Black & Decker 2011 Annual Report Download - page 32

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By completing these three acquisitions in 2011, and the acquisitions of Stanley Solutions de Securite (“SSDS”) and GMT in 2010, the
Company has further advanced its strategy of becoming a global market leader in the commercial security industry. On a pro-forma
combined basis (assuming Niscayah and other 2011 acquisitions were purchased at the beginning of 2011), annual revenues of the
Security segment have grown to $3.3 billion, with 48% of the total earned outside of the U.S. On a pro-forma basis (assuming the
Merger and 2010 Security segment acquisitions occurred at the beginning of the fiscal year) Security segment revenues were $2.2
billion in 2010, of which 30% were earned outside of the U.S. Security revenue would have accounted for 31% of the Company’s total
revenues in 2011 on a pro-forma basis, compared to 10% in 2002 which is the year that the security expansion strategy was launched.
2011 Divestitures
The Company sold three small businesses for total cash proceeds of $27 million. The largest of these businesses was part of the
Company’s Industrial segment, with the two smaller businesses being part of the Company’s Security segment. Net sales associated
with these businesses were $61 million, $66 million, and $54 million in 2011, 2010 and 2009, respectively. These businesses were
sold as the related product lines provided limited growth opportunity or were not considered part of the Company’s core offerings.
The operating results of these three businesses have been reported as discontinued operations in the Consolidated Statements of
Operations for all periods presented.
Merger
In March of 2010, Stanley completed a merger with Black & Decker. Black & Decker is recognized worldwide for its strong brand
names and a superior reputation for quality, design, innovation and value. Management believes the Merger represented a
transformative event bringing together two highly complementary companies with iconic brands, rich business histories and common
distribution channels, yet minimal product overlap. The Merger also enabled a global offering in hand and power tools, as well as
hardware, thus enhancing the Company’s value proposition to customers.
Management believes the Merger will result in approximately $450 million ($485 million on an annualized basis) in cost synergies,
which are expected to be achieved by the end of 2012 and which will help fuel future profit growth and facilitate global cost
leadership. The Company is on track with the integration of Stanley and Black & Decker, and realized approximately $350 million of
cost synergies through 2011. Additionally, revenue synergies from the Merger are projected to be in the range of $300 million to
$400 million by the end of 2013, which implies a benefit of approximately $0.35 — $0.50 of earnings per diluted share. Revenue
synergies are predominantly being derived from geographic expansion, cross-selling opportunities and brand expansion.
Acquisition of CRC-Evans
In July 2010, the Company acquired CRC-Evans for a purchase price of $451.2 million, net of cash acquired. CRC-Evans
immediately established a scalable, global growth business platform for the Company to capitalize on favorable end-market trends in
the oil and gas infrastructure area. CRC-Evans is a supplier of specialized tools, equipment and services used in the construction of oil
and natural gas transmission pipelines. CRC-Evans also sells and rents custom pipe handling and joint welding and coating equipment
used in the construction of large and small diameter pipelines. The acquisition of CRC-Evans diversifies the Company’s revenue base
and provides the Company with a strategic and profitable growth platform. CRC-Evans has been consolidated into the Company’s
Industrial segment.
Driving Further Profitable Growth Within Existing Platforms
While diversifying the business portfolio through expansion in the Company’s specified growth platforms is important, management
recognizes that the branded tool and storage product offerings in the CDIY and Industrial segment businesses are important
foundations of the Company that provide strong cash flow generation and growth prospects. Management is committed to growing
these businesses through innovative product development, as evidenced by the success of the 12-volt, 18-volt and 20-volt MAX
lithium ion power tool lines in the CDIY segment, brand support, continued investment in emerging markets and strong focus on
global cost competitiveness to foster vitality over the long term. The Company’s industrial and automotive repair tool business within
the Industrial segment is creating significant organic growth through a vertical integration of hand tool, power tool and engineered
storage solutions. The integration of these products and solutions has won new customers and increased volume to existing customers
in the automotive aftermarket, military, infrastructure, aerospace and industrial industries.
Continuing to Invest in the Stanley Black & Decker Brands
The Company has a strong portfolio of brands associated with high-quality products including Stanley
®
, FatMax
®
, DEWalt
®
, Black &
Decker
®
, Porter-Cable
®
, Bostitch
®
, Facom
®
, Mac
®
, Proto
®
, CRC
®
, Emhart Teknologies
tm
, Vidmar
®
, Niscayah
®
, Kwikset
®
and Baldwin
®
.
The Stanley
®
and Black & Decker
®
, brands are recognized as two of the world’s great brands and are one of the Company’s most
valuable assets. Sustained brand support has yielded a steady improvement across the spectrum of legacy Stanley brand awareness
measures, notably a climb in unaided Stanley hand tool brand awareness from 27% in 2005 to 48% in 2011. Stanley and DEWalt had
prominent signage at 13 major league baseball stadiums or 40% of all major league baseball games. The Company is also maintaining