Black & Decker 2014 Annual Report Download - page 5

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these markets, for these markets — is
expected to continue to produce share
gains in emerging markets for years to
come. And the CDIY innovation machine
is working on breakthrough technology
that has the potential to support growth
momentum in developed markets well
through the latter part of the decade.
The global tools market remains
fragmented despite CDIY/IAR’s strong
#1 market position and high relative
market share. Our combined global
share in tools is approximately 20%,
so continued consolidation of the tools
industry through bolt-on acquisitions
presents an opportunity to create value
by leveraging our scale and filling gaps
in existing product and geographic
oerings.
Engineered Fastening: Engineered
Fastening is also an attractive high
growth, high margin franchise with
global reach. Our ability to expand the
market through increased platform
penetration enables the business to
generate organic growth at increased
multiples of end-market growth rates.
Due to its high value-added business
model, Engineered Fastening has
unique expertise in a highly technical
field and is a critical design and supply
chain partner to our automotive and
other customers. As a consequence, we
command strong margins on equipment
sales and a recurring revenue stream for
the life of the platform, in most cases.
Recently, with the successful addition
of Infastech, Engineered Fastening
has also achieved strong operating
leverage while bolstering its growth and
profitability in electronics and other
manufacturing verticals. Looking ahead,
Engineered Fastening remains one of
our highest priority growth platforms
and we see a significant opportunity to
expand this business both organically
and through accretive acquisitions.
Security: Our Security segment, which
represents approximately 20% of
the Company’s total revenues, is the
#2 commercial electronic security
services provider in the world, with a
broad global footprint, a comprehensive
suite of security products, services
and solutions, and enormous strategic
potential. Historically, Security
represented a source of stable, above
Company line average operating margin
and provided a source of profit when
revenues declined in CDIY and Industrial
during the 2008–2009 period.
Since acquiring Niscayah in 2011,
however, Security has pressured
both organic revenue and operating
margin growth. We believe we are now
on a path to organic growth as well
as restoring operating margin to the
mid-teens with rigorous, disciplined
management; however, we estimate it
will take two plus years to achieve this.
Importantly, the overall turnaround
depends upon, among other things,
our success in scaling and exploiting
the Vertical Market initiative that is
beginning to produce results in North
America. The Vertical initiative: (1)
aords us the ability to dierentiate
our value proposition, (2) enables us to
grow organically with premium gross
margins, and (3) positions us favorably
as advances in software, electronics
and advanced analytics inevitably blur
the distinction between commercial
security and various adjacencies. It will
also be important for Security Europe to
successfully market these solutions, as
well as grow its monitoring recurring
revenue base as its turnaround progresses.
Although much has been accomplished
during the past year, the Security
turnaround is still in the relatively early
stages. We do, however, have the right
people, the right strategy and are in
the right markets, giving us cause for
cautious optimism that we can return
this business to successful levels of
growth and profitability and therefore
secure its place as part of our long-
term portfolio.
25%
17%
9%
49%
EMERGING
MARKETS
EUROPE
R.O.W.
U.S.
 GLOBAL PRESENCE
% OF  REVENUES