Business Segments

3 Months Ended

Jun. 28, 2014

Business Segments

Business Segments

The Company classifies its business into three reportable segments, which also represent its operating segments: Construction & Do-It-Yourself (“CDIY”), Industrial and Security.

The CDIY segment is comprised of the Professional Power Tool business, the Consumer Products Group, the Hand Tools & Storage business, and the Fastening & Accessories business. The Professional Power Tool business sells professional grade corded and cordless electric power tools and equipment including drills, impact wrenches and drivers, grinders, saws, routers and sanders. The Consumer Products Group sells corded and cordless electric power tools sold primarily under the Black & Decker brand, lawn and garden products and home products. The Hand Tools & Storage business sells measuring, leveling and layout tools, planes, hammers, demolition tools, knives, saws, chisels, tool boxes, sawhorses, and storage units. The Fastening and Accessories business sells pneumatic tools and fasteners including nail guns, nails, staplers and staples, concrete and masonry anchors, as well as power tool accessories which include drill bits, router bits, abrasives and saw blades.

The Industrial segment is comprised of the Industrial and Automotive Repair ("IAR"), Engineered Fastening and Infrastructure businesses. The IAR business sells professional hand tools, power tools, and engineered storage solution products. The Engineered Fastening business primarily sells engineered fastening products and systems designed for specific applications. The product lines include stud welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, engineered plastic and mechanical fasteners, self-piercing riveting systems and precision nut running systems, micro fasteners, and high-strength structural fasteners. The Infrastructure business consists of the Oil & Gas and Hydraulics businesses. The product lines include custom pipe handling machinery, joint welding and coating machinery, weld inspection services and hydraulic tools and accessories.

The Security segment is comprised of the Convergent Security Solutions ("CSS") and the Mechanical Access Solutions ("MAS") businesses. The CSS business designs, supplies and installs electronic security systems and provides electronic security services, including alarm monitoring, video surveillance, fire alarm monitoring, systems integration and system maintenance. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the time of initial equipment installation. The business also includes healthcare solutions, which markets medical cabinets, asset tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The MAS business sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, tubular and mortise door locksets.

The Company utilizes segment profit, which is defined as net sales minus cost of sales and SG&A inclusive of the provision for doubtful accounts (aside from corporate overhead expense), and segment profit as a percentage of net sales to assess the profitability of each segment. Segment profit excludes the corporate overhead expense element of SG&A, interest income, interest expense, other-net (inclusive of intangible asset amortization expense), restructuring, and income taxes. Refer to Note O, Restructuring Charges (Credits), for the amount of restructuring charges (credits) by segment. Corporate overhead is comprised of world headquarters facility expense, cost for the executive management team and cost for certain centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and corporate finance functions. Transactions between segments are not material. Segment assets primarily include accounts receivable, inventory, other current assets, property, plant and equipment, intangible assets and other miscellaneous assets.

As previously discussed, the Company recast 2013 segment net sales and profit between the CDIY and Industrial segments to align reporting with the current management of the Company's operations in the emerging markets to be comparable with the current year presentation. As a result, the related assets and liabilities of these segments were adjusted accordingly to reflect the change. There is no impact to the consolidated financial statements of the Company as a result of this segment realignment.

	Second Quarter						Year-to-Date
	2014			2013			2014			2013
NET SALES
CDIY	$	1,394.6		$	1,392.8		$	2,609.4		$	2,542.0
Industrial	889.2			861.5			1,741.2			1,595.4
Security	601.7			603.9			1,174.4			1,196.0
Total	$	2,885.5		$	2,858.2		$	5,525.0		$	5,333.4
SEGMENT PROFIT
CDIY	$	218.2		$	209.9		$	387.3		$	375.9
Industrial	150.3			117.6			280.6			207.0
Security	67.0			54.7			116.6			112.1
Segment profit	435.5			382.2			784.5			695.0
Corporate overhead	(45.1		)	(53.7		)	(81.6		)	(122.7		)
Other-net	(58.7		)	(71.4		)	(120.2		)	(142.3		)
Restructuring credits (charges)	1.7			30.9			5.4			(12.0		)
Interest expense	(43.3		)	(39.6		)	(87.6		)	(79.5		)
Interest income	3.0			3.3			6.4			6.5
Earnings from continuing operations before income taxes	$	293.1		$	251.7		$	506.9		$	345.0

During the three and six months ended June 28, 2014, the Company recorded a total of $0.2 million and $1.3 million, respectively, of merger and acquisition-related charges, respectively, which reduced segment gross profit, and an additional $2.4 million and $6.2 million, respectively, in SG&A primarily for integration costs associated with merger and acquisition-related activities. These charges reduced segment profit by $0.2 million in CDIY, $1.2 million in Industrial, and $1.2 million in Security for the three months ended June 28, 2014, and $0.6 million in CDIY, $3.4 million in Industrial, and $3.5 million in Security for the six months ended June 28, 2014.

During the three and six months ended June 29, 2013, the Company recorded a total of $7.9 million and $21.2 million, respectively, of merger and acquisition-related charges associated with facility closures, which reduced segment gross profit, and an additional $9.8 million and $18.6 million, respectively, in SG&A primarily for integration costs associated with merger and acquisition-related activities. These charges reduced segment profit by $2.8 million in CDIY, $6.1 million in Industrial, and $8.8 million in Security for the three months ended June 29, 2013, and $6.1 million in CDIY, $18.5 million in Industrial, and $15.2 million in Security for the six months ended June 29, 2013.

Corporate overhead for the three and six months ended June 28, 2014 includes $3.0 million and $5.5 million, respectively, of charges pertaining primarily to merger and acquisition-related employee charges and integration costs. Corporate overhead for the three and six months ended June 29, 2013 includes $14.2 million and $39.7 million, respectively, of charges pertaining primarily to merger and acquisition-related employee charges and integration costs.

The following table is a summary of total assets by segment as of June 28, 2014 and December 28, 2013:

	June 28, 2014			December 28, 2013
CDIY	$	7,550.6		$	7,357.9
Industrial	5,441.7			5,302.0
Security	4,448.0			4,495.6
	17,440.3			17,155.5
Discontinued Operations	5.0			10.1
Corporate assets	(486.5		)	(630.5		)
Consolidated	$	16,958.8		$	16,535.1

Corporate assets primarily consist of cash, deferred taxes and property, plant and equipment. Based on the nature of the Company's cash pooling arrangements, at times corporate-related cash accounts will be in a net liability position.