SEC Pressed Stanley Black & Decker on Non-GAAP Charge Labels
Stanley Black & Decker revised how it describes and discloses years of supply-chain restructuring costs after SEC staff repeatedly challenged which charges belonged outside GAAP earnings.
Stanley Black & Decker (SWK) narrowed its non-GAAP disclosures over a multi-year dialogue with SEC staff, who pushed the company to justify, and in places drop, adjustments tied to its long-running supply chain transformation. The most concrete concession came on the 2023 write-downs tied to the shuttered Fort Worth, Texas, plant: staff told the company plainly that inventory charges represent normal, recurring costs of operations and are not appropriate non-GAAP adjustments, and the company agreed to stop excluding them from its adjusted results in future filings.
The exchange traces back to a 2017 bet that went wrong. Stanley Black & Decker built the Fort Worth facility to reshore manufacturing of Craftsman mechanics hand tools using a first-of-its-kind metal-forming process, aiming to hit costs competitive with the overseas production it was replacing. The automation never worked reliably enough to meet the customer program's cost and timeline commitments, and the company closed the plant in March 2023, writing off roughly $26 million of inventory and $14 million of tooling that had no use anywhere else in its operations. Staff accepted the narrative but drew a line at the accounting treatment, distinguishing between the tooling write-off, which the company could keep excluding, and the inventory charge, which it could not.
That inventory ruling became a template for a broader staff campaign against loosely bundled restructuring adjustments. Reviewers repeatedly asked the company to break out and justify individual line items in its non-GAAP reconciliation tables rather than reporting them as an undifferentiated "supply chain transformation" bucket. In response, the company detailed how its $194 million of 2023 transformation charges split across footprint rationalization, complexity reduction, strategic sourcing and operational excellence, and it committed to itemizing each category going forward. Staff also caught the company mislabeling costs: transformation and reconfiguration spending at ongoing sites had been described using "exit" language properly reserved for restructuring charges under ASC 420, and the company agreed to fix the wording and confirm that true facility-closure costs, covering severance and contract terminations, were being reported separately as restructuring rather than folded into the profit-adjustment tables.
Beyond the transformation charges, staff pressed on presentation mechanics that inflated the appearance of non-GAAP performance. Reviewers flagged an "Operating Profit" subtotal in both SEC filings and earnings releases that excluded asset impairment and restructuring charges without being labeled as a non-GAAP measure; the company agreed to drop the subtotal entirely from its statements of operations and earnings releases. Staff also found that the company's results discussion leaned on non-GAAP figures for gross profit, SG&A and segment profit without first explaining the comparable GAAP figures, a sequencing problem the CDI guidance treats as giving undue prominence to adjusted numbers. The company committed to lead with GAAP trends, including cost of sales movements, before turning to adjusted measures.
The company also cleaned up several disclosure gaps identified along the way: it agreed to explain how it calculates the income tax effect of its non-GAAP adjustments, to itemize corporate overhead adjustments under Item 10(e) of Regulation S-K, and to separate deal-related costs from transition-services income tied to its divested Infrastructure and Security businesses, which had generated as much as $49 million in offsetting income in a single year. In its financial-statement notes, the company committed to expanding disclosure on an intra-entity intellectual-property transfer between foreign subsidiaries that materially swung its effective tax rate, and to adding two SEC and DOJ investigations to its contingency footnote after staff noted they had been addressed only in the legal-proceedings section.
What emerges across the letters is a company whose non-GAAP earnings presentation had grown looser than its underlying transformation program, layering write-downs, transition-services income and subtotals into adjusted figures faster than its disclosures could justify them. The corrections leave Stanley Black & Decker's reported adjusted profit closer to its GAAP results and its restructuring narrative more itemized than when the review began, with the company still projecting additional footprint-related charges beyond 2025 as the multi-year overhaul continues.