Black & Decker 2011 Annual Report Download - page 31

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19
• Accelerating progress via SFS.
Stanley has pursued this strategy which involves industry, geographic and customer diversification, in order to pursue sustainable
revenue, earnings and cash flow growth. In May 2011, the Company’s GICS code was changed to “Industrials – Capital Goods –
Machinery” from “Consumer Discretionary – Consumer Durables – Household Durables” which reflects the evolution of the
Company.
The Company’s vision to be a consolidator of the tool industry and to increase its relative weighting in emerging markets has been
significantly enhanced by the Merger, which along with the impact from the Company’s diversification strategy has driven continued
improvements in financial performance. Sales outside the U.S. represented 49% of total net sales in 2011, up from 29% in 2002. As
further illustration of our diversification strategy, 2011 sales to U.S. and international home centers and mass merchants were
approximately 23%, including nearly 16% in sales to the Company’s two largest customers, which is down from 31% in 2010,
including 20% in sales to the Company’s two largest customers. As acquisitions in the various growth platforms (electronic and
mechanical security, engineered fastening, infrastructure and healthcare solutions) are made in future years, the proportion of sales to
these valued U.S. and international home center and mass merchant customers is expected to continue to decrease.
Execution of this strategy has entailed approximately $4.6 billion of acquisitions since 2002 (aside from the Merger), several
divestitures and increased brand investment, enabled by strong cash flow generation. During the same time period, the Company has
returned 47% of free cash flow to its shareowners.
The Company’s long-term financial objectives are:
• 4-6% organic revenue growth; 10-12% total revenue growth;
• Mid-teens percentage EPS growth;
• Free cash flow greater than or equal to net income;
• Return on capital employed (ROCE) of 15%;
• Continued dividend growth; and
• Strong investment grade credit rating.
The Company’s long-term capital allocation objectives pertaining to the deployment of free cash flow are:
• Invest approximately 2/3 in acquisitions; and
• Return approximately 1/3 to shareowners, as the Company remains committed to continued dividend growth and
opportunistic share buy backs.
The following represent examples of executing on our strategic objectives:
2011 Acquisitions
In September 2011, the Company completed the acquisition of Niscayah Group AB (“Niscayah”) for a total purchase price of $984.5
million. Niscayah is one of the largest access control and surveillance solutions providers in Europe. Niscayah’s integrated security
solutions include video surveillance, access control, intrusion alarms and fire alarm systems, and its offerings include design and
installation services, maintenance and repair, and monitoring systems. The acquisition expands and complements the Company’s
existing security product offerings and further diversifies the Company’s operations and international presence. Management believes
the acquisition of Niscayah will result in approximately $80 million in cost synergies by the end of 2013. Additionally, the acquisition
is expected to provide a benefit of approximately $0.45 of earnings per diluted share (excluding expected acquisition related charges
of $60 million to $80 million) by 2014, with $0.20 in 2012.
In September 2011, the Company acquired Microtec Enterprises, Inc. (“Microtec”, which operates under the business name
“AlarmCap”) for $59 million, net of cash acquired. AlarmCap is one of the leading security alarm service providers in Canada,
serving more than 79,000 residential and commercial customers. It offers customers a full suite of security and related monitoring
products and services, including intrusion, smoke detection and environmental services. AlarmCap and Niscayah are being integrated
into the Company’s Security segment.
In January 2011, the Company acquired InfoLogix, Inc. (“Infologix”) for $60 million, net of cash acquired. Infologix is a leading
provider of enterprise mobility solutions for the healthcare and commercial industries and has added an established provider of mobile
workstations and asset tracking solutions to the Company’s existing healthcare solutions operations, which operates under the
Company’s Security segment.