Black & Decker 2012 Annual Report Download - page 34

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20
should be considered forward-looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to predict. There are a number of important factors that could
cause actual results to differ materially from those indicated by such forward-looking statements. These factors include,
without limitation, those set forth, or incorporated by reference, below under the heading “Cautionary Statements”. The
Company does not intend to update publicly any forward-looking statements whether as a result of new information, future
events or otherwise.
Strategic Objectives
The Company has maintained a consistent strategic framework over time:
• Maintaining portfolio transition momentum by continuing diversification toward higher growth, higher profit
businesses, increasing relative weighting of emerging markets and opportunistically consolidating the tool industry;
• Being selective and operating in markets where brand is meaningful, the value proposition is definable and sustainable
through innovation and global cost leadership is achievable;
• Pursuing growth on multiple fronts through building existing growth platforms such as security (both convergent and
mechanical) and engineered fastening and growing the more nascent stage infrastructure and healthcare platforms;
• Accelerating progress via SFS.
In 2012, the Company undertook to intensify its focus on organic growth in order to achieve its long-term objective of 4-6%
organic growth amidst a global growth environment which may be weaker than normal in the near to medium term. Stanley's
strategy involves industry, geographic and customer diversification, in order to pursue sustainable revenue, earnings and cash
flow growth. In May 2011, the Company’s GICS code was changed to “Industrials – Capital Goods – Machinery” from
“Consumer Discretionary – Consumer Durables – Household Durables” which reflects the evolution of the Company.
Two aspects of the Company’s vision are to be a consolidator within the tool industry and to increase its relative weighting in
emerging markets. These objectives have been significantly enhanced by the Merger, which along with the impact from the
Company’s diversification strategy has driven continued improvements in financial performance. Sales outside the
U.S. represented 52% of total net sales in 2012, up from 29% in 2002. As further illustration of the Company's diversification
strategy, 2012 sales to U.S. and international home centers and mass merchants were approximately 24%, including nearly 16%
in sales to the Company’s two largest customers, which is down from 25% in 2011, including 17% in sales to the Company's
two largest customers. As acquisitions in the various growth platforms (security, engineered fastening, infrastructure and
healthcare) are made in future years, the proportion of sales to these valued U.S. and international home centers and mass
merchants is expected to continue to decrease although they will remain important and highly valued customers.
Execution of this strategy has entailed approximately $5.3 billion of acquisitions since 2002 (aside from the Merger), several
divestitures (including the sale of HHI in December 2012) and increased brand investment, enabled by strong cash flow
generation. During the same time period, the Company has returned 70% of free cash flow to its shareowners.
The Company’s long-term financial objectives are:
• 4-6% organic revenue growth; 10-12% total revenue growth;
• Mid-teens percentage EPS growth;
• Free cash flow greater than or equal to net income;
• Return on capital employed (ROCE) or Cash flow return on investment (CFROI) of 12-15%;
• Continued dividend growth; and
• Strong investment grade credit rating.
The Company’s long-term capital allocation objectives pertaining to the deployment of free cash flow are:
• Invest approximately 2/3 in acquisitions; and
• Return approximately 1/3 to shareowners, as the Company remains committed to continued dividend growth and
opportunistic share buy backs.
The following represent recent examples of executing on the Company's strategic objectives: