“The success of the Black & Decker merger further validates our Company’s acquisition integration capabilities. Looking forward, we are confident in our ability to adapt and apply our expertise and specialized skills in this area to fuel organic growth initiatives. We expect these efforts to ultimately drive 2-3 points of profitable incremental revenue growth on top of what our core franchise will also yield, bringing us to our long-term target of 4-6% by 2015. 2013 will be another important year as we work toward our mid-decade vision of being a $15 billion diversified industrial company with operating margins greater than 15%, ROCE of 15%, 10 working capital turns and greater than 20% of our revenues generated from emerging markets.”
4Q’12 Segment Results
|($ in M)||4Q' 12 Segment Results|
YOY Sales Growth
Profit Rate Ex-Charges 1
1 Charges primarily pertaining to synergy attainment & facility closures
- In the CDIY segment, net sales increased 8% versus 4Q’11 due to unit volumes (+7%) and acquisitions (+3%), which were offset by currency (-1%) and price (-1%). Organic sales grew 7% in North America due to continued market share gains, a successful holiday season and growth across all sales channels. Organic sales in Europe remained flat due to continued share gains in the U.K. Organic sales expanded at a double-digit rate in the emerging markets due to success in Asia with consumer power tools and outdoor/home products as well as Latin America due to hand tools and cordless outdoor products. Continuing to benefit from new product innovations such as the 18/20V Max, the Professional Power Tool business grew at a low-teens rate. The Consumer Power Tool business grew at a high single-digit rate due to the success of the Matrix, Gyro and Stanley FatMax Power Tools. Excluding charges, overall segment profit was 14.5%, up 180 basis points versus 4Q’11, driven by volume leverage and cost synergies.
- Net sales in Security decreased 2% versus 4Q’11 as declines in volume (-3%) and currency (-1%) more than offset slightly positive price and acquisitions (+2%). For the CSS and MAS businesses, 2% organic growth in North America was muted by organic declines of 5% in Europe. The Convergent Security Solutions (CSS) North America business grew 1% organically due to steady backlog conversion. As mentioned above, CSS Europe declined 5% organically, in line with projections, while the bottom line expanded significantly due to cost synergies and the continued success of the integration of Niscayah.Mechanical Access organic sales were up 3% with mid-single digit growth in the commercial mechanical lock business and low-single digit growth in the automatic door business.The segment profit rate, excluding charges, was 15.5%. Excluding Niscayah and charges, the segment profit rate was 17.3%, lower than the comparable 4Q’11 rate due to negative channel mix within the automatic door business and softness in the healthcare storage market.
- As anticipated, organic sales in the Industrial segment fell 1% due to continued weakness in Europe. Unit volumes fell 1%, currency was down 1% and acquisitions added 4%, bringing total sales growth up 2% for the quarter. Organic sales for the Industrial and Automotive Repair (IAR) platform fell 5% as volume declines in Europe and continued soft government spending in the U.S. more than offset strength in Latin America. Engineered Fastening grew 6% organically, outpacing global light vehicle production, which retracted 1.5%. Organic revenues in Europe rose 3% as continued growth in automotive due to increased platform penetration more than offset weakness in industrial fasteners.Overall Industrial segment profit excluding charges fell 40 bps versus prior year to 16.0% as operating leverage in the Engineered Fastening business was more than offset by the volume declines in Europe within IAR.
President and Chief Operating Officer, James M. Loree, commented, “The achievement of 7.5 working capital turns, a 42% increase from pro forma pre-merger turns in 2009, is a clear illustration of the role the Stanley Fulfillment System plays in the continued success of this Company. SFS provides Stanley Black & Decker with differentiated execution capability, superior customer-facing performance value and compelling value creation potential. This critical business system helped us produce close to $1.1 billion in free cash flow in 2012, an approximate 120% free cash flow conversion rate excluding charges and payments. In fact, our free cash flow has exceeded net income every year since SFS’ inception in 2007.