Black & Decker 2011 Annual Report Download - page 91

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L. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) Most U.S. employees, including Black & Decker employees beginning on
January 1, 2011, may contribute from 1% to 25% of their eligible compensation to a tax-deferred 401(k) savings plan, subject to
restrictions under tax laws. Employees generally direct the investment of their own contributions into various investment funds. In
2011 and 2010, an employer match benefit was provided under the plan equal to one-half of each employee’s tax-deferred
contribution up to the first 7% of their compensation. In 2009, an employer match benefit was provided under the plan equal to one-
quarter of each employee’s tax-deferred contribution up to the first 7% of their compensation. Participants direct the entire employer
match benefit such that no participant is required to hold the Company’s common stock in their 401(k) account. The employer match
benefit totaled $17.7 million, $8.8 million and $3.9 million in 2011, 2010 and 2009, respectively. In addition to the regular employer
match, in 2009 the Company made an additional $0.9 million contribution to employees’ accounts based on 2009 forfeitures and a
surplus resulting from appreciation of the Company’s share value.
In addition, approximately 8,600 U.S. salaried and non-union hourly employees are eligible to receive a non-contributory benefit
under the Core benefit plan (formerly the Cornerstone plan). Core benefit allocations range from 2% to 6% of eligible employee
compensation based on age. Approximately 7,000 U.S. employees also receive a Core transition benefit, allocations of which range
from 1%—3% of eligible compensation based on age and date of hire. Approximately 2,517 U.S. employees are eligible to receive an
additional average 1.4% contribution actuarially designed to replace previously curtailed pension benefits. Allocations for benefits
earned under the Core plan, which were suspended in 2009, were $33.0 million in 2011 and $13.7 million in 2010. Assets held in
participant Core accounts are invested in target date retirement funds which have an age-based allocation of investments.
Shares of the Company’s common stock held by the ESOP were purchased with the proceeds of external borrowings in 1989 and
borrowings from the Company in 1991 (“1991 internal loan”). The external ESOP borrowings, which were fully repaid in 2009, were
guaranteed by the Company and were included in Long-term debt. Shareowners’ equity reflects a reduction equal to the cost basis of
unearned (unallocated) shares purchased with the internal and the external borrowings.
The Company accounts for the ESOP under ASC 718-40, “Compensation — Stock Compensation — Employee Stock Ownership
Plans”. Net ESOP activity recognized is comprised of the cost basis of shares released, the cost of the aforementioned Core and 401(k)
match defined contribution benefits, interest expense on the external 1989 borrowing, less the fair value of shares released and
dividends on unallocated ESOP shares. The Company’s net ESOP activity resulted in expense of $28.4 million in 2011, expense of
$3.4 million in 2010 and income of $8.0 million in 2009. The increase in net ESOP expense in 2011 is related to the merger of the
U.S. Black & Decker 401(k) defined contribution plan into the ESOP and extending the core benefit to these employees. ESOP
expense is affected by the market value of the Company’s common stock on the monthly dates when shares are released. The market
value of shares released averaged $68.12 per share in 2011, $58.56 per share in 2010 and $39.37 per share in 2009.
Unallocated shares are released from the trust based on current period debt principal and interest payments as a percentage of total
future debt principal and interest payments. Dividends on both allocated and unallocated shares may be used for debt service and to
credit participant accounts for dividends earned on allocated shares. Dividends paid on the shares acquired with the 1991 internal loan
were used solely to pay internal loan debt service in all periods. Dividends on ESOP shares, which are charged to shareowners’ equity
as declared, were $12.2 million in 2011, $9.7 million in 2010 and $10.3 million in 2009, net of the tax benefit which is recorded
within equity. Dividends on ESOP shares were utilized entirely for debt service in all years. Interest costs incurred by the ESOP on the
1989 external debt, which matured in 2009, were nominal in 2009. Interest costs incurred by the ESOP on the 1991 internal loan,
which have no earnings impact, were $7.2 million, $7.6 million and $8.1 million for 2011, 2010 and 2009, respectively. Both allocated
and unallocated ESOP shares are treated as outstanding for purposes of computing earnings per share. As of December 31, 2011, the
cumulative number of ESOP shares allocated to participant accounts was 11,873,782, of which participants held 3,504,125 shares, and
the number of unallocated shares was 3,691,274. At December 31, 2011, there were 26,768 released shares in the ESOP trust holding
account pending allocation. The Company made cash contributions totaling $16.2 million in 2011, $1.3 million in 2010 and
$11.4 million in 2009.
PENSION AND OTHER BENEFIT PLANS — The Company sponsors pension plans covering most domestic hourly and certain
executive employees, and approximately 16,900 foreign employees. Benefits are generally based on salary and years of service,
except for U.S. collective bargaining employees whose benefits are based on a stated amount for each year of service.
The Company contributes to a number of multi-employer plans for certain collective bargaining U.S. employees. The risks of
participating in these multiemployer plans are different from single-employer plans in the following aspects:
a. Assets contributed to the multiemployer plan by one employer may be used to provide benefit to employees of other
participating employers.
b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be inherited by the
remaining participating employers.