2016 Annual Report
Assignment 2 on the background of Stanley Black & Decker Company, its corporate objectives, capital structure, dividend policy, and investment appraisal.
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Added on 2022-11-24
About This Document
The 2016 Annual Report of Stanley Black & Decker showcases their achievements in innovation, digital transformation, social responsibility, and high performance. The report highlights their financial results, organic growth, margin expansion, and free cash flow generation. It also outlines their vision to become a great diversified industrial company and double their revenue to $22 billion by 2022.
2016 Annual Report
Assignment 2 on the background of Stanley Black & Decker Company, its corporate objectives, capital structure, dividend policy, and investment appraisal.
Added on 2022-11-24
ShareRelated Documents
4
BUILDING ON
INNOVATION
AND DIGITAL
TRANSFORMATION
Delivering
breakthrough and
trusted solutions
that power growth
every day, while
becoming a digital
industrial powerhouse
at the forefront of
how work gets done
BUILDING ON
SOCIAL RESPONSIBILITY
Being a force for
positive, needed
change everywhere
we work and live
BUILDING ON
HIGH PERFORMANCE
Continually raising
the bar as we target
outperformance
BUILDING ON
INNOVATION
AND DIGITAL
TRANSFORMATION
Delivering
breakthrough and
trusted solutions
that power growth
every day, while
becoming a digital
industrial powerhouse
at the forefront of
how work gets done
BUILDING ON
SOCIAL RESPONSIBILITY
Being a force for
positive, needed
change everywhere
we work and live
BUILDING ON
HIGH PERFORMANCE
Continually raising
the bar as we target
outperformance
1STANLEY BLACK & DECKER 2016 ANNUAL REPORT
It is an honor and a privilege to have been named
Stanley Black & Decker’s Chief Executive Officer
as of last August. I am both excited and humbled by
the opportunity to lead this Company, recognizing
the true depth of the responsibility of being just the
13th leader in our long and storied history.
DEAR
SHAREHOLDERS
VISIT THE 2016 YEAR
IN REVIEW WEBSITE
Visit 2016yearinreview.
stanleyblackanddecker.com
to view stories and pictures
that bring exciting aspects
of the Stanley Black & Decker
story to life, explore our
financials, review our
sustainable practices, and
read about our businesses, our
brands and our plans for growth.
I have dedicated the last 18 years of my life to serving this organization, first as
Chief Financial Officer for a decade, and most recently as Chief Operating Officer
for more than seven years. From a $2 billion market cap company with a strong
brand and a modest portfolio of hand tools, hinges, hydraulic tools, entry doors and
automatic doors, we have evolved into a $19 billion large cap, diversified industrial
with iconic brands, the world’s largest tools and storage company, the world’s
second largest commercial electronic security services provider and a leading
provider of engineered fastening solutions. And importantly, we have generated total
shareholder return (TSR) exceeding 400% over this period, well above the S&P 500
and a number of elite industrials.
In 2018, we will be celebrating Stanley Black & Decker’s 175th anniversary.
Fewer than 50 U.S. publicly traded companies have achieved this critical milestone,
and it is a testament to the Company’s openness and willingness to adapt to
changing circumstances over the years. It is clear that in today’s dynamic
world, that same resilience and agility is a prerequisite to success and, increasingly,
corporate longevity.
We have built a winning organization that insists upon high performance in growth,
profitability, asset efficiency and cash flow. At the same time, we have demonstrated
a commitment to grow and develop our people, provide for their health and safety,
and foster an inclusive and respectful work environment. We conduct ourselves
responsibly, with integrity and sustainability at the heart of everything we do. We are
bold and agile, yet thoughtful and disciplined. This approach is what has driven our
history, our results and our evolution through the years, and will be what continues
to make us successful in the future.
STRONG 2016 RESULTS
In 2016, the Stanley Black & Decker team once again distinguished itself with strong
progress against our long-term strategic and financial objectives. It was a year
characterized by breakthrough and core innovation, transformation and financial
success. The Company performed well in terms of organic growth, margin expansion
JAMES M. LOREE
President & Chief Executive Officer
It is an honor and a privilege to have been named
Stanley Black & Decker’s Chief Executive Officer
as of last August. I am both excited and humbled by
the opportunity to lead this Company, recognizing
the true depth of the responsibility of being just the
13th leader in our long and storied history.
DEAR
SHAREHOLDERS
VISIT THE 2016 YEAR
IN REVIEW WEBSITE
Visit 2016yearinreview.
stanleyblackanddecker.com
to view stories and pictures
that bring exciting aspects
of the Stanley Black & Decker
story to life, explore our
financials, review our
sustainable practices, and
read about our businesses, our
brands and our plans for growth.
I have dedicated the last 18 years of my life to serving this organization, first as
Chief Financial Officer for a decade, and most recently as Chief Operating Officer
for more than seven years. From a $2 billion market cap company with a strong
brand and a modest portfolio of hand tools, hinges, hydraulic tools, entry doors and
automatic doors, we have evolved into a $19 billion large cap, diversified industrial
with iconic brands, the world’s largest tools and storage company, the world’s
second largest commercial electronic security services provider and a leading
provider of engineered fastening solutions. And importantly, we have generated total
shareholder return (TSR) exceeding 400% over this period, well above the S&P 500
and a number of elite industrials.
In 2018, we will be celebrating Stanley Black & Decker’s 175th anniversary.
Fewer than 50 U.S. publicly traded companies have achieved this critical milestone,
and it is a testament to the Company’s openness and willingness to adapt to
changing circumstances over the years. It is clear that in today’s dynamic
world, that same resilience and agility is a prerequisite to success and, increasingly,
corporate longevity.
We have built a winning organization that insists upon high performance in growth,
profitability, asset efficiency and cash flow. At the same time, we have demonstrated
a commitment to grow and develop our people, provide for their health and safety,
and foster an inclusive and respectful work environment. We conduct ourselves
responsibly, with integrity and sustainability at the heart of everything we do. We are
bold and agile, yet thoughtful and disciplined. This approach is what has driven our
history, our results and our evolution through the years, and will be what continues
to make us successful in the future.
STRONG 2016 RESULTS
In 2016, the Stanley Black & Decker team once again distinguished itself with strong
progress against our long-term strategic and financial objectives. It was a year
characterized by breakthrough and core innovation, transformation and financial
success. The Company performed well in terms of organic growth, margin expansion
JAMES M. LOREE
President & Chief Executive Officer
2
and free cash flow generation. As always, our entire organization remained focused
on generating value for our shareholders, delivering 10% TSR in 2016. We also
continued to build upon our growth culture, driven by innovation, digital and
commercial excellence, a passion to exceed our customers’ expectations every day,
and elevating our already strong commitment to social responsibility.
Our 2016 financial results included top-quartile organic growth of 4%, along with
record earnings per share, operating margin rate and working capital turns. In
addition, 2016 highlights included:
• Launching the revolutionary DEWALT FlexVolt battery system, which contributed
approximately $100 million of revenues in just four months
• Announcing the $1.95 billion acquisition of Newell Tools in October 2016—our
first major acquisition since 2013
• Completing our Security portfolio assessment in December 2016, resulting in our
decision to retain the commercial electronic and automatic doors portions of the
Security business and sell the majority of our Mechanical Security businesses for
$725 million
These meaningful successes in 2016, in addition to our agreement to purchase the
Craftsman brand from Sears Holdings announced in January 2017, provide for a very
strong setup for 2017.
Solid organic growth was again a hallmark of our results, with solid increases in
several businesses. Tools & Storage generated an impressive 7% organic growth
rate, with each Tools & Storage region demonstrating increases, including 7% in
North America, 8% in Europe and 5% in the Emerging Markets.
This growth was driven by the successful launch of FlexVolt and other innovative
new products, investments in e-commerce and other commercial excellence
initiatives, as well as the continued success of our mid-price-point product launches
in the Emerging Markets, which have now expanded beyond corded to include
cordless power tools.
Importantly, our Security business posted 1% organic growth, its first year of
organic growth since 2012, driven by improved field execution and commercial wins.
Industrial declined organically reflecting pressured industrial end markets and
challenges with one major electronics customer.
Our operating margin rate rose to 14.4%, up 20 basis points over 2015. We
demonstrated the ability to deliver meaningful operating leverage through disciplined
price management, robust productivity and cost control in the face of significant
foreign currency headwinds, while concurrently investing in growth. Tools & Storage
reported its third consecutive year of record operating margin rate, ending the year
up 60 basis points at 17.0%. Security’s margin increased 140 basis points to 12.8%,
reflecting improved field productivity, SG&A cost actions and benefits from a more
disciplined assessment of new commercial opportunities.
We maintained our balanced capital allocation approach, increasing Stanley Black &
Decker’s annual dividend for the 49th consecutive year, opportunistically repurchasing
approximately $350 million of shares and announcing the acquisition of Newell Tools
and the sale of the majority of our Mechanical Security businesses. Our cash flow
return on investment (CFROI) improved significantly, as we increased this important
shareholder return metric by 320 basis points to 16.1%.
We believe that our industry-leading global franchises, world-class brands and powerful
SFS 2.0 operating system position the Company for sustainable above-market
organic growth, margin expansion and free cash flow generation, and offer the
potential to create continued exceptional shareholder value over the long term.
2016 SUMMARY
OF RESULTS
TOTAL REVENUES OF
$11.4 BILLION
LED BY 4% ORGANIC
GROWTH
OPERATING MARGIN RATE
UP 20 BASIS POINTS
TO 14.4%
OVERCOMING
$155 MILLION OF FOREIGN
CURRENCY HEADWINDS
EARNINGS PER SHARE
UP 10% TO A
RECORD $6.51
FREE CASH FLOW
CONVERSION
OF 118%
ENABLING OUR
49TH CONSECUTIVE
ANNUAL DIVIDEND
INCREASE
BEST IN INDUSTRY
10.6 WORKING
CAPITAL TURNS
UP 1.4 TURNS
VERSUS PRIOR YEAR
CFROI OF 16.1%
UP 320 BASIS POINTS
VERSUS 2015
... ALL POWERED BY OUR
STANLEY FULFILLMENT
SYSTEM (SFS) 2.0
and free cash flow generation. As always, our entire organization remained focused
on generating value for our shareholders, delivering 10% TSR in 2016. We also
continued to build upon our growth culture, driven by innovation, digital and
commercial excellence, a passion to exceed our customers’ expectations every day,
and elevating our already strong commitment to social responsibility.
Our 2016 financial results included top-quartile organic growth of 4%, along with
record earnings per share, operating margin rate and working capital turns. In
addition, 2016 highlights included:
• Launching the revolutionary DEWALT FlexVolt battery system, which contributed
approximately $100 million of revenues in just four months
• Announcing the $1.95 billion acquisition of Newell Tools in October 2016—our
first major acquisition since 2013
• Completing our Security portfolio assessment in December 2016, resulting in our
decision to retain the commercial electronic and automatic doors portions of the
Security business and sell the majority of our Mechanical Security businesses for
$725 million
These meaningful successes in 2016, in addition to our agreement to purchase the
Craftsman brand from Sears Holdings announced in January 2017, provide for a very
strong setup for 2017.
Solid organic growth was again a hallmark of our results, with solid increases in
several businesses. Tools & Storage generated an impressive 7% organic growth
rate, with each Tools & Storage region demonstrating increases, including 7% in
North America, 8% in Europe and 5% in the Emerging Markets.
This growth was driven by the successful launch of FlexVolt and other innovative
new products, investments in e-commerce and other commercial excellence
initiatives, as well as the continued success of our mid-price-point product launches
in the Emerging Markets, which have now expanded beyond corded to include
cordless power tools.
Importantly, our Security business posted 1% organic growth, its first year of
organic growth since 2012, driven by improved field execution and commercial wins.
Industrial declined organically reflecting pressured industrial end markets and
challenges with one major electronics customer.
Our operating margin rate rose to 14.4%, up 20 basis points over 2015. We
demonstrated the ability to deliver meaningful operating leverage through disciplined
price management, robust productivity and cost control in the face of significant
foreign currency headwinds, while concurrently investing in growth. Tools & Storage
reported its third consecutive year of record operating margin rate, ending the year
up 60 basis points at 17.0%. Security’s margin increased 140 basis points to 12.8%,
reflecting improved field productivity, SG&A cost actions and benefits from a more
disciplined assessment of new commercial opportunities.
We maintained our balanced capital allocation approach, increasing Stanley Black &
Decker’s annual dividend for the 49th consecutive year, opportunistically repurchasing
approximately $350 million of shares and announcing the acquisition of Newell Tools
and the sale of the majority of our Mechanical Security businesses. Our cash flow
return on investment (CFROI) improved significantly, as we increased this important
shareholder return metric by 320 basis points to 16.1%.
We believe that our industry-leading global franchises, world-class brands and powerful
SFS 2.0 operating system position the Company for sustainable above-market
organic growth, margin expansion and free cash flow generation, and offer the
potential to create continued exceptional shareholder value over the long term.
2016 SUMMARY
OF RESULTS
TOTAL REVENUES OF
$11.4 BILLION
LED BY 4% ORGANIC
GROWTH
OPERATING MARGIN RATE
UP 20 BASIS POINTS
TO 14.4%
OVERCOMING
$155 MILLION OF FOREIGN
CURRENCY HEADWINDS
EARNINGS PER SHARE
UP 10% TO A
RECORD $6.51
FREE CASH FLOW
CONVERSION
OF 118%
ENABLING OUR
49TH CONSECUTIVE
ANNUAL DIVIDEND
INCREASE
BEST IN INDUSTRY
10.6 WORKING
CAPITAL TURNS
UP 1.4 TURNS
VERSUS PRIOR YEAR
CFROI OF 16.1%
UP 320 BASIS POINTS
VERSUS 2015
... ALL POWERED BY OUR
STANLEY FULFILLMENT
SYSTEM (SFS) 2.0
22/22 VISION
We have set a bold vision for the future, continuing on our path to become a great
diversified industrial and doubling the size of the Company to $22 billion in revenue by
2022. Our plan contemplates generating 4%–6% annual organic revenue growth and
$5 billion to $9 billion of revenue from acquisitions over this time horizon across our
business segments, while aspiring to deliver top-quartile total shareholder return.
One of the most important roles of the CEO is to ensure the organization’s long-term
sustainability and success—no small challenge in today’s environment of socio-
political instability, rapid digital disruption and changing customer expectations.
To evolve and stay ahead of the curve and reach our aggressive performance goals,
we must essentially disrupt ourselves before others do it to us.
To successfully operate in this environment and add richness and texture to our
vision of $22 billion by 2022, we are focused on three key strategic themes:
Becoming Recognized as One of the World’s Most Innovative Companies
In this environment of rapid innovation and digital disruption, nurturing a culture of
innovation and digital transformation is paramount. Our enhanced operating system,
SFS 2.0, is at the heart of this objective.
Taking a playbook from leading innovators, we are supplementing our traditional
efforts and focus on core innovation with separate Breakthrough Innovation and
“Special Forces” teams around the organization. This is enabling us to innovate
forward-looking, future products without the traditional day-to-day pressures
historically faced by teams working in a results-driven, performance-oriented culture.
To help facilitate this work, we have set up “maker” spaces in various locations and
established relationships with leading universities and venture companies.
SFS 2.0, our expanded operating system launched in 2015, powers our value creation model,
driving outsized organic growth, margin expansion, and asset and cost efficiency across our enterprise.
2.0 has already meaningfully impacted our results, and the momentum continues to build.
Visit 2016yearinreview.stanleyblackanddecker.com/performance to learn more.
SFS 2.0 — BEST-IN-CLASS OPERATING SYSTEM GETTING BETTER
Commercial
Excellence
Breakthrough
Innovation
Functional
Transformation
Digital
Excellence
Core SFS
SFS
2.0
C o m
m
o
n
P l a
t f
o
r
m
s
C
o
m
m
o
n
P
l
a
t
f
o
r
m
s
Operational
Lean
Complexity
Reduction
Order-to-Cash
Excellence
Sales &
Operations
Planning
Global
Supply
Management
Breakthrough
Customer
Value
CON
TR
O
L
I
M
P
R
O
V
E
E
X
P
A
N
D
3 STANLEY BLACK & DECKER 2016 ANNUAL REPORT
OUR 2022
GO FORWARD VISION
DOUBLE REVENUES TO
$22 BILLION
BUILD UPON
WORLD-CLASS
FRANCHISES
DELIVER TOP-QUARTILE
TOTAL
SHAREHOLDER
RETURN
We have set a bold vision for the future, continuing on our path to become a great
diversified industrial and doubling the size of the Company to $22 billion in revenue by
2022. Our plan contemplates generating 4%–6% annual organic revenue growth and
$5 billion to $9 billion of revenue from acquisitions over this time horizon across our
business segments, while aspiring to deliver top-quartile total shareholder return.
One of the most important roles of the CEO is to ensure the organization’s long-term
sustainability and success—no small challenge in today’s environment of socio-
political instability, rapid digital disruption and changing customer expectations.
To evolve and stay ahead of the curve and reach our aggressive performance goals,
we must essentially disrupt ourselves before others do it to us.
To successfully operate in this environment and add richness and texture to our
vision of $22 billion by 2022, we are focused on three key strategic themes:
Becoming Recognized as One of the World’s Most Innovative Companies
In this environment of rapid innovation and digital disruption, nurturing a culture of
innovation and digital transformation is paramount. Our enhanced operating system,
SFS 2.0, is at the heart of this objective.
Taking a playbook from leading innovators, we are supplementing our traditional
efforts and focus on core innovation with separate Breakthrough Innovation and
“Special Forces” teams around the organization. This is enabling us to innovate
forward-looking, future products without the traditional day-to-day pressures
historically faced by teams working in a results-driven, performance-oriented culture.
To help facilitate this work, we have set up “maker” spaces in various locations and
established relationships with leading universities and venture companies.
SFS 2.0, our expanded operating system launched in 2015, powers our value creation model,
driving outsized organic growth, margin expansion, and asset and cost efficiency across our enterprise.
2.0 has already meaningfully impacted our results, and the momentum continues to build.
Visit 2016yearinreview.stanleyblackanddecker.com/performance to learn more.
SFS 2.0 — BEST-IN-CLASS OPERATING SYSTEM GETTING BETTER
Commercial
Excellence
Breakthrough
Innovation
Functional
Transformation
Digital
Excellence
Core SFS
SFS
2.0
C o m
m
o
n
P l a
t f
o
r
m
s
C
o
m
m
o
n
P
l
a
t
f
o
r
m
s
Operational
Lean
Complexity
Reduction
Order-to-Cash
Excellence
Sales &
Operations
Planning
Global
Supply
Management
Breakthrough
Customer
Value
CON
TR
O
L
I
M
P
R
O
V
E
E
X
P
A
N
D
3 STANLEY BLACK & DECKER 2016 ANNUAL REPORT
OUR 2022
GO FORWARD VISION
DOUBLE REVENUES TO
$22 BILLION
BUILD UPON
WORLD-CLASS
FRANCHISES
DELIVER TOP-QUARTILE
TOTAL
SHAREHOLDER
RETURN
4
DEWALT FlexVolt is the first result of our Breakthrough Innovation initiative. FlexVolt
represents the most extensive global new product launch in D EWALT’s history
and it is changing the professional jobsite by eliminating the need for corded tools.
Powered by a unique battery system, products as powerful as a table saw, for
example, no longer require cords, which is also an essential safety improvement.
Feedback from our retail partners and end users has been extremely positive, and
we significantly surpassed our initial sales expectations in 2016. See more on
FlexVolt at 2016yearinreview.stanleyblackanddecker.com/innovation.html.
To rapidly enable a digital transformation across the Company we formed a Digital
Accelerator team in Atlanta during 2015, which will double to about 100 employees
by the end of this year. This team is comprised of world-class technology talent from
leading universities and companies, with expertise in Internet of Things, cloud,
advanced analytics, social media, mobile applications, search engine optimization,
and digital products, among others. The team is infusing digital capabilities into
our products, processes and business models across the Company. They are also
exploring future technologies that can help drive business growth and protect our
franchises from disruption. DIYZ is a great example of the type of work that is being
produced by the Accelerator. It is a mobile app for your smartphone that helps
DIYers tackle their home improvement projects. With step-by-step instructions,
DIY videos, tool suggestions, and the option to video chat with a pro advisor, it
makes home improvement easy. Introduced just nine months ago, DIYZ has already
been downloaded over 450,000 times and was featured in the Apple Store “New
Apps We Love” section.
Included as part of our digital initiative is a strong commitment to embrace Industry
4.0. We recently selected two of our manufacturing facilities to become “lighthouse”
factories where we will incorporate digital capabilities as well as other elements of
Industry 4.0 to build truly “Smart Factories.” These facilities will incorporate the
World-Class Brands
Attractive Growth Platforms
Scalable, Defensible
Franchises
Differentiable Through
Innovation
World-Class Branded Franchises With Sustainable
Strategic Characteristics That Create Exceptional Shareholder Value
LONG-TERM FINANCIAL
OBJECTIVES
• 4%–6% Organic Growth
• 10%–12% Total Revenue Growth
• 10%–12% EPS Growth
(Including Acquisitions)
• FCF ≥ Net Income
• 10+ Working Capital Turns
~1/2 ~1/2
M&A RETURN CASH TO
SHAREHOLDERS
INVESTOR-FRIENDLY CAPITAL ALLOCATION
STRONG, INNOVATION-DRIVEN BUSINESSES
IN DIVERSE, GLOBAL MARKETS
• OUTSIZED, CAPITAL-EFFICIENT ORGANIC GROWTH
• ATTRACTIVE, EXPANDABLE OPERATING MARGIN RATE
• OUTSTANDING FREE CASH FLOW CONVERSION
POWERED BY:
STANLEY BLACK & DECKER VALUE CREATION MODEL
FOCUSING ON
THREE KEY STRATEGIC
IMPERATIVES
Becoming recognized as
one of the world’s most
INNOVATIVE COMPANIES
Continuing to deliver
top-quartile
PERFORMANCE
Elevating our commitment
to corporate social
RESPONSIBILITY
DEWALT FlexVolt is the first result of our Breakthrough Innovation initiative. FlexVolt
represents the most extensive global new product launch in D EWALT’s history
and it is changing the professional jobsite by eliminating the need for corded tools.
Powered by a unique battery system, products as powerful as a table saw, for
example, no longer require cords, which is also an essential safety improvement.
Feedback from our retail partners and end users has been extremely positive, and
we significantly surpassed our initial sales expectations in 2016. See more on
FlexVolt at 2016yearinreview.stanleyblackanddecker.com/innovation.html.
To rapidly enable a digital transformation across the Company we formed a Digital
Accelerator team in Atlanta during 2015, which will double to about 100 employees
by the end of this year. This team is comprised of world-class technology talent from
leading universities and companies, with expertise in Internet of Things, cloud,
advanced analytics, social media, mobile applications, search engine optimization,
and digital products, among others. The team is infusing digital capabilities into
our products, processes and business models across the Company. They are also
exploring future technologies that can help drive business growth and protect our
franchises from disruption. DIYZ is a great example of the type of work that is being
produced by the Accelerator. It is a mobile app for your smartphone that helps
DIYers tackle their home improvement projects. With step-by-step instructions,
DIY videos, tool suggestions, and the option to video chat with a pro advisor, it
makes home improvement easy. Introduced just nine months ago, DIYZ has already
been downloaded over 450,000 times and was featured in the Apple Store “New
Apps We Love” section.
Included as part of our digital initiative is a strong commitment to embrace Industry
4.0. We recently selected two of our manufacturing facilities to become “lighthouse”
factories where we will incorporate digital capabilities as well as other elements of
Industry 4.0 to build truly “Smart Factories.” These facilities will incorporate the
World-Class Brands
Attractive Growth Platforms
Scalable, Defensible
Franchises
Differentiable Through
Innovation
World-Class Branded Franchises With Sustainable
Strategic Characteristics That Create Exceptional Shareholder Value
LONG-TERM FINANCIAL
OBJECTIVES
• 4%–6% Organic Growth
• 10%–12% Total Revenue Growth
• 10%–12% EPS Growth
(Including Acquisitions)
• FCF ≥ Net Income
• 10+ Working Capital Turns
~1/2 ~1/2
M&A RETURN CASH TO
SHAREHOLDERS
INVESTOR-FRIENDLY CAPITAL ALLOCATION
STRONG, INNOVATION-DRIVEN BUSINESSES
IN DIVERSE, GLOBAL MARKETS
• OUTSIZED, CAPITAL-EFFICIENT ORGANIC GROWTH
• ATTRACTIVE, EXPANDABLE OPERATING MARGIN RATE
• OUTSTANDING FREE CASH FLOW CONVERSION
POWERED BY:
STANLEY BLACK & DECKER VALUE CREATION MODEL
FOCUSING ON
THREE KEY STRATEGIC
IMPERATIVES
Becoming recognized as
one of the world’s most
INNOVATIVE COMPANIES
Continuing to deliver
top-quartile
PERFORMANCE
Elevating our commitment
to corporate social
RESPONSIBILITY
5STANLEY BLACK & DECKER 2016 ANNUAL REPORT
latest in robotics, manufacturing execution systems (MES), new machines, 3-D
printing, innovation labs and maker spaces to drive the next wave of flexibility, cost
efficiency and quality improvement.
We are on a path to become known as one of the world’s great innovators, fostering
a culture of innovation and an open-minded, collaborative approach within and
between our various business units, infusing the organization with digital talent and
staying ahead of disruptive threats.
Continuing to Deliver Top-Quartile Performance
There is little disagreement that in this high volatility, low growth world, day-to-day
execution and focus on performance are more important than ever. For the
foreseeable future, we are expecting an intrinsic global economic growth rate of
only about 2%–3% per year. In this environment, SFS 2.0, Stanley Black & Decker’s
operating system, differentiates our performance. The enablers of SFS 2.0—Core
SFS, Functional Transformation, Breakthrough Innovation, Commercial Excellence
and Digital Excellence—are the tenets that will allow us to achieve our revenue
growth and profitability targets.
Value Creation Model
Our well-established value creation model produces exceptional shareholder value.
It starts with our world-class brands, attractive growth platforms, and scalable
and defensible franchises. Importantly, it leverages the power of our SFS 2.0
operating system (see page 3) to generate outsized organic growth, operating
margin rate expansion and strong free cash flow conversion—unleashing the
potential for continued strong total shareholder returns.
We also employ an investor-friendly capital allocation model. Our historical, long-
term approach, which we intend to continue in the future, is to return approximately
50% of our capital to shareholders in the form of dividends and/or opportunistic
share repurchases, with the remaining 50% earmarked for acquisitions to further
strengthen our business portfolio and fuel growth.
M&A Opportunities
In early 2017, we were pleased to announce an agreement to purchase the
Craftsman brand from Sears Holdings. The transaction will give Stanley Black &
Decker the rights to develop, manufacture and sell Craftsman-branded products
in non-Sears retail, industrial and online sales channels across the U.S. and in
other countries.
Craftsman is a legendary, American brand with tremendous consumer awareness
built on a legacy of producing quality products at a great value and standing
behind them. The agreement represents a significant opportunity for Stanley Black &
Decker to invest in the brand and product innovation and grow the market by
increasing consumer availability of Craftsman products in previously under-
penetrated channels. Today, only roughly 10% of Craftsman sales occur outside
Sears’ retail channels. This is an investment in organic growth: we are expecting
the Craftsman brand to add one-half to one full point of organic growth annually
to our overall organic growth rate, beginning in year two, following the purchase of
the brand.
To accommodate the future growth of the Craftsman brand, we intend to expand
our manufacturing footprint in the U.S., consistent with our “make where we sell”
strategy. Manufacturing in the U.S. is nothing new to Stanley Black & Decker.
We have made products in the U.S. since our founding almost 175 years ago, and
our current U.S. manufacturing footprint still includes our tape measure plant in
STRATEGIC FRAMEWORK
CONTINUE ORGANIC
GROWTH MOMENTUM
UTILIZE SFS 2.0 as a catalyst
MIX into higher growth, higher
margin businesses
INCREASE relative weighting
of emerging markets
(goal = 20%+)
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
BUILD upon global Tools
platform
EXPAND Industrial platform /
diversify Engineered Fastening
and Infrastructure
CONSOLIDATE Commercial
Electronic Security industry
latest in robotics, manufacturing execution systems (MES), new machines, 3-D
printing, innovation labs and maker spaces to drive the next wave of flexibility, cost
efficiency and quality improvement.
We are on a path to become known as one of the world’s great innovators, fostering
a culture of innovation and an open-minded, collaborative approach within and
between our various business units, infusing the organization with digital talent and
staying ahead of disruptive threats.
Continuing to Deliver Top-Quartile Performance
There is little disagreement that in this high volatility, low growth world, day-to-day
execution and focus on performance are more important than ever. For the
foreseeable future, we are expecting an intrinsic global economic growth rate of
only about 2%–3% per year. In this environment, SFS 2.0, Stanley Black & Decker’s
operating system, differentiates our performance. The enablers of SFS 2.0—Core
SFS, Functional Transformation, Breakthrough Innovation, Commercial Excellence
and Digital Excellence—are the tenets that will allow us to achieve our revenue
growth and profitability targets.
Value Creation Model
Our well-established value creation model produces exceptional shareholder value.
It starts with our world-class brands, attractive growth platforms, and scalable
and defensible franchises. Importantly, it leverages the power of our SFS 2.0
operating system (see page 3) to generate outsized organic growth, operating
margin rate expansion and strong free cash flow conversion—unleashing the
potential for continued strong total shareholder returns.
We also employ an investor-friendly capital allocation model. Our historical, long-
term approach, which we intend to continue in the future, is to return approximately
50% of our capital to shareholders in the form of dividends and/or opportunistic
share repurchases, with the remaining 50% earmarked for acquisitions to further
strengthen our business portfolio and fuel growth.
M&A Opportunities
In early 2017, we were pleased to announce an agreement to purchase the
Craftsman brand from Sears Holdings. The transaction will give Stanley Black &
Decker the rights to develop, manufacture and sell Craftsman-branded products
in non-Sears retail, industrial and online sales channels across the U.S. and in
other countries.
Craftsman is a legendary, American brand with tremendous consumer awareness
built on a legacy of producing quality products at a great value and standing
behind them. The agreement represents a significant opportunity for Stanley Black &
Decker to invest in the brand and product innovation and grow the market by
increasing consumer availability of Craftsman products in previously under-
penetrated channels. Today, only roughly 10% of Craftsman sales occur outside
Sears’ retail channels. This is an investment in organic growth: we are expecting
the Craftsman brand to add one-half to one full point of organic growth annually
to our overall organic growth rate, beginning in year two, following the purchase of
the brand.
To accommodate the future growth of the Craftsman brand, we intend to expand
our manufacturing footprint in the U.S., consistent with our “make where we sell”
strategy. Manufacturing in the U.S. is nothing new to Stanley Black & Decker.
We have made products in the U.S. since our founding almost 175 years ago, and
our current U.S. manufacturing footprint still includes our tape measure plant in
STRATEGIC FRAMEWORK
CONTINUE ORGANIC
GROWTH MOMENTUM
UTILIZE SFS 2.0 as a catalyst
MIX into higher growth, higher
margin businesses
INCREASE relative weighting
of emerging markets
(goal = 20%+)
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
BUILD upon global Tools
platform
EXPAND Industrial platform /
diversify Engineered Fastening
and Infrastructure
CONSOLIDATE Commercial
Electronic Security industry
6
New Britain, Connecticut, where our global headquarters is also located. In fact, we
have increased U.S. tools manufacturing jobs by 40% over the last three years, and
plan to expand from close to 40% localized manufacturing today to more than 50%
over the next three years.
While manufacturing in the U.S. is not always an obvious choice to some, it makes
good business sense for us. We know our end users generally like to buy products
made in their own countries, especially professionals in the trades. Our make
where we sell strategy improves the supply chain, mitigates currency exposure and
lessens harmful environmental impact.
We already manufacture many products cost effectively in the U.S. and, in some
cases, we have been able to bring manufacturing back to the U.S. at a lower cost
than producing overseas. Industry 4.0 has become a critical element of our
localization strategy, to significantly improve the effectiveness and efficiency of our
manufacturing plants.
Newell Tools represented our first major acquisition since 2013. This transaction
will enhance the offerings and broaden the reach of our Tools & Storage business.
The $1.95 billion acquisition, with over $700 million of revenues, includes the iconic
Lenox brand and the strong Irwin brand, as well as an array of high performing,
high quality industrial cutting, hand tool and power tool accessories—opening
up new avenues of growth. Newell Tools provides both a source of inorganic growth
in year one and an organic boost thereafter—an acquisition consistent with our
strategy of driving above-market growth in a low growth world.
The sale of the majority of our Mechanical Security businesses allows us to sharpen
our focus on the more strategically attractive commercial electronic security and
automatic doors businesses, and to deploy capital in a more accretive and growth-
oriented manner.
Our primary M&A focus remains on strengthening the core—executing tools
acquisitions, pursuing bolt-ons to expand our Industrial businesses, and further
consolidating the commercial electronic security industry—as well as pursuing
longer-term adjacency opportunities that possess a sound industrial logic and fit
with our value creation model.
Elevating Our Commitment to Corporate Social Responsibility
Particularly in today’s volatile geopolitical environment, a commitment to corporate
social responsibility is not only the right thing to do, but has become a necessity
for attracting and retaining top talent and customers and maintaining permission
to operate in many markets.
Our people create products, tools and solutions for those who make the world,
and we take that accountability seriously. We want to make sure that we are
operating in a way that generates a sustainable impact, and research has proven
that purpose-driven companies—those that operate with a mission beyond
profits—deliver better results and have longer-term sustainable enterprises.
Stanley Black & Decker has made a considerable commitment in this space
already. Our sustainability plan, ECOSMART™, extends across our business from
product design and manufacturing to marketing, selling and transportation. We are
focused on substantially decreasing our environmental impacts by an additional
20% over our 2015 baseline by 2020, through reducing our operational energy
and water consumption, waste generation and carbon emissions. We are
consistently recognized for our sustainability progress, for six consecutive years
by the Dow Jones Sustainability Index and four consecutive years on CDP’s
Climate “A” List.
OUR PURPOSE
WE ARE FOR THOSE
WHO MAKE THE WORLD.
2016 GLOBAL PRESENCE
U.S.
R.O.W.
EMERGING
MARKETS
EUROPE
% 2016 REVENUE
9%
16%
23%
52%
% 2016 Revenues
New Britain, Connecticut, where our global headquarters is also located. In fact, we
have increased U.S. tools manufacturing jobs by 40% over the last three years, and
plan to expand from close to 40% localized manufacturing today to more than 50%
over the next three years.
While manufacturing in the U.S. is not always an obvious choice to some, it makes
good business sense for us. We know our end users generally like to buy products
made in their own countries, especially professionals in the trades. Our make
where we sell strategy improves the supply chain, mitigates currency exposure and
lessens harmful environmental impact.
We already manufacture many products cost effectively in the U.S. and, in some
cases, we have been able to bring manufacturing back to the U.S. at a lower cost
than producing overseas. Industry 4.0 has become a critical element of our
localization strategy, to significantly improve the effectiveness and efficiency of our
manufacturing plants.
Newell Tools represented our first major acquisition since 2013. This transaction
will enhance the offerings and broaden the reach of our Tools & Storage business.
The $1.95 billion acquisition, with over $700 million of revenues, includes the iconic
Lenox brand and the strong Irwin brand, as well as an array of high performing,
high quality industrial cutting, hand tool and power tool accessories—opening
up new avenues of growth. Newell Tools provides both a source of inorganic growth
in year one and an organic boost thereafter—an acquisition consistent with our
strategy of driving above-market growth in a low growth world.
The sale of the majority of our Mechanical Security businesses allows us to sharpen
our focus on the more strategically attractive commercial electronic security and
automatic doors businesses, and to deploy capital in a more accretive and growth-
oriented manner.
Our primary M&A focus remains on strengthening the core—executing tools
acquisitions, pursuing bolt-ons to expand our Industrial businesses, and further
consolidating the commercial electronic security industry—as well as pursuing
longer-term adjacency opportunities that possess a sound industrial logic and fit
with our value creation model.
Elevating Our Commitment to Corporate Social Responsibility
Particularly in today’s volatile geopolitical environment, a commitment to corporate
social responsibility is not only the right thing to do, but has become a necessity
for attracting and retaining top talent and customers and maintaining permission
to operate in many markets.
Our people create products, tools and solutions for those who make the world,
and we take that accountability seriously. We want to make sure that we are
operating in a way that generates a sustainable impact, and research has proven
that purpose-driven companies—those that operate with a mission beyond
profits—deliver better results and have longer-term sustainable enterprises.
Stanley Black & Decker has made a considerable commitment in this space
already. Our sustainability plan, ECOSMART™, extends across our business from
product design and manufacturing to marketing, selling and transportation. We are
focused on substantially decreasing our environmental impacts by an additional
20% over our 2015 baseline by 2020, through reducing our operational energy
and water consumption, waste generation and carbon emissions. We are
consistently recognized for our sustainability progress, for six consecutive years
by the Dow Jones Sustainability Index and four consecutive years on CDP’s
Climate “A” List.
OUR PURPOSE
WE ARE FOR THOSE
WHO MAKE THE WORLD.
2016 GLOBAL PRESENCE
U.S.
R.O.W.
EMERGING
MARKETS
EUROPE
% 2016 REVENUE
9%
16%
23%
52%
% 2016 Revenues
End of preview
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