2013 Annual Report
Total Page:16
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/$%'%&2 3$04%*#,+" 2$0(*5 2013 #&&6#+ $"30$* !"#$%&$"'%"(.)*#&+"!,+#-.#&//"-."$.-01 As we build on our commitment to sustainability, FRONT COVER: Upper Left: The D(WALT Cordless Framing we have continued with a smaller page count Nailer frees professionals from gas combustion and can drive 3.5” or 90mm framing nails all day on a single for this year’s Annual Report, a tradition we charge. Upper Right: With the opening of a new power started in "##$. tools manufacturing plant in the USA, representing the first significant investment in production and delivery of power Visit yearinreview.stanleyblackanddecker.com tools in the U.S. since the original D(WALT launch in 1992, to view videos and pictures that bring exciting D(WALT tools celebrate a living legacy of American pride— aspects of the Stanley Black & Decker story born in the USA and built in the USA. Lower Left: STANLEY Engineered Fastening’s T Series—a next generation stud to life, to explore our financials, review our welding system—delivers improved cycle time, advanced sustainable practices, and to read about our networking capability and increased flexibility. Lower businesses, our brands and our plans for growth. Right: The STANLEY EL Series Electronic Lock is an afford- able option for smaller businesses that need to limit and Stanley Black & Decker was named to the Carbon control access both internally and externally. INSIDE Disclosure Project (CDP) S&P 500 Climate FRONT COVER: Top: The STANLEY FATMAX AntiVibe "-Piece Performance Leadership Index (CPLI) for the Framing Hammer hits like a hammer that is 30% heavier while reducing vibrations for comfort and control. Bottom: 1st time in 2013 within the Industrials Sector. Automotive Brake Line Clips from STANLEY Engineered The CDP allows our stakeholders to assess Fastening are an integral part of cars and trucks around our corporate preparedness for changing the world. INSIDE BACK COVER: Top: The revolutionary market demands and emissions regulations. EyeSwipe-Nano TS system verifies identities on the fly. Bottom: BLACK+DECKER Steam Mops deliver a deep Inclusion on the CPLI acknowledges our ability down, hassle-free clean that kills 99.9% of germs. BACK to measure, verify, manage and reduce our COVER: Upper Left: STANLEY Oil & Gas’s M-400 Welding energy demand and resultant carbon footprint. System is a revolutionary, lightweight, multi-process, multi-power-source, on-board wire feed, single-torch Additionally, Stanley Black & Decker remains on pipe welding system. Upper Right: STANLEY Healthcare’s the 2013 North America Dow Jones Sustainability Patient Flow solution uses Wi-Fi enabled Real-Time Location System (RTLS) technology to monitor the status Index for the third year in a row, in recognition and location of patients at all times. Lower Left: The HP of our economic, environmental and social TWIN8 revolutionizes the way hydraulic tools are used— performance. Stanley Black & Decker was powering two hydraulic power tools at once. Lower Right: recast to the Machinery and Electrical STANLEY White Series Measuring Tape was designed to meet the demands of users across Asia, and has been met Equipment sector for the first time in 2013, with enthusiastic customer and end-user response. a considerably larger sector than Durable Household Goods, our previous classification. In 2013 Stanley Black & Decker continued the application of Stanley Fulfillment System (SFS) principles and delivered year-over- year improvements in environmental waste reduction, energy conservation and water reduction. Our global manufacturing and distribution centers reported: • %&% decrease in energy consumption intensity • %'% decrease in CO2e emission intensity • Over "#% decline in water consumption intensity • Over %'% decrease in waste generation intensity Review these accomplishments and all our sustainability results at www. stanleyblackanddecker.com/company/ sustainability. Letter to Shareholders left John F. Lundgren Chairman & Chief Executive Officer right James M. Loree President & Chief Operating Officer Our mission remains to continue to invest in building world-class franchises with sustainable strategic characteristics that create exceptional shareholder value, a model that has proven highly successful for us over the course of the last decade. In 2013 Stanley Black & Decker faced !"#$ Summary of Results a number of challenges, testing our • Total revenues increased 8% to ability to generate financial returns at $11.0 billion, with organic growth of 3% our historical levels. The success of our organic growth initiatives, solid • Earnings per share was $4.98* growth across our core CDIY and IAR compared to $4.76* in 2012 tools businesses, strong performance • Free cash flow totaled $854* million within Stanley Engineered Fastening and the dividend was increased during and Oil & Gas, and excellent progress the year integrating Infastech were overshadowed by weak operating performance within • Working capital turns increased to our Security segment and significant 8.0 from 7.6, as the impact of the emerging markets currency headwinds. Stanley Fulfillment System continued to As a result, we have adopted a series drive gains in operating efficiencies of actions designed to address these • During the year we invested approx- challenges head-on, and enter 2014 imately $900 million in acquisitions with a clear set of priorities to increase most notably relating to Infastech operating efficiencies, drive profitable and GQ organic growth, improve our cash flow return on investment (CFROI) and increase • Our Security segment underperformed value for shareholders through an against both our expectations in 2013 enhanced capital return program. and the business’ potential; improving Longer-term, our mission remains to our Security segment is one of our continue to invest in building world-class key near-term operational priorities as franchises with sustainable strategic we move into 2014 and beyond characteristics that create exceptional * Excluding charges and payments shareholder value, a model that has proven highly successful for us over the course of the last decade. !" Lessons Learned – Security as the replacement and upgrade of the majority of the sales force during the past As we pride ourselves on continuous two years. improvement, we looked at the challenges Revenue Growth in "$!# faced in 2013 as an opportunity to better In North America, the majority of the 2013 prepare the Company for the future. The operational performance issues centered performance of our Security segment fell around taking on too many changes at significantly below our expectations in once, primarily in our electronics and both Europe and North America in 2013. commercial locks units. The changes we It has been and will continue to be a implemented in these businesses resulted priority for us to learn from what went in a temporary setback to the overall % +Total Revenue$ Growth wrong and lay a new foundation for sustain- performance of North American Security. able, long-term success in Security. However, we firmly believe that our North American Security management team is In Europe, we were impacted by the oper- on top of the issues, as evidenced by the ational underperformance of the legacy steady increase in operating margins from Niscayah business, compounded by 14% in the first half of 2013 to 16% in the a weak macro-economic backdrop. We second half of the year. We fully expect worked diligently to implement important operating margins in our North American remedies during the year which centered Security business to continue to trend on three primary areas: towards their more historical high-teens !. Centralized Operating Model—we levels as we move through 2014. are restructuring the operating model We are bringing all the necessary of the legacy Niscayah business resources to bear to improve the Security so that we have full operational control business and are confident in our ability of branch activity at the country to succeed. Stanley Security has one level and can focus efforts on driving of the best global footprints in the world, productivity, field efficiency, and margin is the only integrator with scale in both improvement actions. mechanical and electronic security, and ". Talent—we upgraded under- carries a high margin recurring revenue performing management in several key model with low capital intensity. We positions at both the headquarters believe that Security is a valuable part of and country levels. our portfolio which will generate returns to shareholders consistent with our #. Sales Orientation—“Hunters” versus long-term financial objectives, ultimately “Farmers”—the Niscayah organization delivering organic growth and above line was overly dependent on “farming” average operating margins. referrals from their former owner, which necessitated a culture change as well !# Stanley Black & Decker #!"$ Annual Report Near Term Focus – Operational !"#$ Business Highlights Efficiency and Capital Allocation By continuing to invest for the long-term, "$!# Global Presence In addition to tackling the problems within we were able to realize many successes in %% OF &'() REVENUES* Security, we remain steadfast in our 2013. Highlights and wins include: commitment to increase both near- and • Integrating the Infastech acquisition D long-term returns for our shareholders. to position the Stanley Engineered To ensure that we achieve our targeted Fastening business to exceed all C operating leverage, we are executing a financial commitments relating to this A cost reduction program,