Black & Decker 2011 Annual Report Download - page 22

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The Company’s operations are significantly dependent on infrastructure, notably certain distribution centers and security alarm
monitoring facilities, which are concentrated in various geographic locations. If any of these were to experience a catastrophic loss,
such as a fire, earthquake, hurricane, or flood, it could disrupt operations, delay production, shipments and revenue and result in large
expenses to repair or replace the facility. The Company maintains business interruption insurance, but it may not fully protect the
Company against all adverse effects that could result from significant disruptions.
Unforeseen events, including war, terrorism and other international conflicts and public health issues, whether occurring in the United
States or abroad, could disrupt our operations, disrupt the operations of our suppliers or customers, or result in political or economic
instability. These events could reduce demand for our products and make it difficult or impossible for us to manufacture our products,
deliver products to customers, or to receive materials from suppliers.
The Company’s results of operations could be negatively impacted by inflationary or deflationary economic conditions which could
affect the ability to obtain raw materials, component parts, freight, energy, labor and sourced finished goods in a timely and cost-
effective manner.
The Company’s products are manufactured using both ferrous and non-ferrous metals including, but not limited to, steel, zinc, copper,
brass, aluminum, nickel and resin. Additionally, the Company uses other commodity-based materials for components and packaging
including, but not limited to, plastics, wood and other corrugated products. The Company’s cost base also reflects significant elements
for freight, energy and labor. The Company also sources certain finished goods directly from vendors. If the Company is unable to
mitigate any inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be
adversely affected.
Conversely, in the event there is deflation, the Company may experience pressure from its customers to reduce prices; there can be no
assurance that the Company would be able to reduce its cost base (through negotiations with suppliers or other measures) to offset any
such price concessions which could adversely impact results of operations and cash flows.
Further, as a result of inflationary or deflationary economic conditions, the Company believes it is possible that a limited number of
suppliers may either cease operations or require additional financial assistance from the Company in order to fulfill their obligations.
In a limited number of circumstances, the magnitude of the Company’s purchases of certain items is of such significance that a change
in established supply relationships with suppliers or increase in the costs of purchased raw materials, component parts or finished
goods could result in manufacturing interruptions, delays, inefficiencies or an inability to market products. Changes in value-added tax
rebates currently available to the Company or to its suppliers could also increase the costs of the Company’s manufactured products as
well as purchased products and components and could adversely affect the Company’s results.
Uncertainty about the financial stability of several countries in the European Union (EU), the increasing risk that those countries
may default on their sovereign debt and related stresses on the European economy could have a significant adverse effect on our
business, results of operations and financial condition.
In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in
Greece, Ireland, Italy, Portugal and Spain, which created concerns about the ability of these EU “peripheral nations” to continue to
service their sovereign debt obligations. These conditions impacted financial markets and resulted in high and volatile bond yields on
the sovereign debt of many EU nations. Certain European nations continue to experience varying degrees of financial stress, and
yields on government-issued bonds in Greece, Ireland, Italy, Portugal and Spain have risen and remain volatile. Despite assistance
packages to Greece, Ireland and Portugal, the creation of a joint EU-IMF European Financial Stability Facility in May 2010, and a
recently announced plan to expand financial assistance to Greece, uncertainty over the outcome of the EU governments’ financial
support programs and worries about sovereign finances persist. Market concerns over the direct and indirect exposure of European
banks and insurers to the EU peripheral nations has resulted in a widening of credit spreads and increased costs of funding for some
European financial institutions.
Risks and ongoing concerns about the debt crisis in Europe could have a detrimental impact on the global economic recovery,
sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions. Market and
economic disruptions have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates,
levels of incurrence and default on consumer debt and home prices, among other factors. There can be no assurance that the market
disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not spread, nor
can there be any assurance that future assistance packages will be available or, even if provided, will be sufficient to stabilize the
affected countries and markets in Europe or elsewhere. To the extent uncertainty regarding the economic recovery continues to
negatively impact consumer confidence and consumer credit factors, our business and results of operations could be significantly and
adversely affected.