Black & Decker 2010 Annual Report Download - page 47

sales. Sales unit volume gains were 21% primarily attributable to customer supply chain restocking, which
subsided in the third quarter, market share gains, and strong end user demand fueled by higher global
production levels and new product introductions. The Americas and Europe each posted robust 20% volume
growth, and were outpaced by Asia. The industrial and automotive repair business enjoyed significant market
share gains, end user market growth in all North American sales channels, particularly through industrial
distribution. The hydraulic tools business also attained strong volume gains further aided by favorable steel
scrap markets. On a pro forma basis, the Black & Decker engineered fastening business grew a substantial
30% associated with significantly higher automotive vehicle production in the Americas and Japan and
increased customer penetration. The pro forma Black & Decker sales were comprised of 27% unit volume,
negative 1% price, 1% favorable foreign currency translation and 3% from an acquisition. Merger and
acquisition-related charges, primarily inventory step-up amortization from the initial turn of the Black &
Decker and CRC-Evans inventories, amounted to $26 million in 2010. Excluding the merger and acquisition-
related charges, segment profit was $269 million, or 14.5% of net sales, representing a robust 440 basis point
expansion of the segment profit rate. This strong performance was enabled by the accretive impact of Black &
Decker and CRC-Evans, along with favorable operating leverage and a reduced cost structure in the legacy
Stanley businesses. Over one third of the segment profit rate improvement pertains to the legacy Stanley
business and the remainder to the inclusion of Black & Decker and CRC-Evans.
Industrial segment net sales from continuing operations decreased 31% in 2009 compared with 2008. Price
provided a 2% benefit which was offset by 2% of unfavorable foreign currency translation. Unit volume fell
31%, about evenly in the Americas and Europe which was partially offset by growth in the Company’s
relatively less significant Asian region. Industrial channels were down more severely than automotive repair
channels. The unit volume declines reflected ongoing severe economic weakness in the U.S. and Europe. In
addition to broad-based, reduced end market demand, the segment was adversely impacted by pervasive
inventory corrections throughout the supply chain which abated in the fourth quarter. There were signs of
stabilization in the channels this business segment serves. Segment profit fell $75 million from the prior year
due to the precipitous sales volume decline which was also reflected in the segment profit rate contraction.
However, price realization partially mitigated the sales volume and related negative manufacturing productivity
effects, along with a solid improvement in Mac Tools’ profit reflecting disciplined cost and other actions. The
Company initiated extensive cost actions throughout the segment in late 2008, but they took longer to
implement in Europe due to the country-specific works council process. Those actions were largely complete
and were supplemented by other ongoing restructuring initiatives in 2009, as reflected in the quarterly segment
profit rate that hit a trough of 9.2% in the third quarter and recovered to 11.3% in the fourth quarter.
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