STANLEY BLACK & DECKER, INC.

Previous wording

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

Current wording

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.

Previous wording

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"). The April 2026 Program will expire 36 months from April 23, 2026. The Company may repurchase shares under the April 2026 Program through open market purchases, privately negotiated transactions or share repurchase programs, including one or more accelerated share repurchase programs (under which an initial payment for the entire repurchase amount may be made at the inception of the program). Such repurchases may be funded from cash on hand, short-term borrowings or other sources of cash at the Company’s discretion, and the Company is under no obligation to repurchase any shares pursuant to the April 2026 Program. The currently authorized shares available for repurchase under the April 2026 Program do not include approximately 3.6 million shares reserved and authorized for purchase under the Company’s approved repurchase program in place prior to the April 2026 Program relating to a forward share purchase contract entered into in March 2015.

Current wording

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.

Previous wording

On April 6, 2026, the Company completed the previously announced sale of its CAM business to Howmet Aerospace for $1.8 billion in cash. The Company has deployed the vast majority of the net proceeds to reduce debt in the second quarter of 2026. For the three months ended April 4, 2026, net sales and segment profit for Engineered Fastening 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.

Current wording

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.

Previous wording

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

Current wording

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.

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. Corporate overhead as discussed below includes and excludes certain gains and charges. These amounts for the first quarters of 2026 and 2025 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. 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:

Previous wording

Below is a summary of the pre-tax Non-GAAP adjustments for the first quarters of 2026 and 2025.

Current wording

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

Previous wording

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 outdoor product line exits (as previously communicated).

Current wording

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).

Previous wording

Net Sales: Net sales were $3.846 billion in the first three months of 2026 compared to $3.745 billion in the first three months of 2025, an increase of 3%, which was driven by a 3% increase in price and a 3% increase from foreign currency, partially offset by a 3% decrease in volume. Tools & Outdoor net sales increased 2% compared to the first three months of 2025 as a 4% increase in price and a 3% increase from foreign currency was partially offset by a 5% decrease in volume. Engineered Fastening net sales increased 10% compared to the first three months of 2025, driven by a 6% increase in volume, a 3% increase from foreign currency, and a 1% increase in price.

Current wording

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.

Previous wording

Cost of Sales and Gross Profit: The Company reported cost of sales of $2.689 billion in the first three months of 2026 compared to $2.624 billion in the first three months of 2025. The year-over-year increase in cost of sales was primarily driven by tariff costs, volume deleveraging, and inflation, partially offset by operational cost improvements. Gross profit, defined as sales less cost of sales, was $1.157 billion, or 30.1% of net sales, in the first three months of 2026 compared to $1.121 billion, or 29.9% of net sales, in the first three months of 2025. Non-GAAP adjustments, which increased cost of sales and reduced gross profit, were $5.2 million, or 0.1% of net sales, for the three months ended April 4, 2026, and $16.7 million, or 0.5% of net sales, for the three months ended March 29, 2025. Excluding these adjustments, gross profit was 30.2% of net sales for the three months ended April 4, 2026, compared to 30.4% of net sales for the three months ended March 29, 2025. Gross profit as a percent of sales and adjusted gross profit as a percent of sales were fairly consistent year-over-year as operational cost improvements and higher pricing were largely offset by increased tariff expense, volume deleverage, and other inflation.

Current wording

Cost of Sales and Gross Profit: The Company reported cost of sales of $2.655 billion in thesecond quarter of 2026 compared to $2.879 billion in thesecond 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 thesecond quarter of 2026 compared to $1.067 billion, or 27.0% of net sales, in thesecond 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.

Previous wording

Selling, general and administrative: SG&A, inclusive of the provision for credit losses, was $884.0 million, or 23.0% of net sales, in the first three months of 2026, compared to $867.0 million, or 23.2% of net sales, in the first three months of 2025. Within SG&A, Non-GAAP adjustments totaled $7.7 million, or 0.2% of net sales, for the three months ended April 4, 2026. and $22.0 million, or 0.6% of net sales, for the three months ended March 29, 2025. Excluding these adjustments, SG&A was 22.8% of net sales for the three months ended April 4, 2026, compared to 22.6% for the three months ended March 29, 2025. SG&A as a percent of sales and adjusted SG&A as a percent of sales were fairly consistent year-over-year as strategic growth investments were balanced by disciplined and targeted cost management.

Current wording

Selling, general and administrative: SG&A, inclusive of the provision for credit losses, was $947.9 million, or 23.9% of net sales, in thesecond quarter of 2026, compared to $873.1 million, or 22.1% of net sales, in thesecond 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.

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 $135.9 million and $129.0 million for the first three months of 2026 and 2025, 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 $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.

Previous wording

Other, net: Other, net totaled $41.9 million and $47.5 million in the first three months of 2026 and 2025, respectively. Excluding Non-GAAP adjustments, Other, net totaled $44.5 million and $56.2 million for the first three 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.

Current wording

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.

Previous wording

Loss on Sale of Business: During the first three months of 2026, the Company reported a pre-tax loss of $3.1 million related to the divestiture of a small business in the Tools & Outdoor segment. During the first three months of 2025, the Company reported a pre-tax loss of $0.3 million related to the divestiture of a small business in the Engineered Fastening segment.

Current wording

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.

Previous wording

Asset Impairment Charges: During the first quarter of 2026, the Company recorded a pre-tax impairment charge of $22.7 million related to a write-down of assets associated with the exit of a Tools and Outdoor product line and related plant closure.

Current wording

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.

Previous wording

Interest, net: Net interest expense was $75.9 million in the first quarter of 2026 and $77.2 million in the first quarter of 2025. The year-over-year decrease was primarily driven by lower interest expense partially offset by lower interest income, both due to lower interest rates.

Current wording

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.

Previous wording

Income Taxes: For the three months ended April 4, 2026, the Company recognized income tax expense of $25.2 million, resulting in an effective tax rate of 29.7%. Excluding the tax effect on Non-GAAP adjustments for the three months ended April 4, 2026, the Company recognized income tax expense of $43.6 million, resulting in an effective tax rate of 26.3%. These effective tax rates for the three months ended April 4, 2026 differ from the U.S. statutory tax rate of 21% primarily due to non- deductible expenses, U.S. tax on foreign earnings, and losses for which a tax benefit is not recognized, partially offset by tax credits.

Current wording

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.

Previous wording

For the three months ended March 29, 2025, the Company recognized income tax expense of $37.2 million, resulting in an effective tax rate of 29.2%. Excluding the tax effect on Non-GAAP adjustments for the three months ended March 29, 2025, the Company recognized income tax expense of $44.7 million, resulting in an effective tax rate of 28.1%. These effective tax rates for the three months ended March 29, 2025 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 remeasurement of uncertain tax position reserves and tax credits.

Current wording

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.

Previous wording

Tools & Outdoor net sales increased $54.7 million, or 2%, in the first three months of 2026 compared to the first three months of 2025 as a 4% increase in price and a 3% increase from foreign currency was partially offset by a 5% decrease in volume. Tools & Outdoor organic revenues decreased 1% primarily due to lower retail volumes in North America, which was mostly offset by increased sell-in ahead of the outdoor product spring season, strong performance in prioritized international markets, and higher rates of professional conversions within the U.S. commercial & industrial channel. Total revenue decreased 1% in North America and increased 11% and 6% in Europe and the rest of the world, respectively. Excluding the impact from foreign currency, organic revenue decreased 2% in North America, increased 1% in Europe, and remained flat in the rest of the world.

Current wording

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.

Previous wording

Tools & Outdoor Segment profit for the first three months of 2026 was $276.0 million, or 8.3% of net sales, compared to $289.2 million, or 8.8% of net sales, in the first three months of 2025. Excluding Non-GAAP adjustments, which primarily related to footprint actions in both periods, of $12.6 million, or 0.4% of net sales, in the first three months of 2026, and $25.0 million, or 0.8% of net sales, in the first three months of 2025, segment profit was 8.7% of net sales in the first three months of 2026 and 9.6% of net sales in the first three months 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 primarily driven by growth investments and greater sales volume of lower-margin outdoor products. Higher pricing in the first three months of 2026 was largely offset by increased tariff expenses.

Current wording

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.

Previous wording

Engineered Fastening net sales increased $47.1 million, or 10%, in the first three months of 2026 compared to the first three months of 2025, driven by a 6% increase in volume, a 3% increase from foreign currency, and a 1% increase in price. Engineered Fastening organic revenues increased 7% driven by robust aerospace growth and automotive outperforming the market, partially offset by a decline in industrial volume.

Current wording

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.

Previous wording

Engineered Fastening segment profit for the first three months of 2026 totaled $60.9 million, or 11.9% of net sales, compared to $39.0 million, or 8.4% of net sales, in the corresponding 2025 period. Excluding Non-GAAP adjustments of $0.2 million, or 0.1% of net sales, in the first three months of 2026, and $7.7 million, or 1.7% of net sales, in the first three months of 2025, which primarily related to costs associated with the supply chain transformation, segment profit amounted to 12.0% of net sales in the first three months of 2026 compared to 10.1% of net sales in the first three months 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 improved profitability in aerospace and higher volume and mix in automotive.

Current wording

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.

Previous wording

Corporate overhead amounted to $63.6 million and $74.4 million in the first three months of 2026 and 2025, respectively. Excluding Non-GAAP adjustments of $0.1 million in the first three months of 2026 and $6.0 million in the first three months of 2025, which primarily consisted of transition services costs related to previously divested businesses, the corporate overhead element of SG&A was $63.5 million and $68.4 million in the first three months of 2026 and 2025, respectively.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

The $44.9 million of net restructuring charges for the three months ended April 4, 2026 includes: $35.6 million in the Tools & Outdoor segment; $7.5 million in the Engineered Fastening segment; and $1.8 million in Corporate.

Current wording

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.

Previous wording

The anticipated annual net cost savings of approximately $78 million related to the 2026 restructuring actions include: $63 million in the Tools & Outdoor segment; $9 million in the Engineered Fastening segment; and $6 million in Corporate.

Current wording

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.

Previous wording

On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). The ruling did not address potential refunds. The U.S. Court of International Trade (“CIT”) has ordered the U.S. Customs and Border Protection (“CBP”) to refund the collected IEEPA tariffs. The administrative process for seeking refunds of IEEPA tariffs previously paid remains under development and the CIT’s order may be subject to U.S. government challenge. On April 20, 2026, the CBP launched the Consolidated Administration and Processing of Entries (CAPE) system for IEEPA refunds, which the CBP plans to implement through a phased development approach. There can be no guarantee that a refund, if received, will equal the full amount of IEEPA tariffs paid, and any refund may be subject to taxes and other adjustments or further legal, regulatory, or administration developments. Given these uncertainties, the Company has not recognized any benefit or asset related to potential IEEPA tariff refunds as of April 4, 2026. Following the U.S. Supreme Court's decision, the U.S. administration announced additional tariffs under Section 122 of the Trade Act of 1974 (“Section 122 tariffs”) and could take action to implement additional tariffs in the future. The Company will continue to evaluate developments on tariff policy and the refund process related to IEEPA tariffs as new information becomes available.

Current wording

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.

Previous wording

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 $4.15 to $5.35, which is higher than prior guidance factoring in the expected gain on the recently closed CAM divestiture. The Company continues to expect diluted earnings per share excluding Non-GAAP adjustments to be in the range of $4.90 to $5.70. These ranges represent year-over-year growth of 79% and 13%, respectively, at the midpoint of each range as compared to 2025 performance. The Company is targeting free cash flow to be in the range of $500 to $700 million, which now includes projected taxes and fees associated with the recently closed CAM divestiture. Excluding such payments, free cash flow is expected to be in the range of $700 to $900 million, consistent with prior guidance.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

Operating Activities: Cash flows used in operations were $388.8 million in the first quarter of 2026 compared to $420.0 million in the corresponding period of 2025. The year-over-year change is primarily driven by changes in working capital.

Current wording

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.

Previous wording

Free Cash Flow: Free cash flow, as defined in the table below, was an outflow of $447.3 million and $485.0 million in the first quarters of 2026 and 2025, respectively. The year-over-year change in free cash flow was due to the same factor 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 $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.

Previous wording

Financing Activities: Cash flows provided by financing activities totaled $508.2 million in the first quarter of 2026, primarily driven by net short-term commercial paper borrowings of $1.145 billion, partially offset by payments on long-term debt of $500.1 million and cash dividend payments on common stock of $126.0 million. Cash flows provided by financing activities totaled $502.0 million in the first quarter of 2025, primarily driven by net short-term commercial paper borrowings of $1.136 billion, partially offset by payments on long-term debt of $500.0 million and cash dividend payments on common stock of $124.5 million.

Current wording

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.

Previous wording

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 quarter 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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

In March 2026, the Company redeemed its $500 million 3.40% notes, at maturity.

Current wording

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

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 April 4, 2026, the Company had commercial paper borrowings outstanding of $1.7 billion, of which $547.6 million in Euro denominated commercial paper was designated as a net investment hedge. In the second quarter of 2026, the Company utilized the vast majority of the net proceeds from the CAM divestiture to repay commercial paper borrowings. As of January 3, 2026, the Company had $605.6 million of commercial paper borrowings outstanding, of which $555.6 million in Euro denominated commercial paper was designated as a net investment hedge. Refer to Note H, Financial Instruments, for further discussion.

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 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.

Previous 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. In June 2025, the 5-Year Credit Agreement was amended to include the covenants listed below. As of April 4, 2026 and January 3, 2026, the Company had not drawn on its five-year committed credit facility.

Current wording

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

Previous wording

In June 2025, the Company terminated its 364-Day $1.25 billion committed credit facility ("the 2024 Syndicated 364-Day Credit Agreement") dated June 2024. There were no outstanding borrowings under the 2024 Syndicated 364-Day Credit Agreement upon termination and as of December 28, 2024. Contemporaneously, the Company entered into a new $1.25 billion syndicated 364-Day Credit Agreement (the "2025 Syndicated 364-Day Credit Agreement") which is a revolving credit loan. The borrowings under the 2025 Syndicated 364-Day Credit Agreement may be made in U.S. Dollars or Euros and bear interest at a floating rate plus an applicable margin dependent upon the denomination of the borrowing and pursuant to the terms of the 2025 Syndicated 364-Day Credit Agreement. The Company must repay all advances under the 2025 Syndicated 364-Day Credit Agreement by the earlier of June 22, 2026 or upon termination. The Company may, however, convert all advances outstanding upon termination into a term loan that shall be repaid in full no later than the first anniversary of the termination date provided that the Company, among other things, pays a fee to the administrative agent for the account of each lender. The 2025 Syndicated 364-Day Credit Agreement serves as part of the liquidity back-stop for the Company’s $3.5 billion U.S. Dollar and Euro commercial paper program. As of April 4, 2026, the Company had not drawn on its 2025 Syndicated 364-Day Credit Agreement.

Current wording

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.

Previous wording

The 5-Year Credit Agreement and the 2025 Syndicated 364-Day Credit Agreement, as described above, contain customary affirmative and negative covenants, including but not limited to, maintenance of an interest coverage ratio. The interest coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes, Depreciation and Amortization to adjusted net Interest Expense ("Adjusted EBITDA"/"Adjusted Net Interest Expense"). The Company must maintain, for each period of four consecutive fiscal quarters of the Company, an interest coverage ratio of not less than 3.50 to 1.00, provided that the Company is only required to maintain an interest coverage ratio of not less than 2.50 to 1.00 for any four fiscal quarter period ending on or before the end of the Company’s second fiscal quarter of 2026. For purposes of calculating the Company’s compliance with the interest coverage ratio, the Company is permitted to increase EBITDA by an amount equal to the Applicable Adjustment Addbacks (as defined in the 2025 Syndicated 364-Day Credit Agreement), provided that the sum of the Applicable Adjustment Addbacks incurred in any four consecutive fiscal quarter periods ending on or before the end of the Company’s second fiscal quarter of 2026 shall not exceed $250,000,000 in the aggregate.

Current wording

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.

Previous wording

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.

Current wording

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.