Black & Decker 2014 Annual Report Download - page 28

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Expansion of the Company's activity in emerging markets may result in risks due to differences in business practices and
cultures.
The Company's growth plans include efforts to increase revenue from emerging markets through both organic sales and
acquisitions. Local business practices in these regions may not comply with US laws, local laws or other laws applicable to the
Company. When investigating potential acquisitions, the Company seeks to identify historical practices of target companies
that would create liability or other exposures for the Company were they to continue post-completion or as a successor to the
target. Where such practices are discovered, the Company assesses the risk to determine whether it is prepared to proceed with
the transaction. In assessing the risk, the Company looks at, among other factors, the nature of the violation, the potential
liability, including any fines or penalties that might be incurred, the ability to avoid, minimize or obtain indemnity for the risks,
and the likelihood that the Company would be able to ensure that any such practices are discontinued following completion of
the acquisition through implementation of its own policies and procedures. Due diligence and risk assessment are, however,
imperfect processes, and it is possible that the Company will not discover problematic practices until after completion, or that
the Company will underestimate the risks associated with historical activities. Should that occur, the Company may incur fees,
fines, penalties, injury to its reputation or other damage that could negatively impact the Company's earnings.
Income tax payments may ultimately differ from amounts currently recorded by the Company as income tax expense. Future
tax law changes and audit results may materially increase the Company's prospective income tax expense.
Pursuant to the rules of ASC 740, Accounting for Income Taxes, income tax payments made may differ from the total income tax
expense recorded, primarily due to deferred taxes and income tax reserves. The Company is subject to income taxation in the
U.S. as well as numerous foreign jurisdictions. Judgment is required in determining the Company's worldwide income tax provision
and accordingly there are many transactions and computations for which the final income tax determination is uncertain. The
Company is routinely audited by income tax authorities in many tax jurisdictions. Although management believes the recorded
tax estimates are reasonable, the ultimate outcome from any audit (or related litigation) could be materially different from amounts
reflected in the Company's income tax provisions and accruals. Future settlements of income tax audits may have a material effect
on earnings between the period of initial recognition of tax estimates in the financial statements and the point of ultimate tax audit
settlement. Additionally, it is possible that future income tax legislation may be enacted that could have a material impact on the
Company's worldwide income tax provision beginning with the period that such legislation becomes enacted. Also, while a
reduction in statutory rates would result in a favorable impact on future net earnings, it would require an initial write down of any
deferred tax assets in the related jurisdiction.
The Company’s failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could
negatively impact its results of operations or cash flows.
The Company is exposed to and becomes involved in various litigation matters arising out of the ordinary routine conduct of its
business, including, from time to time, actual or threatened litigation relating to such items as commercial transactions, product
liability, workers compensation, the Company’s distributors and franchisees, intellectual property claims and regulatory actions.
In addition, the Company is subject to environmental laws in each jurisdiction in which business is conducted. Some of the
Company’s products incorporate substances that are regulated in some jurisdictions in which it conducts manufacturing
operations. The Company could be subject to liability if it does not comply with these regulations. In addition, the Company is
currently, and may in the future be held responsible for remedial investigations and clean-up costs resulting from the discharge
of hazardous substances into the environment, including sites that have never been owned or operated by the Company but at
which it has been identified as a potentially responsible party under federal and state environmental laws and regulations.
Changes in environmental and other laws and regulations in both domestic and foreign jurisdictions could adversely affect the
Company’s operations due to increased costs of compliance and potential liability for non-compliance.
The Company manufactures products, configures and installs security systems and performs various services that create
exposure to product and professional liability claims and litigation. If such products, systems and services are not properly
manufactured, configured, installed, designed or delivered, personal injuries, property damage or business interruption could
result, which could subject the Company to claims for damages. The costs associated with defending product liability claims
and payment of damages could be substantial. The Company’s reputation could also be adversely affected by such claims,
whether or not successful.
There can be no assurance that the Company will be able to continue to successfully avoid, manage and defend such matters. In
addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary
from the Company’s estimates for such contingent liabilities.