Black & Decker 2015 Annual Report Download - page 39

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RESULTS OF OPERATIONS
Below is a summary of the Company’s operating results at the consolidated level, followed by an overview of business segment
performance.
Terminology: The term “organic” is utilized to describe results aside from the impacts of foreign currency fluctuations and
acquisitions during their initial 12 months of ownership. This ensures appropriate comparability to operating results of prior
periods.
Net Sales: Net sales were $11.172 billion in 2015, down 1% compared to $11.339 billion in 2014. Organic sales volume and
pricing provided increases of 5% and 1%, respectively, but were more than offset by a 7% decrease due to negative impacts from
foreign currency. In the Tools & Storage segment, organic sales increased 8% compared to 2014 as a result of strong growth across
all regions primarily due to share gains from innovative new products and an expanded retail footprint. Net sales in the Security
segment decreased 7% compared to 2014 primarily due to foreign currency declines of 7% and lower volumes in North America
and emerging markets, which more than offset organic growth in Europe. In the Industrial segment, organic sales grew 2% relative
to 2014 due to strong organic growth in the Engineered Fastening business primarily as a result of strong global automotive
revenues.
Net sales were $11.339 billion in 2014, up 4% compared to $10.890 billion in 2013. Organic sales and acquisitions (primarily
Infastech) provided increases of 5% and 1% in net sales, respectively, while unfavorable effects of foreign currency translation
resulted in a decrease of 2% in net sales. In the Tools & Storage segment, organic sales increased 6% compared to 2013 as a
result of higher volumes in North America and Europe primarily due to successful new product introductions and an expanded
retail footprint, as well as significant market share gains driven by organic growth initiatives. In the Industrial segment, organic
sales grew 5% relative to 2013 due to strong organic growth in the Engineered Fastening business. In the Security segment, net
sales decreased 2% compared to 2013 due to lower sales volumes in Europe and unfavorable effects of foreign currency
translation, which more than offset modest increases in price.
Gross Profit: The Company reported gross profit of $4.072 billion, or 36.4% of net sales, in 2015 compared to $4.103 billion,
or 36.2% of net sales, in 2014. The increase in the profit rate reflects favorable impacts from volume leverage, price,
productivity, cost actions and commodity deflation, which more than offset significant unfavorable foreign currency
fluctuations.
The Company reported gross profit of $4.103 billion, or 36.2% of net sales, in 2014 compared to $3.904 billion, or 35.8% of
net sales, in 2013. Merger and acquisition-related charges, which reduced gross profit, were $29.5 million in 2013. Excluding
these charges, gross profit was 36.1% of net sales in 2013. The increase in the 2014 profit rate reflects favorable impacts from
sales volume, price, supply chain productivity and cost management, which more than offset negative impacts from foreign
currency fluctuations and lower Security margins caused by field operations inefficiencies and negative installation and
recurring revenue mix.
SG&A Expense: Selling, general and administrative expenses, inclusive of the provision for doubtful accounts (“SG&A”), were
$2.486 billion, or 22.3% of net sales, in 2015 compared to $2.596 billion, or 22.9% of net sales, in 2014. The decrease in the
SG&A rate reflects the positive impacts of volume leverage and cost controls.
SG&A expenses were $2.596 billion, or 22.9% of net sales, in 2014 compared to $2.691 billion, or 24.7% of net sales in 2013.
Within SG&A, merger and acquisition-related compensation costs and integration-related expenses totaled $135.7 million in
2013. Excluding these charges, SG&A was 23.5% of net sales in 2013. The decrease in the SG&A rate was mainly attributable
to increased volumes and the positive impacts from headcount reduction actions and the Company's efforts to significantly
reduce indirect expenses.
Distribution center costs (i.e. warehousing and fulfillment facility and associated labor costs) are classified within SG&A. This
classification may differ from other companies who may report such expenses within cost of sales. Due to diversity in practice,
to the extent the classification of these distribution costs differs from other companies, the Company’s gross margins may not
be comparable. Such distribution costs classified in SG&A amounted to $229.3 million in 2015, $243.2 million in 2014 and
$229.5 million in 2013.
Corporate Overhead: The corporate overhead element of SG&A and gross profit, which is not allocated to the business
segments, amounted to $164.0 million in 2015, $177.4 million in 2014 and $254.0 million in 2013. The decrease in 2015
compared to 2014 reflects the positive impacts from the Company's effort to reduce certain indirect expenses. Corporate
overhead in 2013 included $89.4 million of merger and acquisition-related charges. Corporate overhead, excluding the 2013
merger and acquisition-related charges, represented 1.5%, 1.6%, and 1.5% of net sales in 2015, 2014 and 2013, respectively.