Acquisitions

2013 ACQUISITIONS

On May 28, 2013, the Company purchased a 60% controlling share in Jiangsu Guoqiang Tools Co., Ltd. ("GQ") for a total purchase price of $48.5 million, net of cash acquired. The fair value of the non-controlling interest is $34.4 million. GQ is a manufacturer and seller of power tools, armatures and stators in both domestic and foreign markets. The acquisition of GQ complements the Company's existing power tools product offerings and further diversifies the Company's operations and international presence. GQ is headquartered in Qidong, China and is being consolidated into the Company's CDIY segment.

INFASTECH

On February 27, 2013, the Company acquired Infastech for a total purchase price of $826.4 million, net of cash acquired. Infastech designs, manufactures and distributes highly-engineered fastening technologies and applications for a diverse blue-chip customer base in the industrial, electronics, automotive, construction and aerospace end markets. The acquisition of Infastech adds to the Company's strong positioning in specialty engineered fastening, an industry with solid growth prospects, and further expands the Company's global footprint with its strong concentration in fast-growing emerging markets. Infastech is headquartered in Hong Kong and is being consolidated into the Company's Industrial segment.

The Infastech acquisition has been 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 acquisition date. The following table summarizes the estimated fair values of major assets acquired and liabilities assumed:



(Millions of Dollars)
Cash and cash equivalents	$	82.0
Accounts and notes receivable, net	117.7
Inventories, net	88.9
Prepaid expenses and other current assets	6.2
Property, plant and equipment	49.3
Trade names	22.0
Customer relationships	251.0
Technology	28.0
Other assets	2.5
Short-term borrowings	(0.2		)
Accounts payable	(99.0		)
Accrued expenses	(31.6		)
Deferred taxes	(78.7		)
Other liabilities	(9.0		)
Total identifiable net assets	$	429.1
Goodwill	479.3
Total consideration transferred	$	908.4

The weighted average useful lives assigned to the trade names, customer relationships, and technology were 15 years, 12.7 years and 10 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 Infastech.

The purchase price allocation for Infastech is preliminary in certain respects. During the measurement period, the Company expects to record adjustments relating to the valuations of certain assets, various opening balance sheet contingencies and income tax matters, amongst others. The Company will complete its purchase price allocation as soon as possible within the measurement period. The finalization of the Company's purchase accounting assessment will result in changes in the valuation of assets acquired and liabilities assumed, which the Company does not expect to be material.

The Company also completed two smaller acquisitions during 2013 for a total purchase price of $17.8 million, net of cash acquired, which are being integrated into our Security and Industrial segments.

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 of 2012 and has been integrated within the Security and Industrial segments. Powers was also purchased in the second quarter of 2012 and is part of the CDIY segment. The combined assets acquired for these acquisitions, including $169.9 million of intangible assets and $7.7 million of cash, was approximately $279.4 million, and the combined liabilities assumed were approximately $95.3 million. The related goodwill associated with these two acquisitions is approximately $282.9 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 acquisitions is complete.

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 an 89% controlling share for $102.8 million, net of cash acquired, and assumed $20.1 million of short term debt. In January 2013, the Company purchased the remaining outstanding shares of Tong Lung for approximately $12 million. 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 December 2012 HHI sale and closed on April 8, 2013. Lista was purchased in the first quarter of 2012 and is part of the Industrial segment. Tong Lung was purchased in the third quarter of 2012 and is part of the Security segment. The purchase accounting for these acquisitions is complete.

ACTUAL AND PRO-FORMA IMPACT FROM ACQUISITIONS

Actual Impact from Acquisitions

The following table presents information for Infastech, GQ and other 2013 acquisitions that are included in the Company's Consolidated Statements of Operations and Comprehensive Income:



	Second Quarter	Year-to-Date
(Millions of Dollars)	2013	2013
Net Sales	138.1	$	186.5
Net Earnings (Loss)	0.1	(3.8		)

These amounts include amortization relating to inventory step-up and intangible assets recorded upon acquisition.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the Infastech, GQ, AeroScout, Powers, and other 2013 and 2012 acquisitions had occurred on January 2, 2012. 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 2, 2012. In addition, the pro-forma consolidated results do not reflect the expected realization of any cost savings associated with the acquisitions.



	Second Quarter				Year-to-Date
(Millions of Dollars, except per share amounts)	2013		2012		2013		2012
Net sales	$	2,877.2	$	2,750.2	$	5,461.5	$	5,376.9
Net earnings attributable to common shareowners	197.0		131.1		295.8		235.6
Diluted earnings per share-continuing operations	1.24		0.78		1.87		1.40

The 2013 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2013 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, 2013 to the acquisition dates, adjusted for the applicable tax impact.


•	Because the 2013 acquisitions were assumed to occur on January 1, 2012, there were no deal costs or inventory step-up amortization factored into the 2013 pro-forma year, as such expenses would have occurred in the first year following the acquisition.

The 2012 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2012 and 2013 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 June 30, 2012.


•	Additional expense for deal costs and 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, where applicable.


•	Because the 2013 acquisitions were funded using existing sources of liquidity, additional interest expense was factored into the 2012 pro-forma year.


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