Stanley Black & Decker, Inc. · NYSE:SWK
Stanley Black & Decker — Stanley Works — IPO Roadshow (September 2009)
50 slides from Stanley Black & Decker's IPO roadshow presentation, Sep 4, 2009
Slide 1: The Stanley Works Investor Overview
THE STANLEY WORKS Investor Overview
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Slide 3: Cautionary Statements
Cautionary Statements Certain statements contained in this presentation are forward looking. These are based on assumptions of future events which may not prove to be accurate. They involve risk and uncertainty. Actual results may differ materially from those expected or implied. We direct you to th
Slide 4: The Stanley Works Investor Highlights
The Stanley Works Investor Highlights Business Segments Financial Highlights (’03-’08) Valuation (1) NYSE: SWK / S&P500 $3.2B Market Cap 3.2% Cash Dividend Yield - Increased for 42 years 79.9M Shares Outstanding Security $1.5B Industrial $1.3B CDIY $1.6B 12% Revenue CAGR (2% Organic) 11% EPS CAGR $3
Slide 5: Transition Has Resulted In Stronger, More Diversified Company
Transition Has Resulted In Stronger, More Diversified Company… Largest Customer U.S. Home Ctrs. & MMs 2002 22% 40% 2002 = $2.2B (1) …With Security Rapidly Approaching CDIY In Size Portfolio Transition 2008 ~6% ~13% 2008 = $4.4B 3 CDIY Industrial Security 13% 29% 58% 34% 29% 37% (1) Adjusted for Acqu
Slide 6: Strategy Overview
Strategy Overview Maintain Portfolio Transition Momentum Be Selective and Operate In Markets Where: Pursue Growth On Multiple Fronts Through: Accelerate Progress Via Stanley Fulfillment System (SFS) Strategy Focused On Profitable Growth, Asset Efficiency 4 Be a consolidator of the tool industry Incr
Slide 7: Long-Term Financial Objectives In Place Since 2004
Long-Term Financial Objectives In Place Since 2004 3-5% organic ~10% total Core Financial Objectives Mid-teens % EPS growth FCF Net Income ROCE in the range of 12-15% Sales Growth Financial Performance Dividend Continued growth Credit Rating Upper tier investment grade 5
Slide 8: Focus On Strong Cash Flow, Conservative Financial Position And Liquidity
Focus On Strong Cash Flow, Conservative Financial Position And Proactive Liquidity Management Creates… 6 Debt Picture …Strong Company With Solid Foundation Long Standing Strategy To Remain A /A3/A, A1/P2/F1 Serving SWK Well Early & Decisive Actions Taken To Ensure Ample Liquidity Debt to capital rat
Slide 9: Two Security Growth Platforms Created
Two Security Growth Platforms Created Security 7 Convergent Security ~$800M/Yr. Run Rate Revenues Mechanical Access ~$800M/Yr. Run Rate Revenues Builders Hardware Automatic Doors Systems Integration & Monitoring Product Sales Mechanical Locking Systems
Slide 10: Electronic/Convergent Security Today
Electronic/Convergent Security Today 2008 Revenue Mix 2008 Geographic Mix Financial/Business Profile • ~$800M/Yr. Run Rate Revenues • OM ~17% • 110 Offices Globally & 6 Monitoring Centers, 3,000+ Employees And 450K+ Customers • Current Market Share Of 2%+ Globally Key Competitive Differentiators • R
Slide 11: Improving Mix In Electronic Security
Improving Mix In Electronic Security Installation Revenue Is Down Across All Lines… Concurrently, RMR As A % Of Install Revenue Has Been Growing… Convergent’s Strategic Actions Are Paying Off… Large Projects 15% 30% + National Accounts 38% 20% + Core Commercial 47% 10% 100% % Of Total U.S. Install R
Slide 12: Mechanical Access Today
Mechanical Access Today 2008 Segment Mix 43% High Margin / Solid Growth Business… 2008 Revenue Mix Financial/Business Profile • ~$800/Yr. Run Rate Revenues • OM ~20% • Current Market Share Of 3%+ Globally ( 7%+ In NA) • 60 Offices Globally, 4000+ Employees (2,000 Sales And Service Employees) Key Com
Slide 13: Security Market Opportunity
Security Market Opportunity Market Market Size Growth Mechanical $26B 2-4% Convergent $39B 7-10% Significant Growth Potential Both Organically And Through Acquisitions
Slide 14: Healthcare Growth Platform
Healthcare Growth Platform Healthcare Solutions: $150M (2009E) SWK Well Positioned to Benefit From Growing Healthcare Market • Strong toehold in Personal Security market with Xmark and Senior Technologies • InnerSpace and Scan Modul form solid global base for specialty medical storage solutions busi
Slide 15: Industrial & Automotive Tools
Industrial Industrial & Automotive Tools: $0.9B Overview • $15B Market, Growing 2-3% • 3 Year Revenue CAGR 28% • #1 Market Share Europe, #2 U.S. • Importance Of Brand Strength Very High • Attractive Emerging Markets Creating Growth Opportunities • De minimis Auto OEM Exposure
Slide 16: Industrial Engineered Solutions
Industrial Engineered Solutions: $0.3B Financial Performance Overview 3 Year Revenue CAGR ~ 6% Organic ~13% Total 3 Year Average OM ~ 18% High Return Industrial Storage and Hydraulic Tools Businesses
Slide 17: Construction / DIY
Construction / DIY Construction / DIY: $1.6B CT&S and Bostitch Combination Leverages Operations And Resources
Slide 18: Construction / DIY New Products
Snap Off Knife Hammer Tacker Chalk Belts & Pouches Markers 35’ Tape Soft Storage Construction / DIY Mar. 2007 Sept. 2007 Markers Levels Specialty Saws Mobile Storage Vise Tool Boxes Tapes Mechanic Tools Fubar Long & Short Hammers Mar. 2008 Sept. 2008 Stud Sensor Expert Range 3 in 1 Fire & Rescue Pla
Slide 19: 2009 Brand Reinvestment
2009 Brand Reinvestment iPhone App A Total Of $21M In Brand Investment for 2009 Expanded Major League Baseball Marketing Program Enabling Promotion Of All Product Lines & Generation of At Least Billion Brand Impressions Continued Investment In NASCAR
Slide 20: Capital Allocation Focused On Three Major Growth Platforms
Industrial Capital Allocation Focused On Three Major Growth Platforms Consolidate tool industry Expand into emerging markets Intensify innovation and product development Streamline manufacturing footprint and product platforms Growth Platforms Security Grow organically Expand internationally via acq
Slide 21: Segment Regional / Growth Breakdown
Segment Regional / Growth Breakdown Security Represents Largest Growth Opportunity… CDIY Industrial Security …With Strong Organic Growth Rate As Well As Potential For International Expansion US Europe Asia 3% 47% 14% 75% 10% 19% 33% 45% 48% Normalized Market Growth Rate 2 – 3% 2 – 3% 5 - 7% ROW 3% 2
Slide 22: Financial Review: Annual Revenue Trend
Financial Review Growth Track Firmly Established ‘03 – ’08 CAGR 12% LTM Revenues $4.0B $4.4B Annual Revenue Trend $4.4B $3.9B $3.2B $2.9B $2.5B
Slide 23: Margin Trends
Margin Trends Gross Margin Expansion… …Driven By Diversification Strategy And Execution Focus 39.9% Gross Margin in 2Q’09 12.7% 13.6% 13.4% 12.3% 14.1% 11.0% 9.5% 37.8% 37.9% 36.3% 35.9% 36.7% 34.2% 33.9% OM GM
Slide 24: Financial Review: Annual EPS Trends
Financial Review Annual EPS Trends ‘03–’08 CAGR 11% (a) $2.03 $2.70 $3.06 $3.87 $3.41 $3.33 $2.82 - GAAP Ex-Restructuring $1.07 - GAAP Ex-Restructuring
Slide 25: Financial Review: Free Cash Flow Generation
Financial Review Sustained Free Cash Flow Generation… …Places SWK In A Position Of Strength LTM FCF $310M $ in Millions
Slide 26: SWK Free Cash Flow Conversion Versus Peers
SWK Free Cash Flow Conversion Versus Peers Free Cash Flow Conversion Outperformance… …Driven By Execution Focus 117% 110% 92% SWK Industrial Peers Security Peers 131% 107% 97% SWK Industrial Peers Security Peers 166% 91% 104% SWK Industrial Peers Security Peers Source: Capital IQ (1) Free Cash Flow
Slide 27: What Is SFS?
What Is SFS? SFS: Implementation Of Stanley’s Transformational Lean TM Embedded Processes, Culture Of Continuous Improvement Simplify every aspect of the business to drive profitability and asset efficiency Standardize processes and platforms to provide scalability Implementation of Lean in all our
Slide 28: SFS Driving Favorable Trend In Working Capital Turns
SFS Driving Favorable Trend In Working Capital Turns… Early Results ’03-’08 +1.3 Turns …$400M+ Working Capital Benefit Realized 5.9x 4.6x 4.7x 4.6x 4.5x 5.3x
Slide 29: Working Capital Turn Performance Versus Peers
Working Capital Turn Performance Versus Peers 4.5 5.2 4.0 SWK Industrial Peers Security Peers 5.3 5.1 4.3 SWK Industrial Peers Security Peers 5.9 5.1 3.8 SWK Industrial Peers Security Peers Change 2006-2008 SWK DHR CBE BDK MAS ITW SNA SHW IR NWL SWK SI DBD UTX CKP HON TYC -1.5 -1.0 -0.5 0.0 0.5 1.0
Slide 30: Global Presence
Global Presence With 44% Of Revenues Outside Of The US… …Asia Represents Largest Growth Opportunity Geographic Breakdown 13% U.S. Europe Asia 2% 29% 56% ROW
Slide 31: End Markets
End Markets A Diverse Set Of End Markets Served… …With Only 15% In U.S. Residential Construction / DIY 29% 12% 10% 13% 8% 4% 24% Residential Construction / DIY Commercial Construction Retail Healthcare, Education, Government Automotive Repair (Mac + Facom) Industrial - Other Other (1) “Industrial –
Slide 32: End Markets By Business
End Markets By Business *Industrial includes manufacturing, utilities, distribution, power, rail, oil & gas, etc. End Market MAS CSS Industrial CDIY SWK Res. Const./DIY 23% 0% 8% 59% 29% Comm. Const. 13% 25% 5% 11% 12% Retail 32% 13% 0% 6% 10% Health Care 11% 15% 3% 0% 5% Education 9% 9% 0% 0% 3% Go
Slide 33: Long Term Capital Allocation Objectives
Long Term Capital Allocation Objectives Capital Allocation Near Term Capital Allocation Objectives Debt reduction Dividend Limited acquisition activity Limited share repurchase activity Dividends Acquisitions Share Repurchase
Slide 34: $2.8B Has Been Invested in Acquisitions Since 2002
$2.8B Has Been Invested in Acquisitions Since 2002… Capital Allocation Acquisition Price ($M) Year …To Advance Growth Platforms '07 HSM '02 Best Access '08 Sonitrol '04 Blick & Frisco Bay '05 National '04 ISR, SGI, PHI '02-'08 Various '08 GdP '08 Xmark Sub-total 2,105 '06 Facom '04 CST/Berger '07 In
Slide 35: Make Something Great
MAKE SOMETHING GREAT
Slide 36: Acquisition Integration
Acquisition Integration Proprietary Integration Process Continues To Drive Significant Synergy Realization OM% 22% 15% 12% >30% >30% 15% Sonitrol X-Mark GdP Pre-Acquisition Post-Acquisition Key Features of Integration Process • 100 Day Integration Plan Finalized Prior To Close • Buy In On Integratio
Slide 37: 2009 Guidance Factors
2009 Guidance Factors 2008 GAAP EPS Actual $2.82* Unit Volume -18% To -20% ($3.90 - $3.40) Currency Impact (based on current rates) ($0.50) 2008 Cost Reduction Initiatives $1.75 1Q’09 Cost Reduction Initiatives (net of reinvestment) $0.28 2Q’09 Cost Reduction Initiatives $0.24 Gross Margin Rate Impr
Slide 38: Summary
Summary Executing a Clear Roadmap For Profitable Growth Key Takeaways Diversified portfolio able to better withstand cyclical downturns Moving aggressively to align cost structure with current environment Three large, attractive growth platforms 1. Convergent Security 2. Mechanical Access Solutions
Slide 39: Where is SWK?
Where is SWK? Upcoming Conferences: UBS conference in San Francisco on August 11 Morgan Stanley conference in New York on September 1st ASIS Security conference in September (21 thru 24 ) Imperial Security Conference in New York on November 5 Robert Baird Industrials Conference in Chicago on Novembe
Slide 40: Appendix
Appendix
Slide 41: Make Something Great
MAKE SOMETHING GREAT”
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Slide 50: Cost Actions Summary
Cost Actions Summary • $50M annualized cost actions • ~50% impact in ‘09 • ~35% headcount-related • $265M cost savings • ~ 60% headcount-related • 2010 impact approximately $25M • $45M ‘09 restructuring charges ($85M booked in 2008) • Large majority of restructuring cost is cash-related July ‘09 Act