Black & Decker 2014 Annual Report Download

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
INNOVATE.
EXECUTE.
GROW.
2014 ANNUAL REPORT
YEARINREVIEW.STANLEYBLACKANDDECKER.COM

Table of contents

  • Page 1
    INNOVATE. EXECUTE. GROW. 20 14 A N N U A L R E P O R T YEARINREVIEW.STANLEYBLACKANDDECKER.COM 01

  • Page 2
    ... Rivet tools keep production lines running at full speed. Bottom: STANLEY Security is building momentum in key vertical markets including retail, healthcare, financial and higher education. BACK COVER: Top: Stanley Black & Decker is expanding the number of tools we build in the USA using materials...

  • Page 3
    ... Markets initiative has been a success in North America and the operational and commercial improvements implemented in Security Europe have positioned this business for improved results during 2015 and beyond. As a result of the overall Company's strong financial performance, we exited the year...

  • Page 4
    ... a successful foray into advanced industrial solutions. Our recent thrust into emerging markets through a globally coordinated, combined CDIY/IAR organization with increased feet on the street and a host of new products - designed in * Excluding charges 02 Stanley Black & Decker 2014 Annual Report

  • Page 5
    ... right strategy and are in the right markets, giving us cause for cautious optimism that we can return this business to successful levels of growth and profitability and therefore secure its place as part of our longterm portfolio. 2014 GLOBAL PRESENCE (% OF 2014 REVENUES) R.O.W. EMERGING MARKETS...

  • Page 6
    ... 170 years ago. While we have grown into a global diversified industrial solutions company, we understand that American customers like buying American products, and we are proud to meet that demand. With our new plant in North Carolina, we have expanded the number of tools we build in the USA using...

  • Page 7
    ... structural SG&A levels. ORGANIC REVENUE GROWTH IN 2014 +5% STANLEY FULFILLMENT SYSTEM (SFS) mon Platforms Com CO VE RO NT Sales & Operations Planning Operational Lean RO I MP L Breakthrough Customer Value Order-to-Cash Excellence Global Supply Management Com m o n Pl at for m s E X PA...

  • Page 8
    ...the impact on CFROI. Currently, top M&A priorities include: 1) tool industry consolidation, 2) Engineered Fastening bolt-ons and 3) expanding our industrial platform. M&A activity in Security is expected to be minimal until the core business turnaround is in the late stages. SUMMARY 2014 was a year...

  • Page 9
    ...= Net cash provided by operating activities minus capital expenditures. ** In the fourth quarter of 2014, the Company classified the results of the Security segment's Spain and Italy operations as held for sale based on management's intention to sell these businesses. The results from 2010-2013 were...

  • Page 10
    ...merger and acquisition-related charges of $227 million and $478 million, respectively, primarily associated with the Black & Decker merger and Niscayah acquisitions. (MILLIONS OF DOLLARS) 2014 2013 2012 2011 . % . 2010 Net earnings from continuing operations Interest income Interest expense...

  • Page 11
    ... The Black & Decker Corporation have been excluded from all prior years. New York Stock Exchange Certification ANNUAL CEO CERTIFICATION (SECTION 303A.12(A)) As the Chief Executive Officer of Stanley Black & Decker, and as required by Section 303A.12(a) of the New York Stock Exchange Listed Company...

  • Page 12
    ...up 70 basis points versus 2013. 1,000 products (SKUs)-designed and manufactured in the region for the region-launched by emerging market business units. Working capital turns exceed 10 turns leveraging SFS, a post-merger record. * Excluding charges 012 10 Stanley Black & Decker 2014 Annual Report

  • Page 13
    ...20% for a third consecutive year. * Excluding charges BUSINESS HIGHLIGHTS STANLEY Security North America returned to organic growth, led by Vertical Markets success and Access Technologies growth. • Vertical Markets solutions in Financial, Retail, Healthcare, Education and Government deliver $140...

  • Page 14
    ..., Stanley Security James Cannon President, Stanley Security North America & Emerging Markets Craig A. Douglas Vice President & Treasurer Rhonda Gass Vice President & Chief Information Officer Pete Morris President, Stanley Oil & Gas Lee McChesney Chief Financial Officer, Global Tools & Storage...

  • Page 15
    ... STANLEY BLACK & DECKER, INC. (Exact Name Of Registrant As Specified In Its Charter) Connecticut (State Or Other Jurisdiction Of Incorporation Or Organization) 06-0548860 (I.R.S. Employer Identification Number) 1000 Stanley Drive New Britain, Connecticut (Address Of Principal Executive Offices...

  • Page 16
    ... MARKET RISK ...FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...CONTROLS AND PROCEDURES ...OTHER INFORMATION ...PART III DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ...EXECUTIVE COMPENSATION...SECURITY...

  • Page 17
    ...Stanley") to Stanley Black & Decker, Inc. The Company is a diversified global provider of power and hand tools, products and services for various industrial applications, mechanical access solutions (i.e. automatic doors and commercial locking systems), and electronic security and monitoring systems...

  • Page 18
    ... drivers, grinders, saws, routers and sanders. The Consumer Products Group sells corded and cordless electric power tools sold primarily under the Black & Decker brand, lawn and garden products and home products. Lawn and garden products include hedge trimmers, string trimmers, lawn mowers, edgers...

  • Page 19
    ... sells to consumers, retailers, educational, financial and healthcare institutions, as well as commercial, governmental and industrial customers. Products are sold predominantly on a direct sales basis. The MAS business sells and installs automatic doors, commercial hardware, locking mechanisms...

  • Page 20
    ...that are used in its businesses worldwide. In the CDIY segment, significant trademarks include STANLEY®, BLACK+DECKER®, DEWALT®, Porter-Cable®, Bostitch®, FatMax®, Powers®, Oldham®, Guaranteed Tough® and the yellow & black color scheme for power tools and accessories. Significant trademarks...

  • Page 21
    ... other information in this Annual Report on Form 10-K, including those risks set forth under the heading entitled "Cautionary Statements Under the Private Securities Litigation Reform Act of 1995", and in other documents that the Company files with the U.S. Securities and Exchange Commission, before...

  • Page 22
    ... Canada and Western Europe. Also, certain large customers offer house brands that compete with some of the Company's product offerings as a lower-cost alternative. To remain profitable and defend market share, the Company must maintain a competitive cost structure, develop new products and services...

  • Page 23
    ... management, sales and other personnel sufficiently to maintain its current business and support its projected growth. A shortage of these key employees might jeopardize the Company's ability to implement its growth strategy. The Company has significant operations outside of the United States...

  • Page 24
    ... Company's information technology systems, networks and services, as well as the confidentiality and integrity of the Company's data. If the Company suffers a loss or disclosure of business or stakeholder information due to security breaches, and business continuity plans do not effectively address...

  • Page 25
    ... in emerging markets and relative stability in North America, the Company's future growth, profitability and financial liquidity could be affected, in several ways, including but not limited to the following depressed consumer and business confidence may decrease demand for products and services...

  • Page 26
    ...and global liquidity potentially impacting the Company's ability to access these credit markets and to raise capital. The Company is exposed to market risk from changes in foreign currency exchange rates which could negatively impact profitability. The Company manufactures and sells its products in...

  • Page 27
    ... and clients or customers of acquired companies. In addition, the success of the Company's long-term growth and repositioning strategy will depend in part on successful general reorganization including its ability to combine businesses and operations; integrate departments, systems and procedures...

  • Page 28
    ... liability for non-compliance. The Company manufactures products, configures and installs security systems and performs various services that create exposure to product and professional liability claims and litigation. If such products, systems and services are not properly manufactured, configured...

  • Page 29
    ...'s financial condition and operating results. If the Company were required to write down all or part of its goodwill, indefinite-lived trade names, or other definite-lived intangible assets, its net income and net worth could be materially adversely affected. As a result of the Black and Decker...

  • Page 30
    ... financial position, results of operations or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is listed and traded on the New York...

  • Page 31
    ... provides information about the Company's purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act for the three months ended January 3, 2015: Total Number Of Shares Purchased As Part Of A Publicly Announced Plan or Program 2014 (a) Total Number...

  • Page 32
    ... Consolidated Financial Statements, and prior year 10-K filings, the results in 2010 through 2014 were recast for certain discontinued operations for comparability (in millions, except per share amounts): 2014 (a) 2013 (b) 2012 (c) 2011 (d) 2010 (e) Continuing Operations: Net sales ...Net earnings...

  • Page 33
    ...Notes to Consolidated Financial Statements in Item 8 for further information. Amounts in 2011 reflect earnings of $63 million (or $0.37 per diluted share) related to Security Spain and Italy, HHI, two small businesses divested in 2014, and three small businesses divested during 2011. Amounts in 2010...

  • Page 34
    ...from emerging markets. These objectives have been significantly enhanced by the Black & Decker 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 51% of total net sales in 2014...

  • Page 35
    ... years: (1) increase presence in emerging markets in the Power Tools, Hand Tools and Commercial Hardware mid-price point categories, (2) create a "smart" tools and storage market using radio frequency identification ("RFID") and real-time locating system ("RTLS") technology, (3) utilize technology...

  • Page 36
    ...used for industrial and automotive repair purposes as well as advanced industrial storage solutions. Furthermore, the CDIY and IAR businesses have benefited greatly from the Company's powerful family of brands, global scale and breadth of products across power and hand tools, storage and accessories...

  • Page 37
    ... of the Company's reportable segments beginning in the first quarter of 2015. Continuing to Invest in the Stanley Black & Decker Brands The Company has a strong portfolio of brands associated with high-quality products including STANLEY®, BLACK +DECKER®, DEWALT®, Porter-Cable®, Bostitch...

  • Page 38
    ... Charges Impacting 2014, 2013 and 2012 Earnings Throughout MD&A, the Company has provided a discussion of the outlook and results both inclusive and exclusive of the merger and acquisition-related and other charges. Merger and acquisition-related charges relate primarily to the Black & Decker merger...

  • Page 39
    ... segment, organic sales increased 4% compared to 2012, as a result of successful new product introductions and promotions within the DEWALT, Black & Decker and Bostitch power tool lines, as well as market share gains in the US, Europe and emerging markets due to the implementation of organic growth...

  • Page 40
    ...element of SG&A and gross profit, which is not allocated to the business segments, amounted to $177.4 million in 2014, $254.0 million in 2013 and $252.3 million in 2012. The previously discussed merger and acquisition-related charges that unfavorably impacted corporate overhead totaled $18.7 million...

  • Page 41
    ... drivers, grinders, saws, routers and sanders. The Consumer Products Group sells corded and cordless electric power tools sold primarily under the Black & Decker brand, lawn and garden products and home products. Lawn and garden products include hedge trimmers, string trimmers, lawn mowers, edgers...

  • Page 42
    ... and Automotive Repair ("IAR"), Engineered Fastening and Infrastructure businesses. The IAR business sells professional hand tools, power tools, and engineered storage solution products. The Engineered Fastening business primarily sells engineered fastening products and systems designed for specific...

  • Page 43
    ... management, and emergency call products. The MAS business sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, tubular and mortise door locksets. (Millions of Dollars) 2014 2013 2012 Net sales ...$ Segment profit ...$ % of Net sales...

  • Page 44
    ... for $826 million, net of cash acquired, and GQ for $49 million, net of cash acquired. The Company also received net proceeds of $94 million in 2013 related to the Second Closing of the HHI sale. Cash flows provided by investing activities totaled $183 million in 2012, which primarily consisted of...

  • Page 45
    ... and $1.422 billion in 2014, 2013 and 2012, respectively. The 2014 payments relate to the repurchase of $46 million of 2022 Term Notes. The 2013 payments relate to the repurchase of $300 million of Black & Decker Corporation 5.75% senior notes, which resulted in the Company paying a premium on the...

  • Page 46
    ... the longest consecutive annual and quarterly dividend payments among industrial companies listed on the New York Stock Exchange. Fluctuations in foreign currency rates negatively impacted cash by $147 million and $45 million in 2014 and 2013, respectively. The negative impact in 2014 was primarily...

  • Page 47
    ...used primarily to repay commercial paper borrowings. In the fourth quarter of 2014, the Company repurchased $46 million of 2022 Term Notes. In the fourth quarter of 2013, the Company extinguished $300 million of its Black & Decker Corporation 5.75% senior notes due 2016. In the third quarter of 2012...

  • Page 48
    ...remain un-hedged. The Company may also enter into cross-currency swaps and forward contracts to hedge the net investments in certain subsidiaries and better match the cash flows of operations to debt service requirements. Management estimates the foreign currency impact from its derivative financial...

  • Page 49
    ...the Company's financial position and results of operations. The Company has exposure to commodity prices in many businesses, particularly brass, nickel, resin, aluminum, copper, zinc, steel, and energy used in the production of finished goods. Generally, commodity price exposures are not hedged with...

  • Page 50
    ...underlying net assets of acquired businesses. The Company reported $7.276 billion of goodwill, $1.593 billion of indefinite-lived trade names and $1.159 billion of definite-lived intangibles at January 3, 2015. Management tests goodwill for impairment at the reporting unit level. A reporting unit is...

  • Page 51
    ...'s weighted-average discount rate for the United States and international pension plans was 4.50% and 4.00%, respectively at December 28, 2013. As discussed further in Note L, Employee Benefit Plans, the Company develops the expected return on plan assets considering various factors, which include...

  • Page 52
    ...tax positions as a component of income taxes in the Consolidated Statement of Operations. See Note Q, Income Taxes, in the Notes to Consolidated Financial Statements for further discussion. RISK INSURANCE - To manage its insurance costs efficiently, the Company self insures for certain U.S. business...

  • Page 53
    ... from this estimate. WARRANTY - The Company provides product and service warranties which vary across its businesses. The types of warranties offered generally range from one year to limited lifetime, while certain products carry no warranty. Further, the Company sometimes incurs discretionary costs...

  • Page 54
    ... , as well as integration of existing businesses; (x) the continued acceptance of technologies used in the Company's products and services; (xi) the Company's ability to manage existing Sonitrol franchisee and Mac Tools relationships; (xii) the Company's ability to minimize costs associated with any...

  • Page 55
    ... in consumer channels; inventory management pressures on the Company's customers; the impact the tightened credit markets may have on the Company or its customers or suppliers; the extent to which the Company has to write off accounts receivable or assets or experiences supply chain disruptions...

  • Page 56
    ... affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 9B. OTHER INFORMATION None PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT The information required by this Item, except for certain...

  • Page 57
    ... - Europe (2013). President, Stanley Security Solutions Europe and Executive Director Industrial & Automotive Repair (2012); President, Industrial & Automotive Repair (2009); President, Stanley Europe and President Directeur General, Facom (2007). Chief Financial Officer-Global Tools & Storage since...

  • Page 58
    ...). President, Power Tools-Global Tools and Storage since January 2015. President, Fastening & Accessories (2012). President, Professional Power Tools & Products (2010); Vice President-Global Product Development of the Industrial Products Group, The Black & Decker Corporation (2009); Vice President...

  • Page 59
    ...to the information set forth under the sections entitled "Security Ownership of Certain Beneficial Owners", "Security Ownership of Directors and Officers", and "Executive Compensation", of the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A under the Exchange Act...

  • Page 60
    ... Related Party Transactions" of the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A under the Exchange Act within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information...

  • Page 61
    ... 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STANLEY BLACK & DECKER, INC. By: /s/ John F. Lundgren John F. Lundgren, Chairman and Chief Executive Officer Date: February 19, 2015...

  • Page 62
    ...(1) AND (2) STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts is included in Item 15 (page 49). Management's Report on Internal Control Over Financial Reporting (page 50). Report of Independent...

  • Page 63
    ..., acquisitions and net transfers to/from other accounts. (c) Refer to Note Q, Income Taxes, of the Notes to Consolidated Financial Statements in Item 8 for further discussion. The prior year amounts in the table above have been recast to exclude the amounts relating to businesses classified as...

  • Page 64
    ...accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has assessed the effectiveness of Stanley Black & Decker Inc.'s internal control over financial...

  • Page 65
    ...basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as...

  • Page 66
    ... of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Stanley Black & Decker, Inc. We have audited Stanley Black & Decker, Inc.'s and subsidiaries (the "Company's") internal control over financial reporting as of January 3, 2015, based on criteria established...

  • Page 67
    ...2014 2013 2012 Net Sales ...$ Costs and Expenses...Cost of sales...$ Selling, general and administrative ...Provision for doubtful accounts...Other-net...Restructuring charges and asset impairments...(Gain) loss on debt extinguishment...Interest income...Notes to Consolidated Financial Statements. 53

  • Page 68
    ... 2015, December 28, 2013, and December 29, 2012 (In Millions of Dollars) 2014 Net earnings ...$ Other comprehensive (loss) income: Currency translation adjustment and other...Unrealized gains (losses) on cash flow hedges, net of tax ...Unrealized gains (losses) on net investment hedges, net of tax...

  • Page 69
    ...) 2014 2013 Assets Current Assets Cash and cash equivalents...$ Accounts and notes receivable, net ...Inventories, net...Prepaid expenses ...Assets held for sale ...Other current assets ...Total Current Assets...Property, Plant and Equipment, net...Goodwill ...Customer Relationships, net ...Trade...

  • Page 70
    ...: Capital expenditures...Proceeds from sales of assets ...Business acquisitions, net of cash acquired ...(Payments) proceeds from sales of businesses, net of cash sold...(Payments) proceeds for net investment hedge settlements Other...Net cash (used in) provided by investing activities ...Financing...

  • Page 71
    ...years ended January 3, 2015, December 28, 2013, and December 29, 2012...Balance December 31, 2011 ...$ Net earnings ...Other ...acquired businesses ...Stock-based compensation related ...Tax benefit related to stock options exercised...ESOP and related tax benefit ...Balance December 29, 2012 ...$ Net...

  • Page 72
    ... quarter of 2013, the Company classified two small businesses within the Security and Industrial segments as held for sale based on management's intention to sell these businesses. These businesses were sold in 2014. In December 2012, the Company sold its Hardware & Home Improvement business ("HHI...

  • Page 73
    ...15 3-5 The Company reports depreciation and amortization of property, plant and equipment in cost of sales and selling, general and administrative expenses based on the nature of the underlying assets. Depreciation and amortization related to the production of inventory and delivery of services are...

  • Page 74
    ...-Element Arrangements." Sales of security monitoring systems may have multiple elements, including equipment, installation and monitoring services. For these arrangements, the Company assesses its revenue arrangements to determine the appropriate units of accounting, with each deliverable provided...

  • Page 75
    ... sale. These costs include expenses to acquire and manufacture products to the point that they are allocable to be sold to customers and costs to perform services pertaining to service revenues (e.g. installation of security systems, automatic doors, and security monitoring costs). Cost of sales is...

  • Page 76
    ...standard to have an impact on its consolidated financial statements upon adoption. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The new revenue recognition standard outlines a comprehensive model for companies to use in accounting for revenue arising...

  • Page 77
    ... into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. This standard update was effective prospectively for fiscal years (and...

  • Page 78
    ... December 28, 2013. Cash inflows related to the deferred purchase price receivable totaled $400.6 million for the year ended January 3, 2015 and $370.0 million for the year ended December 28, 2013. All cash flows under the program are reported as a component of changes in accounts receivable within...

  • Page 79
    ...Ltd. ("GQ") for a total purchase price of $48.5 million net of cash acquired. GQ is a manufacturer and seller of power tools, armatures and stators in both domestic and foreign markets. The acquisition of GQ complements the Company's existing power tools product offerings and further diversifies the...

  • Page 80
    ...tool, storage, radio frequency identification ("RFID")-enabled systems, and specialty supply product and service offerings. Tong Lung manufactures and sells commercial and residential locksets. The residential portion of the business was part of the December 2012 HHI sale and closed on April 8, 2013...

  • Page 81
    ... the 2012 annual impairment test, favorable results of the 2013 impairment test, positive 2014 industry performance versus prior year, analyst multiples and other positive qualitative information, all of which indicated that it is more-likely-than-not that the fair values of the four reporting units...

  • Page 82
    ...2014 2013 2012 CDIY ...$ Industrial...Security...2014 2013 Payroll and related taxes ...$ Income and other taxes ...Customer rebates and sales returns ...Insurance and benefits...Accrued restructuring costs...Derivative financial instruments ...Warranty...accounting, which increased the Black & Decker...

  • Page 83
    ... August 2012, the Company repurchased $250.0 million of The Stanley Works 6.15% senior notes due 2013, $350.0 million of The Black & Decker Corporation's 8.95% senior notes due 2014 and $300.0 million of The Black & Decker Corporation's 4.75% senior notes due 2014 by initiating an open market tender...

  • Page 84
    ... 28, 2013, the Company had $368.0 million of commercial paper borrowings outstanding against the Company's $2.0 billion commercial paper program. In June 2013, the Company terminated its four year $1.2 billion committed credit facility with the concurrent execution of a new five year $1.5 billion...

  • Page 85
    ... were components of Equity Units will be used to satisfy in full the Equity Unit holders' obligations to purchase the Company's common stock under the Equity Purchase Contracts (or, in the case of an early remarketing, will be used to purchase a portfolio of U.S. Treasury securities, the proceeds of...

  • Page 86
    ..., which is approximately 40% higher than the closing price of the Company's common stock on November 25, 2013, and are subject to customary anti-dilution adjustments. With respect to the impact on the Company, the capped call transactions and Equity Units, when taken together, result in the economic...

  • Page 87
    ... price equal to 100% of the liquidation preference per share plus accrued and unpaid dividends to the redemption date. If the Company calls the Convertible Preferred Stock for redemption, holders may convert their Convertible Preferred Stock at any time prior to the close of business on the business...

  • Page 88
    ... or annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, in respect of any fiscal quarter with financial statements for such fiscal quarter where the Company's leverage ratio (as described in the prospectus supplement relating to the Convertible Preferred Units...

  • Page 89
    ...value hedges or net investment hedges. Generally, commodity price exposures are not hedged with derivative financial instruments and instead are actively managed through customer pricing initiatives, procurement-driven cost reduction initiatives and other productivity improvement projects. A summary...

  • Page 90
    ...) Recognized in Income (Ineffective Portion*) Foreign Exchange Contracts ... $ 5.1 Cost of sales $ (3.4) $ - * Includes ineffective portion and amount excluded from effectiveness testing on derivatives. For 2014 and 2013, the hedged items' impact to the Consolidated Statement of Operations...

  • Page 91
    .... Interest expense on the underlying debt was $54.6 million and $44.7 million for 2014 and 2013, respectively. NET INVESTMENT HEDGES Foreign Exchange Contracts: The Company utilizes net investment hedges to offset the translation adjustment arising from remeasurement of its investment in the assets...

  • Page 92
    ... maturing on various dates through 2014. The income statement impacts related to derivatives not designated as hedging instruments for 2014 and 2013 are as follows (in millions): Year-to-Date 2014 Amount of Gain (Loss) Recorded in Income on Derivative Year-to-Date 2013 Amount of Gain (Loss) Recorded...

  • Page 93
    ......$ Less: Earnings attributable to participating restricted stock units ("RSU's") ...Net Earnings - basic...$ Net Earnings - diluted ...$ 2014 857.2 $ (96.3) 760.9 - 760.9 760.9 $ $ 2013 520.0 $ (29.7) 490.3 0.2 490.1 490.3 $ $ 2012 458.1 425.7 883.8 1.2 882.6 883.8 $ $ Denominator (in...

  • Page 94
    ... price adjustment. These shares have been reflected as "Returned to treasury" in the table above. COMMON STOCK RESERVED - Common stock shares reserved for issuance under various employee and director stock plans at January 3, 2015 and December 28, 2013 are as follows: 2014 2013 Employee stock...

  • Page 95
    ... and holding period behavior for valuation purposes. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used to value grants made in 2014, 2013 and 2012. 2014 2013 2012 Average...

  • Page 96
    .... For 2014, the Company received $9.2 million in cash from ESPP purchases, and there is no related tax benefit. The fair value of ESPP shares was estimated using the Black-Scholes option pricing model. ESPP compensation cost is recognized ratably over the one-year term based on actual employee stock...

  • Page 97
    ...to-market accounting is applied. Additionally, the Board of Directors were granted restricted share units for which compensation expense of $1.1 million was recognized for 2014, 2013 and 2012. Long-Term Performance Awards: The Company has granted Long Term Performance Awards ("LTIPs") under its 2009...

  • Page 98
    ... directly from the counterparties participating in the net-share settlement, 3,381,162 shares for $326.1 million, equating to an average price of $96.46 per share. In December 2012, the Company entered into a forward starting accelerated share repurchase ("ASR") contract with certain financial...

  • Page 99
    ... Contracts, and an upper strike price of $112.91, which is approximately 40% higher than the closing price of the Company's common stock on November 25, 2013, and are subject to customary antidilution adjustments. The capped call transactions may be settled by net share settlement (the default...

  • Page 100
    ...7% of their compensation. Participants direct the entire employer match benefit such that no participant is required to hold the Company's common stock in their 401(k) account. The employer match benefit totaled $19.9 million, $18.8 million and $19.1 million in 2014, 2013 and 2012, respectively. 86

  • Page 101
    ... paid on the shares acquired with the 1991 internal loan were used solely to pay internal loan debt service in all periods. Dividends on ESOP shares, which are charged to shareowners' equity as declared, were $10.6 million in 2014, $12.3 million in 2013 and $12.4 million in 2012, net of the tax...

  • Page 102
    ... employees in the United States and Canada. Approximately 13,000 participants are covered under these plans. Net periodic post-retirement benefit expense was comprised of the following elements: (Millions of Dollars) 2014 Other Benefit Plans 2013 2012 Service cost...$ Interest cost...Prior service...

  • Page 103
    ... the adoption of new mortality tables used for the Company's US pension and post-retirement plans. U.S. Plans (Millions of Dollars) 2014 2013 Non-U.S. Plans 2014 2013 Other Benefits 2014 2013 Change in benefit obligation Benefit obligation at end of prior year ...$ Service cost ...Interest cost...

  • Page 104
    ...-U.S. Plans 2014 2013 Other Benefits 2014 2013 Amounts recognized in the Consolidated Balance Sheets Prepaid benefit cost (non-current) ...$ Current benefit liability...Non-current benefit liability ...Net liability recognized...$ Accumulated other comprehensive loss (pre-tax): Prior service cost...

  • Page 105
    ... 1 publicly traded securities. The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking place over a period of many years. The Company utilizes the current funded status to transition the portfolio toward investments that better...

  • Page 106
    ... active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs and significant value drivers are observable. Level 3 - Instruments that are valued using unobservable inputs. The Company holds various derivative financial...

  • Page 107
    ....4 97.6 During 2014, the Company recognized $18.8 million of net restructuring charges. The net severance charge of $15.1 million relates to cost reductions associated with the severance of employees, inclusive of reversals due to changes in management's strategy for certain businesses as a result...

  • Page 108
    ...power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers and sanders. The Consumer Products Group sells corded and cordless electric power tools sold primarily under the Black & Decker brand, lawn and garden products and home products. The Hand Tools & Storage...

  • Page 109
    ..., and property, plant and equipment. Based on the nature of the Company's cash pooling arrangements, at times corporate-related cash accounts will be in a net liability position. Sales to the Home Depot were 14% of the CDIY segment net sales in each of 2014, 2013 and 2012. Sales to Lowes were 17...

  • Page 110
    ... in Security for the year ended December 29, 2012, with the remainder residing in corporate overhead. GEOGRAPHIC AREAS (Millions of Dollars) 2014 2013 2012 Net Sales United States ...Canada...Other Americas ...France...Other Europe...Asia ...Consolidated ...Property, Plant & Equipment United States...

  • Page 111
    ... 14.5 50.5 227.1 $ $ Net income taxes paid during 2014, 2013 and 2012 were $113.7 million, $147.3 million and $197.5 million, respectively. The 2014 amount includes refunds of $47.1 million primarily related to prior year overpayments and closing of tax audits. The 2013 amount includes refunds of...

  • Page 112
    ... of the following: (Millions of Dollars) 2014 2013 2012 United States ...$ Foreign ...Earnings from continuing operations before income taxes...$ 234.4 850.4 1,084.8 $ $ 112.7 474.9 587.6 $ $ 95.0 438.1 533.1 Except for certain legacy Black & Decker foreign earnings, as described below, all...

  • Page 113
    ...been settled with the Internal Revenue Service as of December 29, 2012. For Stanley Black & Decker, Inc. tax years 2008 and 2009 have been settled with the Internal Revenue Service as of December 23, 2014. The Company also files many state and foreign income tax returns in jurisdictions with varying...

  • Page 114
    ...the warranty liability as new information becomes available. Following is a summary of the warranty liability activity for the years ended January 3, 2015, December 28, 2013, and December 29, 2012: (Millions of Dollars) 2014 2013 2012 Balance beginning of period...$ Warranties and guarantees issued...

  • Page 115
    ... in a Consent Decree approved by the United States District Court for the Central District of California on July 3, 2013. Per the Consent Decree, Emhart Industries, Inc. (a dissolved, former indirectly wholly-owned subsidiary of The Black & Decker Corporation) ("Emhart") has agreed to be responsible...

  • Page 116
    ...fair value less costs to sell. Both of these businesses were sold in 2014 resulting in an insignificant incremental loss. In December 2012, the Company sold its HHI business, including the residential portion of Tong Lung, to Spectrum Brands Holdings, Inc. ("Spectrum") for approximately $1.4 billion...

  • Page 117
    ... Fourth Year 2014 Net sales...Gross profit...Selling, general and administrative expenses...Net earnings from continuing operations ...Less: Net earnings (loss) attributable to noncontrolling interest...Net earnings from continuing operations attributable to Stanley Black & Decker, Inc...Net loss...

  • Page 118
    ... share $0.19 per diluted share During 2013, the Company recognized $390 million ($270 million after tax), or $1.70 per diluted share, in charges on continuing operations associated with merger and acquisitions-related charges related primarily to the Black & Decker merger and Niscayah and Infastech...

  • Page 119
    ... Form 10-Q filed on May 2, 2012). Amended and Restated ByLaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on April 19, 2013). Indenture, dated as of June 26, 1998, by and among Black & Decker Holdings Inc., as Issuer, The Black & Decker Corporation, as...

  • Page 120
    ... 4.1 to the Company's Current Report on Form 8-K filed on November 22, 2011). Fifth Supplemental Indenture, dated as of November 6, 2012, among Stanley Black & Decker, Inc., The Black & Decker Corporation, as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the...

  • Page 121
    ... the Annual Report on Form 10-K for the period ended January 3, 2009).* Letter Agreement between Stanley Black & Decker, Inc. and John F. Lundgren effective January 13, 2013 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 14, 2013).* Employment...

  • Page 122
    ... stock units to James M. Loree under his employment agreement and The Stanley Works 2009 Long-Term Incentive Plan (as amended March 12, 2010) (incorporated by reference to Exhibit 10(vi)(e) to the Company's Quarterly Report on Form 10-Q filed on May 13, 2010).* The Stanley Black & Decker 2013 Long...

  • Page 123
    ... RSUs issued pursuant to The Stanley Works Restricted Stock Unit Plan for NonEmployee Directors (incorporated by reference to Exhibit 10(xxv) to the Company's Annual Report on Form 10-K for the year ended January 1, 2005).* The Stanley Black & Decker, Inc. 2012 Management Incentive Compensation Plan...

  • Page 124
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  • Page 125
    ... an opportunity to earn a number of Performance Shares (PS) based upon achievement of corporate financial goals, and may earn additional performance shares if the corporate financial goals are exceeded. Each PS unit represents one share of Stanley Black & Decker Common Stock and, accordingly, the...

  • Page 126
    ... summary includes the key aspects of the Program, it is not intended to represent a full accounting of the rules and regulations applicable to the Program and is subject to the terms described in the Terms and Conditions Applicable to Long Term Performance Awards and The Stanley Black & Decker 2013...

  • Page 127
    ... Awards This certifies that Stanley Black & Decker, Inc. (the "Company") has, on the Date set forth in Award Letter to which these Terms and Conditions apply, granted to the Participant named above a performance award ("Performance Award") of that number of Performance Units set forth in the Award...

  • Page 128
    ... & Chief Executive Officer or the Senior Vice President, Human Resources , and the documents referenced therein. Executive Officer. A person who the Company has designated an Executive Officer as such term is defined in Rule 3b-7 under the Securities Exchange Act of 1934 and as such term is used in...

  • Page 129
    ... by the Compensation and Organization Committee of the Board of Directors or, pursuant to an appropriate delegation of authority, the Chief Executive Officer, for performance of the Company as a whole and/or specific businesses or functions during the Measurement Period. The Performance Goals...

  • Page 130
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  • Page 131
    ...OF EARNINGS TO FIXED CHARGES For the fiscal years ended January 3, 2015, December 28, 2013, December 29, 2012, December 31, 2011 and January 1, 2011 (Millions of Dollars) Fiscal Year 2014 2013 2012 2011 2010 Earnings from continuing operations before income taxes and non-controlling interest...Add...

  • Page 132
    ... International Holdings, Inc...CRC-Evans International, Inc...CRC-Evans Pipeline International, Inc...CRC-Evans Welding Services, Inc...Criblist, Inc...Delta International Machinery corp...Devilbiss Air Power Company...Emglo Products, LLC...Emhart (Asia) Limited ...Emhart Hardware Sales Corporation...

  • Page 133
    ... Fund, Inc...Stanley Industrial & Automotive, LLC...Stanley International Holdings, Inc...Stanley Logistics, L.L.C...Stanley Security Solutions, Inc...Stanley Supply & Services, Inc...The Black & Decker Corporation ...The Farmington River Power Company ...UNISPEC, L.L.C...View Technologies...Zag USA...

  • Page 134
    ......Pacom Systems Pty Limited...Powers Fasteners Australasia Pty Limited ...Powers Rawl Pty. Ltd...Rawl Australasia Pty. Ltd...Rawlplug Unit Trust...SBDK Australia GP...Stanley Security Solutions Australia Pty. Ltd...Stanley Black & Decker Australia Pty Ltd...Stanley Black & Decker Holdings Australia...

  • Page 135
    ... & Decker Asia Based Enterprises...Black & Decker (Suzhou) Co., LTD...Black & Decker (Suzhou) Power Tools Co., LTD...Black & Decker (Suzhou) Precision Manufacturing Co., LTD...Black & Decker SSC CO., LTD...Guangzhou Emhart Fastening System Co., LTD...Hefei INTACA Science & Technology Development Co...

  • Page 136
    ...Black et Decker France Services S.A.S...Stanley Doors France S.A.S...Stanley France S.A.S...Stanley Healthcare Solutions France SÃ rl ...Stanley Security France SAS ...Stanley Tools S.A.S...Avdel Deutschland GmbH...B.B.W. Bayrische Bohrerwerke G.m.b.H...Black & Decker Holdings GmbH ...Black & Decker...

  • Page 137
    ...Stanley Black & Decker International Finance 5...Stanley Black & Decker Ireland...Stanley Black & Decker Latin American Investment ...Stanley Security Limited...Stanley Security Solutions Ireland Limited ...AeroScout Ltd...The Stanley Works Israel Ltd...Avdel Italia S.r.l...DeWalt Industrial Tools...

  • Page 138
    ... B.V...Powers Fasteners (NZ) Limited & Co...Powers Fasteners Australasia Limited...Powers Fasteners Limited ...Rawl (NZ) Limited...Stanley Black & Decker NZ Limited ...Stanley Black & Decker Norway AS ...Stanley Security AS...Stanley Security Holding AS...PIH Services ME LLC ...Black & Decker de...

  • Page 139
    ...& Decker Holding GmbH ...Stanley Black & Decker Sales GmbH...Stanley Security Switzerland SÃ rl ...Stanley Works (Europe) GmbH...Besco Pneumatic Corporation ...Fastener Jamher Taiwan Inc...Stanley Chiro International Ltd...Stanley Fastening Systems Investment (Taiwan) Co...Stanley Security Solutions...

  • Page 140
    ... Decker UK Holdings Limited...Stanley Black & Decker UK Limited ...Stanley Security Solutions (NI) Limited...Stanley Security Solutions Limited...Stanley Security Solutions-Europe Limited...Stanley U.K. Holding Ltd...Stanley UK Acquisition Company Limited ...Stanley UK Limited ...Stanley UK Services...

  • Page 141
    ... Public Accounting Firm We consent to the incorporation by reference in the following registration statements and related prospectuses of Stanley Black & Decker, Inc. and subsidiaries (the "Company") of our reports dated February 19, 2015 with respect to the consolidated financial statements...

  • Page 142
    ... OF ATTORNEY We, the undersigned officers and directors of Stanley Black & Decker, Inc., a Connecticut corporation (the "Corporation"), hereby severally constitute Bruce H. Beatt and Donald J. Riccitelli our true and lawful attorneys with full power of substitution, to sign for us and in our names...

  • Page 143
    ... information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 19, 2015 /s/ John F. Lundgren John F. Lundgren Chairman and Chief Executive Officer

  • Page 144
    ...., certify that: 1. I have reviewed this Annual Report on Form 10-K of Stanley Black & Decker, Inc. and subsidiaries; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 145
    ...connection with the Annual Report of Stanley Black & Decker, Inc. (the "Company") on Form 10-K for the period ending January 3, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John F. Lundgren, Chairman and Chief Executive Officer, certify, pursuant to...

  • Page 146
    ... with the Annual Report of Stanley Black & Decker, Inc. (the "Company") on Form 10-K for the period ending January 3, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald Allan Jr., Senior Vice President and Chief Financial Officer, certify, pursuant...

  • Page 147
    ... Fulfilling requests for annual reports, proxy statements, forms 10-Q and 10-K, copies of press releases and other Company information. • Meetings with securities analysts and fund managers. Contact the Stanley Black & Decker investor relations department at our corporate offices by calling Greg...

  • Page 148
    STANLEY BLACK & DECKER | 1000 STANLEY DRIVE | NEW BRITAIN, CT 06053 YEARINREVIEW.STANLEYBLACKANDDECKER.COM 016 Stanley Black & Decker 2014 Annual Report