Donald Allan, Jr.
President and Chief Financial Officer at Stanley Black & Decker
Thank you, Jim, and good morning, everyone. As Jim mentioned in his comments, our focus remains on ensuring we serve the continued healthy demand and investing in our supply chain to further strengthen our position for sustained growth. As I've highlighted on prior calls, we took multiple actions in 2021 to navigate through the global supply chain challenges and further strengthen our manufacturing capacity, sourcing, operational efficiency and agility. These actions are allowing us to better serve our customers and deliver growth in revenue and cash flow in 2022 and beyond. Key areas of investment included adding capacity consistent with our make where we sell strategy, co-investing with strategic sourcing partners with a focus on batteries and electronic components and deploying our manufacturing 4.0 automation solutions to enhance productivity, labor efficiency and competitive costs.
Our investments in this area as well as our electronic component availability continue to progress as expected and remain on track. Demand continues to outpace availability for our hottest products amid this constrained supply chain environment. First, as it relates to inventory, our actions will position us to meet the current demand levels while improving working capital to deliver strong cash flow generation. Greater working capital efficiency and cash flow generation remains a significant opportunity in 2022 and beyond. As a reminder, last year, we made significant investments in inventory to help meet the outsized demand in the tools business.
Our 2022 cash flow guidance assumes that we can modestly reduce inventory versus 2021 levels, and we expect much of that improvement to occur in the second half of the year once we get through this spring to early summer selling season. Our inventory at the end of Q1 was up approximately $850 million versus the year-end '21 balance. The increase in our first quarter inventory was primarily due to working capital seasonality to support the peak outdoor buying season, spring merchandising and the Father's Day selling season. This investment in working capital, coupled with the earlier timing of certain tax payments, contributed to a free cash outflow of $1.4 billion in the first quarter. This Q1 performance will reverse as we execute on the remaining 2022 working capital initiatives. Within the supply chain, tight component supply and elongated transportation times continue to be a challenge.
However, we have seen some signs of stabilization. For example, our goods in transit for the quarter remained stable and similar to year-end levels. The Port of L.A. has seen improvements with reduced congestion, and moving goods from the ports to our DCs is not a significant source of delays. As it relates to China, we continue to frequently monitor our end-to-end supply chain. And while there has been some minor COVID-driven disruption to date, it remains manageable at this stage. This is a dynamic situation that we will continue to watch closely in the coming weeks. As it relates to semiconductors, we continue to see improved supply in line with expectations. Our Tier one contract manufacturers received more semiconductors in the first quarter, which will enable us to increase the throughput for our professional power tools in Q2.
We are on track for an improvement to our electronic component supply of approximately 20% in 2Q and further improvement in 3Q, which will support better fill rates, customer inventory positions and higher revenues as we progress through the remainder of the year. So in summary, we are actively managing a very dynamic supply chain and responding with agility to position ourselves to meet the continued strong demand we are experiencing, especially within the professional power tool portion of our business. Turning to our segment results. The headline for the first quarter is that demand for our products remains healthy, and we are executing the necessary pricing actions to mitigate higher input costs. In Tools and Outdoor, we grew revenue 24% as the strategic outdoor power equipment acquisitions contributed 27% and price drove five points of growth. Price realization accelerated sequentially because of the new global price increases implemented in response to commodity and transportation inflation experienced in late 2021.
These factors were partially offset by a 6% decline in volume and 2% from currency. Volume was impacted by electronic component availability, and we have not seen evidence of broad demand destruction related to price elasticity. We estimate that supply constraints resulted in approximately $200 million in unfulfilled professional power tool opportunities in the first quarter, which, if realized, would have resulted in volume growth and a record prior year performance comp. We will better position to capitalize on this volume opportunity as we improve supply in the coming two quarters. Regional organic growth was relatively in line with our expectations, with Europe up 2%, emerging markets contributing 5% and North America down 3%. The Tools and Outdoor operating margin rate for the segment was 14%, representing a 260 basis point improvement versus the fourth quarter of 2021. We continue to execute on price to protect our margins, and we saw the sequential benefit in Q1. Comparing the Tools and Outdoor margin rate versus prior year, we experienced the decline as price realization was more than offset by inflation, higher transportation costs, growth investments and lower volume.
The outdoor acquisitions were near line average margin rates for the quarter, representing a very strong start to the year. U.S. retail point-of-sale remains at healthy levels, supported by strong professional construction markets and our innovation. While the POS comps were down versus a stimulus-aided Q1 2021, the normalized 2019 comparative growth rates accelerated from the levels we experienced in the back half of 2021. This strengthens our conviction that we continue to experience a very solid demand environment. Now turning to the Tools and Outdoor SBUs. Power tools was down 1% organically in the quarter. We continue to realize benefits from our price increases, along with continued demand for our innovative offerings for the pro and tradesperson. We have launched a series of products under our industry-leading CRAFTSMAN, STANLEY FATMAX, Black and Decker and DEWALT brands. Our recent breakthrough, DEWALT POWERSTACK, continues to be very well received by end users and is expected to be a multi-hundred million dollar contributor to growth in 2022. Hand tools, accessories and storage declined 1% in the quarter against a very difficult comparable.
Revenue was supported by pricing and new product innovation. Some of our new innovations include extending our world's first DEWALT 20-volt laser platform with the new 20-volt MAX laser, expanding our DEWALT ToughSystem storage to include soft storage solutions designed to optimize efficiency in organization, and we added a new IRWIN STRAIT-LINE tape to our industry-leading tape measure lineup. Moving to outdoor products. This business grew 4% organically, while the addition of MTD and Excel added over $800 million of revenue. Growth was driven by price realization, expanded distribution and new product innovations under the Black and Decker CRAFTSMAN and DEWALT brands. Our acquisitions are also benefiting from product innovation, including recent launches such as the redesigned FasTrak zero-turn mower line for commercial use and the first semi-autonomous zero-turn mower with the Cub Cadet SurePath. Despite the strong start for these acquisitions, this growth was modestly impacted from a later breaking outdoor season due to colder weather in many parts of North America.
We expect these revenues to be recovered in the second and third quarter. Our first full quarter as one outdoor team was very successful, and we remain on track to integrate three assets into a new $4 billion revenue platform, as you heard from Jim. As the integration progresses, we continue to build conviction around the innovation, growth and synergy opportunities. We are even more excited about the electrification growth opportunity as we work to integrate these organizations and processes. The team is energized, focused and off to a great start. I want to thank the Tools and Outdoor organization for their efforts in the first quarter. We made progress against our key operational goals for 2022 with strong price realization, improved power tool supply and actioning a strong plan for working capital reduction as we move throughout the year. This dynamic environment requires agility, and I know we have the right people with the perseverance and dedication to be successful. Now shifting to Industrial. Segment revenue declined 2% versus last year as the five points of price realization were more than offset by a 5% volume decline and a 2% negative impact from currency.
Operating margin was 6.9% as the benefit from price realization was more than offset by commodity inflation and market-driven volume declines, in particular, in our higher-margin automotive business where our customers remain constrained by their own supply chain challenges. Looking within the segment, engineered fastening organic revenues were down 3% as 5% general industrial fastener growth was more than offset by lower automotive OEM production as well as a modest decline in aerospace. Our auto fastener business continues to successfully operate in a dynamic environment with customer production fluctuations. Despite this, auto fasteners once again demonstrated outperformance versus light vehicle production. And the business is also benefiting from accelerating growth and content gains across the electric vehicle production space. Our industrial fastener business enjoys a healthy backlog and delivered growth at nearly 2 times global IPI in the first quarter. The aerospace fastener business delivered its third consecutive quarter of sequential revenue improvement. This business is focused on capturing the recovery in the OEM production, which is beginning to emerge.
We expect in 2022 aero fasteners will begin to demonstrate organic growth as it starts the cyclical recovery back towards historical levels of revenue. Infrastructure organic revenues were up 4% as 13% growth in attachment tools were partially offset by lower pipeline project activity in oil and gas. Momentum remains strong in attachment tools driven by record backlogs, dealer inventories continuing to trend below targeted levels and elevated market confidence due to the U.S. infrastructure bill. Our Industrial team is continuing to make steady progress with its revenue and profitability improvements. And we are primed to leverage the cyclical recovery that is on the horizon and capitalize on the auto electrification trend as well. Turning to the next slide. The operating environment continues to be dynamic, and the recent invasion in the Ukraine by Russia has driven a new wave of inflation versus the backdrop earlier this year. From an input cost perspective, our updated expectations for 2022 commodity inflation and cost to serve is now $1.4 billion versus our January expectation of $800 million.
The key drivers of the incremental $600 million reflects significant increases in battery inputs such as lithium, nickel and cobalt, oil-related inputs such as transport and resins, and continued upward movements in other base metals and steel. Looking at the commodity indices since we issued our initial 2022 guidance, lithium, nickel and cobalt are all up approximately 90%, 50% and 7%, respectively, whereas oil is also up nearly 15%. If we break down the $600 million increase, it is in primarily four major categories: $200 million in batteries, $200 million in transportation costs, $100 million in resins due to oil prices and $50 million in gas engine costs. If you look at our commodity basket discretely, the increase to our total direct material spend is up over 30% since the end of 2020. Nearly half of this total impact occurred in February and March of this year. While these commodities continue to be volatile today, we do have solid visibility to the expected sustained impact. And we are building this into the plan and taking additional pricing actions to offset the impact to our margins.
We have executed three rounds of price, which are now in place across our global businesses. And we are in the process of implementing additional price actions in response to the new wave of inflation that has occurred in the last 60 days. These new price actions will be on top of the six to seven points of price we included in our prior guidance, and we now expect price to contribute high single digits for 2022. Our teams remain focused on pricing actions to offset the cumulative inflation impacts experienced in the last nine to 10 months. We believe this will allow us to expand our core margins, and that will begin to emerge in late 2022. As a reminder, before diving into the details on Slide 9, our guidance does not include our security businesses, which are now recorded as discontinued operations. So moving on to our 2022 guidance. We are planning for total revenue growth in the mid-20s, inclusive of organic growth of 7%. We are updating our adjusted earnings per share to a range of $9.50 up to $10.50. On a GAAP basis, we expect the earnings per share range to be $7.20 up to $8.30, inclusive of onetime charges related to restructuring expenses, a voluntary retirement program, the Russian business closure and acquisition-related costs. The current estimate for pretax charges in 2022 is approximately $460 million. On the right side of the slide, we have outlined the components of our EPS adjustment versus our prior estimate. We made two portfolio decisions since January guidance, which reduced EPS by $0.45.
The divestiture of our Stanley Access Technologies business reduces EPS by $0.30. And there will be a $0.15 impact from the closure of our Russian business. Therefore, the January guidance midpoint adjusted for these two decisions is $11.80. Incremental commodity and cost to serve just discussed results in a $3 cost increase or reduction in EPS. Then you have the offset of the outlined price actions, which add $1.70 benefit, which is a net of a lower volume planning assumption to protect ourselves for any potential demand elasticity. Below-the-line items are relatively neutral as a lower tax rate and other expense assumptions are offset by the impact of shares from an adoption of a new accounting standard in Q1 related to preferred shares. This accounting standard change will only impact 2022 and reverses in 2023 as these shares will be retired in November of '22. Turning to the segments. Tools and Outdoor organic growth is expected to be in the mid- to high single digits, supported by price, core and breakthrough innovation and healthy demand across our end markets. We expect that our strategic outdoor acquisitions will contribute just over $3 billion in revenue in 2022. For the full year, Tools and Outdoor consolidated margins are expected to be down on a year-over-year basis as inflation and acquisition mix pressure margins. As you think about Tools and Outdoor margins, excluding acquisitions, our plan calls for a relatively similar OEM in the second quarter to what we just delivered in Q1.
We then expect year-over-year core margins to be up in the back half. There is a meaningful midterm opportunity to improve margins within the outdoor acquisitions over the coming years. And this continues to be a significant priority for us. We expect high single-digit margins this year, and we see the potential for low double-digit margins over the next few years. We believe the Industrial segment will achieve low double-digit organic growth driven by innovation, pricing and cyclical recoveries across much of the portfolio. The Industrial margin rate is expected to be positive year-over-year. Leveraging strong revenue growth, productivity and price, this segment will experience sequential improvement each quarter in 2022. Let's now shift to some color on Q2, full year cash flow and our share repurchase program. We expect the second quarter adjusted EPS will approximate 21% to 22% of the full year. This assumes low single-digit organic growth and a strong revenue contribution from acquisitions. Now turning to cash flow.
As a result of our lower full earnings guidance and higher inventory values at year-end due to the additional wave of inflation we experienced in the last 60 days, we expect free cash flow to now be in the range of $1 billion to $1.5 billion. This range does still reflect a modest working capital reduction year-over-year. We still plan to complete our $4 billion share repurchase program. However, since we see a lower cash flow performance in 2022 for the reasons just articulated, we will defer the remaining portion of -- or $1.7 billion until 2023. We continue to pursue a disciplined capital allocation approach that aims to balance share repurchase activity with a commitment to dividends and strong investment-grade credit ratings. We are committed to the completion of this repurchase program in 2023. The organization is focused on execution in this dynamic environment, with the key operational priorities centered around the following areas: improving supply chain and customer service levels, driving above-market organic growth, delivering on our price and cost control measures, successfully integrating our strategic outdoor acquisitions, closing the two security divestitures later in this year as planned and leveraging the SBD operating model to improve our working capital efficiency in 2022 and beyond.
With that, I will now turn the call back over to Jim to conclude with a summary of our prepared remarks. Jim?