Black & Decker 2010 Annual Report Download - page 42

Outlook for 2011
This outlook discussion is intended to provide broad insight into the Company’s near-term earnings prospects,
and not to discuss the various factors affecting such projections. Management expects earnings per diluted
share (“EPS”) to be in the range of $4.29 to $4.54 in 2011. Excluding the effects of merger and acquisition-
related charges, 2011 EPS is expected to be in the range of $4.75 to $5.00.
RESULTS OF OPERATIONS
Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of
business segment performance.
Terminology: The terms “legacy Stanley”, “organic” and “core” are utilized to describe results aside from the
impact of the Merger and acquisitions during their initial 12 months of ownership. This ensures appropriate
comparability to operating results of prior periods.
The Company has included information as if the Merger had occurred on January 3, 2010 for the year ended
January 1, 2011 (“pro forma” information) which also includes a discussion regarding legacy Black &
Decker’s performance in relation to the prior year on a basis reflecting the post-merger segment organization.
This “pro forma” analysis is provided to aid understanding of the Black & Decker business trends compared to
the prior year since the Merger occurred March 12, 2010, and accordingly the Company’s 2009 reported
results solely reflect legacy Stanley.
Net Sales: Net sales from continuing operations were $8.410 billion in 2010, as compared to $3.737 billion
in 2009, a 125% increase. The Merger provided a 114% increase to sales, along with 6% from other
acquisitions, primarily SSDS and CRC-Evans. Organic unit volume increased 5%, while price and currency
were both flat compared to the prior year. Organic sales growth was driven by the successful launch of various
new products which generally have been well received by customers, and overall improvement in end market
demand, especially in industrial and emerging markets. By segment, legacy Stanley unit volume increased 3%
in CDIY, decreased 3% in Security, which was negatively impacted by the continued weakness in U.S. commer-
cial construction markets along with a large U.S. retailer’s inventory correction, and increased 21% in
Industrial. The Industrial segment benefited from strong end user demand, market share gain, and global
customer re-stocking in certain distribution channels which subsided by the fourth quarter. On a geographic
basis, legacy Stanley unit volume sales increased 3% in the Americas (17% in Latin America), 6% in Europe,
and 20% in the Asian region. On a pro forma basis, the legacy Black & Decker business achieved strong unit
volume growth of 11%, reflecting positive end market demand including robust sales growth in emerging
markets, along with strong new product performance, particularly the 12-volt lithium ion power tools.
Net sales from continuing operations were $3.737 billion in 2009, as compared to $4.426 billion in 2008, a
16% decrease. Price increases provided a 2% sales benefit in 2009, which was offset by 2% from unfavorable
foreign currency translation in all regions, with the largest impact in Europe. Acquisitions within the Security
segment, primarily the carryover effect from the 2008 Sonitrol, GdP and Scan Module acquisitions, contributed
a 4% increase in net sales. Organic unit volume declined 20% reflecting weak global economic conditions.
Geographically, 2009 volume decrease was most severe in Europe at 24%, as compared with 18% in the
Americas and 11% in the less significant Asian region. The Industrial and CDIY segments, with their high
European content, experienced 31% and 21% unit volume declines, respectively, while the Security segment
had the best performance with only an 8% drop in organic volume. Aside from reduced end user demand, the
Industrial segment was adversely affected by inventory de-stocking throughout the supply chain which abated
by the end of the fourth quarter. The consolidated organic sales unit volume decline was 19% in the first
quarter of 2009, deteriorated to 24% in the second quarter, and improved sequentially to 20% in the third
quarter and again to 16% in the fourth quarter. The sequential percentage improvements in the 2009 fiscal
quarters partly relate to easier comparisons to 2008, which had a challenging second half when the recession
deepened, but also reflected some encouraging macro-economic trends. The CDIY segment was most affected
by the residential construction market, which appeared to have stabilized, as well as consumer confidence
which improved in the U.S. and Europe in the second half of 2009.
29