STANLEY BLACK DECKER INC

Previous wording

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

Current wording

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 under the Private Securities Litigation Reform Act of 1995."

Previous wording

The SG&A cost savings are expected to be generated by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend. These savings will help fund $300 million to $500 million of innovation and commercial investments through 2025 to accelerate organic growth.

Current wording

The SG&A cost savings are expected to be generated by simplifying the corporate structure, optimizing organizational spans and layers and reducing indirect spend. These savings will help fund $300 million to $500 million of innovation and commercial investments through 2025 designed to accelerate organic growth.

Previous wording

The charges associated with the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations" and the full year estimate of Non-GAAP adjustments detailed below in "2024 Outlook". The cash investment required to achieve the $1.5 billion of pre-tax run-rate supply chain cost savings is expected to be approximately $0.9 billion to $1.1 billion, of which approximately 40% is expected to be capital expenditures. The Company will continue prioritizing capital expenditures consistent with its existing approach and expects total capital expenditures, inclusive of the supply chain transformation, to be $400 million to $500 million for 2024 and to approximate 3.0% to 3.5% of net sales annually in 2025 and beyond.

Current wording

The charges associated with the supply chain transformation are reflected in the Non-GAAP adjustments detailed below in "Results From Operations" and the full year estimate of Non-GAAP adjustments detailed below in "2024 Outlook". The cash investment required to achieve the $1.5 billion of pre-tax run-rate supply chain cost savings is expected to be approximately $0.9 billion to $1.1 billion, of which approximately 40% is expected to be capital expenditures. Through 2023, the Company has made approximately $0.2 billion of these cash investments. The Company will continue prioritizing capital expenditures consistent with its existing approach and expects total capital expenditures, inclusive of the supply chain transformation, to be $375 million to $475 million for 2024 and to approximate 3.0% to 3.5% of net sales annually in 2025 and beyond.

Previous wording

During the first three months of 2024 and since inception of the program, the Company has generated approximately $145 million and $1.2 billion, respectively, of pre-tax run-rate savings, driven by lower headcount, indirect spend reductions and the supply chain transformation. These savings are comprised of supply chain efficiency benefits, which will support gross margin improvements as the benefits turn through inventory, and SG&A savings. The Company believes that it is on track to grow to approximately $2 billion of pre-tax run-rate savings by year-end 2025. In addition, the Company has reduced inventory by approximately $1.9 billion since the end of the second quarter of 2022 and expects further inventory and working capital reductions to support free cash flow generation in 2024.

Current wording

During the first six months of 2024 and since inception of the program, the Company has generated approximately $295 million and $1.3 billion, respectively, of pre-tax run-rate savings, driven by lower headcount, indirect spend reductions and the supply chain transformation. These savings are comprised of supply chain efficiency benefits, which will support gross margin improvements as the benefits turn through inventory, and SG&A savings. The Company believes that it is on track to grow to approximately $2 billion of pre-tax run-rate savings by year-end 2025. In addition, the Company has reduced inventory by approximately $2.1 billion since the end of the second quarter of 2022 and expects further inventory and working capital reductions to support free cash flow generation in 2024.

Previous wording

The Industrial segment is comprised of the Engineered Fastening and Infrastructure businesses. Annual revenues in the Industrial segment were $2.4 billion in 2023, representing 15% of the Company’s total revenues.

Current wording

The Industrial segment is comprised of the Engineered Fastening business and the Infrastructure business prior to its sale in April 2024. Annual revenues in the Industrial segment, inclusive of the Infrastructure business, were $2.4 billion in 2023, representing 15% of the Company’s total revenues.

Previous wording

On April 1, 2024, the Company completed the previously announced sale of its Infrastructure business to Epiroc AB. This divestiture does not qualify for discontinued operations and therefore, its results are included in the Company's Consolidated Statements of Operations and Comprehensive Loss for all periods presented.

Current wording

As previously discussed, the Company sold its Infrastructure business on April 1, 2024. This divestiture did not qualify for discontinued operations and therefore, its results were included in the Company's Consolidated Statements of Operations and Comprehensive (Loss) Income in continuing operations through the date of sale.

Previous wording

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. These amounts for the first quarters of 2024 and 2023 are as follows:

Current wording

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. These amounts for the second quarter and year-to-date periods of 2024 and 2023 are as follows:

Previous wording

Below is a summary of the pre-tax Non-GAAP adjustments for the first quarters of 2024 and 2023.

Current wording

Below is a summary of the pre-tax Non-GAAP adjustments for the second quarter and year-to-date periods of 2024 and 2023.

Previous wording

Net Sales: Net sales were $3.870 billion in the first three months of 2024 compared to $3.932 billion in the first three months of 2023, representing a decrease of 2% driven by a 1% decrease in volume and a 1% decrease from foreign currency. Tools & Outdoor net sales decreased 1% compared to the first three months of 2023, due to a 1% decline in volume. Industrial net sales decreased 5% compared to the first three months of 2023 as a 1% increase in price was more than offset by a 5% decrease in volume and a 1% decrease from foreign currency.

Current wording

Net sales were $7.894 billion in the first half of 2024 compared to $8.091 billion in the first half of 2023, representing a decrease of 2% driven by a 1% impact from the Infrastructure divestiture and a 1% decrease from foreign currency. Tools & Outdoor net sales decreased 1% compared to the first half of 2023 as a 1% increase in volume was more than offset by a 1% decline in both price and foreign currency. Industrial net sales decreased 12% compared to the first half of 2023 as a 10% impact from the Infrastructure divestiture, a 3% decrease in volume and a 1% decrease from foreign currency was partially offset by a 2% increase in price.

Previous wording

Gross Profit: Gross profit was $1.109 billion, or 28.6% of net sales, in the first three months of 2024 compared to $835.5 million, or 21.2% of net sales, in the first three months of 2023. Non-GAAP adjustments, which reduced gross profit, were $14.4 million for the three months ended March 30, 2024 and $73.4 million for the three months ended April 1, 2023. Excluding these adjustments, gross profit was 29.0% of net sales for the three months ended March 30, 2024, compared to 23.1% for the three months ended April 1, 2023, primarily due to lower inventory destocking costs, supply chain transformation benefits and lower shipping costs.

Current wording

Gross Profit: Gross profit was $1.141 billion, or 28.4% of net sales, in the second quarter of 2024 compared to $932.1 million, or 22.4% of net sales, in the second quarter of 2023. Non-GAAP adjustments, which reduced gross profit, were $33.5 million for the three months ended June 29, 2024 and $51.4 million for the three months ended July 1, 2023. Excluding these adjustments, gross profit was 29.2% of net sales for the three months ended June 29, 2024, compared to 23.6% for the three months ended July 1, 2023, primarily due to lower inventory destocking costs, supply chain transformation benefits and lower shipping costs.

Previous wording

SG&A Expenses: SG&A, inclusive of the provision for credit losses, was $851.8 million, or 22.0% of net sales, in the first three months of 2024, compared to $825.1 million, or 21.0% of net sales, in the first three months of 2023. Within SG&A, Non-GAAP adjustments totaled $20.1 million for the three months ended March 30, 2024 and $20.7 million for the three months ended April 1, 2023. Excluding these adjustments, SG&A was 21.5% of net sales for the three months ended March 30, 2024, compared to 20.5% for the three months ended April 1, 2023, as the Company increased investment in innovation and growth initiatives.

Current wording

SG&A Expenses: SG&A, inclusive of the provision for credit losses, was $828.6 million, or 20.6% of net sales, in the second quarter of 2024, compared to $837.3 million, or 20.1% of net sales, in the second quarter of 2023. Within SG&A, Non-GAAP adjustments totaled $27.6 million for the three months ended June 29, 2024 and $25.4 million for the three months ended July 1, 2023. Excluding these adjustments, SG&A was 19.9% of net sales for the three months ended June 29, 2024, compared to 19.5% for the three months ended July 1, 2023, as the Company increased investments to position the business to gain additional market share.

Previous wording

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 $130.5 million and $129.5 million for the first three months of 2024 and 2023, respectively.

Current wording

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 $131.8 million and $262.3 million for the three and six months ended June 29, 2024, respectively, and $130.7 million and $260.2 million for the three and six months ended July 1, 2023, respectively.

Previous wording

Loss on Sales of Businesses: During the first quarter of 2023, the Company reported a pre-tax loss of $7.6 million primarily related to the divestiture of a small business in the Industrial segment.

Current wording

Loss on Sales of Businesses: During the first half of 2023, the Company reported a pre-tax loss of $7.6 million primarily related to the divestiture of a small business in the Industrial segment.

Previous wording

Asset Impairment Charge: During the first three months of 2024, the Company recorded a pre-tax impairment loss of $25.5 million related to the Infrastructure business. Refer to Note Q, Divestitures, for additional information on the divestiture of the Infrastructure business completed in the second quarter of 2024.

Current wording

Asset Impairment Charge: During the first half of 2024, the Company recorded a pre-tax impairment loss of $25.5 million related to the Infrastructure business. Refer to Note Q, Divestitures, for additional information on the divestiture of the Infrastructure business completed in the second quarter of 2024.

Previous wording

Income Taxes: For the three months ended March 30, 2024, the Company recognized income tax expense of $28.8 million, resulting in an effective tax rate of 59.6%. Excluding the tax effect on Non-GAAP adjustments, for the three months ended March 30, 2024, the Company recognized income tax expense of $35.6 million, resulting in an effective tax rate of 29.7%. These effective tax rates differ from the U.S. statutory tax rate of 21% primarily due to non-deductible expenses, losses for which a tax benefit is not recognized, and U.S. tax on foreign earnings, partially offset by tax credits and state income taxes.

Current wording

Income Taxes: For the three and six months ended June 29, 2024, the Company recognized an income tax benefit from continuing operations of $2.9 million and income tax expense of $25.9 million, respectively, resulting in effective tax rates of 13.1% and 98.9%, respectively. Excluding the tax effect on Non-GAAP adjustments, for the three and six months ended June 29, 2024, the Company recognized income tax expense on continuing operations of $52.7 million and $88.3 million, respectively, resulting in effective tax rates of 24.3% and 26.2%, respectively. These effective tax rates for the three and six months ended June 29, 2024 differ from the U.S. statutory tax rate of 21% primarily due to non-deductible expenses, losses for which a tax benefit is not recognized, and U.S. tax on foreign earnings, partially offset by the remeasurement of uncertain tax position reserves, tax credits, and state income taxes.

Previous wording

For the three months ended April 1, 2023, the Company recognized income tax expense of $23.7 million, resulting in an effective tax rate of (14.4)%. Excluding the tax effect on Non-GAAP adjustments, for the three months ended April 1, 2023, the Company recognized an income tax expense of $3.3 million, resulting in an effective tax rate of (5.8)%. These effective tax rates differ from the U.S. statutory tax rate of 21% primarily due to U.S. tax on foreign earnings, non-deductible expenses, and interest on unrecognized tax benefits, partially offset by tax on foreign earnings at tax rates different than the U.S. tax rate, state income taxes, and tax credits.

Current wording

For the three and six months ended July 1, 2023, the Company recognized an income tax benefit from continuing operations of $253.3 million and $229.6 million, respectively, resulting in effective tax rates of 334.2% and 95.7%, respectively. During the three months ended July 1, 2023, the Company revised its estimated annual effective tax rate to reflect a tax benefit from an intra-entity asset transfer of certain intangible assets in connection with the continued reorganization of the Company’s supply chain. Accordingly, the income tax benefit for the three months ended July 1, 2023 included an incremental interim tax benefit to reflect the impact of the change in the estimated annual effective tax rate to the prior interim year-to-date tax expense, which reversed in the fourth quarter of 2023. The effective tax rates for the three and six months ended July 1, 2023 differ from the U.S. statutory tax rate of 21% primarily due to the tax benefit associated with the intra-entity asset transfer described above, tax on foreign earnings at tax rates different than the U.S. tax rate, state income taxes and tax credits, partially offset by U.S. tax on foreign earnings, non-deductible expenses and losses for which a tax benefit is not recognized.

Previous wording

Refer to Note M, Income Taxes, for additional information on the impacts in interim periods of changes in its estimated annual effective income tax rate.

Current wording

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.

Previous wording

Tools & Outdoor net sales decreased $30.8 million, or 1%, in the first three months of 2024 compared to the first three months of 2023 as volume growth in DEWALT® was more than offset by a muted market demand backdrop which contributed to a 1% decline in volume. Organic revenue decreased 2% and 3% in North America and Europe, respectively, and increased 7% in the rest of the world. During the first quarter of 2024, the U.S. retail point-of-sale demand was down modestly versus the prior year with modest growth in outdoor.

Current wording

Tools & Outdoor net sales decreased $13.5 million, or were relatively flat, in the second quarter of 2024 compared to the second quarter of 2023 as DEWALT® and outdoor leading volume gains of 2% were partially offset by a 1% decrease in both foreign currency and price. Organic revenue increased 1% in North America, decreased 3% in Europe and increased 5% in the rest of the world. During the second quarter of 2024, the U.S. retail point-of-sale demand was up modestly versus the prior year led by outdoor growth and recaptured DEWALT® cordless promotions.

Previous wording

Segment profit for the first three months of 2024 was $255.7 million, or 7.8% of net sales, compared to $18.7 million, or 0.6% of net sales, in the first three months of 2023. Excluding Non-GAAP adjustments of $22.9 million and $79.2 million for the three months ended March 30, 2024 and April 1, 2023, respectively, segment profit was 8.5% of net sales in the first three months of 2024 and 3.0% in the first three months of 2023. The year-over-year increase was a result of lower inventory destocking costs, supply chain transformation benefits and reduced shipping costs, which were partially offset by increased growth investments.

Current wording

Segment profit for the second quarter of 2024 was $316.1 million, or 9.0% of net sales, compared to $102.0 million, or 2.9% of net sales, in the second quarter of 2023. Excluding Non-GAAP adjustments of $52.6 million and $55.8 million for the three months ended June 29, 2024 and July 1, 2023, respectively, segment profit was 10.4% of net sales in the second quarter of 2024 and 4.5% in the second quarter of 2023. The year-over-year increase was primarily due to lower inventory destocking costs, supply chain transformation benefits and lower shipping costs, which were partially offset by growth investments.

Previous wording

Industrial net sales decreased $31.5 million, or 5%, in the first three months of 2024 compared to the first three months of 2023, as a 1% increase in price was more than offset by a 5% decrease in volume, exclusively in Infrastructure, and a 1% decrease from foreign currency. Engineered Fastening organic revenues increased 5%, with aerospace and automotive growth, which was partially offset by general industrial market softness.

Current wording

Industrial net sales decreased $152.5 million, or 12%, in the first half of 2024 compared to the first half of 2023, as a 10% impact from the Infrastructure divestiture, a 3% decrease in volume and a 1% decrease from foreign currency was partially offset by a 2% increase in price. Engineered Fastening organic revenues increased 4%, as aerospace and automotive growth were partially offset by general industrial market softness.

Previous wording

Industrial segment profit for the first three months of 2024 totaled $65.2 million, or 11.1% of net sales, compared to $67.4 million, or 10.9% of net sales, in the corresponding 2023 period. Excluding Non-GAAP adjustments of $5.7 million and $0.3 million for the three months ended March 30, 2024 and April 1, 2023, respectively, segment profit amounted to 12.1% of net sales in the first three months of 2024 compared to 11.0% in the first three months of 2023, due to price realization and cost control.

Current wording

Industrial segment profit for the second quarter of 2024 totaled $66.8 million, or 13.5% of net sales, compared to $71.6 million, or 11.6% of net sales, in the corresponding 2023 period. Excluding Non-GAAP adjustments of $0.3 million and $8.5 million for the three months ended June 29, 2024 and July 1, 2023, respectively, segment profit amounted to 13.5% of net sales in the second quarter of 2024 compared to 13.0% in the second quarter of 2023. The year-over-year increase was primarily due to price realization and cost control.

Previous wording

Corporate Overhead includes the corporate overhead element of SG&A, which is not allocated to the business segments. Corporate Overhead amounted to $64.2 million and $75.7 million in the first quarter of 2024 and 2023, respectively. Excluding Non-GAAP adjustments of $5.9 million for the three months ended March 30, 2024 and $14.6 million for the three months ended April 1, 2023, the corporate overhead element of SG&A was $58.3 million and $61.1 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Current wording

Corporate Overhead includes the corporate overhead element of SG&A, which is not allocated to the business segments. Corporate Overhead amounted to $70.3 million and $78.8 million in the second quarter of 2024 and 2023, respectively. Excluding Non-GAAP adjustments of $8.2 million for the three months ended June 29, 2024 and $12.5 million for the three months ended July 1, 2023, the corporate overhead element of SG&A was $62.1 million and $66.3 million for the three months ended June 29, 2024 and July 1, 2023, respectively.

Previous wording

For the three months ended March 30, 2024, the Company recognized net restructuring charges of $15.0 million, primarily related to severance costs. The Company expects to achieve annual net cost savings of approximately $27 million by the end of 2025 related to the restructuring costs incurred during the three months ended March 30, 2024. The majority of the $34.3 million of reserves remaining as of March 30, 2024 is expected to be utilized within the next 12 months.

Current wording

For the three and six months ended June 29, 2024, the Company recognized net restructuring charges of $29.8 million and $44.8 million, respectively, primarily related to severance costs. The Company expects to achieve annual net cost savings of approximately $104 million by the end of 2025 related to the restructuring costs incurred during the six months ended June 29, 2024. The majority of the $42.3 million of reserves remaining as of June 29, 2024 is expected to be utilized within the next 12 months.

Previous wording

The $15 million of net restructuring charges for the three months ended March 30, 2024 includes: $7 million in the Tools & Outdoor segment; $6 million in Industrial; and $2 million in Corporate.

Current wording

The $45 million of net restructuring charges for the six months ended June 29, 2024 includes: $35 million in the Tools & Outdoor segment; $5 million in Industrial; and $5 million in Corporate.

Previous wording

The anticipated annual net cost savings of approximately $27 million related to the first quarter 2024 restructuring actions include: $17 million in the Tools & Outdoor segment; $5 million in the Industrial segment; and $5 million in Corporate.

Current wording

The anticipated annual net cost savings of approximately $104 million related to the 2024 restructuring actions include: $91 million in the Tools & Outdoor segment; $5 million in the Industrial segment; and $8 million in Corporate.

Previous wording

This outlook discussion is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company is reiterating 2024 guidance and expects diluted earnings per share to approximate $1.60 to $2.85 on a GAAP basis ($3.50 to $4.50 excluding Non-GAAP adjustments). Free cash flow is expected to approximate $0.6 billion to $0.8 billion.

Current wording

This outlook discussion is intended to provide broad insight into the Company's near-term earnings and cash flow generation prospects. The Company is updating 2024 guidance and expects diluted earnings per share to approximate $0.90 to $2.00 on a GAAP basis, revised from $1.60 to $2.85 ($3.70 to $4.50 excluding Non-GAAP adjustments, raised from $3.50 to $4.50). Free cash flow is expected to approximate $650 million to $850 million, raised from $600 million to $800 million. The Company expects second half free cash flow to fund the cash dividend and support an additional $400 million to $500 million short term debt reduction by the end of 2024.

Previous wording

The difference between 2024 diluted earnings per share outlook and the diluted earnings per share range, excluding Non-GAAP adjustments, is approximately $1.65 to $1.90, consisting primarily of charges related to the supply chain transformation under the Global Cost Reduction Program.

Current wording

The difference between 2024 diluted earnings per share outlook and the diluted earnings per share range, excluding Non-GAAP adjustments, is approximately $2.50 to $2.80, consisting primarily of charges related to the supply chain transformation under the Global Cost Reduction Program and environmental reserve adjustments.

Previous wording

Operating Activities: Cash flows used in operations were $431.0 million in the first quarter of 2024 compared to $286.3 million in the corresponding period of 2023. The year-over-year change was primarily driven by changes in working capital as the Company builds inventory for the Tools & Outdoor spring selling season, as well as higher variable compensation, partially offset by higher earnings.

Current wording

Operating Activities: Cash flows provided by operations were $573.0 million in the second quarter of 2024 compared to $264.4 million in the corresponding period of 2023, primarily driven by accelerated working capital improvements and timing within the year. Year-to-date cash flows provided by operations were $142.0 million in 2024 compared to cash flows used in operations of $21.9 million in 2023. The year-over-year change was primarily driven by higher earnings, partially offset by higher variable compensation.

Previous wording

Free Cash Flow: Free cash flow, as defined in the table below, was an outflow of $496.7 million in the first quarter of 2024 compared to an outflow of $354.5 million in the corresponding period of 2023. The year-over-year change in free cash flow was primarily 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.

Current wording

Free Cash Flow: Free cash flow, as defined in the table below, was an inflow of $485.8 million in the second quarter of 2024 compared to an inflow of $196.1 million in the corresponding period of 2023. On a year-to-date basis, free cash flow was an outflow of $10.9 million and $158.4 million in 2024 and 2023, respectively. The year-over-year change in free cash flow was primarily due to the same factors discussed above in operating activities, as well as higher planned capital expenditures in the first half of 2024. 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.

Previous wording

Financing Activities: Cash flows provided by financing activities totaled $548.6 million in the first quarter of 2024, primarily driven by net short-term commercial paper borrowings of $674.9 million, partially offset by cash dividend payments on common stock of $121.8 million. Cash flows provided by financing activities totaled $324.2 million in the first quarter of 2023, primarily driven by proceeds from debt issuances, net of fees, of $747.2 million, partially offset by net repayments of short-term commercial paper borrowings of $285.9 million and cash dividend payments on common stock of $119.8 million.

Current wording

Cash flows used in financing activities totaled $819.5 million in the first half of 2024, primarily driven by net short-term commercial paper repayments of $570.8 million and cash dividend payments on common stock of $243.6 million. Cash flows provided by financing activities totaled $148.4 million in the first half of 2023, primarily driven by proceeds from debt issuances, net of fees, of $745.9 million, partially offset by net repayments of short-term commercial paper borrowings of $327.9 million and cash dividend payments on common stock of $239.5 million.

Previous wording

The Company maintains investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt (S&P A-, 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 quarter of 2024. 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.

Current wording

The Company maintains investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt (S&P A-, 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 2024. 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.

Previous wording

Cash and cash equivalents totaled $476.6 million as of March 30, 2024, which was primarily held in foreign jurisdictions. Cash and cash equivalents totaled $449.4 million as of December 30, 2023, of which approximately 50% was held in foreign jurisdictions.

Current wording

Cash and cash equivalents totaled $318.5 million as of June 29, 2024, which was primarily held in foreign jurisdictions. Cash and cash equivalents totaled $449.4 million as of December 30, 2023, of which approximately 50% was held in foreign jurisdictions.

Previous wording

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 $171 million at March 30, 2024. The Act permits a U.S. company to elect to pay the net tax liability interest-free over a period of up to eight years. The Company has considered the implications of paying the required one-time transition tax and believes it will not have a material impact on its liquidity.

Current wording

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 $83 million at June 29, 2024. The Act permits a U.S. company to elect to pay the net tax liability interest-free over a period of up to eight years. The Company has considered the implications of paying the required one-time transition tax and believes it will not have a material impact on its liquidity.

Previous wording

The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of March 30, 2024, the Company had commercial paper borrowings outstanding of $1.7 billion, of which $357.1 million in Euro denominated commercial paper was designated as a net investment hedge. As of December 30, 2023, the Company had $1.1 billion of borrowings outstanding, of which $399.7 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.

Current wording

The Company has a $3.5 billion commercial paper program which includes Euro denominated borrowings in addition to U.S. Dollars. As of June 29, 2024, the Company had commercial paper borrowings outstanding of $492.3 million, of which $317.4 million in Euro denominated commercial paper was designated as a net investment hedge. As of December 30, 2023, the Company had $1.1 billion of borrowings outstanding, of which $399.7 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.

Previous wording

The Company has a five-year $2.5 billion committed credit facility (the “5-Year Credit Agreement”). Borrowings under the 5-Year Credit Agreement may be made in U.S. Dollars, Euros or Pounds Sterling. A sub-limit amount of $814.3 million isdesignated for swing line advances which may be drawn in Euros pursuant to the terms of the 5-Year Credit Agreement. Borrowings bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and specific terms of the 5-Year Credit Agreement. The Company must repay all advances under the 5-Year Credit Agreement by the earlier of September 8, 2026 or upon termination. The 5-Year Credit Agreement is designated to be a liquidity back-stop for the Company's $3.5 billion U.S. Dollar and Euro commercial paper program. As of March 30, 2024 and December 30, 2023, the Company had not drawn on its five-year committed credit facility.

Current wording

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. As of June 29, 2024 and December 30, 2023, the Company had not drawn on its five-year committed credit facility.

Previous wording

The Company has a $1.5 billion syndicated 364-Day Credit Agreement (the "2023 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2023 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 2023 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2023 Syndicated 364-Day Credit Agreement by the earlier of September 4, 2024 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 2023 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 March 30, 2024 and December 30, 2023, the Company had not drawn on its 2023 Syndicated 364-Day Credit Agreement.

Current wording

In June 2024, the Company terminated its 364-Day $1.5 billion committed credit facility ("the 2023 Syndicated 364-Day Credit Agreement") dated September 2023. There were no outstanding borrowings under the 2023 Syndicated 364-Day Credit Agreement upon termination and as of December 30, 2023. Contemporaneously, the Company entered into a new $1.25 billion syndicated 364-Day Credit Agreement (the "2024 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2024 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 2024 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2024 Syndicated 364-Day Credit Agreement by the earlier of June 27, 2025 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 2024 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 June 29, 2024, the Company had not drawn on its 2024 Syndicated 364-Day Credit Agreement.

Previous wording

There have been no changes in the Company’s critical accounting estimates during the first quarter of 2024. Refer to the“Other Matters” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K for the year ended December 30, 2023 for a discussion of the Company’s critical accounting estimates.

Current wording

There have been no changes in the Company’s critical accounting estimates during the second quarter of 2024. Refer to the“Other Matters” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Form 10-K for the year ended December 30, 2023 for a discussion of the Company’s critical accounting estimates.