E. MERGER AND ACQUISITIONS

NISCAYAH

On September 9, 2011 the Company 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 the year, the Company purchased additional outstanding shares of Niscayah, bringing the Company’s total ownership interest in Niscayah to 99% at December 31, 2011. The remaining outstanding shares will be purchased over the next three months for approximately $10.5 million at a price of 18 SEK per share plus interest at 2% per annum over the Stockholm Interbank Offered Rate (“STIBOR”). The total purchase price paid for Niscayah as of December 31, 2011 is $984.5 million. The Company’s pre-acquisition equity interest in Niscayah was remeasured as of the acquisition date to a share price of 18 SEK per share. The resulting mark to market adjustment was not significant.

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 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		186.0
Inventories, net		72.0
Prepaid expenses and other current assets		45.3
Property, plant and equipment		46.3
Trade names		10.0
Customer relationships		400.0
Other assets		49.1
Short-term borrowings		(202.9	)
Accounts payable		(55.8	)
Deferred taxes		(147.7	)
Other liabilities		(187.1	)
Non-controlling interests		(11.6	)

Total identifiable net assets	$	224.7
Goodwill		759.8

Total consideration transferred	$	984.5

Niscayah is 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 weighted average useful life assigned to the trade names was 5 years and to customer relationships was 12 years.

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.

The purchase price allocation for Niscayah is preliminary in certain respects. During the measurement period the Company expects to record adjustments relating to the finalization of intangible, inventory and property, plant and equipment valuations, for various opening balance sheet contingencies and for 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 finalize the Niscayah purchase accounting for the various open items as soon as reasonably possible during the measurement period. The finalization of the Company’s purchase accounting assessment will result in changes in the valuation of assets and liabilities acquired which the Company does not expect to be material.

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 will add 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 is preliminary, principally with respect to finalization of intangible asset valuations, amongst others.

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 allocation for these acquisitions is complete. There were no significant changes to the purchase price allocations made during 2011.

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 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	$	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 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 Black & Decker. It is estimated that $167.7 million of goodwill, relating to Black & Decker’s pre-merger historical tax basis, will be deductible for tax purposes.

2009 ACQUISITIONS — During 2009, the Company completed six minor acquisitions, primarily relating to the Company’s electronic security solutions business, for a combined purchase price of $24.3 million. Amounts allocated to the assets acquired and liabilities assumed were based on their estimated fair values at the acquisition dates. The purchase price allocations of these acquisitions are complete.

ACTUAL AND PRO-FORMA IMPACT OF THE MERGER AND ACQUISITIONS

The Company’s Consolidated Statement of Operations for 2011 includes $364.6 million in net sales and $40.6 million in net losses (inclusive of deal costs and other acquisition related costs) for Niscayah and other 2011 acquisitions.

The following table presents supplemental pro-forma information as if the Merger, acquisition of Niscayah and other acquisitions had occurred on January 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.


	Year-to-Date
(Millions of Dollars, except per share amounts)	2011		2010
Net sales	$	11,012.6		10,511.8
Net earnings		682.9		205.5
Diluted earnings per share		4.08		1.20

2011 Pro-Forma Results

The 2011 pro-forma results were calculated by combining the results of Stanley Black & Decker, Niscayah’s stand-alone pre-acquisition results and other smaller acquisitions’ pre-acquisition periods. The following adjustments were made to account for certain costs which would have been incurred during this pre-acquisition period.

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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 acquisitions that would have been incurred from January 2, 2011 to the acquisition dates.

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Because the 2011 acquisitions were assumed to occur on January 3, 2010, there were no deal costs, inventory step up amortization, or deferred revenue fair value amortization factored into the 2011 pro-forma year, as such expenses would have occurred in the first year following the acquisition.

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Because the 2011 acquisitions were funded with existing cash resources and debt acquired was repaid, no additional interest expense was factored into the 2011 pro-forma year.

2010 Pro-Forma Results

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 and Niscayah’s stand-alone results from January 3, 2010 through January 1, 2011. The pre-acquisition results of the other 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.

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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.

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

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

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Reduced revenue for fair value adjustments made to deferred revenue for Niscayah.

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

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

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The modifications above were adjusted for the applicable tax impact.