Black & Decker 2012 Annual Report Download - page 21

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Research and Development Costs
Research and development costs, which are classified in SG&A, were $174.8 million, $139.3 million and $124.5 million for
fiscal years 2012, 2011 and 2010, respectively.
Available Information
The Company’s website is located at http://www.stanleyblackanddecker.com. This URL is intended to be an inactive textual
reference only. It is not intended to be an active hyperlink to the Company's website. The information on the Company's
website is not, and is not intended to be, part of this Form 10-K and is not incorporated into this report by reference. The
Company makes its Forms 10-K, 10-Q, 8-K and amendments to each available free of charge on its website as soon as
reasonably practicable after filing them with, or furnishing them to, the U.S. Securities and Exchange Commission.
ITEM 1A. RISK FACTORS
The Company’s business, operations and financial condition are subject to various risks and uncertainties. You should
carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report
on Form 10-K, including those risks set forth under the heading entitled "Cautionary Statements Under the Private Securities
Litigation Reform Act of 1995", and in other documents that the Company files with the U.S. Securities and Exchange
Commission, before making any investment decision with respect to its securities. If any of the risks or uncertainties actually
occur or develop, the Company’s business, financial condition, results of operations and future growth prospects could change.
Under these circumstances, the trading prices of the Company’s securities could decline, and you could lose all or part of your
investment in the Company’s securities.
Changes in customer preferences, the inability to maintain mutually beneficial relationships with large customers, inventory
reductions by customers, and the inability to penetrate new channels of distribution could adversely affect the Company’s
business.
The Company has certain significant customers, particularly home centers and major retailers, although no one customer
represented more than 10% of consolidated net sales in 2012. However, the two largest customers comprised nearly 16% of net
sales, with U.S. and international mass merchants and home centers collectively comprising approximately 24% of net sales.
The loss or material reduction of business, the lack of success of sales initiatives, or changes in customer preferences or
loyalties, for the Company’s products related to any such significant customer could have a material adverse impact on the
Company’s results of operations and cash flows. In addition, the Company’s major customers are volume purchasers, a few of
which are much larger than the Company and have strong bargaining power with suppliers. This limits the ability to recover
cost increases through higher selling prices. Furthermore, unanticipated inventory adjustments by these customers can have a
negative impact on sales.
If customers in the Convergent Security Solutions ("CSS") business are dissatisfied with services and switch to competitive
services, or disconnect for other reasons, the Company's attrition rates may increase. In periods of increasing attrition rates,
recurring revenue and results of operations may be materially adversely affected. The risk is more pronounced in times of
economic uncertainty, as customers may reduce amounts spent on the products and services the Company provides.
In times of tough economic condition, the Company has experienced significant distributor inventory corrections reflecting de-
stocking of the supply chain associated with difficult credit markets. Such distributor de-stocking exacerbated sales volume
declines pertaining to weak end user demand and the broader economic recession. The Company’s results may be adversely
impacted in future periods by such customer inventory adjustments. Further, the inability to continue to penetrate new channels
of distribution may have a negative impact on the Company’s future results.
The Company faces active global competition and if it does not compete effectively, its business may suffer.
The Company faces active competition and resulting pricing pressures. The Company’s products compete on the basis of,
among other things, its reputation for product quality, its well-known brands, price, innovation and customer service
capabilities. The Company competes with both larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses. These companies are often located in countries such
as China, Taiwan and India where labor and other production costs are substantially lower than in the U.S., Canada and
Western Europe. Also, certain large customers offer house brands that compete with some of the Company’s product offerings
as a lower-cost alternative. To remain profitable and defend market share, the Company must maintain a competitive cost
structure, develop new products and services, lead product innovation, respond to competitor innovations and enhance its
existing products in a timely manner. The Company may not be able to compete effectively on all of these fronts and with all of
its competitors, and the failure to do so could have a material adverse effect on its sales and profit margins.