Black & Decker 2015 Annual Report Download - page 34

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The financial and business analysis below provides information which the Company believes is relevant to an assessment and
understanding of its consolidated financial position, results of operations and cash flows. This financial and business analysis
should be read in conjunction with the Consolidated Financial Statements and related notes. All references to “Notes” in this
Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
The following discussion and certain other sections of this Annual Report on Form 10-K contain statements reflecting the
Company’s views about its future performance that constitute “forward-looking statements” under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and
projections about the industry and markets in which the Company operates as well as management’s beliefs and assumptions.
Any statements contained herein (including without limitation statements to the effect that Stanley Black & Decker, Inc. or its
management “believes”, “expects”, “anticipates”, “plans” and similar expressions) that are not statements of historical fact
should be considered forward-looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to predict. There are a number of important factors that could
cause actual results to differ materially from those indicated by such forward-looking statements. These factors include, without
limitation, those set forth, or incorporated by reference, below under the heading “Cautionary Statements”. The Company does
not intend to update publicly any forward-looking statements whether as a result of new information, future events or
otherwise.
Strategic Objectives
The Company continues to employ the following strategic framework:
• Maintaining organic growth momentum by utilizing SFS 2.0 as a catalyst, diversifying toward higher growth, higher
profit businesses, and increasing relative weighting of emerging markets;
• Being selective and operating in markets where brand is meaningful, the value proposition is definable and sustainable
through innovation and global cost leadership is achievable;
• Pursuing acquisitive growth on multiple fronts through opportunistically consolidating the tool industry and expanding
the Industrial platform in Engineered Fastening and Infrastructure.
The Company is continuing to pursue a growth and acquisition strategy that involves industry, geographic and customer
diversification to foster sustainable revenue, earnings and cash flow growth. The Company is focused on growing organically,
including increasing its presence in emerging markets, with a goal of generating greater than 20% of annual revenues from
those markets, and leveraging the Stanley Fulfillment System, a now expanded program focused on breakthrough innovation
and digital capabilities while accelerating commercial and supply chain excellence, and funding these required investments
through functional transformation. These objectives have been significantly enhanced by the Black & Decker merger, which
along with the impact from the Company’s diversification strategy has driven continued improvements in financial
performance. Sales outside the U.S. represented 47% of total net sales in 2015, up from 29% in 2002. As further illustration of
this diversification strategy, sales to U.S. and international home centers and mass merchants accounted for approximately 27%
of total sales in 2015 compared to 31% in 2010.
Execution of the above strategy has resulted in approximately $6.2 billion of acquisitions since 2002 (aside from the Black &
Decker merger), several divestitures (including the sale of HHI in December 2012), increased brand investment, improved
efficiency in the supply chain and manufacturing operation, and enhanced investments in organic growth, enabled by cash flow
generation and increased debt capacity. Over the last decade, the Company has returned approximately 50% of normalized free
cash flow to its shareowners.
Each of the Company's franchises share common attributes: they have world-class brands and attractive growth characteristics,
they are scalable and defensible, and they can differentiate through innovation.
• The Tools & Storage business is the tool company to own with its strong brands, proven innovation machine, global
scale, and broad offering of power and hand tools across many channels in both developed and developing markets.
• The Engineered Fastening business is a highly profitable, GDP+ growth business offering high value-added innovative
solutions with recurring revenue attributes and global scale.
• The Convergent Security Solutions ("CSS") business, with its value-add vertical market offerings and attractive
recurring revenue, presents a significant margin accretion opportunity over the longer term. The Security business,