Black & Decker 2010 Annual Report Download - page 22

• complexities associated with managing the larger, more complex, combined business;
• integrating personnel from the two companies while maintaining focus on providing consistent, high
quality products;
• potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with
the Merger; and
• performance shortfalls at one or both of the companies as a result of the diversion of management’s
attention caused by integrating the companies’ operations.
The Company has incurred, and will continue to incur, substantial integration-related expenses resulting
from the Merger.
The Company will continue to incur substantial expenses in connection with the Merger and the integration of
Black & Decker including certain restructuring actions that may be taken to achieve synergies. Approximately
$200 million of pre-tax restructuring and integration expense pertaining to the Merger is expected to be
incurred over the next two years, in order to achieve an additional estimated $290 million of pre-tax
annualized synergy benefits. There are a large number of processes, policies, procedures, operations,
technologies and systems that must be integrated, including purchasing, accounting and finance, sales, billing,
payroll, manufacturing, marketing and benefits. While the Company has assumed an estimated $200 million of
expenses will be incurred, there are many factors beyond its control that could affect the total amount or the
timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature,
difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that the
Company expects to achieve from the elimination of duplicative expenses and the realization of economies of
scale and cost savings. During 2010 the Company incurred $538 million of pre-tax merger and acquisition-
related charges primarily related to restructuring costs associated with facility closures, employee severance
charges, certain executive compensation charges, investment banking fees, and integration related advisory and
consulting fees. While management believes the $200 million estimate is reasonable, the amount of future
integration expense is not certain and could result in the Company taking significant additional charges against
earnings in future periods.
The Company’s growth and repositioning strategies include acquisitions. The Company may not be able to
successfully integrate the operations of recent acquisitions and the Company may not be able to identify
suitable future acquisition candidates.
In 2002, the Company embarked on a growth strategy to shift its business portfolio toward favored growth
markets through acquisitions and divestitures. The strategy has been advanced over the last several years with
the Merger and the acquisition of a number of companies, including Stanley Solutions de Sécurité (“SSDS”),
CRC-Evans Pipeline International (“CRC-Evans”), GMT, Infologix, Générale de Protection (“GdP”), Xmark
Corporation (“Xmark”), Sonitrol Corporation (“Sonitrol”), and HSM Electronic Protection Services, Inc.
(“HSM”).
The Company expends significant resources identifying opportunities to acquire new lines of business and
companies that could contribute to its success and expansion into existing and new markets. Although the
Company has extensive experience with acquisitions, there can be no assurance that recently acquired
companies will be successfully integrated or that anticipated cost savings, synergies, or other benefits will be
realized. If the Company successfully integrates the acquired companies and effectively implements its
repositioning strategy, there can be no assurance that these acquired businesses will enjoy continued market
acceptance or profitability.
In addition, there can be no assurance that the Company will be able to successfully identify suitable future
acquisition candidates, negotiate appropriate terms, obtain the necessary financing, complete the transactions
or successfully integrate the new companies as necessary to continue its growth and repositioning strategies. If
the Company is unable to successfully integrate acquisitions, it could have a material adverse affect on its
business, financial condition and future growth.
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