Stanley Black & Decker
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STANLEY BLACK & DECKER Investor Overview Version: 7.8.13 Cautionary Statements This presentation contains “forward looking statements,” that is, statements that address future, not past events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as: “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These statements are based on assumptions of future events that may not prove accurate. They are also based on our current plans and strategy and such plans and strategy could change in the future. Actual results may differ materially from those projected or implied in any forward- looking statements. Please refer to our most recent SEC filings, including our 2012 Annual Report on Form 10-K, subsequently filed Quarterly Report on Form 10-Q, as well as our other filings with the Securities and Exchange Commission, for detailed information regarding factors that could cause or contribute to actual results differing materially from those expressed or implied in such forward-looking statements. We do not undertake to update our forward-looking statements. This presentation also contains non-GAAP financial information, including CFROI. CFROI is defined as cash flow from operations less capital and software expenditures* divided by year end capital (debt plus equity* less cash). CFROI is considered important as it is a cash based measure of value creation that ties our strategic focus to returns. Reconciliations of other non-GAAP measures are provided in our quarterly press releases announcing financial results, and may be found in the accompanying appendix. We use this information in our internal analysis of results and believe that this information may be informative to investors. *Excluding M&A Charges/Payments Investor Overview 2 Contents SWK Overview Pages 4 – 16 CDIY Pages 17 – 20 Industrial Pages 21 – 27 Security Pages 28 – 31 Emerging Markets Pages 32 – 34 Acquisitions & Integrations Pages 35 – 38 Stanley Fulfillment System Pages 39 – 43 Financial Highlights Pages 44 – 50 Current Results & Outlook Pages 51 – 55 Appendix Pages 56 – 61 Investor Overview 3 A Diversified Global Leader Stanley Black & Decker (NYSE: SWK) 2012 Revenue: ~$10.2B Market Cap: $12.8B Cash Dividend Yield: 2.5% Dividend Paid Consecutively For 136 Years; Increased For 45 Consecutive Years Security $2.4B • Convergent Security • Mechanical Access Security • Healthcare CDIY $5.2B CDIY • Professional Power Tools Industrial • Hand Tools & Storage • Consumer Products Group Industrial $2.6B • Fastening & Accessories • Industrial & Automotive Repair • Engineered Fastening • Infrastructure Building World Class Branded Franchises With Sustainable Strategic Characteristics That Create Exceptional Shareholder Value Market Cap & Dividend Yield Are As Of Market Close 7/5/13 $79.07 Investor Overview 4 Expanding Geographic Reach Nearly Half Of Our Revenues Still Generated In The U.S. Stanley Black & Decker Segments Canada 6% 10% CDIY Security Industrial Australia 2% 10% 4% Japan 2% 15% 7% 13% 19% 16% 48% 44% 27% 19% 44% 45% 52% 27% U.S. Europe Emerging ROW Markets Emerging Markets ~16% Of Revenue With Inclusion Of Infastech Goal Of 20%+ By 2016/2017 Global Emerging Markets Represent A Significant Opportunity For Organic Growth Investor Overview 5 Global Brand Power A Powerful Portfolio Of Well Managed Brands Unveiled Refreshed Stanley Logo June 2013… Gradual Rollout Planned Investor Overview 6 Global Brand Support 125 Billion 36 Million +19% 2 Billion Brand Impressions Website Visits Stanley Awareness Impressions From (+21% vs. 2011) (+27% vs. 2011) Since 2009 Social Media Sites MAJOR LEAGUE BASEBALL PROFESSIONAL BULL RIDING NASCAR • More Attendance Than NBA, NHL & NFL Combined • 40M+ Fans, Most Not MLB Or NASCAR Fans • Our Car Will Race In All 36 Sprint Cup Events In Front • Signage In 40% Of All Games • Fastest Growing Sport Of 80M Fans • 10 Premiere Stadiums With TV Visible Signage • 60 US And Brazil Televised Events In 2012 • Marcos Ambrose: 2nd Career Victory In DEWALT And • Silvano Alves: Back To Back PBR Titles In 2011 & 2012 Stanley Branded Car At Watkins Glen International Race EUROPEAN FOOTBALL PARTNERSHIPS MOTO GP • Worlds Biggest Sport, Watched Weekly By 650M • Official Tool Provider Of Walt Disney World • World’s Premier Motorcycle Racing Series People Around The World • Over 200 Branded Signs In 40 Disney Properties • Airs In Over 200 Countries • 45% Of Brand Impressions In Asia Or Latin America Forbes Ranked Stanley Black & Decker As The 17th Most Reputable American Company In 2013 Investor Overview 7 Strategic Framework Continue Portfolio Transition Momentum • Accelerate Organic Growth • Mix Into Higher Growth, Higher Margin Businesses • Increase Relative Weighting Of Emerging Markets (Goal = 20%+ By 2016/2017) Be Selective And Operate In Markets Where: • Brand Is Meaningful • Value Proposition Is Definable And Sustainable Through Innovation • Global Cost Leadership Is Achievable Pursue Acquisitive Growth On Multiple Fronts: • Opportunistically Consolidate Tool Industry And Strengthen The Core • Build On Existing Growth Platforms (Security And Engineered Fastening) • Develop Infrastructure Growth Platform Accelerate Progress Via Stanley Fulfillment System Focused On Building Long-Term Shareholder Value Investor Overview 8 Exceeding Financial Objectives Strong Performance Against Long-Term Financial Objectives… Results 2009 – 2013E 22% CAGR • ~10-12% Total Avg. Org. Growth Sales Growth (1%) Including 2009 • 4-6% Organic Last 3 Years 4% Excluding 2009 SWK 4.3% • Mid-Teens % EPS Growth 13% CAGR Peers 4.9% GDP 3.3% Financial Performance • FCF ≥ Net Income >125% Avg. Conversion • CFROI In 12-15% Range Approaching 11% In 2012 Up 53% • Continued Growth Dividend Increased Every Year S&P: A Credit Rating • Strong Investment Grade Moody’s: Baa1 Fitch: A- …Except For Organic Growth, Which Is Now The Focus Investor Overview 9 Stock Price Performance vs. S&P 500 SWK Has Outperformed The Market Over The Long Term… 1 Year Price Performance 13.4% 3 Year Price Performance 43.6% 9.4% 27.9% 5 Year Price Performance 52.6% 10 Year Price Performance 113.9% S&P 500 -2.9% 62.1% SWK Charted To 12/31/12 …Plus, Strong Dividend Growth Has Enhanced Total Return Investor Overview 10 2016/2017 Vision Continued Journey To Building A Global Industrial Leader Revenues: $15B 20%+ From Emerging Markets 10 Working Capital Turns 15%+ Operating Margin 12-15% CFROI Security $3.5B – $4B Tools Engineered Fastening >$2B $7B – $8B Infrastructure $1B – $2B Building World Class Branded Franchises With Sustainable Strategic Characteristics That Create Exceptional Shareholder Value Investor Overview 11 Road Map To 2016/2017 Revenue Target Achieving $15B Revenue Target By 2016/2017 Will Require Growth From M&A Mid-Decade Sales Of $15.0B SWK Market Opportunity Acquired Revenue Necessary $1.6B $35B Tools To Reach Target $2.3B $35B Security $13.4B $12.7B $11.0B 5% Organic Growth $100B Industrial 20132013 Sales Sales 2016 2017 By Segment Portion of Cumulative FCF Spent On M&A To Reach Target(1) Cumulative FCF(1) / Portion Spent On M&A(2) $3.6B / 63% $5.0B / 33% (1) Cumulative From 2014 Through Respective Year. (2) Assumes Revenue Acquired At 1.0x Multiple. Investor Overview 12 Average Three Year Organic Growth Versus Peers & Economy Organic Growth Has Been In Middle Of The Pack… 12.3% 8.9% 7.1% 7.2% 6.5% 6.0% 5.0% Peer Average: 4.9% 4.3% 3.2% 2.7% 2.9% 2.9% 1.9% 1.0% 1.2% TYC MAS SPW UTX ASSA NWL SI SWK IR HON ITW DHR SNA ETN DOV …And Not Good Enough To Generate Outperformance Peer group: Assa Abloy, Danaher, Dover, Eaton, Honeywell, Illinois Tool Works, Ingersoll Rand, Masco, Newell Rubbermaid, Siemens, Snap-on, SPX Corp., Tyco, United Technologies Investor Overview 13 Growth Rate Sources: Analyst Research, Company Filings / Global GDP Source: Bloomberg, CIA Estimate Revving Up Organic Growth A Major Initiative Is Well Underway Which Yields 3 Pts Of Incremental Growth… Emerging Markets $350M Business Units For MPP Hand Tools / Power Tools / Commercial Hardware Advanced Industrial Solutions $100M “Smart” Tools & Storage Vertical Penetration Yields 3 Pts $150M Incremental Healthcare / Security Revenue US Government Growth $100M (Annualized) Healthcare / Security / Industrial Offshore Oil & Gas Pipeline Services $100M Spool Bases / Coating Tech. / Inspection Incremental Impact Continuing To Capture BDK Integration Revenue Synergies $50M ‘13 ’14 ‘15 Total: $850M +1pt +2pt +3pt …Drives $200M+ OM & Enables Strong Performance Against Target Investor Overview 14 Long-Term Capital Allocation Strategy Maintain A Hybrid Model… Long-Term Capital Allocation Objectives • Target Strong Investment Grade Credit Rating ‒ Current Adjusted Debt/Capital Ratio: 30% ‒ Current Debt/EBITDA: 2.3x • Invest Approximately 50% In Acquisitions Dividends & Acquisitions Share Repurchases • Return Approximately 50% To Shareholders In The Form Of Dividends And Share Repurchases • Since 2003, SWK Has Returned 56% Of Its FCF (GAAP) & 45% Of Normalized FCF To Shareholders • Committed To Continued Dividend Growth • These Allocations Do Not Imply A Rigid Annual Formula …A Growth Company That Returns Approximately 50% Of Its Free Cash Flow To Shareholders Investor Overview 15 Compelling Acquisitive Growth Opportunities Addressable Growth Five Acquisitive Growth Areas Market Size Characteristics Tool Consolidation