MERGER AND ACQUISITIONS

PENDING ACQUISITION

On July 23, 2012, the Company announced that it had entered into a definitive agreement to acquire Infastech, a global manufacturer and distributor of specialty engineered fastening technology based in Hong Kong, for approximately $850 million. Infastech will be consolidated into the Company's Industrial segment. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2013.

2012 ACQUISITIONS

During 2012, the Company completed seven acquisitions for a total purchase price of $696.0 million, net of cash acquired. The largest of these acquisitions were AeroScout Inc. (“AeroScout”), which was purchased for $238.8 million, net of cash acquired, and Powers Fasteners, Inc. (“Powers”), which was purchased for $220.5 million, net of cash acquired. AeroScout develops, manufactures, and sells Real-Time Locating Systems ("RTLS") primarily to healthcare and certain industrial customers. Powers distributes fastening products such as mechanical anchors, adhesive anchoring systems, and powered forced-entry systems, mainly for commercial construction end customers. AeroScout was purchased in the second quarter and has been integrated within the Security and Industrial segments. Powers was also purchased in the second quarter and is part of the CDIY segment. The combined assets acquired for these acquisitions, including $185.4 million of intangible assets and $7.1 million of cash, are approximately $297.6 million, and the combined liabilities are approximately $115.1 million. The related goodwill associated with these two acquisitions is approximately $283.9 million. The total purchase price for the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The purchase accounting for these recent acquisitions is substantially complete with the exception of certain minor items.

Five smaller acquisitions were completed during 2012 for a total purchase price of $236.7 million. The largest of these acquisitions were Lista North America (“Lista”), which was purchased for $89.7 million, net of cash acquired, and Tong Lung Metal Industry Co. ("Tong Lung"), which the Company purchased a 89% controlling share for $102.8 million, net of cash acquired, and assumed $20.1 million of short term debt. Lista's storage and workbench solutions complement the Industrial & Automotive Repair division's tool, storage, radio frequency identification ("RFID")-enabled systems, and specialty supply product and service offerings. Tong Lung manufactures and sells commercial and residential locksets. The residential portion of the business was part of the HHI sale and is expected to close no later than April 2013. Refer to Note T, Discontinued Operations, for further discussion of divestitures. Lista was purchased in the first quarter and is part of the Industrial segment. Tong Lung was purchased in the third quarter and is part of the Security segment. The purchase accounting for these recent acquisitions is substantially complete with the exception of certain minor items. In January 2013, the Company purchased the remaining outstanding shares of Tong Lung for approximately $12 million.

2011 ACQUISITIONS

NISCAYAH

In September 2011, the Company acquired Niscayah, one of the largest access control and surveillance solutions providers in Europe. Niscayah's integrated security solutions include video surveillance, access control, intrusion alarms and fire alarm systems, and its offerings include design and installation services, maintenance and repair, and monitoring systems. The acquisition expands and complements the Company’s existing security product offerings and further diversifies the Company’s operations and international presence.

The initial purchase of $984.5 million established a controlling ownership interest of 95% in Niscayah. This was accomplished as part of an existing tender offer to purchase all Niscayah outstanding shares at a price of 18 SEK per share, whereby the Company increased its ownership interest from 5.8% of the outstanding shares of Niscayah at July 2, 2011 to 95% of the outstanding shares at September 9, 2011. Over the remainder of 2011, the Company purchased additional outstanding shares of Niscayah, bringing the Company’s total ownership interest in Niscayah to 99% at December 31, 2011. During the second quarter of 2012, the Company purchased the remaining outstanding shares of Niscayah for $11.3 million, or 18 SEK per share. The total purchase price paid for Niscayah was $995.8 million. Niscayah has been consolidated into the Company's Security segment.

The Niscayah acquisition 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 acquisition date. The purchase price allocation for Niscayah was completed during the third quarter of 2012 within the measurement period. The following table summarizes the estimated fair values of major assets acquired and liabilities assumed:




(Millions of Dollars)
Cash and cash equivalents	$	21.1
Accounts and notes receivable, net	178.0
Inventories, net	55.1
Prepaid expenses and other current assets	45.3
Property, plant and equipment	32.3
Trade names	6.0
Customer relationships	350.0
Other assets	43.1
Short-term borrowings	(202.9		)
Accounts payable	(55.8		)
Deferred taxes	(143.5		)
Other liabilities	(253.9		)
Total identifiable net assets	$	74.8
Goodwill	921.0
Total consideration transferred	$	995.8

The weighted average useful lives assigned to the trade names and customer relationships were 4 years and 16 years, respectively.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected cost synergies of the combined business, assembled workforce, and the going concern nature of Niscayah.

OTHER 2011 ACQUISITIONS

During 2011, the Company completed nine additional acquisitions for a total purchase price of $216.2 million, net of cash acquired. The largest of these acquisitions were Infologix, Inc. ("Infologix") and Microtec Enterprises, Inc. ("Microtec", which operates under the business name "AlarmCap"), which were purchased for $60.0 million and $58.8 million, respectively. Infologix is a leading provider of enterprise mobility solutions for the healthcare and commercial industries and adds an established provider of mobile workstations and asset tracking solutions. AlarmCap is a full service monitoring provider, which significantly increases the Company's Canadian footprint. Both acquisitions are part of the Company's Security segment. The Company also completed seven small acquisitions across all segments for a combined purchase price of $97.4 million. The purchase accounting for these 2011 acquisitions has been completed. There were no significant changes to the purchase price allocations made during 2012.

2010 ACQUISITIONS

During 2010, the Company completed ten acquisitions for a total purchase price of $550.3 million, of which approximately $451.6 million related to CRC-Evans. The net assets acquired of CRC-Evans, including $181.2 million of intangible assets, were approximately $233.6 million and the resulting goodwill was $218.0 million. 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 these acquisitions is complete.

MERGER

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, inclusive of all former Black & Decker shares outstanding and employee related equity awards. The transaction was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to 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. 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 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 and cash equivalents	$	949.4
Accounts and notes receivable, net	907.2
Inventories, net	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

The amount allocated to trade names includes $1.362 billion for indefinite-lived trade names. The weighted-average useful lives assigned to the finite-lived intangible assets are trade names --- 14 years; customer relationships --- 15 years; and licenses, technology and patents --- 12 years. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business, assembled workforce, and the going concern nature of Black & Decker. It is estimated that $150.4 million of goodwill, relating to Black & Decker's pre-merger historical tax basis, will be deductible for tax purposes.

ACTUAL AND PRO-FORMA IMPACT FROM ACQUISITIONS

Actual Impact from Acquisitions

The Company's Consolidated Statement of Operations for the year ended December 29, 2012 includes $191.6 million in net sales and $5.9 million in net earnings for the 2012 acquisitions. These amounts include charges relating to inventory step-up, fair value adjustments to deferred revenue, and restructuring charges.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information for continuing operations as if the Niscayah, AeroScout, Powers and other 2012 and 2011 acquisitions had occurred on January 3, 2011. This pro-forma information includes 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 these acquisitions on January 3, 2011. In addition, the pro-forma consolidated results do not reflect the expected realization of any cost savings associated with the acquisitions.



	Year-to-Date
(Millions of Dollars, except per share amounts)	2012		2011
Net sales	$	10,297.0	$	10,408.6
Net earnings attributable to common shareowners	448.4		600.3
Diluted earnings per share-continuing operations	2.69		3.53

The 2012 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2012 acquisitions for their respective pre-acquisition periods. The following adjustments were made to account for certain costs which would have been incurred during this pre-acquisition period:


•	Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the purchase price allocation that would have been incurred from January 1, 2012 to the acquisition dates, adjusted for the applicable tax impact.


•	Because the 2012 acquisitions were assumed to occur on January 3, 2011, there were no deal costs, inventory step-up amortization, or deferred revenue fair value amortization factored into the 2012 pro-forma year, as such expenses would have occurred in the first year following the acquisition.


•	Because the 2012 acquisitions were funded with existing cash resources and debt acquired was repaid, no additional interest expense was factored into the 2012 pro-forma year.

The 2011 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2011 and 2012 acquisitions for their respective pre-acquisition periods. The following adjustments were made to account for certain costs which would have been incurred during this pre-acquisition period:


•	Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the purchase price allocation that would have been incurred from January 3, 2011 to the acquisition dates.


•	Additional expense for deal costs and the inventory step-up, where applicable, which would have been amortized as the corresponding inventory was sold.


•	Reduced revenue for fair value adjustments made to deferred revenue for Niscayah and AeroScout.


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