Black & Decker 2010 Annual Report Download - page 36

• Pursuing growth on multiple fronts through building existing growth platforms such as convergent
security, mechanical security and engineered fastening and developing new growth platforms over
time such as infrastructure and healthcare;
• Accelerating progress via Stanley Fulfillment System (“SFS”).
Stanley has pursued this strategy which involves industry, geographic and customer diversification in order to
pursue sustainable revenue, earnings and cash flow growth. In addition, the Company’s desire to be a
consolidator of the tool industry and to increase its relative weighting in emerging markets has been
significantly enhanced by the Merger. The impact of this diversification strategy is evident in the performance
of the Company. Sales outside the U.S. represented 45% of the total in 2010, up from 29% in 2002. When we
embarked on the diversification strategy, legacy Stanley sales to U.S. home centers and mass merchants
declined from a high of approximately 40% in 2002 to 14% in 2010. On a pro-forma combined basis (as if
combined the entire year), Stanley and Black & Decker 2010 sales to U.S. home centers and mass merchants
were approximately 31%, including nearly 21% in sales to the combined Company’s two largest customers. As
acquisitions in the various growth platforms (electronic/convergent Security, mechanical security, engineered
fastening, infrastructure solutions and healthcare solutions) are made in future years, the proportion of sales to
these valued U.S. home center and mass merchant customers is expected to decrease. Execution of this strategy
has entailed approximately $3.4 billion of acquisitions since 2002 (aside from the Merger), several divestitures
and increased brand investment, enabled by strong cash flow generation and proceeds from divestitures.
The Company’s long-term financial objectives are:
• 4-6% organic revenue growth; 10-12% total revenue growth;
• Mid-teens EPS growth;
• Free cash flow greater than equal to net income;
• Return on capital employed (ROCE) between 12-15%;
• Continued dividend growth;
• Strong investment grade credit rating.
The Company’s long-term capital allocation objectives pertaining to the deployment of free cash flow are:
• Invest approximately 2⁄3in acquisitions and growth;
• Return approximately 1⁄3to shareowners as the Company remains committed to continued dividend
growth and opportunistic share buy backs.
The long-term capital allocation strategy with respect to growth is focused on its growing existing platforms:
electronic / convergent security, mechanical security, engineered fastening, infrastructure solutions, and
healthcare solutions as well as further consolidating the tool industry. The Company plans to expand these
existing platforms through both organic growth and primarily international acquisitions. The Merger rounded
out the mechanical security product offerings, and brought with it another strong growth platform in
engineered fastening.
Business Segments
The Company classifies its business into three reportable segments: Construction & Do It Yourself (“CDIY”),
Security, and Industrial.
The CDIY segment manufactures and markets hand tools, corded and cordless electric power tools and
equipment, lawn and garden products, consumer portable power products, home products, accessories and
attachments for power tools, plumbing products, consumer mechanics tools, storage systems, and pneumatic
tools and fasteners. These products are sold to professional end users, distributors, and consumers, and are
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