Black & Decker 2011 Annual Report Download - page 33

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long-standing NASCAR racing sponsorships which will entail brand exposure over 36 race weekends in 2012. The Company is in
year four of a ten year alliance agreement with the Walt Disney World Resort
®
whereby Stanley
®
and DEWalt
®
logos are displayed on
construction walls throughout the theme parks and Stanley
®
, Mac
®
, Proto
®
, and Vidmar
®
brand logos and/or products are featured in
various attractions where they will be seen by millions of visitors each year. Additionally, Stanley is “The Official Tool Provider of
the Walt Disney World Resort
®
.” In 2009 the Company also began advertising in the English Premier League which is the number one
soccer league in the world, watched weekly by 650 million people around the world. In 2012 and 2013, the Company will advertise in
approximately 225 televised events. Starting in 2011 the Company became a sponsor of the Liverpool Football Club and the Fulham
Football Club including player rights, hospitality assets and stadium signage. The Company advertises in 60 televised Professional
Bull Riders events in the US and Brazil and sponsors three riders. Additionally the Company sponsors a team and two riders in Moto
GP, the world’s premiere motorcycle racing series. The Company will continue to allocate its brand and advertising spend wisely
generating more than 25 billion brand impressions annually.
The Stanley Fulfillment System
SFS employs continuous improvement techniques to streamline operations and drive efficiency throughout the supply chain. SFS has
five primary elements that work in concert: sales and operations planning (“S&OP”), operational lean, complexity reduction, global
supply management, and order-to-cash excellence. S&OP is a dynamic and continuous unified process that links and balances supply
and demand in a manner that produces world-class fill rates while minimizing DSI (Days Sales of Inventory). Operational lean is the
systemic application of lean principles in progressive steps throughout the enterprise to optimize flow toward a pre-defined end state
by eliminating waste, increasing efficiency and driving value. Complexity reduction is a focused and overt effort to eradicate costly
and unnecessary complexity from our products, supply chain and back room process and organizations. Complexity reduction enables
all other SFS elements and, when successfully deployed, results in world-class cost, speed of execution and customer satisfaction.
Global supply management focuses on strategically leveraging the company’s scale to achieve the best possible price and payment
terms with the best possible quality, service and delivery among all categories of spend. Order-to-cash excellence is a methodical,
process-based approach that provides a user-friendly, automated and error-proof customer experience from intent-to-purchase to
shipping and billing to payment, while minimizing cash collection cycle time and DSO (Days Sales Outstanding). Other benefits of
SFS include reductions in lead times, rapid realization of synergies during acquisition integrations, and focus on employee safety. SFS
disciplines helped to mitigate the substantial impact of material and energy price inflation that was experienced in recent years.
SFS is instrumental in the reduction of working capital evidenced by the improvement in working capital turns for legacy Stanley
from 4.6 in 2003 to 8.6 at the end of 2009, directly preceding the merger. Closing out 2010, once blended with the legacy Black &
Decker working capital turns of 4.7, working capital turns for the combined company were 5.7. The opportunity to deploy SFS across
the entire combined enterprise and increase turns represents a significant opportunity to generate incremental free cash flow. Through
the initial integration of the legacy Black & Decker businesses and the ongoing improvement of the legacy Stanley businesses with the
SFS model, working capital turns experienced a 23% improvement from 5.7 at the end of 2010 to 7.0 (excluding the impact of
Niscayah) at the end of 2011. In 2012 and beyond, the Company plans to further leverage SFS to generate ongoing improvements both
in the existing business and future acquisitions in working capital turns, cycle times, complexity reduction and customer service
levels.
Certain Items Impacting Earnings
Merger and Acquisition-Related Charges Impacting 2011, 2010 and 2009 Earnings
Throughout MD&A, the Company has provided a discussion of the outlook and results both inclusive and exclusive of the merger and
acquisition-related charges. The amounts and measures, including gross profit and segment profit, on a basis excluding such charges
are considered relevant to aid analysis and understanding of the Company’s results aside from the material impact of the merger and
acquisition-related charges; the measures are utilized internally by management to understand business trends, as once the
aforementioned anticipated cost synergies from the Merger and acquisitions are realized, such charges are not expected to recur. The
merger and acquisition-related charges are as follows:
2011
The Company reported $256 million in pre-tax charges during 2011 pertaining to the Merger and other acquisition activities, which
were comprised of the following:
• $37 million reducing Gross profit primarily pertaining to facility closure-related charges;
• $99 million in Selling, general & administrative expenses primarily for integration-related administrative costs and
consulting fees, as well as employee related matters;
• $51 million in Other-net predominantly for transaction costs; and
• $69 million in Restructuring and asset impairment charges primarily for severance and the planned closures of facilities.