Stanley Black & Decker Inc.
07/29/2026 | Press release | Distributed by Public on 07/29/2026 13:59
Quarterly Report for Quarter Ending July 4, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains statements reflecting the Company's views about its future performance that constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Please read the information under the caption entitled "Cautionary Statement Concerning Forward-Looking Statements."
Throughout this Management's Discussion and Analysis ("MD&A"), references to Notes refer to the "Notes To Unaudited Condensed Consolidated Financial Statements" in Part 1, Item 1 of this Quarterly Report on Form 10-Q, unless otherwise indicated.
BUSINESS OVERVIEW
Strategy
The Company is a global provider of hand tools, power tools, outdoor products and related accessories, as well as a leading provider of engineered fastening solutions. In recent years, the Company has re-shaped its portfolio through a series of divestitures. These divestitures reflect the Company's ongoing strategic commitment to simplify and streamline its portfolio to focus on its leading market positions in tools and outdoor, as well as engineered fastening systems.
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 organization, focused on its core imperatives, the Company is well-positioned to drive performance towards its long-term financial targets.
In terms of capital allocation, the Company's top priority is funding organic growth investments that drive long-term value. The Company also remains committed, over time, to maintaining a strong and growing dividend and opportunistically repurchasing shares. The Company deployed the vast majority of the net proceeds from the Consolidated Aerospace Manufacturing ("CAM") divestiture to reduce debt and repurchase shares in the second quarter of 2026.
Repurchases Of Common Stock
On April 23, 2026, the Board terminated the previous share repurchase program (the "April 2022 Program") and approved a new share repurchase program of up to $500 million in purchase price of shares of the Company's common stock ("the April 2026 Program"). As of July 4, 2026, the authorized amount remaining under the April 2026 Program was approximately $250 million after giving effect to open market repurchases made in the second quarter of 2026, as further discussed below. The April 2026 Program will expire 36 months from April 23, 2026. The Company may repurchase shares under the April 2026 Program through open market purchases, privately negotiated transactions or share repurchase programs, including one or more accelerated share repurchase programs (under which an initial payment for the entire repurchase amount may be made at the inception of the program). Such repurchases may be funded from cash on hand, short-term borrowings or other sources of cash at the Company's discretion, and the Company is under no obligation to repurchase any shares pursuant to the April 2026 Program. The authorized amount available for share repurchases under the April 2026 Program does not include approximately 2.4 million shares remaining under a forward share purchase contract entered into in March 2015 as further discussed below, which were reserved and authorized for purchase under the Company's approved repurchase program in place prior to the April 2026 Program.
During the second quarter of 2026, the Company executed open market share repurchases for a total of 3,239,690 shares of common stock for approximately $250.0 million. In addition, during the second quarter of 2026, the Company paid $125 million to partially settle its March 2015 forward share purchase contract and physically received 1,271,583 shares of common stock. Subsequent to this partial settlement, 2,373,927 shares of common stock remain under the contract. The reduction of shares of common stock outstanding was recorded at the inception of the forward share purchase contract in March 2015 and factored into the calculation of weighted-average shares outstanding at that time; therefore, the shares physically settled in the partial settlement during the second quarter of 2026 did not affect the calculation of weighted-average shares outstanding.
Refer to Note C, Earnings Per Share, for further discussion.
Repurchases Of Securities Other Than Common Stock
In October 2025, 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. No repurchases have been executed pursuant to this authorization to date.
Divestitures
On April 6, 2026, the Company sold the CAM business to Howmet Aerospace for $1.8 billion in cash. The Company deployed the vast majority of the net proceeds to reduce debt and repurchase shares in the second quarter of 2026. Through the date of sale, net sales and segment profit for the Engineered Fastening segment included $117.0 million and $22.0 million, respectively, related to the CAM business. See below for further discussion of the Company's business segments and results.
Refer to Note Q, Divestitures, for further discussion.
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 was completed as of the end of 2025 and 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.
Although the broader Global Cost Reduction Program has been completed, the Company continues to pursue targeted and strategic footprint actions to support the ongoing network transformation and reposition its supply chain, as necessary.
The charges associated with the execution of the Global Cost Reduction Program in 2025, as well as the charges related to targeted footprint actions in 2026, are reflected in the Non-GAAP adjustments detailed below in "Results From Operations." The expected charges for 2026 are reflected in the Company's full year estimate of Non-GAAP adjustments detailed below in "2026 Guidance".
Segments
The Company's operations are classified into two reportable business segments: Tools & Outdoor and Engineered Fastening. 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.
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
On April 6, 2026, the Company completed the sale of its CAM business to Howmet Aerospace. This divestiture does not qualify for discontinued operations and therefore, the results of the CAM business are included in the Company's Consolidated Statements of Operations and Comprehensive Income through the date of sale.
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 Guidance" 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 Guidance." 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's operating results at the consolidated level as discussed below include and exclude certain gains and charges impacting gross profit, SG&A, Other, net, and Income taxes. The Company's business segment results as discussed below include and exclude certain gains and charges impacting gross profit and SG&A. Corporate overhead as discussed below includes and excludes certain gains and charges. These amounts for the second quarter and year-to-date periods of 2026 and 2025 are as follows:
Second Quarter 2026
| (Millions of Dollars) | GAAP |
Non-GAAP Adjustments2
|
Non-GAAP | |||||||||||||||||
| Gross profit | $ | 1,305.8 | $ | 28.7 | $ | 1,334.5 | ||||||||||||||
|
Selling, general and administrative1
|
947.9 | (3.0) | 944.9 | |||||||||||||||||
| Earnings before income taxes | 499.0 | (221.3) | 277.7 | |||||||||||||||||
|
Income taxes3
|
147.7 | (105.7) | 42.0 | |||||||||||||||||
| Net earnings | 351.3 | (115.6) | 235.7 | |||||||||||||||||
| Diluted earnings per share of common stock | $ | 2.33 | $ | (0.76) | $ | 1.57 | ||||||||||||||
Year-to-Date 2026
| (Millions of Dollars) | GAAP |
Non-GAAP Adjustments2
|
Non-GAAP | |||||||||||||||||
| Gross profit | $ | 2,463.1 | $ | 33.9 | $ | 2,497.0 | ||||||||||||||
|
Selling, general and administrative1
|
1,831.9 | (10.7) | 1,821.2 | |||||||||||||||||
| Earnings before income taxes | 583.8 | (140.3) | 443.5 | |||||||||||||||||
|
Income taxes3
|
172.9 | (87.3) | 85.6 | |||||||||||||||||
| Net earnings | 410.9 | (53.0) | 357.9 | |||||||||||||||||
| Diluted earnings per share of common stock | $ | 2.71 | $ | (0.35) | $ | 2.36 | ||||||||||||||
Second Quarter 2025
| (Millions of Dollars) | GAAP |
Non-GAAP Adjustments2
|
Non-GAAP | |||||||||||||||||
| Gross profit | $ | 1,066.5 | $ | 20.0 | $ | 1,086.5 | ||||||||||||||
|
Selling, general and administrative1
|
873.1 | (52.6) | 820.5 | |||||||||||||||||
| Earnings before income taxes | 26.7 | 83.0 | 109.7 | |||||||||||||||||
|
Income taxes3
|
(75.2) | 21.8 | (53.4) | |||||||||||||||||
| Net earnings | 101.9 | 61.2 | 163.1 | |||||||||||||||||
| Diluted earnings per share of common stock | $ | 0.67 | $ | 0.41 | $ | 1.08 | ||||||||||||||
Year-to-Date 2025
| (Millions of Dollars) | GAAP |
Non-GAAP Adjustments2
|
Non-GAAP | |||||||||||||||||
| Gross profit | $ | 2,187.3 | $ | 36.7 | $ | 2,224.0 | ||||||||||||||
|
Selling, general and administrative1
|
1,740.1 | (74.6) | 1,665.5 | |||||||||||||||||
| Earnings before income taxes | 154.3 | 114.5 | 268.8 | |||||||||||||||||
|
Income taxes3
|
(38.0) | 29.3 | (8.7) | |||||||||||||||||
| Net earnings | 192.3 | 85.2 | 277.5 | |||||||||||||||||
| Diluted earnings per share of common stock | $ | 1.27 | $ | 0.56 | $ | 1.83 | ||||||||||||||
|
1 Includes provision for credit losses
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2 Refer to table below for additional detail of the Non-GAAP adjustments
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3 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.
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Below is a summary of the pre-tax Non-GAAP adjustments for the second quarter and year-to-date periods of 2026 and 2025.
| Second Quarter | Year-to-Date | |||||||||||||||||||||||||
| (Millions of Dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Supply Chain Transformation Costs: | ||||||||||||||||||||||||||
|
Footprint Rationalization1
|
$ | 29.0 | $ | 5.4 | $ | 34.2 | $ | 12.0 | ||||||||||||||||||
| Material Productivity & Operational Excellence | - | 3.3 | - | 8.0 | ||||||||||||||||||||||
|
Voluntary retirement program2
|
(0.5) | 11.9 | (0.5) | 11.9 | ||||||||||||||||||||||
| Other charges | 0.2 | (0.6) | 0.2 | 4.8 | ||||||||||||||||||||||
| Gross profit | $ | 28.7 | $ | 20.0 | $ | 33.9 | $ | 36.7 | ||||||||||||||||||
| Supply Chain Transformation Costs: | ||||||||||||||||||||||||||
|
Footprint Rationalization1
|
$ | 2.3 | $ | 5.0 | $ | 8.9 | $ | 11.1 | ||||||||||||||||||
|
Complexity Reduction & Operational Excellence3
|
- | 10.5 | - | 20.5 | ||||||||||||||||||||||
| Transition services costs related to previously divested businesses | 1.9 | 3.1 | 1.9 | 8.4 | ||||||||||||||||||||||
|
Voluntary retirement program2
|
(2.7) | 33.5 | (2.7) | 33.5 | ||||||||||||||||||||||
| Other charges | 1.5 | 0.5 | 2.6 | 1.1 | ||||||||||||||||||||||
| Selling, general and administrative | $ | 3.0 | $ | 52.6 | $ | 10.7 | $ | 74.6 | ||||||||||||||||||
| Income related to providing transition services to previously divested businesses | $ | (1.9) | $ | (3.5) | $ | (1.9) | $ | (10.3) | ||||||||||||||||||
|
Voluntary retirement program2
|
- | 6.2 | - | 6.2 | ||||||||||||||||||||||
|
Deal-related costs and other4
|
2.2 | (11.1) | (0.4) | (13.0) | ||||||||||||||||||||||
| Other, net | $ | 0.3 | $ | (8.4) | $ | (2.3) | $ | (17.1) | ||||||||||||||||||
| (Gain) loss on sales of businesses | $ | (273.7) | $ | - | $ | (270.6) | $ | 0.3 | ||||||||||||||||||
|
Asset impairment charges5
|
5.3 | - | 28.0 | - | ||||||||||||||||||||||
|
Restructuring charges6
|
15.1 | 18.8 | 60.0 | 20.0 | ||||||||||||||||||||||
| Non-GAAP adjustments before income taxes | $ | (221.3) | $ | 83.0 | $ | (140.3) | $ | 114.5 | ||||||||||||||||||
| 1 | Footprint Rationalization costs in 2026 primarily relate to accelerated depreciation of manufacturing equipment driven by plants closed in the second quarter of 2026, as well as site transformation and re-configuration costs. Footprint Rationalization costs in 2025 primarily relate to site transformation and re-configuration costs. Facility exit costs related to site closures are reported in Restructuring charges. | ||||
| 2 | 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. | ||||
| 3 | Complexity Reduction & Operational Excellence costs in 2025 primarily related 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. | ||||
| 4 | Includes an $8.1 million gain on sale of a distribution center in the second quarter of 2025 as part of the supply chain transformation. | ||||
| 5 | Asset impairment charges in 2026 relate to the write-down of assets associated with the exit of a Tools and Outdoor product line and related plant closure. | ||||
| 6 | 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, transfers of product lines between segments, and the strategic transition to a licensing model for gas walk-behind outdoor product lines (as previously communicated).
Consolidated Results
Net Sales: Net sales were $3.961 billion in the second quarter of 2026 compared to $3.945 billion in the second quarter of 2025, relatively flat year-over-year, as a 3% increase in volume and a 1% increase from foreign currency were offset by a 3% decrease from the CAM business divestiture and a 1% decrease from strategic outdoor product line transitions. Tools & Outdoor net sales increased 3% compared to the second quarter of 2025 as a 3% increase in volume and a 1% increase from foreign currency were partially offset by a 1% decrease from strategic outdoor product line transitions. Engineered Fastening net sales decreased 18% compared to the second quarter of 2025 as a 21% decrease from the CAM business divestiture was partially offset by a 2% increase in volume and a 1% increase in price.
Net sales were $7.807 billion in the first half of 2026 compared to $7.690 billion in the first half of 2025, representing an increase of 2%, as a 2% increase from foreign currency and 1% increase in price were partially offset by a 1% decrease from the CAM business divestiture. Tools & Outdoor net sales increased 2% compared to the first half of 2025 as a 2% increase in price and a 2% increase from foreign currency were partially offset by a 1% decrease in volume and a 1% decrease from strategic outdoor product line transitions. Engineered Fastening net sales decreased 4% compared to the first half of 2025, as a 10% decrease from the CAM business divestiture was partially offset by a 4% increase in volume, a 1% increase in price, and a 1% increase from foreign currency.
Cost of Sales and Gross Profit: The Company reported cost of sales of $2.655 billion in the second quarter of 2026 compared to $2.879 billion in the second quarter of 2025. The year-over-year change in cost of sales was primarily driven by operational cost improvements and the net benefit related to tariff refunds realized and directly attributable offsetting costs for variable incentive compensation and growth investments. Gross profit, defined as sales less cost of sales, was $1.306 billion, or 33.0% of net sales, in the second quarter of 2026 compared to $1.067 billion, or 27.0% of net sales, in the second quarter of 2025. Non-GAAP adjustments, which increased cost of sales and reduced gross profit, were $28.7 million, or 0.7% of net sales, for the three months ended July 4, 2026, and $20.0 million, or 0.5% of net sales, for the three months ended June 28, 2025. Excluding these adjustments, gross profit was 33.7% of net sales for the three months ended July 4, 2026, compared to 27.5% of net sales for the three months ended June 28, 2025. The year-over-year change in gross profit as a percent of sales and adjusted gross profit as a percent of sales were primarily driven by operational cost improvement and favorable product mix, in addition to a benefit of approximately 250 basis points related to the net impact of tariff refunds realized as described above.
The Company reported cost of sales of $5.344 billion in the first half of 2026 compared to $5.503 billion in the first half of 2025. The year-over-year change in cost of sales was driven by the same factors discussed above that impacted the second quarter of 2026. Gross profit, defined as sales less cost of sales, was $2.463 billion, or 31.5% of net sales, in the first half of 2026 compared to $2.187 billion, or 28.4% of net sales, in the first half of 2025. Non-GAAP adjustments, which increased cost of sales and reduced gross profit, were $33.9 million, or 0.5% of net sales, for the six months ended July 4, 2026, and $36.7 million, or 0.5% of net sales, for the six months ended June 28, 2025. Excluding these adjustments, gross profit was 32.0% of net sales for the six months ended July 4, 2026, compared to 28.9% of net sales for the six months ended June 28, 2025. The year-over-year change in gross profit as a percent of sales and adjusted gross profit as a percent of sales were driven by the same factors discussed above that impacted the second quarter of 2026.
Selling, general and administrative: SG&A, inclusive of the provision for credit losses, was $947.9 million, or 23.9% of net sales, in the second quarter of 2026, compared to $873.1 million, or 22.1% of net sales, in the second quarter of 2025. Within SG&A, Non-GAAP adjustments totaled $3.0 million, less than 0.1% of net sales, for the three months ended July 4, 2026 and $52.6 million, or 1.3% of net sales, for the three months ended June 28, 2025. Excluding these adjustments, SG&A was 23.9% of net sales for the three months ended July 4, 2026, compared to 20.8% for the three months ended June 28, 2025. The year-over-year change in SG&A as a percent of sales and adjusted SG&A as a percent of sales were primarily driven by incremental variable incentive compensation costs and growth investments directly attributable to the tariff refunds realized.
SG&A, inclusive of the provision for credit losses, was $1.832 billion, or 23.5% of net sales, in the first half of 2026, compared to $1.740 billion, or 22.6% of net sales, in the first half of 2025. Within SG&A, Non-GAAP adjustments totaled $10.7 million, or 0.2% of net sales, for the six months ended July 4, 2026 and $74.6 million, or 0.9% of net sales, for the six months ended June 28, 2025. Excluding these adjustments, SG&A was 23.3% of net sales for the six months ended July 4, 2026, compared to 21.7% for the six months ended June 28, 2025. The year-over-year change in SG&A as a percent of sales and adjusted SG&A as a percent of sales were driven by the same factors discussed above that impacted the second quarter of 2026.
Distribution center costs (i.e. warehousing and fulfillment facility and associated labor costs) are classified within SG&A. This classification may differ from other companies who may report such expenses within cost of sales. Due to diversity in practice, to the extent the classification of these distribution costs differs from other companies, the Company's gross margins may not be comparable. Such distribution costs classified in SG&A amounted to $140.5 million and $276.4 million for the three and six
months ended July 4, 2026, respectively, and $131.1 million and $260.1 million for the three and six months ended June 28, 2025, respectively.
Other, net: Other, net totaled $52.9 million and $67.7 million in the second quarter of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, Other, net totaled $52.6 million and $76.1 million in the second quarter of 2026 and 2025, respectively. The year-over-year decrease in Other, net, both inclusive and exclusive of Non-GAAP adjustments, is primarily driven by lower intangible amortization expense in 2026 and positive impacts from foreign currency.
Other, net totaled $94.8 million and $115.2 million in the first half of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, Other, net totaled $97.1 million and $132.3 million for the first six months of 2026 and 2025, respectively. The year-over-year decrease in Other, net, both inclusive and exclusive of Non-GAAP adjustments, is primarily driven by lower intangible amortization expense in 2026 and positive impacts from foreign currency.
(Gain) Loss on Sales of Businesses: During the first half of 2026, the Company reported a net pre-tax gain of $270.6 million, driven by a pre-tax gain of $276.7 million from the CAM business divestiture, which was partially offset by a pre-tax loss of $6.1 million related to the divestitures of two small businesses in the Tools & Outdoor segment.
During the first half of 2025, the Company reported a pre-tax loss of $0.3 million related to the divestiture of a small business in the Engineered Fastening segment.
Asset Impairment Charges: During the three and six months ended July 4, 2026, the Company recorded a pre-tax impairment charge of $5.3 million and $28.0 million, respectively, related to the write-down of assets associated with the exit of a Tools and Outdoor product line and related plant closure.
Interest, net: Net interest expense was $59.3 million in the second quarter of 2026 and $80.2 million in the second quarter of 2025. On a year-to-date basis, net interest expense was $135.2 million in 2026 and $157.4 million in 2025.The year-over-year decreases were primarily driven by lower interest expense due to lower debt balances partially offset by lower interest income.
Income Taxes: For the three and six months ended July 4, 2026, the Company recognized income tax expense of $147.7 million and $172.9 million, respectively, resulting in effective tax rates of 29.6% for both periods. These effective tax rates for the three and six months ended July 4, 2026 differ from the U.S. statutory tax rate of 21% primarily due to the tax effect of certain basis differences associated with the CAM divestiture for which no corresponding tax benefit was recognized and non-deductible expenses, partially offset by the remeasurement of uncertain tax positions. Excluding the tax effect on Non-GAAP adjustments for the three and six months ended July 4, 2026, the Company recognized income tax expense of $42.0 million and $85.6 million, respectively, resulting in effective tax rates of 15.1% and 19.3%, respectively. These effective tax rates for the three and six months ended July 4, 2026 differ from the U.S. statutory tax rate of 21% primarily due to the remeasurement of uncertain tax positions, partially offset by non-deductible expenses.
For the three and six months ended June 28, 2025, the Company recognized an income tax benefit of $75.2 million and $38.0 million, respectively, resulting in effective tax rates of (281.6)% and (24.6)%, respectively. Excluding the tax effect on Non-GAAP adjustments for the three and six months ended June 28, 2025, the Company recognized an income tax benefit of $53.4 million and $8.7 million, respectively, resulting in effective tax rates of (48.7)% and (3.2)%, respectively. These effective tax rates for the three and six months ended June 28, 2025 differ from the U.S. statutory tax rate of 21% primarily due to the remeasurement of uncertain tax positions, partially offset by non-deductible expenses.
Refer to Note M, Income Taxes, for additional information on the impacts in interim periods of changes in the estimated annual effective income tax rate.
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 expected to be immaterial to the Company's 2026 estimated annual tax rate. 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:
| Second Quarter | Year-to-Date | ||||||||||||||||||||||
| (Millions of Dollars) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales | $ | 3,564.3 | $ | 3,461.4 | $ | 6,899.9 | $ | 6,742.3 | |||||||||||||||
| Segment profit | $ | 389.0 | $ | 238.1 | $ | 665.0 | $ | 527.3 | |||||||||||||||
| % of Net sales | 10.9 | % | 6.9 | % | 9.6 | % | 7.8 | % | |||||||||||||||
Tools & Outdoor net sales increased $102.9 million, or 3.0%, in the second quarter of 2026 compared to the second quarter of 2025 as a 3% increase in volume and a 1% increase from foreign currency were partially offset by a 1% decrease from strategic outdoor product line transitions. Organic revenue increased 3%, primarily driven by power tools strength in U.S. retail and commercial and industrial ("C&I") channels. Total revenue increased 3% in North America, remained flat in Europe, and increased 8% in the rest of the world. Excluding the impact from foreign currency and strategic outdoor product line transitions, organic revenue increased 4% in North America, decreased 2% in Europe, and increased 3% in the rest of the world.
Tools & Outdoor net sales increased $157.6 million, or 2%, in the first half of 2026 compared to the first half of 2025 as a 2% increase in price and a 2% increase from foreign currency were partially offset by a 1% decrease in volume and a 1% decrease from strategic outdoor product line transitions. Tools & Outdoor organic revenues increased 1% primarily driven by power tools strength in U.S. retail and C&I channels and strong performance in prioritized international markets. Total revenue increased 1%, 5%, and 7% in North America, Europe and the rest of the world, respectively. Excluding the impact from foreign currency and strategic outdoor product line transitions, organic revenue increased 1% in North America, decreased 1% in Europe, and increased 2% in the rest of the world.
Tools & Outdoor segment profit for the second quarter of 2026 was $389.0 million, or 10.9% of net sales, compared to $238.1 million, or 6.9% of net sales, in the second quarter of 2025. Excluding Non-GAAP adjustments, which primarily related to charges associated with footprint actions in both periods and a voluntary retirement program in 2025, of $30.5 million, or 0.9% of net sales, in the three months ended July 4, 2026, and $38.4 million, or 1.1% of net sales, for the three months ended June 28, 2025, segment profit was 11.8% of net sales in the second quarter of 2026 and 8.0% of net sales in the second quarter of 2025. The year-over-year change in segment profit as a percent of sales and adjusted segment profit as a percent of sales were primarily driven by net productivity gains and favorable product mix, as well as a net benefit of approximately 150 basis points related to tariff refunds and directly attributable offsetting costs for variable incentive compensation and growth investments.
Tools & Outdoor segment profit for the first half of 2026 was $665.0 million, or 9.6% of net sales, compared to $527.3 million, or 7.8% of net sales, in the first half of 2025. Excluding Non-GAAP adjustments, which related to the same factors discussed above that impacted the second quarter of 2026 and 2025, of $43.1 million, or 0.7% of net sales, in the first half of 2026, and $63.4 million, or 1.0% of net sales, in the first half of 2025, segment profit was 10.3% of net sales in the first half of 2026 and 8.8% of net sales in the first half of 2025. The year-over-year changes in segment profit as a percent of sales were driven by the same factors discussed above that impacted the second quarter of 2026.
Engineered Fastening:
| Second Quarter | Year-to-Date | ||||||||||||||||||||||
| (Millions of Dollars) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales | $ | 396.4 | $ | 483.8 | $ | 907.2 | $ | 947.5 | |||||||||||||||
| Segment profit | $ | 51.6 | $ | 35.0 | $ | 112.5 | $ | 74.0 | |||||||||||||||
| % of Net sales | 13.0 | % | 7.2 | % | 12.4 | % | 7.8 | % | |||||||||||||||
Engineered Fastening net sales decreased $87.4 million, or 18.1%, in the second quarter of 2026 compared to the second quarter of 2025, as a 21% decrease from the CAM business divestiture was partially offset by a 2% increase in volume and a 1% increase in price. Engineered Fastening organic revenues increased 3%, driven by industrial strength, as well as continued automotive fasteners growth.
Engineered Fastening net sales decreased $40.3 million, or 4%, in the first half of 2026 compared to the first half of 2025, as a 10% decrease from the CAM business divestiture was partially offset by a 4% increase in volume, a 1% increase in price, and a 1% increase from foreign currency. Engineered Fastening organic revenues increased 5% driven by robust aerospace growth in the first quarter of 2026 and continued automotive fasteners growth.
Engineered Fastening segment profit for the second quarter of 2026 totaled $51.6 million, or 13.0% of net sales, compared to $35.0 million, or 7.2% of net sales, in the corresponding 2025 period. Non-GAAP adjustments totaled $0.1 million, or less than 0.1% of net sales, in the second quarter of 2026, and $17.3 million, or 3.6% of net sales, in the second quarter of 2025, which primarily related to costs associated with the supply chain transformation and a voluntary retirement program. Excluding these Non-GAAP adjustments, segment profit amounted to 13.0% of net sales in the second quarter of 2026 compared to 10.8% of net sales in the second quarter of 2025. The year-over-year change in segment profit as a percent of sales and adjusted segment profit as a percent of sales were driven by net productivity improvements, favorable automotive volume and mix, and a net benefit of approximately 50 basis points related to tariff refunds and directly attributable offsetting variable incentive compensation costs.
Engineered Fastening segment profit for the first half of 2026 totaled $112.5 million, or 12.4% of net sales, compared to $74.0 million, or 7.8% of net sales, in the corresponding 2025 period. Excluding Non-GAAP adjustments of $0.3 million, or less than 0.1% of net sales, in the first half of 2026, and $25.0 million, or 2.6% of net sales, in the first half of 2025, which relate to the same factors discussed above that impacted the second quarter of 2025, segment profit amounted to 12.4% of net sales in the first half of 2026 compared to 10.4% of net sales in the first half of 2025. The year-over-year changes in segment profit as a percent of sales and adjusted segment profit as a percent of sales were driven by the same factors discussed above that impacted the second quarter of 2026, as well as improved profitability in aerospace in the first quarter of 2026.
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 $82.7 million and $79.7 million in the second quarter of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, which primarily related to a voluntary retirement program and transition services costs related to previously divested businesses, the corporate overhead element of SG&A was $81.6 million and $62.8 million for the three months ended July 4, 2026 and June 28, 2025, respectively. The year-over-year increase was primarily driven by variable incentive compensation costs directly attributable to the tariff refund realized in the second quarter of 2026.
On a year-to-date basis, corporate overhead amounted to $146.3 million and $154.1 million in the first half of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, which related to the same factors discussed above that impacted the second quarter of 2026 and 2025, the corporate overhead element of SG&A was $145.1 million and $131.2 million in the first half of 2026 and 2025, respectively. The year-over-year increase was primarily driven by the same factor discussed above that impacted the second quarter of 2026.
RESTRUCTURING ACTIVITIES
A summary of the restructuring reserve activity from January 3, 2026 to July 4, 2026 is as follows:
| (Millions of Dollars) |
January 3, 2026 |
Net Additions | Usage | Currency |
July 4, 2026 |
||||||||||||||||||||||||
| Severance and related costs | $ | 45.7 | $ | 47.0 | $ | (49.3) | $ | 0.3 | $ | 43.7 | |||||||||||||||||||
| Facility closures and other | 2.1 | 13.0 | (13.7) | (0.1) | 1.3 | ||||||||||||||||||||||||
| Total | $ | 47.8 | $ | 60.0 | $ | (63.0) | $ | 0.2 | $ | 45.0 | |||||||||||||||||||
For the three and six months ended July 4, 2026, the Company recognized net restructuring charges of $15.1 million and $60.0 million, respectively, related to severance costs primarily associated with reorganizations of the Company's supply chain resources and plant closures, as well as facility exit costs. The Company expects to achieve annual net cost savings of approximately $120 million by the end of 2027 related to the restructuring costs incurred during the six months ended July 4, 2026. The majority of the $45.0 million of reserves remaining as of July 4, 2026 is expected to be utilized within the next twelve months.
Segments:
The $60.0 million of net restructuring charges for the six months ended July 4, 2026 includes: $50.0 million in the Tools & Outdoor segment; $6.5 million in the Engineered Fastening segment; and $3.5 million in Corporate.
The $15.1 million of net restructuring charges for the three months ended July 4, 2026 includes: $14.4 million of charges in the Tools & Outdoor segment; $1.0 million of net reversals in the Engineered Fastening segment; and $1.7 million of charges in Corporate.
The anticipated annual net cost savings of approximately $120 million related to the 2026 restructuring actions include: $103 million in the Tools & Outdoor segment; $9 million in the Engineered Fastening segment; and $8 million in Corporate.
TARIFF POLICY IMPLICATIONS
On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). The ruling did not address potential refunds. The U.S. Court of International Trade ("CIT") ordered the U.S. Customs and Border Protection ("CBP") to refund the collected IEEPA tariffs. On April 20, 2026, the CBP launched the Consolidated Administration and Processing of Entries (CAPE) system for IEEPA refunds, which the CBP continues to implement through a phased approach. The Company has submitted claims relating to Phase 1 and Phase 2 of the CAPE tariff refund process. During the three months ended July 4, 2026, the Company recognized a pre-tax gain of $118 million in cost of sales related to Phase 1 IEEPA tariff refunds realized, which was partially offset by directly attributable costs for variable incentive compensation and growth investments impacting cost of sales and selling, general, and administrative ("SG&A") expenses totaling approximately $83 million, and related tax effects approximating the Company's marginal tax rate. The Company expects this pre-tax gain to be further offset by additional growth investments deployed in the third and fourth quarters of 2026. There can be no guarantee that additional refunds in excess of the amounts realized in the second quarter of 2026 will be received or that the ultimate amount of refunds received will equal the full amount of IEEPA tariffs paid. Furthermore, any future refund amounts realized will most likely result in additional obligations to the Company, including variable incentive compensation and taxes, and may be utilized to support incremental growth investments. Refunds may also be subject to further legal, regulatory, or administration developments. Following the U.S. Supreme Court's decision, the U.S. administration announced temporary tariffs under Section 122 of the Trade Act of 1974 ("Section 122 tariffs"), which expired on July 24, 2026. In July 2026, the U.S. administration announced plans to implement additional tariffs under Section 301 of the Trade Act of 1974 ("Section 301 tariffs") and could take action to implement additional tariffs in the future. The Company will continue to monitor and evaluate developments on tariff policy and the ongoing phased refund process related to IEEPA tariffs as new information becomes available.
In response to the U.S. administration's policy actions in 2025 and recent developments in 2026 discussed above, as well as 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 tariff policy remain unchanged:
•Serve its end users and customers during a dynamic period;
•Minimize 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;
•Implemented price increases in 2025 with a long-term perspective and to protect cash flow; and
•Continue to proactively engage with the U.S. administration.
Refer to "2026 Guidance" below for more information.
2026 GUIDANCE
This discussion of certain guidance is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company is updating its guidance for 2026 diluted earnings per share on a GAAP basis to be in the range of $4.60 to $5.45, revised from $4.15 to $5.35. The Company is also updating its guidance for diluted earnings per share excluding Non-GAAP adjustments to be in the range of $5.20 to $5.80, revised from $4.90 to $5.70. These revised diluted earnings per share ranges on a GAAP basis and excluding Non-GAAP adjustments represent year-over-year growth of 90% and 18%, respectively, at the midpoint of each range as compared to 2025 performance. The Company is now targeting free cash flow to be in the range of $600 to $800 million, revised from $500 to $700 million, which incorporates the tariff refund realized in the second quarter of 2026 and projected taxes and fees associated with the CAM divestiture.
The above guidance ranges exclude the results of the CAM business as of April 6, 2026, and the impacts of any potential future tariff refunds. Furthermore, the above guidance ranges assume that the temporary tariff tailwind in 2026 driven by the ruling on IEEPA tariffs, which were at higher levels than the Section 122 tariffs that replaced them through late July, will be offset by higher inflation, primarily driven by battery metals, tungsten, and oil derivatives. The revised full year guidance ranges also assume that the recently announced Section 301 tariffs, as well as additional tariffs expected under Section 301, will approximate IEEPA-equivalent levels.
The difference between the guidance for 2026 diluted earnings per share on a GAAP basis and diluted earnings per share excluding Non-GAAP adjustments is approximately $0.35 to $0.60, consisting primarily of charges related to footprint actions and other cost actions, largely offset by the gain on the sale of the CAM business.
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 $763.1 million in the second quarter of 2026 compared to $214.3 million in the corresponding period of 2025, primarily driven by changes in working capital. Year-to-date cash flows provided by operations were $374.3 million in 2026 compared to cash flows used in operations of $205.7 million in 2025, primarily driven by the same factors discussed above that impacted the second quarter of 2026.
Free Cash Flow: Free cash flow, as defined in the table below, was an inflow of $698.2 million in the second quarter of 2026 and $134.7 million in the corresponding period of 2025. On a year-to-date basis, free cash flow was an inflow of $250.9 million in 2026 compared to an outflow of $350.3 million in 2025. The year-over-year change in free cash flow was due to the same factors discussed above in operating activities. Management considers free cash flow an important indicator of its liquidity and capital efficiency, as well as its ability to fund future growth and provide dividends to shareowners, and is useful information for investors. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company's common stock and business acquisitions, among other items.
| Second Quarter | Year-to-Date | ||||||||||||||||||||||
| (Millions of Dollars) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 763.1 | $ | 214.3 | $ | 374.3 | $ | (205.7) | |||||||||||||||
| Less: capital and software expenditures | (64.9) | (79.6) | (123.4) | (144.6) | |||||||||||||||||||
| Free cash flow | $ | 698.2 | $ | 134.7 | $ | 250.9 | $ | (350.3) | |||||||||||||||
Investing Activities: Cash flows provided by investing activities totaled $1.753 billion in the second quarter of 2026, primarily due to proceeds from the sale of the CAM business of $1.815 billion, which was partially offset by capital and software expenditures of $64.9 million. Cash flows used in investing activities totaled $67.2 million in the second quarter of 2025, primarily due to capital and software expenditures of $79.6 million.
Cash flows provided by investing activities totaled $1.698 billion in the first half of 2026, primarily due to proceeds from the sale of the CAM business of $1.815 billion, which was partially offset by capital and software expenditures of $123.4 million. Cash flows used in investing activities totaled $124.9 million in the first half of 2025, primarily due to capital and software expenditures of $144.6 million.
Financing Activities: Cash flows used in financing activities totaled $2.251 billion in the second quarter of 2026, primarily driven by net short-term commercial paper repayments of $1.750 billion, purchases of common stock for treasury of $252.1 million, a partial cash settlement of a forward share purchase contract of $125.0 million, and cash dividend payments on common stock of $124.3 million. Cash flows used in financing activities totaled $223.0 million in the second quarter of 2025, primarily driven by cash dividend payments on common stock of $124.0 million and net short-term commercial paper repayments of $98.2 million.
Cash flows used in financing activities totaled $1.743 billion in the first half of 2026, primarily driven by net short-term commercial paper repayments of $604.8 million, payments on long-term debt of $500.1 million, purchases of common stock for treasury of $267.4 million, cash dividend payments on common stock of $250.3 million, and a partial cash settlement of a forward share purchase contract of $125.0 million. Cash flows provided by financing activities totaled $279.0 million in the first half of 2025, primarily driven by net short-term commercial paper borrowings of $1.038 billion, partially offset by payments on long-term debt of $500.3 million and cash dividend payments on common stock of $248.5 million.
Credit Ratings & 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). There were no changes to any of the Company's credit ratings during the first half of 2026. Failure to maintain investment grade rating levels could adversely affect the Company's cost of funds, liquidity and access to capital markets, but would not have an adverse effect on the Company's ability to access its existing committed credit facilities.
Cash and cash equivalents totaled $592.4 million as of July 4, 2026, of which approximately 60% was held in foreign jurisdictions. Cash and cash equivalents totaled $280.1 million as of January 3, 2026, which was primarily held in foreign jurisdictions.
In March 2026, the Company redeemed its $500 million 3.40% notes, at maturity. The redemption was funded through the issuance of commercial paper.
The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of July 4, 2026, the Company had no commercial paper borrowings outstanding. In the second quarter of 2026, the Company utilized the majority of the net proceeds from the CAM divestiture to repay commercial paper borrowings. As of January 3, 2026, the Company had $605.6 million of commercial paper borrowings outstanding, of which $555.6 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.
In June 2026, the Company amended and restated its existing $2.25 billion committed credit facility with the concurrent execution of a new five-year $2.0 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 18, 2031 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. The 5-Year Credit Agreement includes the covenants listed below. As of July 4, 2026 and January 3, 2026, the Company had not drawn on its five-year committed credit facility.
In June 2026, the Company terminated its 364-Day $1.25 billion committed credit facility (the "2025 Syndicated 364-Day Credit Agreement") dated June 2025. There were no outstanding borrowings under the 2025 Syndicated 364-Day Credit Agreement upon termination and as of January 3, 2026. Contemporaneously, the Company entered into a new $1.0 billion syndicated 364-Day Credit Agreement (the "2026 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2026 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 2026 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2026 Syndicated 364-Day Credit Agreement by the earlier of June 17, 2027 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 2026 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 July 4, 2026, the Company had not drawn on its 2026 Syndicated 364-Day Credit Agreement.
The 5-Year Credit Agreement and the 2026 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 5-Year Credit Agreement and the 2026 Syndicated 364-Day Credit Agreement, respectively), 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 the aggregate.
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 forward share purchase contract and updated the final settlement date to June 2028, or earlier at the Company's option. In May 2026, the Company paid $125 million and physically settled 1,271,583 shares of common stock. Subsequent to this partial settlement, 2,373,927 shares of common stock remain under the contract.
Refer to Note G, Long-Term Debt and Financing Arrangements, for further discussion of the Company's financing arrangements.
OTHER MATTERS
There have been no changes in the Company's critical accounting estimates during the second quarter of 2026. Refer to the "Other Matters" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended January 3, 2026 for a discussion of the Company's critical accounting estimates.
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