Black & Decker 2014 Annual Report Download - page 44

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Of the $97.6 million reserves remaining as of January 3, 2015, the majority are expected to be utilized by the end of 2015.
Segments: The $18.8 million of net charges recognized in 2014 includes: $12.8 million of net charges pertaining to the CDIY
segment; $2.2 million of net reserve reductions pertaining to the Industrial segment; $6.5 million of net charges pertaining to
the Security segment; and $1.7 million of net charges pertaining to Corporate charges.
In addition to the restructuring charges described in the preceding paragraphs, the Company recognized $33.4 million and
$165.2 million of restructuring-related costs in 2014 and 2013, respectively, pertaining to acquisition-related activity. All of
these charges impact gross profit or selling, general and administrative expenses, and include charges associated with facility
closures as well as certain integration-related administration and consulting costs.
FINANCIAL CONDITION
Liquidity, Sources and Uses of Capital: The Company’s primary sources of liquidity are cash flows generated from operations
and available lines of credit under various credit facilities. The Company's cash flows are presented on a consolidated basis and
include cash flows from discontinued operations.
Operating Activities: Cash flows from operations were $1.296 billion in 2014 compared to $868 million in 2013, representing a
$428 million increase. The year over year increase was primarily driven by an increase in earnings and lower one-time
restructuring and related payments, partially offset by higher employee benefit plan contributions. Furthermore, operating cash
flows in 2014 were positively impacted by an increase in working capital turns from 8.1 at December 28, 2013 to 9.2 at January
3, 2015, demonstrating the continued success of SFS.
In 2013, cash flows from operations were $868 million, a $98 million decrease compared to $966 million in 2012. Cash flows
from operations were negatively impacted by merger and acquisition-related charges and payments of $280 million in 2013 and
$357 million in 2012. Excluding these charges, cash flows from operations were $1.148 billion and $1.323 billion in 2013 and
2012, respectively. The year over year decrease was primarily driven by the divestiture of HHI in December 2012. Inflows
from working capital (accounts receivable, inventory, accounts payable and deferred revenue) were $13 million in 2013
compared to $48 million in 2012. The 2013 inflows were primarily driven by strong cash collections in the fourth quarter of
2013, partially offset by increases in inventory balances due to higher year over year backlog predominantly in CDIY. Working
capital turns improved to 8.1 times at December 28, 2013, as compared to 7.6 times for 2012, reflecting process-driven
improvements from SFS. Operating cash flows in 2013 were also negatively impacted by increases in employee related
payments and investments in organic growth initiatives.
Free Cash Flow: Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund
future growth and provide dividends to shareowners. Operating cash flows included $152 million, $280 million and $357
million of merger and acquisition-related charges and payments in 2014, 2013, and 2012, respectively. Free cash flow does not
include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common
stock and business acquisitions, among other items.
(Millions of Dollars) 2014 2013 2012
Net cash provided by operating activities ................................................ $ 1,296 $ 868 $ 966
Less: capital expenditures ........................................................................ (291)(340)(373)
Free cash flow .......................................................................................... $ 1,005 $ 528 $ 593
Investing Activities: Cash flows used in investing activities were $382 million in 2014, which primarily consisted of capital and
software expenditures of $291 million and payments related to net investment hedge settlements of $61 million. The decrease
in capital expenditures in 2014 was driven by management's continued focus to control spend in this area as well as lower
integration related capital expenditures. The payments related to net investment hedge settlements were mainly driven by the
significant fluctuations in foreign currency rates during 2014 associated with foreign exchange contracts hedging a portion of
the Company's pound sterling denominated net investment. Cash flows used in investing activities in 2013 totaled $1.198
billion primarily due to capital and software expenditures of $340 million and acquisition spending of $934 million, which was
mainly driven by the purchases of Infastech 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 approximately $1.3 billion in
net proceeds related to the First Closing of the HHI sale, partially offset by $373 million in capital and software expenditures
and $707 million in acquisition spending related to the purchases of Powers, AeroScout, Tong Lung, Lista, and the remaining