Black & Decker 2014 Annual Report Download - page 24

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The Company’s business is subject to risks associated with sourcing and manufacturing overseas.
The Company imports large quantities of finished goods, component parts and raw materials. Substantially all of its import
operations are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements,
bilateral actions or, in some cases unilateral action. In addition, the countries in which the Company’s products and materials
are manufactured or imported may from time to time impose additional quotas, duties, tariffs or other restrictions on its imports
(including restrictions on manufacturing operations) or adversely modify existing restrictions. Imports are also subject to
unpredictable foreign currency variation which may increase the Company’s cost of goods sold. Adverse changes in these
import costs and restrictions, or the Company’s suppliers’ failure to comply with customs regulations or similar laws, could
harm the Company’s business.
The Company’s operations are also subject to the effects of international trade agreements and regulations such as the North
American Free Trade Agreement, and the activities and regulations of the World Trade Organization. Although these trade
agreements generally have positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or
eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also
impose requirements that adversely affect the Company’s business, such as setting quotas on products that may be imported
from a particular country into key markets including the U.S. or the European Union, or making it easier for other companies to
compete, by eliminating restrictions on products from countries where the Company’s competitors source products.
The Company’s ability to import products in a timely and cost-effective manner may also be affected by conditions at ports or
issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, labor disputes, severe
weather or increased homeland security requirements in the U.S. and other countries. These issues could delay importation of
products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers. These
alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on
the Company’s business and financial condition.
The Company’s success depends on its ability to improve productivity and streamline operations to control or reduce costs.
The Company is committed to continuous productivity improvement and evaluating opportunities to reduce fixed costs,
simplify or improve processes, and eliminate excess capacity. The Company has undertaken restructuring actions, the savings
of which may be mitigated by many factors, including economic weakness, competitive pressures, and decisions to increase
costs in areas such as sales promotion or research and development above levels that were otherwise assumed. Failure to
achieve or delays in achieving projected levels of efficiencies and cost savings from such measures, or unanticipated
inefficiencies resulting from manufacturing and administrative reorganization actions in progress or contemplated, would
adversely affect the Company’s results.
The performance of the Company may suffer from business disruptions associated with information technology, cyber
attacks, system implementations, or catastrophic losses affecting distribution centers and other infrastructure.
The Company relies heavily on computer systems to manage and operate its businesses, and record and process transactions.
Computer systems are important to production planning, customer service and order fulfillment among other business-critical
processes. Consistent and efficient operation of the computer hardware and software systems is imperative to the successful
sales and earnings performance of the various businesses in many countries.
Despite efforts to prevent such situations, insurance policies and loss control and risk management practices that partially
mitigate these risks, the Company’s systems may be affected by damage or interruption from, among other causes, power
outages, system failures or computer viruses. Computer hardware and storage equipment that is integral to efficient operations,
such as e-mail, telephone and other functionality, is concentrated in certain physical locations in the various continents in which
the Company operates.
Further, security threats and sophisticated computer crime pose a potential risk to the security of the 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 these issues on a timely basis, the Company may suffer interruptions in its ability to manage operations as well
as reputational, competitive or business harm, which may adversely impact the Company’s results of operations and financial
condition.
In addition, the Company is in the process of system conversions to SAP as well as other applications to provide a common
platform across most of its businesses. There can be no assurances that expected expense synergies will be achieved or that
there will not be delays to the expected timing of such synergies. It is possible the costs to complete the system conversions
may exceed current expectations, and that significant costs may be incurred that will require immediate expense recognition as