Black & Decker 2012 Annual Report Download - page 37

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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 as 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 continued
efforts to deploy SFS across the entire Company and increase turns has created significant opportunities to generate
incremental free cash flow. Working capital turns have experienced a 32% improvement from 5.7 at the end of 2010 to 7.5 at
the end of 2012. Going forward, 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, with a goal of achieving 10 working capital turns by mid-decade.
Certain Items Impacting Earnings
Merger and Acquisition-Related and Other Charges Impacting 2012, 2011 and 2010 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 and other charges. Merger and acquisition-related charges relate primarily to the Black &
Decker merger and Niscayah acquisition while other charges relate to the 2012 cost actions and the loss on extinguishment of
debt. 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 these charges. In
addition, these measures are utilized internally by management to understand business trends, as once the aforementioned
anticipated cost synergies from the Black & Decker merger and other acquisitions are realized, such charges are not expected to
recur. The merger and acquisition-related and other charges are as follows:
2012
The Company reported $442 million in pre-tax merger and acquisition-related and other charges during 2012, which were
comprised of the following:
• $30 million reducing Gross profit primarily pertaining to facility closure-related charges;
• $138 million in Selling, general & administrative expenses primarily for integration-related administrative costs and
consulting fees, as well as employee related matters;
• $99 million in Other-net primarily related to transaction costs and the $45 million loss on the extinguishment of $900
million of debt in the third quarter of 2012; and
• $175 million in Restructuring charges, which primarily represent Niscayah-related restructuring charges and cost
containment actions associated with the severance of employees.
The tax effect on the above charges, some of which were not tax deductible, in 2012 was $113 million, resulting in an after-tax
charge of $329 million, or $1.97 per diluted share.
2011
The Company reported $236 million in pre-tax charges during 2011 pertaining to the Merger and other acquisition activities,
which were comprised of the following:
• $21 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;
• $49 million in Other-net predominantly for transaction costs; and
• $67 million in Restructuring charges primarily for severance and the planned closures of facilities.
The tax effect on the above charges, some of which were not tax deductible, in 2011 was $50 million, resulting in an after-tax
charge of $186 million, or $1.09 per diluted share.