Corbin Walburger, Interim CFO, commented, "We are taking measures that adjust our cost base and inventory for a demand environment that returns to 2019 levels, which is the current lower bound of our expectations. We believe this is a prudent approach, in light of our inventory position being sufficient to serve upside market demand. By prioritizing cash generation in 2022 and taking the necessary cost actions today, we believe we are positioning the Company for strength in 2023 and beyond."
The Company is revising its 2022 EPS outlook to $0.80 to $2.05 on a diluted GAAP basis from $7.20 to $8.30, and on a Non-GAAP adjusted basis to $5.00 to $6.00 from $9.50 to $10.50.
Free cash flow is expected to be $0.4 to $1.0 billion in the back half including tax payments of $0.5 to $0.6 billion associated with Security divestitures. Excluding such payments, cash generation is expected to be $1.0 to $1.5 billion driven by working capital reductions. The Company is focused on serving its customers by improving power tool supply while reducing inventory in other categories. Stanley Black & Decker remains focused on disciplined capital allocation, and intends to balance share repurchase activity with its commitment to dividends and strong investment grade credit ratings.
Key assumption changes to the Company's prior EPS outlook at the midpoint include:
- Lower second half revenue, primarily driven by slowing consumer demand in Tools & Outdoor and moderated expectations for price (-$4.25)
- Currency translation, other below the line items and second quarter performance (-$0.55)
- Impact from plant production curtailments (-$0.50 - $0.70)
- 2022 Impact from cost savings initiatives (+$0.80 - $1.00)
The difference between 2022 GAAP and adjusted EPS guidance is $3.95 to $4.20, consisting of acquisition-related and other charges. These forecasted charges primarily relate to restructuring expenses, a voluntary retirement program, the Russia business closure, integration-related costs, non-cash impairment charge for Oil & Gas, and non-cash inventory step-up charges.
* Non-GAAP Financial Measure As Further Defined On Page 8