with U.S. GAAP. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future multi-year periods and cannot be accomplished without unreasonable effort. The Company believes such a reconciliation would also imply a degree of precision that is inappropriate for these forward-looking measures.

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 2025 and 2024 are as follows:

(Millions of Dollars)

GAAP

Non-GAAP Adjustments 2

Non-GAAP

Gross profit

Selling, general and administrative 1

Earnings from continuing operations before income taxes

Income taxes on continuing operations 3

Net earnings from continuing operations

Diluted earnings per share of common stock - Continuing operations

(Millions of Dollars)

GAAP

Non-GAAP Adjustments 2

Non-GAAP

Gross profit

Selling, general and administrative 1

Earnings from continuing operations before income taxes

Income taxes on continuing operations 3

Net earnings from continuing operations

Diluted earnings per share of common stock - Continuing operations

Includes provision for credit losses

Refer to table below for additional detail of the Non-GAAP adjustments

Income taxes attributable to Non-GAAP adjustments are determined by calculating income taxes on pre-tax earnings, both inclusive and exclusive of Non-GAAP adjustments, taking into consideration the nature of the Non-GAAP adjustments and the applicable statutory income tax rates.

Below is a summary of the pre-tax Non-GAAP adjustments for 2025 and 2024.

(Millions of Dollars)

Supply Chain Transformation Costs:

Footprint Rationalization 1

Material Productivity & Operational Excellence

Voluntary retirement program 2

Other charges

Gross Profit

Supply Chain Transformation Costs:

Footprint Rationalization 1

Complexity Reduction & Operational Excellence 3

Transition services costs related to previously divested businesses

Voluntary retirement program 2

Other (gains) charges

Selling, general and administrative

Income related to providing transition services to previously divested businesses

Voluntary retirement program 2

Environmental charges 4

Deal-related costs and other 5

Other, net

Loss on sale of business

Asset impairment charges 6

Restructuring charges 7

Non-GAAP adjustments before income taxes

Footprint Rationalization costs primarily relate to site transformation and re-configuration costs of $35.4 million and $45.2 million in 2025 and 2024, respectively, as well as accelerated depreciation of manufacturing and distribution center equipment of $48.9 million in 2024. Facility exit costs related to site closures are reported in Restructuring charges.

In June 2025, the Company implemented a voluntary retirement program (“VRP”) to right-size the Company’s corporate and support functions to align with a more focused portfolio following recent divestitures and more streamlined operations as part of the supply chain transformation. The costs associated with the VRP relate to separation benefits provided to eligible employees who voluntarily retired from the Company.

Complexity Reduction & Operational Excellence costs in 2025 primarily relate to third-party consulting fees to provide expertise in identifying business model changes and quantifying related cost savings opportunities within the Company’s Engineered Fastening business, developing a detailed program and related governance, and assisting the Company with the implementation of actions necessary to achieve the identified objectives.

The $143.2 million pre-tax environmental charges in 2024 related primarily to a reserve adjustment for the non-active Centredale Superfund site as a result of regulatory changes and revisions to remediation alternatives.

Deal-related costs and other in 2025 include an $8.1 million gain on sale of a distribution center as part of the supply chain transformation and a $14.3 million gain related to a favorable patent infringement settlement, partially offset by deal costs associated with the announced divestiture of the CAM business.

Asset impairment charges in 2025 include: (a) $108.4 million driven by updates to the Company’s brand prioritization strategy impacting the Lenox, Troy-Bilt, and Irwin trade names, (b) $43.9 million related to the write-down of certain minority investments pertaining to legacy corporate ventures, (c) $17.1 million related to the write-down of assets due to the planned exit of certain Outdoor product lines, and (d) $20.1 million related to a small business in the Tools & Outdoor segment. Asset impairment charges in 2024 include: (a) $41.0 million related to the Lenox trade name, (b) $25.5 million related to the Infrastructure business, and (c) $5.9 million related to a small business in the Engineered Fastening segment.

Refer to “Restructuring Activities” below for further discussion.

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, and transfers of product lines between segments.

Consolidated Results

Net Sales:  Net sales were $15.130 billion in 2025 compared to $15.366 billion in 2024, representing a decrease of 2%, as a 3% increase in price was more than offset by a 4% decrease in volume and a 1% decrease from the Infrastructure divestiture. Tools & Outdoor net sales decreased 1% compared to 2024 as a 3% increase in price and a 1% increase from foreign currency were more than offset by a 5% decrease in volume. Engineered Fastening net sales decreased 4% compared to 2024 as a 2% increase in volume, a 1% increase in price, and a 1% increase from foreign currency were more than offset by a 5% decrease from the Infrastructure divestiture and a 3% decrease from a product line transfer to Tools & Outdoor.

Cost of Sales and Gross Profit:  The Company reported cost of sales of $10.542 billion in 2025 compared to $10.851 billion in 2024. The year-over-year decrease in cost of sales was primarily driven by lower volume and supply chain transformation efficiencies, partially offset by tariff costs and inflation. Gross profit, defined as sales less cost of sales, was $4.588 billion, or 30.3% of net sales, in 2025 compared to $4.514 billion, or 29.4% of net sales, in 2024. Non-GAAP adjustments, which increased cost of sales and reduced gross profit, were $50.6 million, or 0.4% of net sales, in 2025 and $88.8 million, or 0.6% of net sales in 2024. Excluding these adjustments, gross profit was 30.7% of net sales in 2025 compared to 30.0% of net sales in 2024. The year-over-year changes in gross profit as a percent of sales and adjusted gross profit as a percent of sales were primarily due to benefits from pricing strategies and supply chain cost transformation efficiencies partially offset by tariffs, lower volume and inflation.

Selling, general and administrative:  SG&A, inclusive of the provision for credit losses, were $3.333 billion, or 22.0% of net sales, in 2025 compared to $3.333 billion, or 21.7% of net sales, in 2024. Within SG&A, Non-GAAP adjustments totaled $86.6 million, or 0.5% of net of sales, in 2025 and $81.3 million, or 0.5% of net sales in 2024. Excluding these adjustments, SG&A was 21.5% of net sales in 2025 compared to 21.2% in 2024. The year-over-year changes in SG&A as a percent of sales and adjusted SG&A as a percent of sales were driven by strategic growth investments, which were partially offset by disciplined and targeted cost management.

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 $522.5 million in 2025 and $534.4 million in 2024.

Other, net:  Other, net totaled $240.7 million in 2025 compared to $448.8 million in 2024. The year-over-year decrease is primarily driven by a $142.3 million environmental remediation reserve adjustment related to the Centredale site and write-downs on certain investments in 2024, as well as lower intangible asset amortization in 2025. Excluding Non-GAAP

adjustments, Other, net, totaled $260.6 million in 2025 compared to $325.2 million in 2024. The year-over-year decrease in Other, net, excluding Non-GAAP adjustments, is primarily driven by lower intangible asset amortization, environmental remediation expenses, and pension costs in 2025, and write-downs on certain investments in 2024.

Loss on Sales of Businesses: During 2025, the Company reported a pre-tax loss of $0.3 million primarily related to the divestiture of a small business in the Engineered Fastening segment.

Asset Impairment Charges : During 2025, the Company recorded pre-tax, non-cash impairment charges of $189.5 million, comprised of $108.4 million driven by updates to the Company’s brand prioritization strategy impacting the Lenox, Troy-Bilt, and Irwin trade names, $43.9 million related to the write-down of certain minority investments pertaining to legacy corporate ventures, $17.1 million related to the write-down of assets due to the planned exit of certain Outdoor product lines, and $20.1 million related to a small business in the Tools & Outdoor segment. During 2024, the Company recorded pre-tax, non-cash impairment charges of $72.4 million, comprised of $41.0 million related to the Lenox trade name, $25.5 million related to the Infrastructure business, and $5.9 million related to a small business in the Engineered Fastening segment. Refer to Note E, Goodwill and Intangible Assets , for additional information on the trade name impairments. Refer to Note L, Fair Value Measurements , for additional information on the minority investment write-downs. Refer to Note S, Divestitures , for additional information on the 2024 divestiture of the Infrastructure business.

Interest, net:  Net interest expense in 2025 was $317.9 million compared to $319.5 million in 2024. The year-over-year decrease was driven by higher interest income, partially offset by higher interest expense due to higher commercial paper balances.

Income Taxes : The Company's effective tax rate on continuing operations was 3.8% in 2025 and (18.7)% in 2024. Excluding the tax effect on Non-GAAP adjustments, the effective tax rate in 2025 on continuing operations was 12.8%. This effective tax rate differs from the U.S. statutory tax rate primarily due to tax benefits associated with partial realignment of the Company's legal structure, remeasurement of uncertain tax positions, and tax credits, partially offset by withholding taxes, deferred tax assets for which a tax benefit is not recognized, U.S. tax on foreign earnings, and non-deductible expenses.

Excluding the tax effect on Non-GAAP adjustments, the effective tax rate in 2024 on continuing operations was 6.7%. This effective tax rate differs from the U.S. statutory tax rate primarily due to tax benefits associated with partial realignment of the Company's legal structure, remeasurement of uncertain tax positions, the recognition of previously unrecognized foreign deferred tax assets, state income taxes, and tax credits, partially offset by non-deductible expenses, U.S. tax on foreign earnings, withholding taxes, and losses for which a tax benefit is not recognized.

On December 20, 2021, the Organization for Economic Cooperation and Development ("OECD") published a proposal for the establishment of a global minimum tax rate of 15% (“Pillar Two"). The Pillar Two rules provide a template that jurisdictions can translate into domestic law, to assist with the implementation within an agreed upon timeframe and in a coordinated manner. Certain countries in which the Company operates have enacted legislation effective January 1, 2024, while other jurisdictions are in various stages of implementation.

On January 5, 2026, the OECD published a package introducing new safe harbors and a side-by-side system (“SbS”) in relation to the Pillar Two global minimum tax rules. If enacted into law in each of the jurisdictions in which the Company operates following the indicated timeline, the SbS system would generally be expected to exempt the Company from the application of two of the three Pillar Two top-up taxes starting in 2026.

The Company has performed an assessment of the potential impact to its income taxes as a result of Pillar Two. The assessment of the potential impact is based on the most recent tax filings, country-by-country reporting, and financial statements of affected subsidiaries. Based on results of the assessment, the Company believes it can avail itself of the transitional safe harbor rules in most jurisdictions in which the Company operates. There are, however, a limited number of jurisdictions where the transitional safe harbor relief does not apply. The Pillar Two tax impact from these jurisdictions is immaterial to the Company's 2025 income tax provision. The Company continues to assess the potential impact of Pillar Two, including the SbS system, and monitor developments in legislation, regulation, and interpretive guidance in these areas.

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain Tax Cuts & Jobs Act provisions and accelerating the phase-out of certain Inflation Reduction Act incentives. The OBBBA includes provisions modifying net interest deduction limitations, expensing of U.S.-based research and development expenses, and tax depreciation methods, as well as international tax provisions modifying global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), base erosion and anti-abuse tax (BEAT), and foreign tax credits. The Company evaluated the impacts of the OBBBA and concluded that it did not have a material impact on the Company’s consolidated financial statements in 2025 and does not

expect a material impact to future income tax provisions. The Company will continue to assess the potential impact of the OBBBA and monitor developments in legislation, regulation, and interpretive guidance in this area.

Business Segment Results

The Company’s reportable segments represent 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 operations are classified into two reportable business segments: Tools & Outdoor and Engineered Fastening.

Tools & Outdoor:

(Millions of Dollars)

Net sales

Segment profit

% of Net sales

Tools & Outdoor net sales decreased $146.0 million, or 1%, in 2025 compared to 2024 as a 3% increase in price and a 1% increase from foreign currency were more than offset by a 5% decrease in volume. Organic revenue decreased 2% driven by a soft market backdrop and mid-year tariff related promotional reductions, partially offset by strategic pricing initiatives and growth in DEWALT®. Total revenue decreased 2% in North America, increased 3% in Europe, and decreased 3% in the rest of the world. Excluding the impact from foreign currency, organic revenue decreased 2%, 1%, and 2% in North America, Europe, and the rest of the world, respectively.

Tools & Outdoor segment profit amounted to $1.329 billion, or 10.1% of net sales, in 2025 compared to $1.197 billion, or 9.0% of net sales, in 2024. Excluding Non-GAAP adjustments, which primarily related to a voluntary retirement program in 2025 and footprint actions associated with the supply chain transformation in both periods, of $81.6 million, or 0.6% of net sales, and $143.1 million, or 1.1% of net sales in 2025 and 2024, respectively, segment profit amounted to 10.7% of net sales in 2025 and 10.1% of net sales in 2024. The year-over-year changes in segment profit as a percent of sales and adjusted segment profit as a percent of sales were primarily driven by higher pricing and supply chain transformation efficiencies.

Engineered Fastening:

(Millions of Dollars)

Net sales

Segment profit

% of Net sales

Engineered Fastening net sales decreased $89.3 million, or 4%, in 2025 compared to 2024, as a 2% increase in volume, a 1% increase in price, and a 1% increase from foreign currency were more than offset by a 5% decrease from the Infrastructure divestiture and a 3% decrease from a product line transfer to Tools & Outdoor. Engineered Fastening organic revenues increased 3% driven by strength in aerospace, partially offset by declines in industrial and automotive.

Engineered Fastening segment profit totaled $197.0 million, or 10.0% of net sales, in 2025 compared to $254.9 million, or 12.4% of net sales, in 2024. Excluding Non-GAAP adjustments of $29.3 million, or 1.5% of net sales in 2025, which related to a voluntary retirement program and costs associated with the supply chain transformation, and $3.6 million, or 0.1% of net sales in 2024, segment profit amounted to 11.5% of net sales in 2025 compared to 12.5% of net sales in 2024. The year-over-year changes in segment profit as a percent of sales and adjusted segment profit as a percent of sales were primarily due to lower volume in the higher-margin automotive business.

Corporate Overhead:

The corporate overhead element of SG&A, which is not allocated to the business segments for purposes of determining segment profit, consists of the costs associated with the executive management team and expenses related to centralized functions that benefit the entire Company but are not directly attributable to the business segments, such as legal and corporate finance functions, as well as expenses for the world headquarters facility.

Corporate Overhead amounted to $270.4 million in 2025 compared to $270.6 million in 2024. Excluding Non-GAAP adjustments of $26.3 million in 2025 and $23.4 million in 2024, which primarily consisted of a voluntary retirement program in 2025 and transition services costs related to previously divested businesses in both periods, the Corporate Overhead element of SG&A was $244.1 million in 2025 compared to $247.2 million 2024.

RESTRUCTURING ACTIVITIES

A summary of the restructuring reserve activity from December 28, 2024 to January 3, 2026 is as follows:

(Millions of Dollars)

December 28, 2024

Net Additions

Usage

Currency

January 3, 2026

Severance and related costs

Facility closures and other

Total

During 2025, the Company recognized net restructuring charges of approximately $89 million, primarily driven by severance costs and certain related pension charges associated with reorganizations of the Company’s corporate and support functions and supply chain resources, as well as facility exit costs related to footprint actions associated with the supply chain transformation. The Company expects to achieve annual net cost savings of approximately $188 million by the end of 2026 related to the restructuring costs incurred during 2025. The majority of the $48 million of reserves remaining as of January 3, 2026 is expected to be utilized within the next twelve months.

During 2024, the Company recognized net restructuring charges of approximately $100 million, primarily related to severance and facility closures associated with the supply chain transformation. The Company estimates that these actions resulted in net cost savings of approximately $129 million in 2025.

Segments:  The $89 million of net restructuring charges in 2025 includes: $71 million pertaining to the Tools & Outdoor segment; $5 million pertaining to the Engineered Fastening segment; and $13 million pertaining to Corporate.

The anticipated annual net cost savings of approximately $188 million related to the 2025 restructuring actions include: $168 million in the Tools & Outdoor segment; $9 million in the Engineered Fastening segment; and $11 million in Corporate.

TARIFF POLICY IMPLICATIONS

In response to the United States’ policy actions in 2025 and potential policy changes in the future, the Company is continuing to execute its plan with the objective to safeguard gross margins and position the business for success with a focus on achieving its long-term financial objectives.

The Company's guiding principles and actions executed in response to tariffs include:

• Serving its end users and customers during a dynamic period;

• Minimizing cost increases through supply chain moves with a focus on leveraging the Company’s North American footprint and reducing China production for the United States by the end of 2026 or early 2027;

• Implementing price increases in 2025 with a long-term perspective and to protect cash flow; and

• Continuing to proactively engage with the U.S. administration.

Refer to "2026 Planning Assumptions" below for more information.

2026 PLANNING ASSUMPTIONS

This discussion of certain planning assumptions is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company's planning assumptions for 2026 are for diluted earnings per share on a GAAP basis to be $3.15 to $4.35 and for diluted earnings per share excluding Non-GAAP adjustments to be $4.90 to $5.70, which reflects year-over-year growth of 42% and 13%, respectively, at the midpoint of each range. The Company is targeting free cash flow to be in the range of $700 to $900 million, reflecting an increase of 16% at the midpoint. These underlying planning assumptions include results of the CAM business for the first half of 2026 and the tariff landscape as of January 2026.

The difference between the planning assumptions for 2026 diluted earnings per share on a GAAP basis and diluted earnings per share excluding Non-GAAP adjustments is approximately $1.35 to $1.75, consisting primarily of charges related to footprint actions and other cost actions.

FINANCIAL CONDITION

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

Operating Activities:  Cash flows provided by operations were $971.2 million in 2025 compared to $1,106.9 million in 2024 as higher earnings were more than offset by changes in working capital.

Free Cash Flow:  Free cash flow, as defined in the table below, was $687.9 million in 2025 and $753.0 million in 2024. The year-over-year changes in free cash flow are due to the same factors discussed above in operating activities, as well as lower planned capital expenditures in 2025. 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.

(Millions of Dollars)

Net cash provided by operating activities

Less: capital and software expenditures

Free cash flow

Investing Activities:  Cash flows used in investing activities totaled $261.5 million in 2025 primarily due to capital and software expenditures of $283.3 million.

Cash flows provided by investing activities in 2024 totaled $394.2 million, primarily due to net proceeds from sales of businesses of $735.6 million, partially offset by capital and software expenditures of $353.9 million.

Financing Activities: Cash flows used in financing activities totaled $794.4 million in 2025 primarily driven by payments on long term debt of $850.5 million and cash dividend payments on common stock of $500.6 million, partially offset by net short-term commercial paper borrowings of $572.9 million.

Cash flows used in financing activities totaled $1.557 billion in 2024 primarily driven by net repayments of short-term commercial paper borrowings of $1.057 billion and cash dividend payments on common stock of $491.2 million.

Fluctuations in foreign currency rates positively impacted cash by $79.3 million in 2025 due to the weakening of the U.S. dollar against other currencies. Fluctuations in foreign currency rates negatively impacted cash by $106.2 million in 2024 due to the strengthening of the U.S. dollar against other currencies.

Refer to Note G, Long-Term Debt and Financing Arrangements , and Note I, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

Credit Ratings and Liquidity:

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). In the third quarter of 2025, S&P downgraded the Company's senior unsecured debt credit rating from A- to BBB+. 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 $280.1 million and $290.5 million as of January 3, 2026 and December 28, 2024, respectively, which was primarily held in foreign jurisdictions.

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 $2 million at January 3, 2026. 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. See the "Contractual Obligations" table below for the estimated amounts due by period.

In August 2025, the Company redeemed its $350 million 6.272% notes at par prior to maturity. The redemption was funded through the issuance of commercial paper at a lower prevailing interest rate. The Company recognized a pre-tax loss of $0.3 million from the redemption related to the write-off of unamortized deferred financing fees.

The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of January 3, 2026, the Company had $605.6 million of borrowings outstanding, of which $555.6 million in Euro denominated commercial paper was designated as a net investment hedge. As of December 28, 2024, the Company had no commercial paper borrowings outstanding. Refer to Note H, Financial Instruments , for further discussion.

In June 2024, the Company amended and restated its existing five-year $2.5 billion committed credit facility with the concurrent execution of a new five year $2.25 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 of an amount equal to the Euro equivalent of $800.0 million is designated for swing line advances. 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 June 28, 2029 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. In June 2025, the 5-Year Credit Agreement was amended to include the covenants listed below. As of January 3, 2026 and December 28, 2024, the Company had not drawn on its five-year committed credit facility.

In June 2025, the Company terminated its 364-Day $1.25 billion committed credit facility ("the 2024 Syndicated 364-Day Credit Agreement") dated June 2024. There were no outstanding borrowings under the 2024 Syndicated 364-Day Credit Agreement upon termination and as of December 28, 2024. Contemporaneously, the Company entered into a new $1.25 billion syndicated 364-Day Credit Agreement (the "2025 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2025 Syndicated 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 2025 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2025 Syndicated 364-Day Credit Agreement by the earlier of June 22, 2026 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 2025 Syndicated 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 January 3, 2026, the Company had not drawn on its 2025 Syndicated 364-Day Credit Agreement.

The 5-Year Credit Agreement and the 2025 Syndicated 364-Day Credit Agreement, as described above, contain customary affirmative and negative covenants, including but not limited to, maintenance of an interest coverage ratio. The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted net Interest Expense ("Adjusted EBITDA"/"Adjusted Net Interest Expense"). 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 2.50 to 1.00 for any four fiscal quarter period ending on or before the end of the Company’s second fiscal quarter of 2026. For purposes of calculating the Company’s compliance with the interest coverage ratio, the Company is permitted to increase EBITDA by an amount equal to the Applicable Adjustment Addbacks (as defined in the 2025 Syndicated 364-Day Credit Agreement), provided that the sum of the Applicable Adjustment Addbacks incurred in any four consecutive fiscal quarter periods ending on or before the end of the Company's second fiscal quarter of 2026 shall not exceed $250,000,000 in aggregate.

In addition, the Company has other short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating to $299.8 million, of which approximately $216.1 million was available at January 3, 2026, and approximately $83.7 million of the short-term credit lines were utilized primarily pertaining to outstanding letters of credit for which there are no required or reported debt balances. Short-term arrangements are reviewed annually for renewal.

At January 3, 2026, the aggregate amount of short-term and long-term committed and uncommitted lines of credit was approximately $3.8 billion. The weighted-average interest rates on U.S. dollar denominated short-term borrowings for the years ended January 3, 2026 and December 28, 2024 were 4.6% and 5.6%, respectively. The weighted-average interest rates on Euro denominated short-term borrowings for the years ended January 3, 2026 and December 28, 2024 were 2.3% and 3.9%, respectively.

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 September 2025, the Company amended the settlement date to June 2028, or earlier at the Company's option.

Refer to Note G, Long-Term Debt and Financing Arrangements , and Note I, Capital Stock , for further discussion regarding the Company's debt and equity arrangements.

Contractual Obligations:  The following table summarizes the Company’s significant contractual and other obligations that impact its liquidity:

Payments Due by Period

(Millions of Dollars)

Total

Thereafter

Long-term debt (a)

Interest payments on long-term debt (b)

Short-term borrowings

Lease obligations

Inventory purchase commitments (c)

Deferred compensation

Marketing commitments

Forward stock purchase contract (d)

Pension funding obligations (e)

U.S. income tax (f)

Supplier agreements (g)

Derivatives (h)

Total contractual cash obligations

(a) Future payments on long-term debt encompass all payments related to aggregate debt maturities, excluding certain fair value adjustments included in long-term debt, as discussed further in Note G, Long-Term Debt and Financing Arrangements.

(b) Future interest payments on long-term debt reflect the applicable interest rate in effect at January 3, 2026 .

(c) Inventory purchase commitments primarily consist of open purchase orders to purchase raw materials, components, and sourced products.

(d) In March 2015, the Company entered into a forward share purchase contract with a financial institution counterparty which obligates the Company to pay $350 million, plus an additional amount related to the forward component of the contract. In September 2025, the Company amended the settlement date to June 2028 or earlier at the Company's option. See Note I, Capital Stock, for further discussion.

(e) This amount principally represents contributions either required by regulations or laws or, with respect to unfunded plans, necessary to fund current benefits. The Company has not presented estimated pension and post-retirement funding beyond 2026 as funding can vary significantly from year to year based upon changes in the fair value of the plan assets, actuarial assumptions, and curtailment/settlement actions.

(f) Income tax liability for the one-time deemed repatriation tax on unremitted foreign earnings and profits.

(g) Supplier agreements with long-term minimum material purchase requirements and freight forwarding arrangements.

(h) Future cash flows on derivative instruments reflect the fair value and accrued interest as of January 3, 2026. The ultimate cash flows on these instruments will differ, perhaps significantly, based on applicable market interest and foreign currency rates at their maturity.

To the extent the Company can reliably determine when payments will occur, the related amounts will be included in the table above. However, due to the high degree of uncertainty regarding the timing of potential future cash flows associated with the contingent consideration liability related to the Craftsman acquisition and the unrecognized tax liabilities of $110 million and $406 million, respectively, at January 3, 2026, the Company is unable to make a reliable estimate of when (if at all) these amounts may be paid. Refer to Note L, Fair Value Measurements, and Note P, Income Taxes, for further discussion.

Payments of the above contractual and other obligations (with the exception of payments related to debt principal, the forward stock purchase contract, and tax obligations) will typically generate a cash tax benefit such that the net cash outflow will be lower than the gross amounts summarized above.

Other Significant Commercial Commitments:

Amount of Commitment Expirations Per Period

(Millions of Dollars)

Total

Thereafter

U.S. lines of credit

Short-term borrowings, long-term debt and lines of credit are explained in detail within Note G, Long-Term Debt and Financing Arrangements .

MARKET RISK

Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments, currencies, commodities and other items traded in global markets. The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices, bond prices and commodity prices, amongst others.

Exposure to foreign currency risk results because the Company, through its global businesses, 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 and the Taiwan Dollar. Certain cross-currency trade flows arising from both trade and affiliate sales and purchases are consolidated and netted prior to obtaining risk protection through the use of various derivative financial instruments which may include: purchased basket options, purchased options, collars, cross-currency swaps and currency forwards. The Company is thus able to capitalize on its global positioning by taking advantage of naturally offsetting exposures and portfolio efficiencies to reduce the cost of purchasing derivative protection. At times, the Company also enters into foreign exchange derivative contracts to reduce the earnings and cash flow impacts of non-functional currency denominated receivables and payables, primarily for affiliate transactions. Gains and losses from these hedging instruments offset the gains or losses on the underlying net exposures. Management determines the nature and extent of currency hedging activities, and in certain cases, may elect to allow certain currency exposures to remain un-hedged. The Company may also enter into cross-currency swaps and forward contracts to hedge the net investments in certain subsidiaries and better match the cash flows of operations to debt service requirements. Management estimates the foreign currency impact from its derivative financial instruments outstanding at the end of 2025 would have been an incremental pre-tax loss of approximately $27 million based on a hypothetical 10% adverse movement in all net derivative currency positions. The Company follows risk management policies in executing derivative financial instrument transactions, and does not use such instruments for speculative purposes. 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 in future periods.

As mentioned above, the Company routinely has cross-border trade and affiliate flows that cause an impact on earnings from foreign exchange rate movements. The Company is also exposed to currency fluctuation volatility from the translation of foreign earnings into U.S. dollars and the economic impact of foreign currency volatility on monetary assets held in foreign currencies. It is more difficult to quantify the transactional effects from currency fluctuations than the translational effects. Aside from the use of derivative instruments, which may be used to mitigate some of the exposure, transactional effects can potentially be influenced by actions the Company may take. For example, if an exposure occurs from a European entity sourcing product from a U.S. supplier it may be possible to change to a European supplier. Management estimates the combined translational and transactional impact, on pre-tax earnings, of a 10% overall movement in exchange rates is approximately $196 million. In 2025, translational and transactional foreign currency fluctuations negatively impacted pre-tax earnings from continuing operations by approximately $13 million.

The Company’s exposure to interest rate risk results from its outstanding debt and derivative obligations, short-term investments, and derivative financial instruments employed in the management of its debt portfolio. The debt portfolio including both trade and affiliate debt, is managed to achieve capital structure targets and reduce the overall cost of borrowing by leveraging, as appropriate, a combination of fixed and floating rate debt as well as interest rate swaps and cross-currency swaps.

The Company’s primary exposure to interest rate risk comes from its commercial paper program in which the pricing is partially based on short-term U.S. interest rates. The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. The impact of a hypothetical 10% increase in the average interest rate of the Company’s average commercial paper borrowings outstanding during 2025 would have been an incremental pre-tax loss of approximately $4 million. As of January 3, 2026, the Company had $605.6 million of commercial paper borrowings outstanding.

The Company has exposure to commodity prices in many businesses, particularly brass, nickel, resin, aluminum, copper, zinc, steel, and energy used in the production of finished goods. Generally, commodity price exposures are not hedged with

derivative financial instruments, but instead are actively managed through customer product and service pricing actions, procurement-driven cost reduction initiatives and other productivity improvement projects.

The Company has $124.4 million of liabilities as of January 3, 2026 pertaining to unfunded defined contribution plans for certain U.S. employees for which there is mark-to-market exposure.

The assets held by the Company’s defined benefit plans are exposed to fluctuations in the market value of securities, primarily global stocks and fixed-income securities. The Company employs diversified asset allocations to help mitigate this risk. The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking place over a period of many years to effectively manage portfolio risk. The Company utilizes the current funded status to transition the portfolio toward investments that better match the duration and cash flow attributes of the underlying liabilities. In 2025 and 2024, investment gains resulted in an increase of $112 million and $15 million to pension plan assets, respectively. The funded status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 90% in 2025 and 2024. The Company expects funding obligations on its defined benefit plans to be approximately $29 million in 2026. Management has worked to minimize this exposure by freezing and terminating defined benefit plans where appropriate. Refer to Note K, Employee Benefit Plans, for further discussion regarding the Company's pension plans.

The Company has access to financial resources and borrowing capabilities around the world. There are no inst ruments within the debt structure that would accelerate payment requirements solely due to a change in credit rating.

The Company’s existing credit facilities and sources of liquidity, including expected operating cash flows, are considered more than adequate to conduct business as normal. The Company believes that its strong financial position, expected operating cash flows, committed long-term credit facilities and borrowing capacity, and ability to access equity markets, provide the financial flexibility necessary to continue its record of annual dividend payments, to invest in the routine needs of its businesses, and to fund other initiatives encompassed by its business strategy and maintain its strong investment grade credit ratings.

CRITICAL ACCOUNTING ESTIMATES — Preparation of the Company’s Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Significant accounting policies used in the preparation of the Consolidated Financial Statements are described in Note A, Significant Accounting Policies . Management believes the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters with inherent uncertainty. The most significant areas involving management estimates are described below. Actual results in these areas could differ from management’s estimates.

GOODWILL AND INTANGIBLE ASSETS — The Company acquires businesses in purchase transactions that result in the recognition of goodwill and intangible assets. The determination of the value of intangible assets requires management to make estimates and assumptions. In accordance with Accounting Standards Codification ("ASC") 350-20, Goodwill , acquired goodwill and indefinite-lived intangible assets are not amortized but are subject to impairment testing at least annually or when an event occurs or circumstances change that indicate it is more likely than not an impairment exists. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. At January 3, 2026, the Company reported $7.288 billion of goodwill, $2.256 billion of indefinite-lived trade names and $831.2 million of net definite-lived intangibles.

Management tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment as defined in ASC 280, Segment Reporting , or one level below an operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels of an operating segment having similar economic characteristics. If the carrying value of a reporting unit (including the value of goodwill) is greater than its estimated fair value, an impairment charge would be recorded for the amount that the carrying amount of the reporting unit exceeded its fair value.

As required by the Company’s policy, goodwill was tested for impairment in the third quarter of 2025. In accordance with Accounting Standards Update ("ASU") 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment , companies are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. Impairment tests are completed separately with respect to the goodwill of each of the Company’s reporting units. For its annual impairment testing performed in the third quarter of 2025, the Company applied a quantitative test for each of its reporting units using a discounted cash flow valuation model. Based on the results of the Company’s annual impairment testing, it was determined that the fair value of each of its reporting units was substantially in excess of its carrying amount.

With respect to the quantitative tests, the key assumptions applied to the cash flow projections include a discount rate of 10% and a perpetual growth rate of 3% for both reporting units. In addition, near-term cash flow projections for both reporting units included cumulative annual revenue growth rates in the mid-single digits (ranging from approximately 3% to 5%) and Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin rates in the mid to high-teens (ranging from approximately 15% to 19%), which are consistent with the Company's overall long-term financial targets as further discussed in "Strategic Objectives" in Item 7 . These assumptions contemplated business, market and overall economic conditions. Management performed sensitivity analyses on the estimated fair values from the discounted cash flow valuation models utilizing more conservative assumptions that reflect reasonably likely future changes in the discount rate and perpetual growth rate. The discount rate was increased by 250 basis points with no impairment indicated. The perpetual growth rate was decreased by 300 basis points with no impairment indicated.

When a portion of a reporting unit is classified as held for sale, the Company allocates goodwill to the disposal group based on the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained. The Company then performs a goodwill impairment test on the remaining reporting unit. As of January 3, 2026, the Company classified the CAM business, which is included in the Engineered Fastening reporting unit, as held for sale and allocated a portion of the goodwill of the Engineered Fastening reporting unit to CAM. The Company then performed a goodwill impairment test on the remaining reporting unit after the allocation of goodwill to CAM, which did not result in impairment.

The Company also tested its indefinite-lived trade names for impairment during the third quarter of 2025 utilizing a discounted cash flow model. The key assumptions used included discount rates, royalty rates, and perpetual growth rates applied to the projected sales. With the exception of the Lenox, Troy-Bilt, and Irwin trade names discussed below, the Company determined that the fair values of its indefinite-lived trade names exceeded their respective carrying amounts.

During 2025, in conjunction with its annual long-term strategic planning, the Company updated its brand prioritization and investment strategy to transition targeted product categories to its priority global brands, while leveraging certain of its complementary brands on more focused product categories and regions where those brands hold more meaningful market positions and value to end users. As a result of these strategic decisions, the Company recognized a $108.4 million pre-tax, non-cash impairment charge related to the Lenox, Troy-Bilt, and Irwin trade names in the third quarter of 2025. Subsequent to this impairment charge, the carrying value of the Lenox, Troy-Bilt, and Irwin trade names totaled $119.6 million. In the third quarter of 2024, the Company recognized a $41.0 million pre-tax, non-cash impairment charge related to the Lenox trade name. The Lenox, Troy-Bilt, and Irwin trade names, which the Company intends to continue utilizing indefinitely in a more focused manner as described above, represented approximately 5% of 2025 net sales for the Tools & Outdoor segment.

In the event that future operating results of any of the Company's reporting units or indefinite-lived trade names do not meet current expectations, management, based upon conditions at the time, would consider taking restructuring or other strategic actions, as necessary, to maximize revenue growth and profitability. A thorough analysis of all the facts and circumstances existi ng at that time would need to be performed to determine if recording an impairment loss would be appropriate.

DEFINED BENEFIT OBLIGATIONS — T he valuation of pension and other postretirement benefits costs and obligations is dependent on various assumptions. These assumptions, which are updated annually, include discount rates, expected return on plan assets, future salary increase rates, and health care cost trend rates. The Company considers current market conditions, including interest rates, to establish these assumptions. Discount rates are developed considering the yields available on high-quality fixed income investments with maturities corresponding to the duration of the related benefit obligations. The Company’s weighted-average discount rates used to determine benefit obligations at January 3, 2026 for the United States and international pension plans were 5.27% and 5.11%, respectively. The Company’s weighted-average discount rates used to determine benefit obligations at December 28, 2024 for the United States and international pension plans were 5.55% and 5.04%, respectively. As discussed further in Note K, Employee Benefit Plans , the Company develops the expected return on plan assets considering various factors, which include its targeted asset allocation percentages, historic returns, and expected future returns. The Company’s expected rate of return assumptions for the United States and international pension plans were 6.72% and 6.37%, respecti vely, at January 3, 2026. The Company will use a 6.55% weighted-average expected rate of return assumption to determine the 2026 net periodic benefit cost. A 25 basis point reduction in the expected rate of return assumption would increase 2026 net periodic benefit cost by approximately $4 million on a pre-tax basis.

The Company believes that the assumptions used are appropriate; however, differences in actual experience or changes in the assumptions may materially affect the Company’s financial position or results of operations. To the extent that actual (newly measured) results differ from the actuarial assumptions, the difference is recognized in accumulated other comprehensive loss, and, if in excess of a specified corridor, amortized over future periods. The expected return on plan assets is determined using the expected rate of return and the fair value of plan assets. Accordingly, market fluctuations in the fair value of plan assets can affect the net periodic benefit cost in the following yea r. The projected benefit obligation for defined benefit plans exceeded the fair value of plan assets by $221 million at January 3, 2026. A 25 basis point reduction in the discount rate would have

increased the projected benefit obligation by approximately $44 million a t January 3, 2026. The primary Black & Decker U.S. pension and post-employment benefit plans were curtailed in late 2010, as well as the only material Black & Decker international plan, and in their place the Company implemented defined contribution benefit plans. The vast majority of the projected benefit obligation pertains to plans that have been frozen; the remaining defined benefit plans that are not frozen are predominantly small domestic union plans and those that are statutorily mandated in certain international jurisdictions. The Company recognized approximately $43 million of defined benefit plan expense in 2025, which may fluctuate in future years depending upon various factors including future discount rates and actual returns on plan assets.

Additional information regarding the Company's pension plans is available in Note K, Employee Benefit Plans.

ENVIRONMENTAL — The Company incurs costs related to environmental issues as a result of various laws and regulations governing current operations as well as the remediation of previously contaminated sites. The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The amount of liability recorded is based on an evaluation of currently available facts with respect to each individual site and includes such factors as existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. The liabilities recorded do not take into account any claims for recoveries from insurance or third parties. As assessments and remediation progress at individual sites, the amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available.

As of January 3, 2026, the Company had reserves of $259 million for remediation activities associated with Company-owned properties as well as for Superfund sites, for losses that are probable and estimable. As of January 3, 2026, the range of environmental remediation costs that is reasonably possible is $179 million to $396 million which is subject to change in the near term. The Company may be liable for environmental remediation of sites it no longer owns. Liabilities have been recorded on those sites in accordance with this policy.

Additional information regarding environmental matters is available in Note R, Contingencies.

INCOME TAXES — The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. Any changes in tax rates on deferred tax assets and liabilities are recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent that it is more likely than not that these assets will be realized. In making this determination, management considers all available positive and negative evidence, including future reversals of existing temporary differences, estimates of future taxable income, tax-planning strategies, and the realizability of net operating loss carryforwards. In the event that it is determined that an asset is not more likely than not to be realized, a valuation allowance is recorded against the asset. Valuation allowances related to deferred tax assets can be impacted by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would not be able to realize all or a portion of its deferred tax assets in the future, the unrealizable amount would be charged to earnings in the period in which that determination is made. Conversely, if the Company were to determine that it would be able to realize deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation allowance through a favorable adjustment to earnings in the period that the determination was made.

The Company records uncertain tax positions in accordance with ASC 740, which requires a two-step process. First, management determines whether it is more likely than not that a tax position will be sustained based on the technical merits of the position and second, for those tax positions that meet the more likely than not threshold, management recognizes the largest amount of the tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxing authority. The Company maintains an accounting policy of recording interest and penalties on uncertain tax positions as a component of Income taxes in the Consolidated Statements of Operations.

The Company is subject to income tax in a number of locations, including U.S. federal, state and foreign jurisdictions. Significant judgment is required when calculating the worldwide provision for income taxes. Many factors are considered when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next twelve months. These changes may be the result of settlements of ongoing audits, litigation, or other proceedings with taxing authorities. The Company periodically assesses its liabilities and contingencies for all tax years still subject to audit based on the most current available information, which involves inherent uncertainty.

Additional information regarding income taxes is available in Note P, Income Taxes.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any goals, projections, guidance or planning assumptions or scenarios regarding earnings, EPS, income, revenue, margins, or margin expansion, costs and cost savings/reductions, sales, sales growth, organic growth, profitability, cash flow, leverage ratios, debt reduction or other financial items; any statements of the plans, strategies, investments and objectives of management for future operations, including expectations around the Company's productivity and efficiency goals and future operational strategies following completion of the Company's transformation; future market share gain, shareholder returns, any statements concerning innovation initiatives and proposed new products, services or developments and brand prioritization strategies; any statements regarding future economic conditions or performance; any statements concerning future dividends or share repurchases; any statements of beliefs, plans, intentions or expectations; any statements and assumptions or scenarios regarding possible tariff and tariff impact projections and related mitigation plans (including price actions, supply chain adjustments) and expected timing and benefits related to such plans; any statements concerning the consummation of the CAM sale transaction, the Company’s ability to maximize value for shareholders through active portfolio management and the impact of the transaction to fund debt reduction and support the Company’s capital allocation strategy and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “could,” “project,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “run-rate,” “annualized,” “forecast,” “commit,” “goal,” “target,” “design,” “on-track,” “position or positioning,” “guidance,” “aim,” “looking forward,” “multi-year” or any other similar words.

Although the Company believes that the expectations reflected in any of its forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of its forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in the Company's filings with the Securities and Exchange Commission.

Important factors that could cause the Company's actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in its forward-looking statements include, among others, the following: (i) successfully developing, marketing and achieving sales from new products and services and the continued acceptance of current products and services as well as successful execution of, and realization of expected benefits from, the Company’s brand prioritization and investment strategy, including potential licensing initiatives and related restructuring efforts, and its ability to estimate and mitigate negative consequences from the same including, but not limited to, reduced ability to generate sales; (ii) macroeconomic factors, including global and regional business conditions, commodity availability and prices, inflation and deflation, interest rate volatility, currency exchange rates, and uncertainties in the global financial markets; (iii) laws, regulations and governmental policies affecting the Company's activities in the countries where it does business or sources supply inputs, including those related to taxation, data privacy, anti-bribery, anti-corruption, government contracts, and trade controls, including but not limited to, tariffs, import and export controls, raw material and rare earth related controls and other monetary and non-monetary trade regulations or barriers; (iv) the Company’s ability to predict the timing and extent of any trade related regulations (or any court rulings in response thereto), clearances, restrictions, including but not limited to, trade barriers, tariffs, raw material and rare earth related controls, as well as its ability to successfully assess the impact to its business of, and mitigate or respond to, such macroeconomic or trade, tariff and raw material and rare earth import/export control changes or policies (including, but not limited to, the Company’s ability to predict and respond to court rulings in response thereto, or to obtain price increases from its customers and complete effective supply chain adjustments within anticipated time frames and ability to obtain rare earth related supply clearances); (v) the economic, political, cultural and legal environment in the U.S., Europe, and the emerging markets in which the Company generates sales, particularly Latin America and China; (vi) realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures and the costs associated with such transactions; (vii) pricing pressure and other changes within competitive markets; (viii) availability and price of raw materials, rare earth materials, component parts, freight, energy, labor and sourced finished goods; (ix) the impact that the tightened credit markets may have on the Company or its customers or suppliers; (x) the extent to which the Company has to write off accounts receivable, inventory or other assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers; (xi) the Company's ability to identify and effectively execute productivity improvements and cost reductions, including complexity reduction through platforming products and SKU reduction initiatives, and other manufacturing and administrative reorganization actions; (xii) potential business, supply chain and distribution disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, natural disasters or pandemics, sanctions, political unrest, war or terrorism, including the conflicts between Russia and Ukraine, and Israel and Hamas and tensions or conflicts in South Korea, China, Taiwan and the Middle East; (xiii) the continued consolidation of customers, particularly in consumer channels, and the Company’s continued reliance on significant customers; (xiv) managing franchisee relationships; (xv) the impact of poor weather conditions and climate change and risks related to the transition to a lower-carbon economy, such as the Company's ability to successfully adopt new

technology, meet market-driven demands for carbon neutral and renewable energy technology, or to comply with changes in environmental regulations or requirements, which may be more stringent and complex, impacting its reporting processes and manufacturing facilities and business operations as well as remediation plans and costs relating to any of its current or former locations or other sites; (xvi) maintaining or improving production rates in the Company's manufacturing facilities (including leveraging its North American footprint in connection with tariff mitigation), responding to significant changes in customer preferences or expectations, product demand and fulfilling demand for new and existing products, and learning, adapting and integrating new technologies into products, services and processes; (xvii) changes in the competitive landscape in the Company's markets; (xviii) the Company's non-U.S. operations, including sales to non-U.S. customers; (xix) the Company’s ability to predict the extent or timing of, and impact from demand changes within domestic or world-wide markets associated with construction, homebuilding and remodeling, aerospace, outdoor, engineered fastening, automotive and other markets which the Company serves; (xx) potential adverse developments in new or pending litigation and/or government investigations; (xxi) the incurrence of debt and changes in the Company's ability to obtain debt on commercially reasonable terms and at competitive rates; (xxii) substantial pension and other post-retirement benefit obligations; (xxiii) potential regulatory liabilities, including environmental, privacy, data breach, workers compensation and product liabilities; (xxiv) attracting, developing and retaining senior management and other key employees, managing a workforce in many jurisdictions, labor shortages, work stoppages or other labor disruptions; (xxv) the Company's ability to keep abreast with the pace of technological change; (xxvi) changes in accounting estimates; (xxvii) the Company’s ability to protect its intellectual property rights and to maintain its public reputation and the strength of its brands; (xxviii) critical or negative publicity, including on social media, whether or not accurate, concerning the Company’s brands, products, culture, key employees or suppliers, or initiatives, and the Company's handling of divergent stakeholder expectations regarding the same; and (xxix) the failure to consummate, or a delay in the consummation of, the CAM sale transaction for various reasons (including but not limited to failure to receive, or delay in receiving, required regulatory approvals and meet customary closing conditions), and failure to realize the expected benefits of the Company’s value creation, debt reduction and capital allocation strategy.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in this Annual Report on Form 10-K, including under the headings “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Consolidated Financial Statements and the related Notes, and other filings with the Securities and Exchange Commission.

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and forward-looking statements in documents that are incorporated by reference herein speak only as of the date of those documents. The Company does not undertake any obligation or intention to update or revise any forward-looking statements, whether as a result of future events or circumstances, new information or otherwise, except as required by law.