Black & Decker 2012 Annual Report Download - page 42

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similar challenges due to reductions in capital spend by its largest customer. Healthcare organic revenue declined due to lower
hospital capital expenditures.
Segment profit amounted to $305.6 million, or 12.6% of net sales, in 2012 compared to $297.1 million, or 15.4% of net sales,
in 2011. Excluding merger and acquisition-related charges of $41.3 million, segment profit was $346.9 million, or 14.3% of net
sales, in 2012 compared to $312.4 million, or 16.2% of net sales, in 2011 (excluding $15.3 million in merger and acquisition-
related charges). The year over year decline in margin is primarily driven by lower margins for Niscayah as the Company
continues to integrate this business, as well as absorption pressure from volume declines in Europe, which were partially offset
by cost containment actions in 2012. Further, upon the exclusion of Niscayah's impact on 2012, in addition to merger and
acquisition-related charges, segment profit was 15.4% of net sales in 2012.
Security segment sales increased 32% in 2011. The impact of acquisitions, principally Niscayah and Infologix, provided 28%
of the sales increase, organic sales growth was 2% and favorable foreign currency translation resulted in a 2% increase. More
specifically, CSS organic sales increased 4%, which was largely attributed to installation and recurring monthly revenue
growth in the U.S., France and the U.K. Healthcare operations achieved 6% in organic sales growth due to both patient security
and RFID-enabled storage systems. Mechanical access solutions organic sales were flat due primarily to success in the
commercial hardware business, offset by lower sales in the Access Technologies business resulting primarily from remodeling
deferrals at its largest customer.
Segment profit in 2011 increased $44.2 million from 2010 and includes $15.3 million of merger and acquisition-related
charges. The impact from acquisitions (primarily Niscayah and Infologix) was the primary driver of the increase in segment
profit. Excluding merger and acquisition-related charges, segment profit was $312.4 million, or 16.2% of net sales in 2011,
which compares with $252.9 million, or 17.3% of net sales in 2010 (there were no merger and acquisition-related charges
related to the Security segment in 2010). Further, upon the exclusion of Niscayah’s impact on 2011, in addition to merger and
acquisition-related charges, segment profit was 17.6% of net sales in 2011. The decline in the segment profit rate excluding
merger and acquisition related charges is due to both unrecovered cost inflation and the temporary dilutive effect on the
segment profit rate from 2011 acquisitions.
Industrial:
The Industrial segment is comprised of the Industrial and Automotive Repair ("IAR"), Engineered Fastening and Infrastructure
businesses. The IAR business sells hand tools, power tools, and engineered storage solution products. The Engineered
Fastening business primarily sells engineered fasteners designed for specific industrial applications. These product lines include
stud welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, engineered plastic fasteners, self-
piercing riveting systems and precision nut running systems. The Infrastructure business consists of CRC-Evans, acquired in
2010, and the Hydraulics business. The product lines within the Infrastructure business include custom pipe handling
machinery, joint welding and coating machinery, weld inspection services and hydraulic tools, attachments and accessories.
(Millions of Dollars) 2012 2011 2010
Net sales………………………………………………………………… $ 2,568 $ 2,501 $ 1,892
Segment profit………………………………………………………….. $ 410 $ 401 $ 256
% of Net sales…………………………………………………………... 16.0% 16.0% 13.5%
Industrial net sales increased $66.5 million, or 3%, in 2012 compared with 2011. Organic sales increased 1% and the impact of
acquisitions contributed 4%, both of which were partially offset by unfavorable foreign currency translation of 2%. The
increase in organic sales is primarily attributed to strong results in the Engineered Fastening business, which grew 9%
organically, far outpacing global light vehicle production which rose 5%. This solid performance was mostly offset by organic
sales declines in European end markets in IAR, weak large diameter onshore pipeline markets which affected the Oil &
Gas/CRC-Evans business, and depressed scrap metal prices, which negatively impacted the Hydraulics business.
Segment profit increased $9.5 million and reflects $7.9 million of merger and acquisition-related charges. Excluding these
charges, segment profit was $418.1 million, or 16.3% of net sales, in 2012 compared to $410.1 million (excluding merger and
acquisition-related charges of $9.4 million), or 16.4% of net sales, in 2011. The profit rate remained consistent, attributable to
sales volume leverage within Engineered Fastening and the success of cost containment measures offset by the impacts of
volume reductions in the IAR and Infrastructure businesses.
Industrial segment net sales rose 32% in 2011 compared with 2010. The impact of the Black & Decker merger and other
acquisitions (primarily CRC-Evans) provided a 19% increase in net sales, organic growth provided an additional 10% and
favorable foreign currency contributed 3% for 2011. The Engineered Fastening business had 13% organic growth through gains
in market share, specifically in North America and Europe, as well as expansion into new automotive platforms and growth
within the commercial aerospace market. The Industrial and Automotive Repair business achieved 11% organic growth due to