Stanley Black & Decker First Quarter 2017 Overview April 21, 2017
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 The Cautionary Statements Detailed In The Corresponding Press Release And Form 8-K And Our Recent 34 Act SEC Filings. 1Q'17 INVESTOR PRESENTATION 2
Participants Jim Loree Don Allan Jeff Ansell Greg Waybright President & CEO Executive VP & CFO Executive VP & Group Executive, Global Tools & Storage VP, Investor Relations 1Q'17 INVESTOR PRESENTATION 3
1Q 2017 Financial Highlights Strong Start To 2017 Highlighted By 5% Organic Growth And Record 14.2%* OM Rate 1Q 17 Revenues Of $2.8 Billion (Up 5% Vs. Prior Year) Fueled By 5% Organic Growth Tools & Storage (+6%), Industrial (+4%) & Security (+1%) Operating Margin Rate, Excluding M&A Related Charges, Expanded 110 Basis Points To A Record 14.2% 1Q 17 Diluted Adjusted EPS Of $1.29 Reflecting Strong Operational Performance Which More Than Offset Currency, Higher Restructuring, One-Time Environmental Charge And Higher Shares Closed Previously-Announced Acquisitions Of Newell Tools And The Craftsman Brand As Well As The Divestiture Of The Majority Of Mechanical Security Businesses Raising 2017 Full-Year Adjusted EPS Guidance Range* To $7.08 - $7.28 From $6.98 - $7.18 Combined With Closing Of Three Important Portfolio Transactions * Excludes M&A Related Charges And Gain On Sales Of Businesses 1Q'17 INVESTOR PRESENTATION 4
1Q 2017 Portfolio Transactions Update Closed Three Portfolio Transactions In 1Q Minimal 1Q EPS Impact* Consistent With Expectations Closed March 9, 2017 Dedicated Team In Place Focusing On Supply Chain Execution & Commercial Strategies Strong Organic Growth Potential ~$100M Of Avg. Annual Revenue Growth For ~Next 10 Yrs. Earnings Accretion Of Approx. $0.08 Per Share In 2017, Excluding Charges Closed March 10, 2017 Integration Teams Formed And Actions Underway To Deliver Expected Results And Benefits $80 - $90 Million Of Total Cost Synergies Significant Potential Revenue Synergy Opportunities Earnings Accretion Of ~$0.24 Per Share In 2017, Excluding Charges Newell Tools & Craftsman Integration Activities Well Underway * Excludes M&A Related Charges And Gain On Sales Of Businesses 1Q'17 INVESTOR PRESENTATION 5
1Q 2017 Segment Overview $1,707 +9% Tools & Storage $1,855 $262 +16% $305 15.3% 16.4% 1Q 16 1Q 17 1Q 16 1Q 17 Revenue Profit* +6% Organic Growth +8% NA, +6% EUR, +1% EM +9% PTE, +3% HTAS NA: Share Gains Fueled By New Product Innovations, Including FLEXVOLT, And Strong Commercial Execution EUR: Broad-Based Growth Driven By Innovation & Expanded Retail Footprint EM: Growth Led By Latin America & Asia Driven By MPP Products And Pricing Actions 110 Bps OM Rate Increase Driven By Volume, Productivity / Cost Actions & Mix $504-5% $478 Security $60 $51 1Q 16 1Q 17 1Q 16 1Q 17 Revenue Profit* +1% Organic Growth +2% NA FLAT EUR NA: Growth Led By Higher Automatic Doors & Healthcare Volumes EUR: Strength In Nordics And UK Offset By Weakness In France EM: MSD Growth In Latin America And Southeast Asia Mechanical Sale Impacts OM Rate By ~70 Bps Balance Of Rate Decline Due Primarily To Mix & Investments $461 Industrial $473 $76 $86 +3% -15% +14% 11.9% 10.7% 16.5% 18.3% 1Q 16 1Q 17 1Q 16 1Q 17 Revenue Profit* +4% Organic Growth +4% Eng. Fastening +2% Infrastructure EF: Strong Auto. System Volumes Offset Electronics Weakness Fuels Record OM Rate INFRA: Higher Hydraulic Volumes Driven By Commercial Actions And Improved Market Conditions; Oil & Gas Flat Vs. Prior Year Volume, Productivity / Cost Actions Drive 180 Bps OM Rate Expansion * 1Q 17 Excludes M&A Related Charges & Gain On Sales Of Businesses 1Q'17 INVESTOR PRESENTATION 6
1Q 2017 Free Cash Flow Strong Working Capital Execution Led To +0.9 Turns, Excluding Acquisitions And Divestitures 6.7 WCT 1Q'16 1Q'17 V$ Net Income $ 189 $ 393 $ 204 Deprec / Amort 100 102 2 Pre-Tax Gain On Sales Of Businesses - (269) (269) Working Capital (268) (410) (142) Other (114) 39 153 Operating CF (93) (145) (52) CapEx (65) (65) 0 Free Cash Flow $ (158) $ (210) $ (52) On Track To Achieve Full-Year Commitment Of 100% FCF Conversion* * Excludes Gain On Sales Of Businesses 1Q'17 INVESTOR PRESENTATION 7
2017 Outlook Raising Adjusted EPS Outlook* To $7.08 - $7.28 From $6.98 - $7.18, Up ~9% - 12% Versus Prior Year FY2017 Guidance Item Impact FY2017 Segment Outlook Org Rev Growth Margin Rate EPS Guidance 2017 EPS, GAAP 2017 EPS, Adjusted $7.95 - $8.15 $7.08 - $7.28 Tools & Storage Mid Single Digit Positive Y-O-Y EPS Guidance Details Modest Increase To Organic Growth Outlook (~4%+) Higher One-Time 1Q 17 Environmental Charge (~$17M)** Incremental Cost & Productivity Actions ~$0.08 (~$0.08) ~$0.10 Security Low Single Digit Down*** Y-O-Y Reiterating Gross FX & Commodity HWs (~$100 - $105M) Other Maintaining ~$50M Core Restructuring Estimate (Includes ~$12M Pension Curtailment Charge) 2Q-17 EPS To Be ~27% Of FY 17 Earnings Industrial Relatively Flat Positive Y-O-Y Reiterating Free Cash Flow Conversion Rate Of Approximately 100%* * Excludes M&A Related Charges And Gain On Sales Of Businesses FCF Conversion Excludes Gain On Sales ** Reported In Other, Net *** Flat To Modestly Positive Excluding Mechanical Security Sale 1Q'17 INVESTOR PRESENTATION 8
Summary Overall Outlook For 2017 Remains Positive, Although Macro & Geopolitical Challenges Remain Generated 5% Organic Growth With Record 1Q OM Rate Of 14.2%* Raised 2017 Adjusted EPS Guidance Range* To $7.08 - $7.28 (From $6.98 - $7.18) ~10% Increase At Mid-Point Versus Prior Year On ~4%+ Organic Growth Closed Three Important Portfolio Transactions Newell Tools & Craftsman Integration Activities Well Underway With Energetic And Positive Responses From Employees, Customers And Suppliers SWK Investor Day To Be Held Morning Of May 16, 2017 In NYC Focus On Solid Execution & SFS 2.0 Position SWK To Deliver On Updated 2017 Financial Outlook * Excludes M&A Related Charges And Gain On Sales Of Businesses 1Q'17 INVESTOR PRESENTATION 9
Appendix
Global Presence Canada 4Q 16 1Q'17 Organic +6% +8% % SWK 4% 5% US 4Q 16 1Q'17 Organic +5% +6% % SWK 52% 54% Europe 4Q 16 1Q'17 Organic +1% +3% % SWK 22% 23% Japan 4Q 16 1Q'17 Organic +18% +19% % SWK 3% 3% Emg Mkt 4Q 16 1Q 17 Organic +4% -1% % SWK 17% 14% Australia 4Q 16 1Q'17 Organic -3% -3% % SWK 2% 1% 1Q'17 INVESTOR PRESENTATION 11
Regional Revenue Breakout 1Q 2017 Tools & Storage Security Industrial $1,855M $478M $473M Emerging Markets 14% Europe 18% Other 3% N.America 65% Emerging Markets 4% Europe 37% Other 1% N.America 58% Emerging Markets 24% Europe 29% Other 11% N.America 36% 1Q'17 INVESTOR PRESENTATION 12
Organic sales growth is defined as total sales growth less the sales of companies acquired in the past twelve months and any foreign currency impacts. Operating margin is defined as sales less cost of sales and selling, general and administrative expenses. Management uses operating margin and its percentage of net sales as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level. Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company s common stock and business acquisitions, among other items. Free cash flow conversion is defined as free cash flow divided by net income. The normalized statement of operations and business segment information, as reconciled to GAAP on pages 13 and 14 of the press release for 2017, is considered relevant to aid analysis of the Company s margin and earnings results aside from the material impact of the acquisition-related charges and gain on sales of businesses. 1Q'17 INVESTOR PRESENTATION 13