Acquisitions

2017 ACQUISITIONS

Newell Tools

On March 9, 2017, the Company acquired the Tools business of Newell Brands ("Newell Tools"), which includes the industrial cutting, hand tool and power tool accessory brands Irwin® and Lenox®, for approximately $1.84 billion, net of cash acquired and an estimated working capital adjustment. This acquisition will enhance the Company’s position within the global tools & storage industry and broadens the Company’s product offerings and solutions to customers and end users, particularly within power tool accessories. The results of Newell Tools are being consolidated into the Company's Tools & Storage segment.

The Newell Tools acquisition is being accounted for as a business combination, 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	$	17.1
Accounts and notes receivable	44.4
Inventory	203.0
Prepaid expenses and other current assets	4.6
Property, plant and equipment	98.0
Trade names	283.0
Customer relationships	540.0
Other assets	8.2
Accounts payable	(65.2		)
Accrued expenses	(19.7		)
Deferred taxes	(299.8		)
Other liabilities	(0.7		)
Total identifiable net assets	$	812.9
Goodwill	1,044.5
Total consideration paid	$	1,857.4

The trade names were determined to have indefinite lives. The weighted-average useful life assigned to the customer relationships was 15 years.

Goodwill is 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 Newell Tools. It is estimated that $14.9 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes.

The purchase price allocation for Newell Tools is preliminary in all respects. During the measurement period, the Company expects to record adjustments relating to the finalization of intangible asset, inventory and property, plant and equipment valuations, various opening balance sheet contingencies, including environmental remediation and risk insurance reserves, and various income tax matters, amongst others.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from operations. The Company will complete its purchase price allocation as soon as reasonably possible within the measurement period.

Craftsman Brand

On March 8, 2017, the Company purchased the Craftsman brand from Sears Holdings, which provides the Company with the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings channels. The total estimated cash purchase price is $889.8 million, consisting of a cash payment at closing of $571.8 million, which reflects the impact of working capital adjustments, a cash payment at the end of year three with an estimated present value of $234.0 million, and future payments to Sears Holdings of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products through March 2032, which was valued at $84.0 million at the acquisition date based on estimated future sales projections which are subject to change. Refer to Note M, Fair Value Measurements, for additional details. In addition, as part of the acquisition the Company also granted a perpetual license to Sears Holdings to continue selling Craftsman®-branded product in Sears-related channels. The perpetual license will be royalty-free until March 2032, which represents an estimated value of approximately $300.0 million, and 3% thereafter. The estimated fair value of the royalty-free license period is preliminary and based on estimated future sales projections which are subject to change. The Craftsman results are being consolidated into the Company's Tools & Storage segment.

The Craftsman brand acquisition is being accounted for as a business combination which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated fair value of assets acquired, which includes $47.6 million of working capital and $487.0 million of intangible assets, is $648.9 million. The related goodwill is approximately $540.9 million. The amount allocated to intangible assets includes $466.0 million of an indefinite-lived trade name. The useful life assigned to the customer relationships was 15 years.

Goodwill is 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 and the going concern nature of the Craftsman brand. Goodwill is not expected to be deductible for tax purposes.

The purchase price allocation for Craftsman is preliminary in all respects. During the measurement period, the Company expects to record adjustments relating to the finalization of valuations for intangible assets, inventory, the contingent consideration liability relating to future payments to Sears Holdings and the royalty-free license period described above, and various opening balance sheet contingencies, including warranty exposures, amongst others.

OTHER ACQUISITIONS

The Company also completed one smaller acquisition during the first quarter of 2017 for a total purchase price of $26.1 million, net of cash acquired, which is being consolidated into the Security segment.

2016 ACQUISITIONS

During 2016, the Company completed five small acquisitions for a total purchase price of $59.3 million, net of cash acquired, which are being integrated into the Company’s Tools & Storage and Security segments. 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 substantially complete with the exception of certain minor items and will be completed within the measurement period.

ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISTIONS

Actual Impact from Acquisitions

The Company's Consolidated Statements of Operations and Comprehensive Income for the first quarter of 2017 include net sales of $66.1 million and a net loss of $32.5 million from 2017 acquisitions. These amounts include amortization relating to inventory step-up and intangible assets recorded upon acquisition, transaction costs, and other integration-related costs.

Pro-forma Impact from Acquisitions

The following table presents supplemental pro-forma information as if the acquisitions had occurred on January 3, 2016. 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 acquisitions on January 3, 2016. In addition, the pro-forma consolidated results do not purport to project the future results of the combined Company.



	First Quarter
(Millions of Dollars, except per share amounts)	2017		2016
Net sales	$	2,953.2	$	2,876.9
Net earnings attributable to common shareowners	436.9		142.3
Diluted earnings per share	$	2.88	$	0.96

2017 Pro-forma Results

The 2017 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2017 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made:


•	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, 2017 to the acquisition dates.


•	Because the 2017 acquisitions were assumed to occur on January 3, 2016, there were no deal costs or inventory step-up amortization factored into the 2017 pro-forma year, as such expenses would have occurred in the first year following the acquisition.

2016 Pro-forma Results

The 2016 pro-forma results were calculated by taking the historical financial results of Stanley Black & Decker and adding the historical results of the 2017 acquisitions for their respective pre-acquisition periods. Accordingly the following adjustments were made assuming the acquisitions commenced on January 3, 2016:


•	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, 2016 to April 2, 2016.


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