Black & Decker 2010 Annual Report Download - page 112

In addition, approximately 3,300 U.S. salaried and non-union hourly employees are eligible to receive a non-
contributory benefit under the Cornerstone plan. Cornerstone benefit allocations range from 3% to 9% of
eligible employee compensation based on age. Approximately 1,100 U.S. employees are eligible to receive an
additional average 1.6% contribution actuarially designed to replace previously curtailed pension benefits.
Allocations for benefits earned under the Cornerstone plan, which were suspended in 2009, were $13.7 million
in 2010 and $15.6 million in 2008. Assets held in participant Cornerstone accounts are invested in target date
retirement funds which have an age-based allocation of investments.
Shares of the Company’s common stock held by the ESOP were purchased with the proceeds of external
borrowings in 1989 and borrowings from the Company in 1991 (“1991 internal loan”). The external ESOP
borrowings, which were fully repaid in 2009, were guaranteed by the Company and were included in Long-
term debt. Shareowners’ equity reflects a reduction equal to the cost basis of unearned (unallocated) shares
purchased with the internal and the external borrowings.
The Company accounts for the ESOP under ASC 718-40, “Compensation — Stock Compensation — Employee
Stock Ownership Plans”. Net ESOP activity recognized is comprised of the cost basis of shares released, the
cost of the aforementioned Cornerstone and 401(k) match defined contribution benefits, interest expense on
the external 1989 borrowing, less the fair value of shares released and dividends on unallocated ESOP shares.
The Company’s net ESOP activity resulted in expense of $3.4 million in 2010, income of $8.0 million in 2009
and expense of $10.6 million in 2008. ESOP expense is affected by the market value of the Company’s
common stock on the monthly dates when shares are released. The market value of shares released averaged
$58.56 per share in 2010, $39.37 per share in 2009 and $43.65 per share in 2008.
Unallocated shares are released from the trust based on current period debt principal and interest payments as
a percentage of total future debt principal and interest payments. Dividends on both allocated and unallocated
shares may be used for debt service and to credit participant accounts for dividends earned on allocated shares.
Dividends 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
$9.7 million in 2010, $10.3 million in 2009 and $9.7 million in 2008, net of the tax benefit which is recorded
within equity. Dividends on ESOP shares were utilized entirely for debt service in all years. Interest costs
incurred by the ESOP on the 1989 external debt, which matured in 2009, amounted to $0.2 million in 2008
and were nominal in 2009. Interest costs incurred by the ESOP on the 1991 internal loan, which have no
earnings impact, were $7.6 million, $8.1 million and $8.4 million for 2010, 2009 and 2008, respectively. Both
allocated and unallocated ESOP shares are treated as outstanding for purposes of computing earnings per
share. As of January 1, 2011, the cumulative number of ESOP shares allocated to participant accounts was
11,550,815, of which participants held 2,844,002 shares, and the number of unallocated shares was 4,014,241.
At January 1, 2011, there were 31,553 released shares in the ESOP trust holding account pending allocation.
The Company made cash contributions totaling $1.3 million in 2010, $11.4 million in 2009 and $15.6 million
in 2008.
PENSION AND OTHER BENEFIT PLANS — The Company sponsors pension plans covering most
domestic hourly and certain executive employees, and approximately 16,400 foreign employees. Benefits are
generally based on salary and years of service, except for U.S. collective bargaining employees whose benefits
are based on a stated amount for each year of service.
The Company contributes to multi-employer plans for certain collective bargaining U.S. employees. In
addition, various other defined contribution plans are sponsored worldwide, including a tax-deferred 401(k)
savings plan covering substantially all Black & Decker U.S. employees. The expense for such defined
contribution plans, aside from the earlier discussed ESOP plans, follows:
(Millions of Dollars) 2010 2009 2008
Multi-employer plan expense.............................. $0.6 $0.5 $0.6
Other defined contribution plan expense ..................... $16.4 $3.3 $5.0
Both the defined contribution expense and the net periodic pension expense increased significantly in 2010 as
compared to the prior years due to the Merger.
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