Black & Decker 2014 Annual Report Download - page 38

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To that end, the Company has spent considerable time and effort developing the next iteration of the successful SFS program,
which has driven working capital turns to world-class levels and vastly improved the supply chain and customer-facing metrics.
Entitled “SFS 2.0” this refreshed and revitalized business system will continue the progress on core SFS, but importantly,
provide resources and added focus into (1) commercial excellence, (2) breakthrough innovation, (3) digital excellence and (4)
functional transformation. The Company is making a significant commitment to SFS 2.0 which will help drive further
improvement to revenue, earnings and cash flow growth. Management believes that success in SFS 2.0 will be characterized
by dependable organic growth in the 4-6% range as well as significantly expanded operating margin rates over the next 3 to 5
years as the Company leverages the growth and reduces structural SG&A levels.
Certain Items Impacting Earnings
Merger and Acquisition-Related and Other Charges Impacting 2014, 2013 and 2012 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 and Infastech acquisitions, while other charges relate to the 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:
2014
The Company reported $54 million in pre-tax merger and acquisition-related charges during 2014, which were comprised of the
following:
• $2 million reducing Gross profit primarily pertaining to integration-related matters;
• $31 million in Selling, general & administrative expenses primarily for integration-related administrative costs and
consulting fees, as well as employee related matters;
• $2 million in Other-net primarily related to transaction costs; and
• $19 million in net Restructuring charges, which primarily represent cost reduction actions associated with the
severance of employees.
The tax effect on the above charges, some of which were not tax deductible, in 2014 was $5 million, resulting in an after-tax
charge of $49 million, or $0.30 per diluted share.
2013
The Company reported $390 million in pre-tax merger and acquisition-related and other charges during 2013, which were
comprised of the following:
• $29 million reducing Gross profit primarily pertaining to integration-related matters and amortization of the inventory
step-up adjustment for the Infastech acquisition;
• $136 million in Selling, general & administrative expenses primarily for integration-related administrative costs and
consulting fees, as well as employee related matters;
• $51 million in Other-net primarily related to deal transaction costs and the $21 million pre-tax loss on the
extinguishment of $300 million of debt in the fourth quarter of 2013; and
• $174 million in net Restructuring charges, which primarily represent Niscayah integration-related restructuring
charges and cost reduction actions associated with the severance of employees.
The tax effect on the above charges, some of which were not tax deductible, in 2013 was $120 million, resulting in an after-tax
charge of $270 million, or $1.70 per diluted share.