Business Segments

9 Months Ended

Sep. 29, 2012

Business Segments

Business Segments

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

The CDIY segment is comprised of the Professional Power Tool and Accessories businesses, the Consumer Power Tool business, the Hand Tools, Fasteners & Storage business and the Plumbing Products business. The Professional Power Tool and Accessories 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 Power Tool business sells corded and cordless power tools, lawn and garden products and home products. The Hand Tools, Fasteners & Storage business sells measuring and leveling tools, planes, hammers, demolition tools, knives, saws and chisels. Fastening products include pneumatic tools and fasteners including nail guns, nails, staplers and staples. Storage products include tool boxes, sawhorses and storage units. The Plumbing Products business sells plumbing fixtures primarily for residential use.

The Security segment is comprised of the electronic security solutions ("CSS") and the Mechanical Access Solutions 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 and repair. Purchasers of these systems typically contract for ongoing security systems monitoring and maintenance at the time of initial equipment installation. The CSS business also sells healthcare solutions which include medical carts and cabinets, asset tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call products. The Mechanical Access Solutions business sells and installs automatic doors, residential and commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, tubular and mortise door locksets.

The Industrial segment is comprised of the Industrial and Automotive Repair, Engineered Fastening and Infrastructure businesses. The Industrial and Automotive Repair business sells hand tools, power tools, and engineered storage solution products. The Engineered Fastening business primarily sells engineered fasteners designed for specific applications. The businesses product lines include stud welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, engineered plastic fasteners, self-piercing riveting systems and precision nut running systems. The Infrastructure business consists of the CRC-Evans business, and the Company’s Hydraulics business. The business’s product lines include custom pipe handling machinery, joint welding and coating machinery, weld inspection services and hydraulic tools and accessories.

The Company utilizes segment profit, which is defined as net sales minus cost of sales and selling, general and administrative (“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 tax expense. Refer to Note N, Restructuring and Asset Impairments, for the amount of restructuring charges 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.

	Third Quarter						Year-to-Date
	2012			2011			2012			2011
NET SALES
CDIY	$	1,376.1		$	1,337.6		$	3,991.5		$	3,912.8
Security	789.7			648.2			2,344.7			1,811.2
Industrial	620.9			633.9			1,917.6			1,860.5
Total	$	2,786.7		$	2,619.7		$	8,253.8		$	7,584.5
SEGMENT PROFIT
CDIY	$	200.3		$	169.8		$	564.6		$	516.9
Security	120.2			107.3			319.2			283.8
Industrial	95.1			106.8			314.1			308.7
Segment profit	415.6			383.9			1,197.9			1,109.4
Corporate overhead	(61.8		)	(55.3		)	(184.7		)	(172.4		)
Other-net	(77.0		)	(89.6		)	(248.7		)	(201.7		)
Restructuring charges and asset impairments	(53.4		)	(14.9		)	(114.1		)	(49.2		)
Loss on debt extinguishment	(45.5		)	—			(45.5		)	—
Interest expense	(36.7		)	(34.8		)	(105.1		)	(103.5		)
Interest income	2.6			8.0			7.5			20.3
Earnings from continuing operations before income taxes	$	143.8		$	197.3		$	507.3		$	602.9

The Company recorded a total of $11.3 million and $25.4 million of merger and acquisition-related charges, respectively, which reduced segment gross profit associated with facility closures and an additional $16.7 million and $43.9 million, respectively, in SG&A primarily for integration costs associated with merger and acquisition-related activities for the three and nine month periods ended September 29, 2012. For the three and nine months ended October 1, 2011, the Company recorded a total of $13.8 million and $25.1 million of merger and acquisition-related charges, respectively, which reduced segment gross profit associated with facility closure and an additional $4.5 million and $6.7 million, respectively in SG&A primarily for integration costs associated with the merger and acquisition-related activities. These charges reduced segment profit by $17.2 million in CDIY, $10.2 million in Security and $0.6 million in Industrial for the three months ended September 29, 2012, and $6.7 million in CDIY, $11.1 million in Security, and $0.5 million for Industrial for the three months ended October 1, 2011. On a year-to-date basis, segment profit was reduced by $31.0 million in CDIY, $34.7 million in Security, and $3.6 million in Industrial for nine months ended September 29, 2012, and $13.3 million in CDIY, $17.7 million in Security, and $0.8 million in Industrial for the nine months ended October 1, 2011.

Corporate overhead for the three and nine months ended September 29, 2012 includes $22.5 million and $57.7 million, respectively, of charges pertaining primarily to merger and acquisition-related employee charges and integration costs. For the three and nine months ended October 1, 2011, such charges included in corporate overhead were $18.9 million and $50.3 million, respectively.

The following table is a summary of total assets by segment for the periods ended September 29, 2012 and December 31, 2011:

	September 29, 2012		December 31, 2011
CDIY	$	7,678.0	$	7,499.5
Security	5,577.4		5,167.4
Industrial	3,422.3		3,282.9
	16,677.7		15,949.8
Corporate assets	436.5		(0.8		)
Consolidated	$	17,114.2	$	15,949.0

Corporate assets primarily consist of cash, deferred taxes and property, plant and equipment.