Black & Decker 2011 Annual Report Download - page 39

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27
Industrial and Automotive Repair and hydraulic tools businesses, in Europe, primarily from Engineered Fastening, and in the
emerging markets, mostly from Industrial and Automotive Repair. On a pro forma basis, the Industrial segment net sales increased
21%, with the acquisition impact, primarily from CRC-Evans, accounting for 8% of the increase, organic growth providing 10% of the
increase, along with a 3% benefit from foreign currency translation.
Segment profit increased $147 million and reflects $9 million of merger and acquisition-related charges. Excluding the merger and
acquisition-related charges, segment profit is $415 million, or 16.6% of net sales in 2011, which compares with $286 million
(excluding merger and acquisition-related charges of $27 million), or 15.1% of net sales, in the corresponding 2010 period. The strong
improvement in segment profit and the profit rate is primarily attributable to sales volume leverage, cost synergies, successful pricing
actions and overall strong market conditions in the Industrial segment.
Industrial segment net sales rose 115% in 2010 compared with 2009. Black & Decker provided 78% of the sales increase and the
CRC-Evans acquisition contributed 13%. Unfavorable foreign currency translation, driven by Europe, reduced sales by 2% while
price provided a 1% increase in sales. Sales unit volume gains were 25% primarily attributable to customer supply chain restocking,
which subsided in the third quarter, market share gains, and strong end user demand fueled by higher global production levels and new
product introductions. The Americas and Europe each posted robust 20% volume growth, and were outpaced by Asia. The industrial
and automotive repair business enjoyed significant market share gains, end user market growth in all North American sales channels,
particularly through industrial distribution. The hydraulic tools business also attained strong volume gains further aided by favorable
steel scrap markets. On a pro forma basis, the Black & Decker Engineered Fastening business grew a substantial 29% associated with
significantly higher automotive vehicle production in the Americas and Japan and increased customer penetration. The pro forma
Black & Decker sales were comprised of 26% unit volume, negative 1% price, 1% favorable foreign currency translation and 3% from
an acquisition. Merger and acquisition-related charges, primarily inventory step-up amortization from the initial turn of the Black &
Decker and CRC-Evans inventories, amounted to $27 million in 2010. Excluding the merger and acquisition-related charges, segment
profit was $286 million, or 15.1% of net sales, representing a robust 360 basis point expansion of the segment profit rate. This strong
performance was enabled by the accretive impact of Black & Decker and CRC-Evans, along with favorable operating leverage and a
reduced cost structure in the legacy Stanley businesses. Over one third of the segment profit rate improvement pertains to the legacy
Stanley business and the remainder to the inclusion of Black & Decker and CRC-Evans.
RESTRUCTURING ACTIVITIES
At December 31, 2011 restructuring reserves totaled $84.1 million. A summary of the restructuring reserve activity from January 1,
2011 to December 31, 2011 is as follows (in millions):
1/1/11
Acquisitions
Net
Additions
Usage
Currency
12/31/11
2011 Actions
Severance and related costs ................................
.........
$ — $ 5.7 $ 67.0
$ (17.4) $ (1.3) $ 54.0
Asset impairments ................................
........................
— — 0.2
(0.2) —
—
Facility closure ................................
.............................
— — 2.7
(2.7) —
—
Other ................................................................
............
— — 1.6
(1.5) —
0.1
Subtotal 2011 actions ................................
...................
— 5.7 71.5
(21.8) (1.3) 54.1
Pre-2011 Actions
Severance and related costs ................................
.........
97.8 — (5.7) (65.5) 1.8
28.4
Facility closure ................................
.............................
2.3 — 3.9
(5.0) —
1.2
Other ................................................................
............
1.1 — 1.3
(2.0) —
0.4
Subtotal Pre-2011 actions ................................
............
101.2 — (0.5) (72.5) 1.8
30.0
Total ................................................................
............
$ 101.2 $ 5.7 $ 71.0
$ (94.3) $ 0.5
$ 84.1
2011 Actions: During 2011, the Company recognized $68.6 million of restructuring charges associated with the Merger, Niscayah,
and other acquisitions, relating to activities initiated in the current year. Of those charges, $64.3 million relates to severance charges
associated with the reduction of 1,425 employees, $2.5 million relates to facility closure costs, $0.2 million relates to asset
impairments, and $1.6 million represents other charges.
As a result of the Niscayah acquisition, the Company has assumed $5.7 million of restructuring reserves recorded by Niscayah prior to
the acquisition as part of legacy cost reduction initiatives in 2010.
In addition, the Company continued to initiate cost reduction actions in 2011 that were not associated with the Merger or other
acquisitions, resulting in severance and related charges of $2.7 million pertaining to the reduction of 83 employees, and facility
closure costs of $0.2 million.