Black & Decker 2014 Annual Report Download - page 42

28
Segment profit amounted to $777.1 million, or 14.7% of net sales, in 2013 compared to $693.1 million, or 13.9% of net sales,
in 2012. Excluding $13.0 million in merger and acquisition-related charges, segment profit totaled $790.1 million, or 15.0% of
net sales, in 2013 compared to $734.8 million, or 14.7% of net sales, in 2012 (excluding $41.7 million in merger and
acquisition-related charges). The increase in segment profit year over year resulted primarily from higher volumes and
productivity, partially offset by incremental investments in organic growth initiatives and negative impacts from foreign
currency.
Industrial:
The Industrial segment is comprised of the Industrial and Automotive Repair ("IAR"), Engineered Fastening and Infrastructure
businesses. The IAR business sells professional hand tools, power tools, and engineered storage solution products. The
Engineered Fastening business primarily sells engineered fastening products and systems designed for specific applications.
The product lines include stud welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, engineered
plastic and mechanical fasteners, self-piercing riveting systems, precision nut running systems, micro fasteners, and high-
strength structural fasteners. The Infrastructure business consists of the Oil & Gas and Hydraulics businesses. The Oil & Gas
business sells and rents custom pipe handling, joint welding and coating equipment used in the construction of large and small
diameter pipelines, and provides pipeline inspection services. The Hydraulics business sells hydraulic tools and accessories.
(Millions of Dollars) 2014 2013 2012
Net sales .................................................................................................. $ 3,499 $ 3,303 $ 2,739
Segment profit......................................................................................... $ 554 $ 457 $ 441
% of Net sales ......................................................................................... 15.8% 13.8% 16.1%
Industrial net sales increased $196.2 million, or 6%, in 2014 compared with 2013. Organic sales and acquisitions (primarily
Infastech) provided increases of 5% and 3% in net sales, respectively, while unfavorable effects of foreign currency translation
decreased net sales by 2%. IAR grew 5% organically due to strong performances across all geographies. The North American
and European tools business benefited from new product introductions and strong industrial demand while emerging markets
was supported by mid-price point tool launches. Engineered Fastening achieved organic growth of 6%, which was mainly
attributable to strong global automotive and electronic revenues. Infrastructure organic sales were relatively flat year over year
as solid hydraulic tools growth was offset by lower volumes in Oil & Gas due primarily to project delays resulting from
geopolitical situations in certain emerging markets as well as the recent contraction in oil prices and resulting slowdown in
pipeline construction.
Segment profit totaled $553.5 million, or 15.8% of net sales, in 2014 compared to $456.7 million, or 13.8% of net sales, in
2013. Excluding $6.8 million of merger and acquisition-related charges, segment profit was $560.3 million, or 16.0% of net
sales, in 2014 compared to $481.5 million (excluding merger and acquisition-related charges of $24.8 million), or 14.6% of net
sales, in 2013. The year over year increase in segment profit rate was primarily due to favorable volume leverage, price, supply
chain productivity gains and SG&A cost controls, partially offset by negative impacts from foreign currency fluctuations.
Industrial net sales increased $563.3 million, or 20.6%, in 2013 compared with 2012. Organic sales and acquisitions (primarily
Infastech) increased 5% and 17%, respectively, while foreign currency decreased net sales by 2%. IAR grew 3% organically as
a result of volume increases in North America, which were driven by strong MRO vending sales and strength within the Mac
Tools mobile distribution driven by new product introductions, and strong organic growth in emerging markets. These results
were partially offset by the impact of budgetary cuts on IAR’s US Government business and lower volumes in Europe.
Engineered Fastening achieved organic growth of 3%, which was mainly attributable to global automotive revenues outpacing
global light vehicle production due to customer share gains. Organic sales for Infrastructure increased 17% as a result of strong
growth in the Oil & Gas business, which was driven by a continued rebound in North America onshore operations as well as
strong offshore growth performance.
Segment profit totaled $456.7 million, or 13.8% of net sales, in 2013 compared to $440.7 million, or 16.1% of net sales, in
2012. Excluding $24.8 million of merger and acquisition-related charges, segment profit was $481.5 million, or 14.6% of net
sales, in 2013 compared to $448.6 million (excluding merger and acquisition-related charges of $7.9 million), or 16.4% of net
sales, in 2012. The decrease in the profit rate was driven by higher operating expenses associated with the organic growth
initiatives, negative impacts from foreign currency and the impact of modestly below line average Infastech margins.