Black & Decker 2014 Annual Report Download - page 43

29
Security:
The Security segment is comprised of the Convergent Security Solutions ("CSS") and the Mechanical Access Solutions
("MAS") businesses. The CSS business designs, supplies and installs electronic security systems and provides electronic
security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system
maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the
time of initial equipment installation. The business also includes healthcare solutions, which markets medical cabinets, asset
tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call
products. The MAS business sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry
systems, keying systems, tubular and mortise door locksets.
(Millions of Dollars) 2014 2013 2012
Net sales ................................................................................................. $ 2,281 $ 2,316 $ 2,282
Segment profit ........................................................................................ $ 259 $ 233 $ 301
% of Net sales......................................................................................... 11.4% 10.1% 13.2%
Security net sales decreased $35.0 million, or 2%, in 2014 compared to 2013. Organic sales were relatively flat year over year
while foreign currency fluctuations resulted in a 2% decrease in net sales. Organic growth of 1% in North America and
emerging markets was primarily due to growth within the commercial electronics business as a result of vertical selling
solutions and the automatic doors business, partially offset by lower installation and recurring revenues in Europe in addition to
declines in the U.S. commercial lock business as the business model transition continues to progress slowly.
Segment profit amounted to $259.2 million, or 11.4% of net sales, in 2014 compared to $233.3 million, or 10.1% of net sales,
in 2013. Excluding merger and acquisition-related charges of $6.9 million, segment profit was $266.1 million, or 11.7% of net
sales, in 2014 compared to $271.3 million, or 11.7% of net sales, in 2013 (excluding $38.0 million in merger and acquisition-
related charges). The segment profit rate was flat year over year as improved operating performances in North America and
emerging markets were offset by installation field inefficiencies and negative installation and recurring revenue mix in Europe.
Security net sales increased $33.8 million, or 1%, in 2013 compared to 2012. Pricing, acquisitions and foreign currency
translation each resulted in a 1% increase to net sales, while lower volumes caused a 2% decrease. CSS North America realized
organic revenue growth of 2%, while CSS Europe declined 5% organically due primarily to continued softness in certain
regions. MAS organic sales were up 3% as a result of strong growth within the automatic door business due to successful door
conversion wins and new product introductions and growth in the commercial mechanical lock business in the emerging
markets.
Segment profit amounted to $233.3 million, or 10.1% of net sales, in 2013 compared to $301.4 million, or 13.2% of net sales,
in 2012. Excluding merger and acquisition-related charges of $38.0 million, segment profit was $271.3 million, or 11.7% of net
sales, in 2013 compared to $342.7 million, or 15.0% of net sales, in 2012 (excluding $41.3 million in merger and acquisition-
related charges). The year over year decline in margin was attributable to planned growth investments in vertical solutions and
emerging markets, new product development, incremental costs associated with the distributor model transition, investments in
field technicians in North America and impacts of volume pressures and field inefficiencies in Europe.
RESTRUCTURING ACTIVITIES
A summary of the restructuring reserve activity from December 28, 2013 to January 3, 2015 is as follows (in millions):
12/28/2013
Net
Additions Usage Currency 1/3/2015
Severance and related costs ......................................... $ 169.9 $ 15.1 $ (96.7)$ (7.1)$ 81.2
Facility closures and other ........................................... 21.6 3.7 (8.2)(0.7)16.4
Total............................................................................. $ 191.5 $ 18.8 $ (104.9)$ (7.8)$ 97.6
During 2014, the Company recognized $18.8 million of net restructuring charges. Net severance charges of $15.1 million relate
to cost reductions associated with the severance of employees, inclusive of reversals primarily related to changes in
management's strategy for certain businesses as a result of new developments during 2014 as well as adjustments of severance
accruals due to the finalization of prior year actions. Also included in net restructuring charges are facility closure costs of $3.7
million.