Black & Decker 2015 Annual Report Download - page 28

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audit based on the most currently available information, which involves inherent uncertainty. The Company is routinely audited
by income tax authorities in many tax jurisdictions. Although management believes the recorded tax estimates are reasonable,
the ultimate outcome of any audit (or related litigation) could differ materially from amounts reflected in the Company’s
income tax accruals. Additionally, it is possible that future income tax legislation may be enacted that could have a material
impact on the Company’s worldwide income tax provision beginning with the period that such legislation becomes enacted.
Lastly, the global income tax provision can be materially impacted due to foreign currency fluctuations against the U.S. dollar
since a significant amount of the Company’s earnings are generated outside the United States.
The Company’s failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could
negatively impact its results of operations or cash flows.
The Company is exposed to and becomes involved in various litigation matters arising out of the ordinary routine conduct of its
business, including, from time to time, actual or threatened litigation relating to such items as commercial transactions, product
liability, workers compensation, the Company’s distributors and franchisees, intellectual property claims and regulatory actions.
In addition, the Company is subject to environmental laws in each jurisdiction in which business is conducted. Some of the
Company’s products incorporate substances that are regulated in some jurisdictions in which it conducts manufacturing
operations. The Company could be subject to liability if it does not comply with these regulations. In addition, the Company is
currently, and may in the future be held responsible for remedial investigations and clean-up costs resulting from the discharge
of hazardous substances into the environment, including sites that have never been owned or operated by the Company but at
which it has been identified as a potentially responsible party under federal and state environmental laws and regulations.
Changes in environmental and other laws and regulations in both domestic and foreign jurisdictions could adversely affect the
Company’s operations due to increased costs of compliance and potential liability for non-compliance.
The Company manufactures products, configures and installs security systems and performs various services that create
exposure to product and professional liability claims and litigation. If such products, systems and services are not properly
manufactured, configured, installed, designed or delivered, personal injuries, property damage or business interruption could
result, which could subject the Company to claims for damages. The costs associated with defending product liability claims
and payment of damages could be substantial. The Company’s reputation could also be adversely affected by such claims,
whether or not successful.
There can be no assurance that the Company will be able to continue to successfully avoid, manage and defend such matters. In
addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods may vary
from the Company’s estimates for such contingent liabilities.
The Company’s products could be recalled.
The Consumer Product Safety Commission or other applicable regulatory bodies may require the recall, repair or replacement
of the Company’s products if those products are found not to be in compliance with applicable standards or regulations. A recall
could increase costs and adversely impact the Company’s reputation.
The Company is exposed to credit risk on its accounts receivable.
The Company’s outstanding trade receivables are not generally covered by collateral or credit insurance. While the Company
has procedures to monitor and limit exposure to credit risk on its trade and non-trade receivables, there can be no assurance
such procedures will effectively limit its credit risk and avoid losses, which could have an adverse effect on the Company’s
financial condition and operating results.
If the Company were required to write-down all or part of its goodwill, indefinite-lived trade names, or other definite-lived
intangible assets, its net income and net worth could be materially adversely affected.
As a result of the Black and Decker merger and other acquisitions, the Company has $7.084 billion of goodwill, $1.578 billion
of indefinite-lived trade names and $0.964 billion of definite-lived intangible assets at January 2, 2016. The Company is
required to periodically, at least annually, determine if its goodwill or indefinite-lived trade names have become impaired, in
which case it would write down the impaired portion of the intangible asset. The definite-lived intangible assets, including
customer relationships, are amortized over their estimated useful lives; such assets are also evaluated for impairment when
appropriate. Impairment of intangible assets may be triggered by developments outside of the Company’s control, such as
worsening economic conditions, technological change, intensified competition or other factors resulting in deleterious
consequences.
If the investments in employee benefit plans do not perform as expected, the Company may have to contribute additional
amounts to these plans, which would otherwise be available to cover operating expenses or other business purposes.