Merger and Acquisitions

6 Months Ended

Jul. 02, 2011

Merger and Acquisitions

F.        Merger and Acquisitions

2011 ACQUISITIONS

In January 2011, the Company acquired InfoLogix, Inc.(“Infologix”) for $60.0 million, net of cash acquired. Infologix is a leading provider of enterprise mobility solutions for the healthcare and commercial industries and will add an established provider of mobile workstations and asset tracking solutions to the Company’s Security segment. The total purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. Additionally, the Company completed five small acquisitions in the Industrial and Security segments for a combined purchase price of $45.7 million. The purchase accounting for these 2011 acquisitions is preliminary, principally with respect to finalization of intangible asset valuation and certain other minor items.

2010 ACQUISITIONS

During 2010 the Company completed ten acquisitions for a total purchase price of $547.3 million, of which approximately $451.6 million related to CRC-Evans Pipeline International (“CRC-Evans”). The total purchase price for the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The purchase price allocations for the acquisitions which are still within the measurement period are substantially complete, pending the completion of a few minor items. There were no significant changes to the purchase price allocations made during the first six months of 2011.

MERGER

As discussed in Note A, Basis of Presentation, the Merger occurred on March 12, 2010 and the total fair value of consideration transferred as part of the Merger was $4,656.5 million. Refer to Note E, Merger and Acquisitions, of the Company’s 2010 Annual Report on Form 10-K for the fiscal year ended January 1, 2011 for further discussion regarding the Merger.

The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed be recognized at their fair values as of the merger date. The purchase price allocation for Black & Decker was completed during the first quarter of 2011 within the measurement period. The measurement period adjustments recorded in the first quarter of 2011 did not have a significant impact on the Company’s consolidated statements of operations, balance sheet, or condensed statements of cash flows. The following table summarizes the fair values of major assets acquired and liabilities assumed as part of the Merger:

(Millions of Dollars)
Cash	$	949.4
Accounts and notes receivable		907.2
Inventory		1,066.3
Prepaid expenses and other current assets		257.7
Property, plant and equipment		545.2
Trade names		1,505.5
Customer relationships		383.7
Licenses, technology and patents		112.3
Other assets		243.4
Short-term borrowings		(175.0	)
Accounts payable		(479.1	)
Accrued expenses and other current liabilities		(849.9	)
Long-term debt		(1,657.1	)
Post-retirement benefits		(775.8	)
Deferred taxes		(808.5	)
Other liabilities		(517.8	)
Total identifiable net assets	$	707.5
Goodwill		3,949.0
Total consideration transferred	$	4,656.5

ACTUAL AND PRO-FORMA IMPACT OF THE MERGER AND ACQUISITIONS

The following table presents supplemental pro-forma information as if the Merger, 2010 acquisitions and Infologix acquisition had occurred on January 3, 2010 for the six months ended July 3, 2010. This pro-forma information includes merger and acquisition-related charges for the period. The pro-forma consolidated results are not necessarily indicative of what the Company’s consolidated net earnings would have been had the Company completed the Merger and acquisitions on January 3, 2010. In addition, the pro-forma consolidated results do not reflect the expected realization of any cost savings associated with the Merger and acquisitions.

(Millions of Dollars, except per share amounts)	2010
Net sales		$ 4,759.9
Net loss		(55.2)
Diluted loss per share		$    (0.33)

2010 Pro-Forma Results

Pro-forma results for the 2011 year are not shown as the results of Black and Decker and acquisitions are already included in the three and six month period to date results. The pro-forma results are not shown for the three months ended July 3, 2010 because Black & Decker is already included in the three month period and the impact from the acquisitions is not significant.

The 2010 pro-forma results were calculated by combining the results of Stanley Black & Decker with Black & Decker’s stand-alone results from January 3, 2010 through March 12, 2010. The pre-acquisition results of the acquisitions were also combined for their respective pre-acquisition periods. The following adjustments were made to account for certain costs which would have been incurred during this pre-Merger period and pre-acquisition period.

• Elimination of the historical pre-Merger and pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the Merger and acquisitions that would have been incurred from January 3, 2010 to the merger and/or acquisition dates.

• Additional expense for the inventory step-up which would have been amortized as the corresponding inventory was sold.

• Additional expense pertaining to Merger-related compensation for key executives which would have been incurred from January 3, 2010 to March 12, 2010.

• Reduced interest expense for the Black & Decker debt fair value adjustment which would have been amortized from January 3, 2010 to March 12, 2010.

• Additional depreciation related to property, plant and equipment fair value adjustments that would have been expensed prior to the Merger and acquisition commencement dates.

• The modifications above were adjusted for the applicable tax impact.