Black & Decker 2011 Annual Report Download - page 38

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26
Security net sales increased $555 million, or 27%, in 2011. The impact of acquisitions, principally Niscayah and Infologix, provided
25% of the sales increase, organic sales growth was 1% and favorable foreign currency translation resulted in a 1% increase. More
specifically, electronic security solutions organic sales increased 4%, which was largely attributed to installation and recurring
monthly revenue growth in the U.S., France and the U.K. Healthcare operations achieved 6% in organic sales growth due to both
patient security and RFID-enabled storage systems. Mechanical access solutions organic sales were down 2% due primarily to the
continued softness in commercial and residential construction, lower sales in the Access Technologies business resulting from
remodeling delays at its largest customer and by declines within the residential lock business resulting from a significant U.S customer
inventory correction in the legacy Black & Decker hardware and home improvement business.
Segment profit increased $90 million and includes $32 million of merger and acquisition-related charges. The impact from
acquisitions (primarily Niscayah and Infologix) was the primary driver of the increase in segment profit. Excluding merger and
acquisition-related charges, segment profit was $431 million, or 16.3% of net sales in 2011, which compares with $352 million, or
16.9% of net sales in 2010 (excluding $43 million in merger and acquisition-related charges from 2010). Further, upon the exclusion
of Niscayah’s impact on 2011, in addition to merger and acquisition-related charges, segment profit was 17.3% of net sales in 2011.
The decline in the segment profit rate excluding merger and acquisition related charges is due to both unrecovered cost inflation and
the temporary dilutive effect on the segment profit rate from recent acquisitions.
Security segment sales increased 35% in 2010, reflecting a 29% contribution from the Merger and 8% from acquisitions, principally
the March 2010 SSDS acquisition and the fourth quarter 2010 GMT Chinese hardware business. Modest price and favorable foreign
currency translation provided a combined 1% sales benefit, with organic sales volume decreasing 3%. The mechanical access
solutions sales volume decline was associated with continued slow commercial construction markets and a large U.S. retailer’s
inventory reduction that affected the hardware business. On a pro forma basis, the Black & Decker hardware and home improvement
business achieved 7% higher sales, with 6% unit volume growth, 2% favorable foreign currency translation and a 1% price decline.
The HHI Kwikset
®
and Baldwin
®
new product introductions fueled the higher sales, overcoming the unfavorable impact of a
residential hardware customer’s inventory destocking. Electronic security solutions had a low single digit sales volume decrease as a
solid performance by the healthcare solutions business was more than offset by weakness in commercial installations in the U.S. and
U.K. security businesses.
Segment profit in 2010 reflects $43 million of merger and acquisition-related charges, comprised of facility closure-related costs and
inventory step-up amortization from the initial turn of the Black & Decker inventory. Segment profit amounted to $352 million, or
16.9% of sales, aside from these costs. This 16.9% segment profit rate reflects 40 basis points of dilution from Black & Decker and
acquired companies, such that legacy Stanley achieved a 17.3% segment profit rate excluding merger and acquisition-related charges.
The increase in the total segment profit amount is attributable to Black & Decker and acquisitions which more than offset lower
profits in the legacy Stanley business. The legacy Stanley performance pertained to lower absorption from reduced sales volume, due
to weak construction markets and the previously mentioned customer inventory correction, along with inflation that pressured the
segment profit rate. These factors more than offset the benefits from productivity improvements and restructuring actions with respect
to legacy Stanley.
Industrial:
The Industrial segment is comprised of the industrial and automotive repair, engineered fastening and infrastructure businesses. The
industrial and automotive repair business sells hand tools, power tools, and engineered storage solution products. The engineered
fastening business primarily sells engineered fasteners designed for specific applications. The businesses product lines include stud
welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, engineered plastic fasteners, self-piercing
riveting systems and precision nut running systems. The infrastructure business consists of CRC Evans business, and the Company’s
legacy hydraulics business. The business’s product lines include custom pipe handling machinery, joint welding and coating
machinery, weld inspection services and hydraulic tools and accessories.
(Millions of Dollars)
2011
2010
2009
Net sales
................................................................................................
...
$ 2,501
$ 1,892
$ 881
Segment profit ................................................................
.........................
$ 406
$ 259
$ 101
% of Net sales ................................................................
..........................
16.2% 13.7%
11.5%
Industrial net sales increased $609 million, or 32%, in 2011 compared with 2010. The impact of the Merger and other acquisitions
(primarily CRC-Evans) provided a 19% increase in net sales, organic growth provided an additional 10% and favorable foreign
currency contributed 3% for 2011. The Engineered Fastening business had 13% organic growth through gains in market share,
specifically in North America and Europe, as well as expansion into new automotive platforms and growth within the commercial
aerospace market. The Industrial and Automotive Repair business achieved 11% organic growth due to market demand, new products,
strong hand tool sales within the North American industrial distribution channel, and continued growth in the Mac Tools mobile
distribution channel. Geographically, the Industrial segment achieved organic growth in North America, primarily driven by the