Black & Decker 2014 Annual Report Download - page 34

20
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The financial and business analysis below provides information which the Company believes is relevant to an assessment and
understanding of its consolidated financial position, results of operations and cash flows. This financial and business analysis
should be read in conjunction with the Consolidated Financial Statements and related notes. All references to “Notes” in this
Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the
Company’s views about its future performance that constitute “forward-looking statements” under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and
projections about the industry and markets in which the Company operates as well as management’s beliefs and assumptions.
Any statements contained herein (including without limitation statements to the effect that Stanley Black & Decker, Inc. or its
management “believes”, “expects”, “anticipates”, “plans” and similar expressions) that are not statements of historical fact
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, and increasing relative weighting of emerging markets;
• 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 acquisitive growth on multiple fronts through opportunistically consolidating the tool industry, building on
existing growth platforms such as engineered fastening and infrastructure, and opportunistically adding to security
when the conditions are right;
• Accelerating progress via the Stanley Fulfillment System.
In 2012, the Company intensified its focus on organic growth in order to achieve its long-term objective of 4-6% organic
growth. Stanley's strategy involves industry, geographic and customer diversification, in order to pursue sustainable revenue,
earnings and cash flow growth.
Two aspects of the Company’s vision are to be a consolidator within the tool industry and to increase its presence in emerging
markets, with a goal of ultimately generating greater than 20% of annual revenues from emerging markets. These objectives
have been significantly enhanced by the Black & Decker 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 51% of
total net sales in 2014, up from 29% in 2002. As further illustration of the Company's diversification strategy, 2014 sales to
U.S. and international home centers and mass merchants were approximately 23%, including nearly 16% in sales to the
Company’s two largest customers, which is down from 31% in 2010, including 20% in sales to the Company's two largest
customers. As operations in the various growth platforms within the Industrial and Security segments continue to expand 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 the above strategy has resulted in approximately $6.2 billion of acquisitions since 2002 (aside from the Black &
Decker merger), several divestitures (including the sale of HHI in December 2012), increased brand investment, improved
efficiency in the supply chain and manufacturing operation, and enhanced investments in organic growth, enabled by cash flow
generation and increased debt capacity. Over the last decade, the Company has returned approximately 50% of normalized free
cash flow to its shareowners.