NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APRIL 1, 2017

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereinafter referred to as “generally accepted accounting principles”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the interim periods have been included and are of a normal, recurring nature. Operating results for the three months ended April 1, 2017 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes included in Stanley Black & Decker, Inc.’s (the “Company”) Form 10-K for the year ended December 31, 2016 , and subsequent related filings with the Securities and Exchange Commission.

In February 2017, the Company sold the majority of its mechanical security businesses within the Security segment, which included the commercial hardware brands of Best Access, phi Precision and GMT. In addition, the Company sold a small business within the Tools & Storage segment on January 3, 2017. The operating results of these businesses have been reported within continuing operations in the Consolidated Financial Statements through their respective date of sale in 2017 and for the three months ended April 2, 2016. In addition, the assets and liabilities related to the businesses sold were classified as held for sale on the Company's Consolidated Balance Sheets as of December 31, 2016. Refer to Note T, Divestitures, for further discussion.

In March 2017, the Company acquired the Tools business of Newell Brands ("Newell Tools") and the Craftsman brand, which are both being accounted for as business combinations. The results of these acquisitions are being consolidated into the Company's Tools & Storage segment. Refer to Note F, Acquisitions, for further discussion.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates.

In March 2017, the Financial Accounting Standards Boards ("FASB") issued Accounting Standards Update ("ASU") 2017-07, Compensation-Retirement Benefits (Topic 715). The new standard improves the presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610). The new standard provides guidance for recognizing gains and losses of nonfinancial assets in contracts with non-customers. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. This ASU will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard narrows the definition of a business and provides a framework for evaluation. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory . The new standard eliminates the exception to the principle in ASC 740, for all intra-entity sales of assets other than inventory, to be deferred, until the transferred asset is sold to a third party or otherwise recovered through use. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) . The objective of this update is to provide additional guidance and reduce diversity in practice when classifying certain transactions within the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The new standard requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. These standards are effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard prospectively in the first quarter of 2017 and it did not have a material impact on its consolidated financial statements. Prior periods were not adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . The main objective of this update is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The new guidance addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU changes the measurement principle for certain inventory methods from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU does not apply to inventory that is measured using Last-in First-out ("LIFO") or the retail inventory method. The provisions of ASU 2015-11 was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of 2017 and it did not have an impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue recognition standard outlines a comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new model provides a five-step analysis in determining when and how revenue is recognized. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB affirmed its proposal to defer the effective date of the standard to annual reporting periods (and interim reporting periods within those years) beginning after December 15, 2017. Entities are permitted to apply the new revenue standard early, but not before the original effective date of annual periods beginning after December 15, 2016. The standard shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In March, April, May and December 2016, the FASB clarified the implementation guidance on principal versus agent, identifying performance obligations, licensing, collectability and made

technical corrections on various topics. The Company expects to apply the full retrospective method of adoption starting with the first interim period after December 15, 2017. Based on the Company’s preliminary assessment, the anticipated impacts to the financial statements are primarily related to classification of outbound freight on the income statement and presentation of returns reserve.

The following weighted-average stock options were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive (in thousands):

As described in detail in Note J, Equity Arrangements, the Company issued Equity Units in December 2013 comprised of $345.0 million of Notes and Equity Purchase Contracts, which obligated the holders to purchase on November 17, 2016, for $100 , between 1.0122 and 1.2399 shares of the Company’s common stock. The shares related to the Equity Purchase Contracts were anti-dilutive during January and February 2016. Upon the November 17, 2016 settlement date, the Company issued 3,504,165 shares of common stock and received cash proceeds of $345.0 million .

D.    Financing Receivables

Long-term trade financing receivables of $183.6 million and $180.9 million at April 1, 2017 and December 31, 2016 , respectively, are reported within Other Assets in the Condensed Consolidated Balance Sheets. Financing receivables and long-term financing receivables are predominantly related to certain security equipment leases with commercial businesses. Generally, the Company retains legal title to any equipment under lease and bears the right to repossess such equipment in an event of default. All financing receivables are interest bearing and the Company has not classified any financing receivables as held-for-sale. Interest income earned from financing receivables that are not delinquent is recorded on the effective interest method. The Company considers any financing receivable that has not been collected within 90 days of original billing date as past-due or delinquent. Additionally, the Company considers the credit quality of all past-due or delinquent financing receivables as non-performing.

The Company has an accounts receivable sale program that expires on January 5, 2018. According to the terms of that program, the Company is required to sell certain of its trade accounts receivables at fair value to a wholly-owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS”). The BRS, in turn, must sell such receivables to a third-party financial institution (“Purchaser”) for cash and a deferred purchase price receivable. The Purchaser’s maximum cash investment in the receivables at any time is $100.0 million . The purpose of the program is to provide liquidity to the Company. The Company accounts for these transfers as sales under ASC 860, "Transfers and Servicing." Receivables are derecognized from the Company’s consolidated balance sheet when the BRS sells those receivables to the Purchaser. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred

purchase price receivable. At April 1, 2017 , the Company did not record a servicing asset or liability related to its retained responsibility based on its assessment of the servicing fee, market values for similar transactions and its cost of servicing the receivables sold.

At April 1, 2017 and December 31, 2016 , $65.3 million and $100.5 million , respectively, of net receivables were derecognized. Gross receivables sold amounted to $453.8 million ( $388.9 million , net) for the three months ended April 1, 2017 . These sales resulted in a pre-tax loss of $1.4 million , and included servicing fees of $0.2 million , for the three months ended April 1, 2017 . Proceeds from transfers of receivables to the Purchaser totaled $337.0 million for the three months ended April 1, 2017 . Collections of previously sold receivables, including deferred purchase price receivables, and all fees, which are settled one month in arrears, resulted in payments to the Purchaser of $372.4 million for the three months ended April 1, 2017 .

Gross receivables sold amounted to $384.7 million ( $341.3 million , net) for the three months ended April 2, 2016 . These sales resulted in a pre-tax loss of $1.0 million , and included servicing fees of $0.2 million , for the three months ended April 2, 2016 . Proceeds from transfers of receivables to the Purchaser totaled $277.6 million for the three months ended April 2, 2016 . Collections of previously sold receivables, including deferred purchase price receivables, and all fees, which are settled one month in arrears, resulted in payments to the Purchaser of $294.2 million for the three months ended April 2, 2016 .

The Company’s risk of loss following the sale of the receivables is limited to the deferred purchase price receivable, which was $166.8 million at April 1, 2017 and $83.2 million at December 31, 2016 . The deferred purchase price receivable will be repaid in cash as receivables are collected, generally within 30 days, and as such the carrying value of the receivable recorded approximates fair value. There were no delinquencies or credit losses for the three months ended April 1, 2017 and April 2, 2016 . Cash inflows related to the deferred purchase price receivable totaled $129.9 million for the three months ended April 1, 2017 , and $90.8 million for the three months ended April 2, 2016 . All cash flows under the program are reported as a component of changes in working capital within operating activities in the Condensed Consolidated Statements of Cash Flows since all the cash from the Purchaser is either: 1) received upon the initial sale of the receivable or 2) from the ultimate collection of the underlying receivables and the underlying receivables are not subject to significant risks, other than credit risk, given their short-term nature.

As more fully disclosed in Note F, Acquisitions , the Company acquired inventory with estimated fair values of approximately $203.0 million and $18.0 million during the first quarter of 2017 related to the Newell Tools and Craftsman brand acquisitions, respectively.

2017 ACQUISITIONS

Newell Tools

On March 9, 2017, the Company acquired the Tools business of Newell Brands ("Newell Tools"), which includes the industrial cutting, hand tool and power tool accessory brands Irwin® and Lenox®, for approximately $1.84 billion , net of cash acquired and an estimated working capital adjustment. This acquisition will enhance the Company’s position within the global tools & storage industry and broadens the Company’s product offerings and solutions to customers and end users, particularly within power tool accessories. The results of Newell Tools are being consolidated into the Company's Tools & Storage segment.

The Newell Tools acquisition is being accounted for as a business combination, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The following table summarizes the estimated fair values of major assets acquired and liabilities assumed:

The trade names were determined to have indefinite lives. The weighted-average useful life assigned to the customer relationships was 15 years .

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business, assembled workforce, and the going concern nature of Newell Tools. It is estimated that $14.9 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes.

The purchase price allocation for Newell Tools is preliminary in all respects. During the measurement period, the Company expects to record adjustments relating to the finalization of intangible asset, inventory and property, plant and equipment valuations, various opening balance sheet contingencies, including environmental remediation and risk insurance reserves, and various income tax matters, amongst others.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from operations. The Company will complete its purchase price allocation as soon as reasonably possible within the measurement period.

Craftsman Brand

On March 8, 2017, the Company purchased the Craftsman brand from Sears Holdings, which provides the Company with the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings channels. The total estimated cash purchase price is $889.8 million , consisting of a cash payment at closing of $571.8 million , which reflects the impact of working capital adjustments, a cash payment at the end of year three with an estimated present value of $234.0 million , and future payments to Sears Holdings of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products through March 2032, which was valued at $84.0 million at the acquisition date based on estimated future sales projections which are subject to change. Refer to Note M, Fair Value Measurements, for additional details. In addition, as part of the acquisition the Company also granted a perpetual license to Sears Holdings to continue selling Craftsman®-branded product in Sears-related channels. The perpetual license will be royalty-free until March 2032, which represents an estimated value of approximately $300.0 million , and 3% thereafter. The estimated fair value of the royalty-free license period is preliminary and based on estimated future sales projections which are subject to change. The Craftsman results are being consolidated into the Company's Tools & Storage segment.

The Craftsman brand acquisition is being accounted for as a business combination which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated fair value of assets acquired, which includes $47.6 million of working capital and $487.0 million of intangible assets, is $648.9 million . The related goodwill is approximately $540.9 million . The amount allocated to intangible assets includes $466.0 million of an indefinite-lived trade name. The useful life assigned to the customer relationships was 15 years .

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business and the going concern nature of the Craftsman brand. Goodwill is not expected to be deductible for tax purposes.

The purchase price allocation for Craftsman is preliminary in all respects. During the measurement period, the Company expects to record adjustments relating to the finalization of valuations for intangible assets, inventory, the contingent consideration liability relating to future payments to Sears Holdings and the royalty-free license period described above, and various opening balance sheet contingencies, including warranty exposures, amongst others.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from operations. The Company will complete its purchase price allocation as soon as reasonably possible within the measurement period.

OTHER ACQUISITIONS

The Company also completed one smaller acquisition during the first quarter of 2017 for a total purchase price of $26.1 million , net of cash acquired, which is being consolidated into the Security segment.

2016 ACQUISITIONS

During 2016, the Company completed five small acquisitions for a total purchase price of $59.3 million , net of cash acquired, which are being integrated into the Company’s Tools & Storage and Security segments. The total purchase price for the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The purchase accounting for these acquisitions is substantially complete with the exception of certain minor items and will be completed within the measurement period.

ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISTIONS

Actual Impact from Acquisitions

The Company's Consolidated Statements of Operations and Comprehensive Income for the first quarter of 2017 include net sales of $66.1 million and a net loss of $32.5 million from 2017 acquisitions. These amounts include amortization relating to inventory step-up and intangible assets recorded upon acquisition, transaction costs, and other integration-related costs.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the acquisitions had occurred on January 3, 2016. The pro-forma consolidated results are not necessarily indicative of what the Company’s consolidated net earnings would have been had the Company completed the acquisitions on January 3, 2016. In addition, the pro-forma consolidated results do not purport to project the future results of the combined Company.

2017 Pro-forma Results

The 2017 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2017 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:

2016 Pro-forma Results

The 2016 pro-forma results were calculated by taking the historical financial results of Stanley Black & Decker and adding the historical results of the 2017 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made assuming the acquisitions commenced on January 3, 2016:

G.    Goodwill

Changes in the carrying amount of goodwill by segment are as follows:

(Millions of Dollars)	Tools & Storage				Security				Industrial				Total
Balance December 31, 2016	$	3,247.8			$	2,007.0			$	1,439.2			$	6,694.0
Acquisition adjustments	1,585.4				15.7				—				1,601.1
Foreign currency translation and other	54.1				9.8				5.2				69.1
Balance April 1, 2017	$	4,887.3			$	2,032.5			$	1,444.4			$	8,364.2

In the first quarter of 2017, goodwill increased by approximately $1.7 billion , which primarily related to the Newell Tools and Craftsman brand acquisitions. The goodwill amounts for these acquisitions are subject to change based upon the allocation of the consideration transferred to the assets acquired and liabilities assumed. Refer to Note F, Acquisitions, for further discussion.

⁽¹⁾ Unamortized gain/loss associated with interest rate swaps are more fully discussed in Note I, Financial Instruments.

In January 2017, the Company amended its existing $2.0 billion commercial paper program to increase the maximum amount of notes authorized to be issued to $3.0 billion and to include Euro denominated borrowings in addition to U.S. Dollars. As of April 1, 2017 , the Company had $1.2 billion of borrowings outstanding against the Company’s $3.0 billion commercial paper program, of which approximately $961.7 million in Euro denominated commercial paper was designated as a Net Investment Hedge as described in more detail in Note I, Financial Instruments . At December 31, 2016, the Company had no commercial paper borrowings outstanding.

In January 2017, the Company also executed a 364-day $1.3 billion committed credit facility (the "2017 Credit Agreement"). The 2017 Credit Agreement consists of a $1.3 billion revolving credit loan and a sub-limit of an amount equal to the Euro equivalent of $400 million for swing line advances. Borrowings under the 2017 Credit Agreement may be made in U.S. Dollars or Euros, pursuant to the terms of the agreement, and bear interest at a floating rate dependent on the denomination of the borrowing. Repayments must be made by January 17, 2018 or upon an earlier termination of the 2017 Credit Agreement at the election of the Company. The 2017 Credit Agreement serves as a liquidity back-stop for the Company’s $3.0 billion U.S. Dollar and Euro commercial paper program, also authorized and amended in January 2017, as discussed above. As of April 1, 2017, the Company had not drawn on this commitment.

As of April 1, 2017 and December 31, 2016, the Company had not drawn on its existing five year $1.75 billion committed credit facility.

I.    Financial Instruments

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and commodity prices. As part of the Company’s risk management program, a variety of financial instruments such as interest rate swaps, currency swaps, purchased currency options, foreign exchange contracts and commodity contracts may be used to mitigate interest rate exposure, foreign currency exposure and commodity price exposure.

If the Company elects to do so and if the instrument meets the criteria specified in ASC 815, "Derivatives and Hedging," management designates its derivative instruments as cash flow hedges, fair value hedges or net investment hedges. Generally, commodity price exposures are not hedged with derivative financial instruments and instead are actively managed through customer pricing initiatives, procurement-driven cost reduction initiatives and other productivity improvement projects. Financial instruments are not utilized for speculative purposes.

A summary of the fair values of the Company’s financial instruments recorded in the Condensed Consolidated Balance Sheets at April 1, 2017 and December 31, 2016 follows: 

The counterparties to all of the above mentioned financial instruments are major international financial institutions. The Company is exposed to credit risk for net exchanges under these agreements, but not for the notional amounts. The credit risk is limited to the asset amounts noted above. The Company limits its exposure and concentration of risk by contracting with diverse financial institutions and does not anticipate non-performance by any of its counterparties. Further, as more fully

discussed in Note M, Fair Value Measurements , the Company considers non-performance risk of its counterparties at each reporting period and adjusts the carrying value of these assets accordingly. The risk of default is considered remote.

During the three months ended April 1, 2017 and April 2, 2016 , cash flows related to derivatives, including those that are separately discussed below, resulted in net cash received of $30.0 million and net cash paid of $0.9 million , respectively.

CASH FLOW HEDGES

As of April 1, 2017 and December 31, 2016 , there was an after-tax mark-to-market loss of $53.6 million and $46.3 million , respectively, reported for cash flow hedge effectiveness in Accumulated other comprehensive loss. An after-tax loss of $7.9 million is expected to be reclassified to earnings as the hedged transactions occur or as amounts are amortized within the next twelve months. The ultimate amount recognized will vary based on fluctuations of the hedged currencies and interest rates through the maturity dates.

The tables below detail pre-tax amounts reclassified from Accumulated other comprehensive loss into earnings for active derivative financial instruments during the periods in which the underlying hedged transactions affected earnings for the three months ended April 1, 2017 and April 2, 2016 (in millions): 

 * Includes ineffective portion and amount excluded from effectiveness testing on derivatives.

For the three months ended April 1, 2017 , the hedged items' impact to the Consolidated Statements of Operations and Comprehensive Income was a loss of $4.5 million in Cost of sales, which is offsetting the amounts shown above. For the three months ended April 2, 2016 , the hedged items’ impact to the Consolidated Statements of Operations and Comprehensive Income was a loss of $18.6 million . There was no impact related to the interest rate contracts' hedged items for all periods presented.

For the three months ended April 1, 2017 , an after-tax gain of $0.4 million was reclassified from Accumulated other comprehensive loss into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) during the periods in which the underlying hedged transactions affected earnings. For the three months ended April 2, 2016 , an after-tax gain of $9.3 million was reclassified from Accumulated other comprehensive loss into earnings (inclusive of the gain/loss amortization on terminated derivative instruments) during the periods in which the underlying hedged transactions affected earnings.

Interest Rate Contracts

The Company enters into interest rate swap agreements in order to obtain the lowest cost source of funds within a targeted range of variable to fixed-debt proportions. At April 1, 2017 and December 31, 2016 , the Company had $400 million of forward starting swaps outstanding which were executed in 2014. The objective of the hedges is to offset the expected variability on future payments associated with the interest rate on debt instruments expected to be issued in 2018. Gains or losses on the swaps are recorded in Accumulated other comprehensive loss and will be subsequently reclassified into earnings as the future interest expense is recognized in earnings or as ineffectiveness occurs.

Foreign Currency Contracts

Forward Contracts:  Through its global businesses, the Company enters into transactions and makes investments denominated in multiple currencies that give rise to foreign currency risk. The Company and its subsidiaries regularly purchase inventory from subsidiaries with functional currencies different than their own, which creates currency-related volatility in the Company’s results of operations. The Company utilizes forward contracts to hedge these forecasted purchases and sales of

inventory. Gains and losses reclassified from Accumulated other comprehensive loss for the effective portion of the hedge are recorded in Cost of sales. The ineffective portion, if any, as well as gains and losses incurred after a hedge has been de-designated are not recorded in Accumulated other comprehensive loss, but are recorded directly to the Consolidated Statements of Operations and Comprehensive Income in Other, net. At April 1, 2017 , the notional value of forward currency contracts outstanding was $587.6 million , maturing on various dates through 2018. At December 31, 2016 , the notional value of forward currency contracts outstanding was $503.8 million , maturing on various dates through 2017.

Purchased Option Contracts:  The Company and its subsidiaries have entered into various intercompany transactions whereby the notional values are denominated in currencies other than the functional currencies of the party executing the trade. In order to better match the cash flows of its intercompany obligations with cash flows from operations, the Company enters into purchased option contracts. Gains and losses reclassified from Accumulated other comprehensive loss for the effective portions of the hedge are recorded in Cost of sales. The ineffective portion, if any, as well as gains and losses incurred after a hedge has been de-designated are not recorded in Accumulated other comprehensive loss, but are recorded directly to the Consolidated Statements of Operations and Comprehensive Income in Other, net. At April 1, 2017 , the notional value of purchased option contracts was $187.5 million maturing on various dates through 2017. As of December 31, 2016 , the notional value of purchased option contracts was $252.0 million , maturing on various dates through 2017.

FAIR VALUE HEDGES

Interest Rate Risk:  In an effort to optimize the mix of fixed versus floating rate debt in the Company’s capital structure, the Company enters into interest rate swaps. In previous years, the Company entered into interest rate swaps on the first five years of the Company's $400 million 5.75% notes due 2053, interest rate swaps with notional values which equaled the Company's $400 million 3.40% notes due 2021 and the Company's $150 million 7.05% notes due 2028. These interest rate swaps effectively converted the Company's fixed rate debt to floating rate debt based on LIBOR, thereby hedging the fluctuation in fair value resulting from changes in interest rates. In the second quarter of 2016, the Company terminated all of the above interest rate swaps and there were no open contracts as of April 1, 2017 and December 31, 2016. The terminations resulted in cash receipts of $27.0 million . This gain was deferred and is being amortized to earnings over the remaining life of the notes.

Prior to termination of the Company’s interest rate swaps discussed above, the changes in fair value of the swaps and the offsetting changes in fair value related to the underlying notes were recognized in earnings. A summary of fair value adjustments relating to these swaps is as follows (in millions):

*Includes ineffective portion and amount excluded from effectiveness testing.

Amortization of the gain/loss on terminated swaps of $0.8 million are reported as a reduction of interest expense for the three months ended April 1, 2017 . In addition to the fair value adjustments in the table above, net swap accruals and amortization of the gain/loss on terminated swaps of $3.0 million are reported as a reduction of interest expense for the three months ended April 2, 2016 . Interest expense on the underlying debt when the hedge was active was $11.8 million for the three months ended April 2, 2016 .

NET INVESTMENT HEDGES

Foreign Exchange Contracts:  The Company utilizes net investment hedges to offset the translation adjustment arising from re-measurement of its investment in the assets and liabilities of its foreign subsidiaries. The total after-tax amounts in Accumulated other comprehensive loss were gains of $78.4 million and $88.6 million at April 1, 2017 and December 31, 2016 , respectively.

As of April 1, 2017 , the Company had foreign exchange forward contracts maturing on various dates in 2017 with notional values totaling $732.0 million outstanding hedging a portion of its British pound sterling, Mexican peso, Swedish krona, Euro and Canadian dollar denominated net investments; a cross currency swap with a notional value totaling $250.0 million maturing in 2023 hedging a portion of its Japanese yen denominated net investment; and Euro denominated commercial paper with a notional value of $961.7 million maturing in 2017 hedging a portion of its Euro denominated net investments. As of December 31, 2016 , the Company had foreign exchange contracts maturing on various dates in 2017 with notional values totaling $1.0 billion outstanding hedging a portion of its British pound sterling, Mexican peso, Swedish krona, Euro and Canadian dollar denominated net investments, and a cross currency swap with a notional value totaling $250.0 million

maturing 2023 hedging a portion of its Japanese yen denominated net investment. For the three months ended April 1, 2017 and April 2, 2016 , maturing foreign exchange contracts resulted in net cash received of $20.7 million and net cash paid of $2.4 million , respectively.

Gains and losses on net investment hedges remain in Accumulated other comprehensive income (loss) until disposal of the underlying assets. Gains and losses after a hedge has been de-designated are recorded directly to the Consolidated Statements of Operations and Comprehensive Income in Other, net.

The pre-tax gain or loss from fair value changes was as follows (in millions):

*Includes ineffective portion and amount excluded from effectiveness testing.

UNDESIGNATED HEDGES

Foreign Exchange Contracts:  Currency swaps and foreign exchange forward contracts are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities (such as affiliate loans, payables and receivables). The objective of these practices is to minimize the impact of foreign currency fluctuations on operating results. The total notional amount of the forward contracts outstanding at April 1, 2017 was $1.2 billion , maturing on various dates in 2017. The total notional amount of the forward contracts outstanding at December 31, 2016 was $1.5 billion , maturing on various dates in 2017. The income statement impacts related to derivatives not designated as hedging instruments for the three months ended April 1, 2017 and April 2, 2016 are as follows (in millions): 

J.    Equity Arrangements

In 2016, the Company repurchased 3,940,087 shares of common stock for approximately $374.1 million . Additionally, the Company net-share settled capped call options on its common stock and received 711,376 shares during 2016. Refer to Note J, Capital Stock , of the Company's Form 10-K for the year ended December 31, 2016.

In November 2016, the Company issued 3,504,165 shares of common stock to settle the purchase contracts of the 2013 Equity Units. See further discussion below.

In March 2015, the Company entered into a forward share purchase contract with a financial counterparty for 3,645,510 shares of common stock. The contract obligates the Company to pay $350.0 million , plus an additional amount related to the forward

component of the contract. In November 2016, the Company amended the settlement date to April 2019, or earlier at the Company's option. The reduction of common shares outstanding was recorded at the inception of the forward share purchase contract in March 2015 and factored into the calculation of weighted-average shares outstanding at that time.

In October 2014, the Company entered into a forward share purchase contract on its common stock. The contract obligated the Company to pay $150.0 million , plus an additional amount related to the forward component of the contract, to the financial institution counterparty not later than October 2016, or earlier at the Company’s option, for the 1,603,822 shares purchased. The reduction of common shares outstanding was recorded at the inception of the forward share purchase contract in October 2014 and factored into the calculation of weighted-average shares outstanding at that time. In October 2016, the Company physically settled the contract, receiving 1,603,822 shares for a settlement amount of $147.4 million . Refer to Note J, Capital Stock , of the Company's Form 10-K for the year ended December 31, 2016, for additional disclosure related to the shares physically received.

As described more fully in Note H, Long-Term Debt and Financing Arrangements , of the Company’s Form 10-K for the year ended December 31, 2016 , in November 2013, the Company purchased from certain financial institutions “out-of-the-money” capped call options on 12.2 million shares of its common stock (subject to customary anti-dilution adjustments). In February 2015, the Company net-share settled 9.1 million of the 12.2 million capped call options on its common stock and received 911,077 shares using an average reference price of $96.46 per common share. In February 2016, the Company net-share settled the remaining 3.1 million capped call options on its common stock and received 293,142 shares using an average reference price of $94.34 per common share.

Equity Units and Capped Call Transactions

As described more fully in Note H, Long-Term Debt and Financing Arrangements , of the Company’s Form 10-K for the year ended December 31, 2016 , in December 2013, the Company issued Equity Units comprised of $345.0 million of Notes and Equity Purchase Contracts. The Equity Purchase Contracts obligated the holders to purchase on November 17, 2016, for $100.00 , between 1.0122 and 1.2399 shares of the Company’s common stock, which are equivalent to an initial settlement price of $98.80 and $80.65 , respectively, per share of common stock.

In accordance with the Equity Purchase Contracts, on November 17, 2016, the Company issued 3,504,165 shares of common shares and received additional cash proceeds of $345.0 million. The conversion rate used in calculating the average of the daily volume-weighted-average price of common stock during the market value averaging period, was 1.0157 (equivalent to the minimum settlement rate and a conversion price of $98.45 per common share) on November 17, 2016.

Contemporaneously with the issuance of the Equity Units described above, the Company paid $9.7 million , or an average of $2.77 per option, to enter into capped call transactions on 3.5 million shares of common stock with a major financial institution. The purpose of the capped call transactions was to offset the potential economic dilution associated with the common shares issuable upon the settlement of the Equity Purchase Contracts. Refer to Note H, Long-Term Debt and Financing Arrangements , of the Company’s Form 10-K for the year ended December 31, 2016 for further discussion. The $9.7 million premium paid was recorded as a reduction to equity.

The capped call transactions cover, subject to customary anti-dilution adjustments, the number of shares equal to the number of shares issuable upon settlement of the Equity Purchase Contracts at the 1.0122 minimum settlement rate. In October and November 2016, the Company's capped call options on its common stock expired and were net-share settled resulting in the Company receiving 418,234 shares using an average reference price of $117.84 per common share.

K.    Accumulated Other Comprehensive Loss

The following tables summarize the changes in the balances for each component of accumulated other comprehensive loss:

(Millions of Dollars)		Currency translation adjustment and other				Unrealized losses on cash flow hedges, net of tax				Unrealized gains (losses) on net investment hedges, net of tax				Pension (losses) gains, net of tax				Total
Balance - December 31, 2016		$	(1,586.3	)		$	(46.3	)		$	88.6			$	(377.2	)		$	(1,921.2	)
Other comprehensive income (loss) before reclassifications		114.6				(6.9		)		(10.2		)		(2.7		)		94.8
Adjustments related to sales of businesses		4.7				—				—				2.6				7.3
Reclassification adjustments to earnings		—				(0.4		)		—				11.8				11.4
Net other comprehensive income (loss)		119.3				(7.3		)		(10.2		)		11.7				113.5
Balance - April 1, 2017		$	(1,467.0	)		$	(53.6	)		$	78.4			$	(365.5	)		$	(1,807.7	)

The reclassifications out of accumulated other comprehensive loss for the three months ended April 1, 2017 and April 2, 2016 were as follows (in millions):