Stanley Black & Decker, Inc 10-Q for FY2020 Q1

About this 10-Q

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Stanley Black & Decker, Inc. (SWK)

10-Q 2020-05-01 For: 2020-03-28

Added on April 06, 2026

Stanley Black & Decker, Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 28, 2020 (FY2020 Q1).

Year-to-Date

Number of stock options

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.13B; down 6.1% from $3.33B a year earlier
Net income: $133.2M; down 21.6% from net income of $169.9M a year earlier
Diluted EPS: $0.88; down 22.1% from $1.13 a year earlier

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CT		06-0548860
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)



Title Of Each Class		Trading Symbol	Name Of Each Exchange On Which Registered
Common Stock	$2.50 Par Value per Share	SWK	New York Stock Exchange
Corporate Units		SWP	New York Stock Exchange
Corporate Units		SWT	New York Stock Exchange



Large Accelerated Filer	þ	Accelerated Filer	¨

Non-Accelerated Filer	¨	Smaller Reporting Company	☐

		Emerging Growth Company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ¨




PART I — FINANCIAL INFORMATION	3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47
ITEM 4. CONTROLS AND PROCEDURES	47
PART II — OTHER INFORMATION	49
ITEM 1. LEGAL PROCEEDINGS	49
ITEM 1A. RISK FACTORS	49
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	50
ITEM 6. EXHIBITS	51
SIGNATURE	52



	Year-to-Date
	2020			2019
Net Sales	$	3,129.4		$	3,333.6
Costs and Expenses
Cost of sales	$	2,106.3		$	2,228.0
Selling, general and administrative	737.8			760.6
Provision for credit losses	10.7			18.3
Other, net	74.9			65.4
Restructuring charges	3.9			8.7
Interest expense	59.7			74.4
Interest income	(10.1		)	(16.6		)
	$	2,983.2		$	3,138.8
Earnings before income taxes and equity interest	146.2			194.8
Income taxes	12.9			24.7
Net earnings before equity interest	$	133.3		$	170.1
Share of net (losses) earnings of equity method investment	(0.2		)	0.3
Net earnings	$	133.1		$	170.4
Less: Net (loss) earnings attributable to non-controlling interests	(0.1		)	0.5
Net Earnings Attributable to Common Shareowners	$	133.2		$	169.9
Total Comprehensive (Loss) Income Attributable to Common Shareowners	$	(125.6	)	$	170.9
Earnings per share of common stock:
Basic	$	0.89		$	1.15
Diluted	$	0.88		$	1.13
Dividends per share of common stock	$	0.69		$	0.66
Weighted-average shares outstanding (in thousands):
Basic	150,330			147,863
Diluted	151,903			149,908



	March 28, 2020			December 28, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	987.1		$	297.7
Accounts and notes receivable, net	1,681.5			1,454.6
Inventories, net	2,532.4			2,255.0
Other current assets	491.9			449.3
Total Current Assets	5,692.9			4,456.6
Property, plant and equipment, net	2,036.7			1,959.5
Goodwill	9,727.5			9,237.5
Intangibles, net	4,149.9			3,622.0
Other assets	1,298.0			1,321.0
Total Assets	$	22,905.0		$	20,596.6
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Short-term borrowings	$	1,674.0		$	337.3
Current maturities of long-term debt	3.1			3.1
Accounts payable	2,029.2			2,087.8
Accrued expenses	1,664.0			1,977.5
Total Current Liabilities	5,370.3			4,405.7
Long-term debt	4,662.6			3,176.4
Deferred taxes	727.9			731.2
Post-retirement benefits	586.1			609.4
Other liabilities	2,598.9			2,531.7
Commitments and Contingencies (Notes R and S)
Shareowners’ Equity
Stanley Black & Decker, Inc. Shareowners’ Equity
Preferred stock, without par value: Authorized 10,000,000 shares in 2020 and 2019 Issued and outstanding 1,500,000 shares in 2020 and 2019	1,500.0			1,500.0
Common stock, par value $2.50 per share: Authorized 300,000,000 shares in 2020 and 2019 Issued 176,902,738 shares in 2020 and 2019	442.3			442.3
Retained earnings	6,796.6			6,772.8
Additional paid in capital	4,496.6			4,492.9
Accumulated other comprehensive loss	(2,143.4		)	(1,884.6		)
ESOP	—			(2.3		)
	11,092.1			11,321.1
Less: cost of common stock in treasury	(2,138.7		)	(2,184.8		)
Stanley Black & Decker, Inc. Shareowners’ Equity	8,953.4			9,136.3
Non-controlling interests	5.8			5.9
Total Shareowners’ Equity	8,959.2			9,142.2
Total Liabilities and Shareowners’ Equity	$	22,905.0		$	20,596.6



	March 28, 2020		December 28, 2019
Cash and cash equivalents	$	987.1	$	297.7
Restricted cash included in Other current assets	11.2		16.9
Cash, cash equivalents and restricted cash	$	998.3	$	314.6



	Preferred Stock		Common Stock		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			ESOP			Treasury Stock			Non- Controlling Interests			Shareowners’ Equity
Balance December 28, 2019	$	1,500.0	$	442.3	$	4,492.9		$	6,772.8		$	(1,884.6	)	$	(2.3	)	$	(2,184.8	)	$	5.9		$	9,142.2
Net earnings	—		—		—			133.2			—			—			—			(0.1		)	133.1
Other comprehensive loss	—		—		—			—			(258.8		)	—			—			—			(258.8		)
Cash dividends declared — $0.69 per share	—		—		—			(105.6		)	—			—			—			—			(105.6		)
Issuance of common stock (744,339 shares)	—		—		(20.5		)	—			—			—			65.1			—			44.6
Repurchase of common stock (125,294 shares)	—		—		10.0			—			—			—			(19.0		)	—			(9.0		)
Preferred stock issuance costs	—		—		(1.2		)	—			—			—			—			—			(1.2		)
Stock-based compensation related	—		—		15.4			—			—			—			—			—			15.4
ESOP	—		—		—			—			—			2.3			—			—			2.3
Adoption of ASU 2016-13	—		—		—			(3.8		)	—			—			—			—			(3.8		)
Balance March 28, 2020	$	1,500.0	$	442.3	$	4,496.6		$	6,796.6		$	(2,143.4	)	$	—		$	(2,138.7	)	$	5.8		$	8,959.2



(Millions of Dollars)	March 28, 2020			December 28, 2019
Trade accounts receivable	$	1,521.1		$	1,284.0
Trade notes receivable	144.1			156.7
Other accounts receivable	138.0			126.3
Gross accounts and notes receivable	$	1,803.2		$	1,567.0
Allowance for credit losses	(121.7		)	(112.4		)
Accounts and notes receivable, net	$	1,681.5		$	1,454.6
Long-term receivables, net	$	138.9		$	146.1



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


(a)	Represents the cumulative-effect adjustment to opening retained earnings due to the adoption of ASU 2016-13. Refer to Note B, New Accounting Standards, for further discussion.



(Millions of Dollars)	Total		Within 1 Year		2 Years		3 Years		4 Years		5 Years		Thereafter
Financing receivables	$	202.2	$	75.9	$	57.4	$	37.0	$	19.9	$	8.3	$	3.7
Operating leases	$	53.2	$	50.8	$	1.3	$	0.8	$	0.3	$	—	$	—



(Millions of Dollars)
Cash and cash equivalents	$	35.5
Accounts receivable, net	48.6
Inventories, net	127.5
Prepaid expenses and other assets	3.5
Property, plant and equipment	124.7
Trade names	25.0
Customer relationships	570.0
Accounts payable	(26.3		)
Accrued expenses	(19.8		)
Deferred taxes	(20.9		)
Other liabilities	(0.6		)
Total identifiable net assets	$	867.2
Goodwill	626.0
Contingent consideration	(155.3		)
Total consideration paid	$	1,337.9



	First Quarter
(Millions of Dollars, except per share amounts)	2020		2019
Net sales	$	3,175.4	$	3,502.9
Net earnings attributable to common shareowners	$	147.9	$	154.8
Diluted earnings per share	$	0.97	$	1.02


•	Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the acquisition accounting that would have been incurred from December 29, 2019 to the acquisition date.



	Year-to-Date
	2020			2019
OPERATING ACTIVITIES
Net earnings	$	133.1		$	170.4
Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation and amortization of property, plant and equipment	92.8			94.0
Amortization of intangibles	48.3			43.8
Share of net losses (earnings) of equity method investment	0.2			(0.3		)
Changes in working capital	(512.7		)	(616.8		)
Changes in other assets and liabilities	(166.9		)	(122.4		)
Cash used in operating activities	(405.2		)	(431.3		)
INVESTING ACTIVITIES
Capital and software expenditures	(82.9		)	(89.6		)
Business acquisitions, net of cash acquired	(1,302.4		)	(676.2		)
Purchase of investments	(6.5		)	(245.4		)
Net investment hedge settlements	24.4			3.9
Other	3.7			—
Cash used in investing activities	(1,363.7		)	(1,007.3		)
FINANCING ACTIVITIES
Payment on long-term debt	—			(400.0		)
Proceeds from debt issuances, net of fees	1,486.4			496.9
Stock purchase contract fees	(20.1		)	(10.1		)
Net short-term borrowings	1,351.9			1,419.9
Proceeds from issuances of common stock	44.6			10.2
Purchases of common stock for treasury	(9.0		)	(8.1		)
Craftsman deferred purchase price	(250.0		)	—
Termination of interest rate swaps	(20.5		)	(1.0		)
Cash dividends on common stock	(105.6		)	(97.6		)
Other	(2.5		)	(2.0		)
Cash provided by financing activities	2,475.2			1,408.2
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(22.6		)	4.8
Change in cash, cash equivalents and restricted cash	683.7			(25.6		)
Cash, cash equivalents and restricted cash, beginning of period	314.6			311.4
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	998.3		$	285.8


A.	SIGNIFICANT ACCOUNTING POLICIES


C.	EARNINGS PER SHARE


•	Because the 2020 acquisition was assumed to occur on December 30, 2018, there were no acquisition-related costs or inventory step-up charges factored into the 2020 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date.


•	Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 30, 2018 to the acquisition date of IES Attachments.


•	Additional expense for acquisition-related costs and inventory step-up charges relating to the 2020 acquisition, as such expenses would have been incurred from December 30, 2018 to March 30, 2019.


•	Because the 2019 acquisitions were assumed to occur on December 31, 2017, there were no acquisition-related costs or inventory step-up charges factored into the 2019 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date.



(Millions of Dollars)	Tools & Storage			Industrial			Security			Total
Balance December 28, 2019	$	5,161.8		$	1,995.5		$	2,080.2		$	9,237.5
Acquisitions	—			628.5			—			628.5
Foreign currency translation	(85.5		)	(1.7		)	(51.3		)	(138.5		)
Balance March 28, 2020	$	5,076.3		$	2,622.3		$	2,028.9		$	9,727.5



(Millions of Dollars)	Balance Sheet Classification	March 28, 2020		December 28, 2019		Balance Sheet Classification	March 28, 2020		December 28, 2019
Derivatives designated as hedging instruments:
Interest Rate Contracts Cash Flow	LT other assets	$	—	$	—	LT other liabilities	$	118.9	$	40.5
Foreign Exchange Contracts Cash Flow	Other current assets	17.2		7.0		Accrued expenses	0.6		7.8
Net Investment Hedge	Other current assets	26.0		18.6		Accrued expenses	2.2		8.5
	LT other assets	—		—		LT other liabilities	0.9		2.6
Non-derivative designated as hedging instrument:
Net Investment Hedge		—		—		Short-term borrowings	460.4		335.5
Total designated as hedging		$	43.2	$	25.6		$	583.0	$	394.9
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Other current assets	$	24.9	$	3.7	Accrued expenses	$	10.6	$	6.1
Total		$	68.1	$	29.3		$	593.6	$	401.0



	Year-to-Date 2020
(Millions of Dollars)	Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	(98.9	)	Interest expense	$	(4.5	)	$	—
Foreign Exchange Contracts	$	20.3		Cost of sales	$	2.3		$	—



	Year-to-Date 2019
(Millions of Dollars)	Gain (Loss) Recorded in OCI			Classification of Gain (Loss) Reclassified from OCI to Income	Gain (Loss) Reclassified from OCI to Income			Gain (Loss) Recognized in Income on Amounts Excluded from Effectiveness Testing
Interest Rate Contracts	$	(10.9	)	Interest expense	$	(4.0	)	$	—
Foreign Exchange Contracts	$	7.0		Cost of sales	$	(0.2	)	$	—



(Millions of Dollars)	Year-to-Date 2020 Interest Expense			Year-to-Date 2019 Interest Expense
Total amount in the Consolidated Statements of Operations and Comprehensive (Loss) Income in which the effects of the fair value hedges are recorded	$	59.7		$	74.4
Amortization of gain on terminated swaps	$	(0.8	)	$	(5.4	)



	March 28, 2020
(Millions of Dollars)	Carrying Amount of Hedged Liability ⁽¹⁾		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
Current Maturities of Long-Term Debt	$	3.1	Terminated Swaps	$	3.1
Long-Term Debt	$	4,662.6	Terminated Swaps	$	(18.3	)



	Year-to-Date 2020
(Millions of Dollars)	Total Gain (Loss) Recorded in OCI			Excluded Component Recorded in OCI		Income Statement Classification	Total Gain (Loss) Reclassified from OCI to Income		Excluded Component Amortized from OCI to Income
Forward Contracts	$	(0.1	)	$	—	Other, net	$	—	$	—
Cross Currency Swap	$	42.0		$	18.8	Other, net	$	5.4	$	5.4
Option Contracts	$	—		$	—	Other, net	$	—	$	—
Non-derivative designated as Net Investment Hedge	$	15.6		$	—	Other, net	$	—	$	—



(Millions of Dollars)	Income Statement Classification	Year-to-Date 2020		Year-to-Date 2019
Foreign Exchange Contracts	Other, net	$	12.4	$	2.3



(Millions of Dollars)	Currency translation adjustment and other			Unrealized (losses) gains on cash flow hedges, net of tax			Unrealized gains (losses) on net investment hedges, net of tax			Pension (losses) gains, net of tax			Total
Balance - December 28, 2019	$	(1,517.2	)	$	(54.2	)	$	97.3		$	(410.5	)	$	(1,884.6	)
Other comprehensive (loss) income before reclassifications	(258.4		)	(58.7		)	43.0			14.1			(260.0		)
Reclassification adjustments to earnings	—			1.4			(4.1		)	3.9			1.2
Net other comprehensive (loss) income	(258.4		)	(57.3		)	38.9			18.0			(258.8		)
Balance - March 28, 2020	$	(1,775.6	)	$	(111.5	)	$	136.2		$	(392.5	)	$	(2,143.4	)



	Year-to-Date
	Pension Benefits												Other Benefits
	U.S. Plans						Non-U.S. Plans						All Plans
(Millions of Dollars)	2020			2019			2020			2019			2020			2019
Service cost	$	1.7		$	3.0		$	4.0		$	3.7		$	0.1		$	0.1
Interest cost	8.8			11.8			5.6			7.7			0.4			0.4
Expected return on plan assets	(14.7		)	(15.4		)	(10.3		)	(11.6		)	—			—
Amortization of prior service cost (credit)	0.3			0.2			(0.2		)	(0.2		)	(0.3		)	(0.3		)
Amortization of net loss (gain)	2.1			2.0			2.9			2.2			0.1			(0.1		)
Settlement / curtailment loss	—			—			0.1			0.1			—			—
Net periodic pension (benefit) expense	$	(1.8	)	$	1.6		$	2.1		$	1.9		$	0.3		$	0.1



(Millions of Dollars)	Total Carrying Value		Level 1		Level 2		Level 3
March 28, 2020
Money market fund	$	2.4	$	2.4	$	—	$	—
Derivative assets	$	68.1	$	—	$	68.1	$	—
Derivative liabilities	$	133.2	$	—	$	133.2	$	—
Non-derivative hedging instrument	$	460.4	$	—	$	460.4	$	—
Contingent consideration liabilities	$	356.7	$	—	$	—	$	356.7
December 28, 2019
Money market fund	$	1.2	$	1.2	$	—	$	—
Derivative assets	$	29.3	$	—	$	29.3	$	—
Derivative liabilities	$	65.5	$	—	$	65.5	$	—
Non-derivative hedging instrument	$	335.5	$	—	$	335.5	$	—
Contingent consideration liability	$	196.1	$	—	$	—	$	196.1



(Millions of Dollars)	December 28, 2019		Net Additions		Usage			Currency		March 28, 2020
Severance and related costs	$	140.3	$	2.9	$	(27.8	)	$	1.7	$	117.1
Facility closures and asset impairments	7.5		1.0		(5.9		)	—		2.6
Total	$	147.8	$	3.9	$	(33.7	)	$	1.7	$	119.7



(Millions of Dollars)	Term	Maximum Potential Payment		Carrying Amount of Liability
Guarantees on the residual values of leased assets	One to four years	$	103.8	$	—
Standby letters of credit	Up to three years	158.8		—
Commercial customer financing arrangements	Up to six years	64.7		6.2
Total		$	327.3	$	6.2


•	Ensuring the health and safety of its employees and supply chain partners;


•	Maintaining business continuity and financial strength and stability;


•	Serving its customers as they provide essential products and services to the world; and