Black & Decker 2010 Annual Report Download - page 23

The Company’s acquisitions may result in certain risks for its business and operations.
In addition to the Merger, the Company made one other significant acquisition of CRC-Evans in 2010 in
addition to nine smaller acquisitions, six small acquisitions in 2009, and a number of more significant
acquisitions in 2008, including, but not limited to: GdP in October 2008 and Sonitrol and Xmark in July 2008.
The Company may make additional acquisitions in the future. Acquisitions involve a number of risks,
including:
• the diversion of Company management’s attention and other resources,
• the incurrence of unexpected liabilities, and
• the loss of key personnel and clients or customers of acquired companies.
Any intangible assets that the Company acquires may have a negative effect on its earnings and return on
capital employed. In addition, the success of the Company’s future acquisitions will depend in part on its
ability to:
• combine operations,
• integrate departments, systems and procedures, and
• obtain cost savings and other efficiencies from the acquisitions.
Failure to effectively consummate or manage future acquisitions may adversely affect the Company’s existing
businesses and harm its operational results due to large write-offs, contingent liabilities, substantial deprecia-
tion, adverse tax or other consequences. The Company is still in the process of integrating the businesses and
operations of Black & Decker, CRC-Evans, SSDS and certain other smaller acquisitions made in the past two
years. The Company cannot ensure that such integrations will be successfully completed, or that all of the
planned synergies will be realized.
The Company has incurred, and may incur in the future, significant indebtedness, or issue additional equity
securities, in connection with mergers or acquisitions which may impact the manner in which it conducts
business or the Company’s access to external sources of liquidity. The potential issuance of such securities
may limit the Company’s ability to implement elements of its growth strategy and may have a dilutive effect
on earnings.
As described in Note H, Long-Term Debt and Financing Arrangements, of the Notes to the Consolidated
Financial Statements in Item 8, the Company has a committed revolving credit agreement, expiring in
February 2013, supporting borrowings up to $800 million. Upon closing of the Merger, the Company entered
into a $700 million revolving credit agreement that became effective on March 12, 2010 and will expire in
March 2011. These agreements include provisions that allow designated subsidiaries to borrow up to
$250 million in Euros and Pounds Sterling, which may be available to, among other things, fund acquisitions.
The instruments and agreements governing certain of the Company’s current indebtedness contain requirements
or restrictive covenants that include, among other things:
• a limitation on creating liens on certain property of the Company and its subsidiaries;
• a restriction on entering into certain sale-leaseback transactions;
• customary events of default. If an event of default occurs and is continuing, the Company might be
required to repay all amounts outstanding under the respective instrument or agreement; and
• maintenance of a specified financial ratio. The Company has an interest coverage covenant that must
be maintained to permit continued access to its committed revolving credit facilities. The interest
coverage ratio tested for covenant compliance compares adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization to adjusted Interest Expense (“adjusted EBITDA”/“adjusted Interest
Expense”); such adjustments to interest or EBITDA include, but are not limited to, removal of non-
cash interest expense, certain restructuring and other merger and acquisition-related charges as well
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