Black & Decker 2011 Annual Report Download - page 69

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In December 2011, the Company extended the terms of its accounts receivable sale program by three years to December 11, 2014.
According to the terms of that program the Company is required to sell certain of its trade accounts receivables at fair value to a
wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS”). The BRS, in turn, must sell such receivables to a
third-party financial institution (“Purchaser”) for cash and a deferred purchase price receivable. The Purchaser’s maximum cash
investment in the receivables at any time is $100.0 million. The purpose of the program is to provide liquidity to the Company. The
Company accounts for these transfers as sales under ASC 860 “Transfers and Servicing”. Receivables are derecognized from the
Company’s Consolidated Balance Sheets when the BRS sells those receivables to the Purchaser. The Company has no retained
interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred purchase
price receivable. At December 31, 2011, the Company did not record a servicing asset or liability related to its retained responsibility,
based on its assessment of the servicing fee, market values for similar transactions and its cost of servicing the receivables sold.
At December 31, 2011 and January 1, 2011, $92.1 million and $31.5 million, respectively, of net receivables were derecognized.
Gross receivables sold amounted to $1,094.5 million ($966.4 million, net) for the year ended December 31, 2011 and $552.1 million
($492.9 million, net) for the year ended January 1, 2011. These sales resulted in a pre-tax loss of $2.4 million and $1.4 million for the
years ended December 31, 2011 and January 1, 2011, respectively. Proceeds from transfers of receivables to the Purchaser totaled
$925.2 million and $495.3 million for the years ended December 31, 2011 and January 1, 2011, respectively. Collections of previously
sold receivables, including deferred purchase price receivables, and all fees, which are settled one month in arrears, resulted in
payments to the Purchaser of $865.3 million and $498.8 million for the years ended December 31, 2011 and January 1, 2011,
respectively. Servicing fees amounted to $0.3 million and less than $0.3 million for the years ended December 31, 2011 and January 1,
2011, respectively.
The Company’s risk of loss following the sale of the receivables is limited to the deferred purchase price receivable, which was $17.6
million at December 31, 2011 and $13.8 million at January 1, 2011. The deferred purchase price receivable will be repaid in cash as
receivables are collected, generally within 30 days, and as such the carrying value of the receivable recorded approximates fair value.
Delinquencies and credit losses on receivables sold were $0.8 million for the year ended December 31, 2011 and less than $0.2 million
for the year ended January 1, 2011. Cash inflows related to the deferred purchase price receivable totaled $254.7 million for the year
ended December 31, 2011 and $174.4 million for the year ended January 1, 2011. All cash flows under the program are reported as a
component of changes in accounts receivable within operating activities in the Condensed Consolidated Statements of Cash Flows
since all the cash from the Purchaser is either: 1) received upon the initial sale of the receivable; or 2) from the ultimate collection of
the underlying receivables and the underlying receivables are not subject to significant risks, other than credit risk, given their short-
term nature.
C. INVENTORIES
(Millions of Dollars)
2011
2010
Finished products ................................................................
........................
$ 1,043.1
$ 909.8
Work in process................................................................
...........................
147.7
116.4
Raw materials ................................................................
..............................
247.8
235.8
Total ................................................................................................
............
$ 1,438.6
$ 1,262.0
Net inventories in the amount of $504.4 million at December 31, 2011 and $516.6 million at January 1, 2011 were valued at the lower
of LIFO cost or market. If the LIFO method had not been used, inventories would have been $75.2 million higher than reported at
December 31, 2011 and $67.0 million higher than reported at January 1, 2011. During 2010, inventory quantities increased due to the
Merger and resulting addition of Black & Decker inventories ($1.1 billion) resulting in an increment at January 1, 2011.
D. PROPERTY, PLANT AND EQUIPMENT
(Millions of Dollars)
2011
2010
Land ................................................................................................
........
$ 109.7
$ 113.9
Land improvements ................................................................
.................
36.1
40.6
Buildings ................................................................................................
.
453.0
464.2
Leasehold improvements................................................................
.........
59.9
43.0
Machinery and equipment ................................................................
.......
1,482.8
1,286.6
Computer software ................................................................
..................
308.0
225.1
Property, plant & equipment, gross ................................
.........................
$ 2,449.5
$ 2,173.4
Less: accumulated depreciation and amortization ................................
...
(1,198.6
)
(1,017.4)
Property, plant & equipment, net ................................
............................
$ 1,250.9
$ 1,156.0