Black & Decker 2011 Annual Report Download - page 26

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The Company manufactures products, configures and installs security systems and performs various services that create exposure to
product and professional liability claims and litigation. If such products, systems and services are not properly manufactured,
configured, installed, designed or delivered, personal injuries, property damage or business interruption could result, which could
subject the Company to claims for damages. The costs associated with defending product liability claims and payment of damages
could be substantial. The Company’s reputation could also be adversely affected by such claims, whether or not successful.
There can be no assurance that the Company will be able to continue to successfully avoid, manage and defend such matters. In
addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary from
the Company’s estimates for such contingent liabilities.
The Company’s products could be recalled.
The Consumer Product Safety Commission or other applicable regulatory bodies may require the recall, repair or replacement of the
Company’s products if those products are found not to be in compliance with applicable standards or regulations. A recall could
increase costs and adversely impact the Company’s reputation.
The Company is exposed to credit risk on its accounts receivable.
The Company’s outstanding trade receivables are not generally covered by collateral or credit insurance. While the Company has
procedures to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be no assurance such
procedures will effectively limit its credit risk and avoid losses, which could have an adverse affect on the Company’s financial
condition and operating results.
If the Company were required to write down all or part of its goodwill, indefinite-lived trade names, or other definite-lived
intangible assets, its net income and net worth could be materially adversely affected.
As a result of the Merger and other acquisitions, the Company has $6.9 billion of goodwill, $1.6 billion of indefinite-lived trade names
and $1.5 billion of definite-lived intangible assets at December 31, 2011. The Company is required to periodically, at least annually,
determine if its goodwill or indefinite-lived trade names have become impaired, in which case it would write down the impaired
portion of the intangible asset. The definite-lived intangible assets, including customer relationships, are amortized over their
estimated useful lives; such assets are also evaluated for impairment when appropriate. Impairment of intangible assets may be
triggered by developments outside of the Company’s control, such as worsening economic conditions, technological change,
intensified competition or other factors resulting in deleterious consequences.
If the investments in employee benefit plans do not perform as expected, the Company may have to contribute additional amounts
to these plans, which would otherwise be available to cover operating expenses or other business purposes.
The Company sponsors pension and other post-retirement defined benefit plans. The Company’s defined benefit plan assets are
currently invested in equity securities, government and corporate bonds and other fixed income securities, money market instruments
and insurance contracts. The Company’s funding policy is generally to contribute amounts determined annually on an actuarial basis
to provide for current and future benefits in accordance with applicable law which require, among other things, that the Company
make cash contributions to under-funded pension plans. During 2011, the Company made cash contributions to its defined benefit
plans of $131 million and it expects to contribute $110 million to its defined benefit plans in 2012.
There can be no assurance that the value of the defined benefit plan assets, or the investment returns on those plan assets, will be
sufficient in the future. It is therefore possible that the Company may be required to make higher cash contributions to the plans in
future years which would reduce the cash available for other business purposes, and that the Company will have to recognize a
significant pension liability adjustment which would decrease the net assets of the Company and result in higher expense in future
years. The fair value of these assets at December 31, 2011 was $1.789 billion.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.