Black & Decker 2015 Annual Report Download - page 35

21
which has historically provided a stable revenue stream through economic cycles, is a gateway into the digital world
and an avenue to capitalize on rapid digital changes.
As communicated at the May 2015 Investor Day, the Company intends to provide further information on the state of its
Security franchise and its fit within the Company's portfolio in the second half of 2016. The Company is encouraged by
Security's recent favorable performance trends of improving operating margins, increasing order rates and stabilizing attrition at
targeted levels. Operational enhancements are beginning to take hold across the segment and talent upgrades in many portions
of the business are starting to pay dividends in terms of results and building a high performance culture.
The Company’s three-year annual financial targets ("2018 Vision") communicated in May 2015, which assumes a relatively
stable currency environment and approximately $50 million of annual restructuring costs, include:
• 4-6% organic revenue growth, with total revenue growth enhanced by acquisitions;
• 50-75 basis points of operating margin rate improvement to approximately 16% by 2018;
• 10-12% earnings per share growth (including acquisitions), 7-9% organic growth;
• Cash flow return on investment ("CFROI") expansion to 14-15%; and
• Progress towards 10+ working capital turns.
In terms of capital allocation, the Company remains committed to returning approximately 50% of free cash flow to
shareholders through a strong and growing dividend as well as opportunistically repurchasing shares. The remaining free cash
flow (approximately 50%) will be deployed towards acquisitions. Since the beginning of the fourth quarter of 2014, the
Company has reduced its share count by the equivalent of approximately $1.2 billion worth of shares by utilizing both cash and
equity derivatives.
The following represents recent examples of executing on the Company's strategic objectives:
Acquisitions
In May 2013, the Company purchased a 60% controlling share in Jiangsu Guoqiang Tools Co., Ltd. ("GQ") for a total purchase
price of $48.5 million, net of cash acquired. In December 2015, the Company purchased the remaining 40% interest for a total
purchase price of $33.5 million. GQ is a manufacturer and seller of power tools in both domestic and foreign markets. The
acquisition of GQ complements the Company's existing power tools product offerings and further diversifies the Company's
operations and international presence. This acquisition allows the Company to accelerate its emerging market mid-price point
product strategy. GQ is headquartered in Qidong, China and has been consolidated into the Company's Tools & Storage
segment.
In February 2013, the Company acquired a 100% ownership interest in Infastech for a total purchase price of $826.4 million,
net of cash acquired. Infastech designs, manufactures and distributes highly-engineered fastening technologies and applications
for a diverse blue-chip customer base in the industrial, electronics, automotive, construction and aerospace end markets. The
acquisition of Infastech added to the Company's strong positioning in specialty engineered fastening, an industry with solid
growth prospects, and further expanded the Company's global footprint with its strong concentration in fast-growing emerging
markets. Infastech is headquartered in Hong Kong and has been consolidated into the Company's Industrial segment.
HHI and Tong Lung Residential Divestiture
In December 2012, the Company sold HHI to Spectrum for approximately $1.4 billion in cash. HHI is a provider of residential
locksets, residential builders hardware and plumbing products marketed under the Kwikset, Weiser, Baldwin, Stanley, National
and Pfister brands. The majority of the HHI business was part of the Company's Security segment. The divestiture of the HHI
business is part of the continued diversification of the Company's revenue streams and geographic footprint consistent with the
Company's strategic framework.
The purchase and sale agreement stipulated that the sale occur in a First and Second Closing, for approximately $1.3 billion and
approximately $94 million, respectively. The First Closing, which excluded the residential portion of the Tong Lung business,
occurred on December 17, 2012. The Second Closing, relating to the residential portion of the Tong Lung business, occurred
on April 8, 2013.
During 2013, the Company completed the 2012 income tax return filings which included the final calculations of the tax gain
on HHI sale which took place in 2012. As a result of these tax return filings, the Company recorded an income tax benefit of
approximately $19.1 million within discontinued operations related to finalization of the taxable gain on the HHI sale. Changes