• Tools & Storage organic sales increased 25% versus 4Q'19 due to volume (+23%) and price (+2%). Organic revenues across all regions benefited from the consumer reconnection with the home and garden, positive eCommerce trends, a strong holiday season and a robust lineup of new and innovative products, with North America +27%, Europe +18% and emerging markets +22%. North America growth was led by a strong performance in retail which was coupled with positive growth in both the commercial and industrial channels. Exceptionally strong point-of-sale demand in U.S. retail continued through the end of 2020 and retailer inventory ended the year significantly below 4Q'19 levels. Europe achieved growth in all regions with a strong performance in retail brick and mortar and eCommerce channels. Emerging market growth was driven by strong construction-related demand led by Latin America, Russia, India and South Korea. The Tools & Storage segment profit rate, excluding charges, was 20.7%, up 420 basis points versus 4Q'19, as volume, productivity, cost control and price were partially offset by new growth investments.
• Industrial net sales grew 10% versus 4Q'19 as the CAM acquisition (+11%) and currency (+2%) were partially offset by lower volume (-2%) and a divestiture of a product line in Oil & Gas (-1%). Engineered Fastening organic revenues were down 2% as strong automotive fastener growth was offset by an improved, but still declining, general industrial market and lower systems volumes. Infrastructure organic revenues were down 5% as modest growth in Attachment Tools was offset by reduced pipeline construction activity in oil & gas. The overall Industrial segment profit rate, excluding charges, was 14.7%, up 110 basis points from 4Q'19, as the unfavorable impact from lower volume was more than offset by the benefits from productivity and restructuring.
• Security net sales decreased 3% versus 4Q'19 as currency (+3%), price (+1%) and acquisitions (+1%) were partially offset by divestitures (-3%) and volume (-5%). North America declined 5% primarily due to lower installations in automatic doors, the still-improving market in commercial electronic security and a difficult comparable from 2019. This was partially offset by double digit growth in healthcare as the new health and safety growth initiatives ramped up during the quarter. Europe was down 1% organically as growth in France was offset by lower volume in the UK related to the pandemic. The executable backlog remains healthy which should enable a return to organic growth in the first half of 2021. Overall Security segment profit rate, excluding charges, was 11.2%, flat versus the prior year rate, as price and cost control offset the impact from lower volume and growth investments. The gross margin rate in Security expanded 230 basis points versus 4Q'19.

2021 Outlook

Donald Allan Jr., Executive Vice President and CFO, commented, "In 2020, we were proactive in preparing our cost base for the pandemic and the organization remained agile to capture revenue opportunities resulting from quickly improving markets which resulted in a historic financial performance. Most notably we delivered 10% organic revenue growth in the second half along with full year gross and operating margin rate expansion, 8% EPS growth and a record free cash flow performance. It was a rewarding end to a year that was difficult on so many dimensions for our employees and the Company. We have prepared the businesses to emerge successfully from this economic disruption and we have a strong setup for growth in 2021."

Improving visibility has enabled management to reinstate guidance for 2021, although a wider than historical range has been provided to account for an operating environment that remains dynamic. The Company expects 2021 EPS to be $9.15 To $9.85 on a GAAP basis and $9.70 - $10.30 on an adjusted basis. Free cash flow conversion is expected to approximate GAAP Net Income. Management will discuss its 2021 planning assumptions on today's earnings call.

Allan continued, "We plan to leverage our portfolio of growth catalysts to gain share as markets continue to improve and are focused on leveraging our cost actions to deliver margin expansion. In addition, the margin resiliency program remains in place to protect against unforeseen changes in the external environment or to support additional margin improvement or growth investments going forward.

"We believe the Company is well positioned to deliver sustained above-market organic growth, operating margin expansion, strong free cash flow generation and top-quartile shareholder returns over the long-term."

The difference between 2021 GAAP and adjusted EPS guidance is $0.45 - $0.55, consisting of acquisition-related and other charges. These forecasted charges primarily relate to facility moves, deal and integration costs and functional transformation initiatives.

Merger And Acquisition ("M&A") Related And Other Charges

Total pre-tax M&A related and other charges in 4Q'20 were $79.5 million, primarily related to charges related to the extinguishment of debt, Security business transformation and margin resiliency initiatives, partially offset by a release of a contingent consideration liability relating to the CAM acquisition. Gross margin included $12.5 million of these charges while SG&A included $31.1 million. Other, net and Restructuring included $14.0 million and $8.4 million of these charges, respectively. M&A related and other charges in 4Q'20 also included a net pre-tax loss of $13.5 million related to divestitures.

Share of net earnings of equity method investment included $2.9 million of charges.

Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, electronic security solutions, healthcare solutions, engineered fastening systems, and more. Learn more at www.stanleyblackanddecker.com.