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MERGER AND ACQUISITIONS | 12 Months Ended
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Dec. 28, 2019
Business Combinations [Abstract] |
MERGER AND ACQUISITIONS | ACQUISITIONS AND INVESTMENTS PENDING ACQUISITION On January 3, 2020, the Company reached an agreement to acquire Consolidated Aerospace Manufacturing, LLC ("CAM") for up to $1.5 billion in cash, with $200 million of the purchase price held back and contingent on the Boeing 737 MAX Airplanes receiving Federal Aviation Administration authorization to return to service and The Boeing Company achieving certain production levels. CAM is an industry-leading manufacturer of specialty fasteners and components for the aerospace and defense markets. The Company expects the acquisition to further diversify the Company's presence in the industrial markets and expand its portfolio of specialty fasteners in the high-growth, high-margin aerospace and defense market. The acquisition will be accounted for as a business combination using the acquisition method of accounting and consolidated into the Company's Industrial segment. The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close in late February 2020. 2019 INVESTMENTS On January 2, 2019, the Company acquired a 20 percent interest in MTD, a privately held global manufacturer of outdoor power equipment, for $234 million in cash. With annual revenues of approximately $2.4 billion, MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 EBITDA, with an equitable sharing arrangement for future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment. During 2019, the Company made additional immaterial investments that are not accounted for under the equity method. The Company acquired less than 20 percent interest in each investment and does not have the ability to significantly influence any of the investees. 2019 ACQUISITIONS IES Attachments On March 8, 2019, the Company acquired IES Attachments for $653.5 million, net of cash acquired. IES Attachments is a manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The acquisition further diversifies the Company's presence in the industrial markets, expands its portfolio of attachment solutions and provides a meaningful platform for continued growth. The results of IES Attachments subsequent to the date of acquisition are included in the Company's Industrial segment. The IES Attachments acquisition is being accounted for as a business combination using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated acquisition date value of identifiable net assets acquired, which includes $77.9 million of working capital (primarily inventory), $78.3 million of deferred tax liabilities, and $328.0 million of intangible assets, is $344.7 million. The related goodwill is $308.8 million. The amount allocated to intangible assets includes $304.0 million for customer relationships. The weighted-average useful life assigned to the intangible assets is 14 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 IES Attachments. It is estimated that $2.4 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes. The purchase price allocation for IES Attachments is substantially complete with the exception of certain opening balance sheet liabilities and tax matters. The Company will complete its purchase price allocation in the first quarter of 2020. Any measurement period adjustments resulting from the finalization of the Company’s purchase accounting assessment are not expected to be material. 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. Other 2019 Acquisitions During 2019, the Company completed five smaller acquisitions for $40.8 million, net of cash acquired. The estimated acquisition date value of the identifiable net assets acquired, which includes $6.0 million of working capital and $8.8 million of customer relationships, is $19.1 million. The related goodwill is $21.7 million. The useful lives assigned to the customer relationships range from 8 to 10 years. The results of these acquisitions subsequent to the dates of acquisition are included in the Company's Industrial and Security segments. The acquisition accounting for these acquisitions is substantially complete with the exception of certain minor items and will be completed within the measurement period. 2018 ACQUISITIONS Nelson Fastener Systems On April 2, 2018, the Company acquired Nelson for $424.2 million, net of cash acquired. Nelson is complementary to the Company's product offerings, enhances its presence in the general industrial end markets, and expands its portfolio of highly-engineered fastening solutions. The results of Nelson are included in the Company's Industrial segment. The Nelson acquisition was accounted for as a business combination using the acquisition method of accounting. The acquisition date value of identifiable net assets acquired, which included $64.2 million of working capital and $167.0 million of intangible assets, was $211.8 million. The related goodwill was $216.9 million. The amount allocated to intangible assets included $149.0 million for customer relationships. The useful lives assigned to the intangible assets ranged from 12 to 15 years. Goodwill was 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 Nelson. Goodwill is not expected to be deductible for tax purposes. The acquisition accounting for Nelson is complete. The measurement period adjustments recorded in 2019 did not have a material impact to the Company's Consolidated Financial Statements. Other 2018 Acquisitions During 2018, the Company completed six smaller acquisitions for a total purchase price of $104.5 million, net of cash acquired. The acquisition date value of the identifiable net assets acquired, which included $13.4 million of working capital and $35.5 million of intangible assets, was $38.1 million. The related goodwill was $66.4 million. The amount allocated to intangible assets included $32.0 million for customer relationships. The useful lives assigned to intangible assets ranged from 10 to 14 years. The acquisition accounting for these acquisitions is complete. The measurement period adjustments recorded in 2019 did not have a material impact to the Company's Consolidated Financial Statements. 2017 ACQUISITIONS Newell Tools On March 9, 2017, the Company acquired Newell Tools for approximately $1.86 billion, net of cash acquired. The Newell Tools results are included in the Company's Tools & Storage segment. The Newell Tools acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price allocation for Newell Tools was completed in 2018. The measurement period adjustments recorded in 2018 did not have a material impact on the Company's Consolidated Financial Statements. The following table summarizes the acquisition date value of assets acquired and liabilities assumed:
(Millions of Dollars) |
Cash and cash equivalents | $ | 20.0 |
Accounts and notes receivable, net | 19.7 |
Inventories, net | 195.5 |
Prepaid expenses and other current assets | 27.1 |
Property, plant and equipment, net | 112.4 |
Trade names | 283.0 |
Customer relationships | 548.0 |
Other assets | 8.8 |
Accounts payable | (70.3 | )
Accrued expenses | (40.7 | )
Deferred taxes | (269.4 | )
Other liabilities | (7.9 | )
Total identifiable net assets | $ | 826.2 |
Goodwill | 1,031.8 |
Total consideration paid | $ | 1,858.0 |
The trade names were determined to have indefinite lives. The weighted-average useful life assigned to the customer relationships was 15 years. Goodwill was 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 $15.7 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes. Craftsman Brand On March 8, 2017, the Company purchased the Craftsman® brand from Sears Holdings Corporation ("Sears Holdings") for a total estimated cash purchase price of $936.7 million on a discounted basis, which consisted of an initial cash payment of $568.2 million, a cash payment due in March 2020 with an estimated present value at acquisition date of $234.0 million, and future payments to Sears Holdings of between 2.5% and 3.5% on sales of Craftsman products in new Stanley Black & Decker channels through March 2032, which was valued at $134.5 million at the acquisition date based on estimated future sales projections. 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 products in Sears Holdings-related channels. The perpetual license will be royalty-free until March 2032, which represented an estimated value at acquisition date of approximately $293.0 million, and 3% thereafter. The Craftsman results are included in the Company's Tools & Storage segment. The Craftsman® brand acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price allocation for Craftsman was completed during 2018. The measurement period adjustments recorded in 2018 did not have a material impact on the Company's Consolidated Financial Statements. The acquisition date value of identifiable net assets acquired, which included $40.2 million of working capital and $418.0 million of intangible assets, was $482.6 million. The related goodwill was $747.1 million. The amount allocated to intangible assets included $396.0 million of an indefinite-lived trade name. The useful life assigned to the customer relationships was 17 years. Goodwill was 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. It is estimated that $442.7 million of goodwill will be deductible for tax purposes. Other 2017 Acquisitions During 2017, the Company completed four smaller acquisitions for a total purchase price of $182.9 million, net of cash acquired. The results of these acquisitions subsequent to the dates of acquisition are included in the Company's Tools & Storage and Security segments. The purchase price allocation for these acquisitions was completed in 2018. The acquisition date value of the identifiable net assets acquired, which included $35.3 million of working capital and $54.4 million of intangible assets, was $88.1 million. The related goodwill was $94.8 million. The amount allocated to intangible assets included $51.4 million for customer relationships. The useful lives assigned to the customer relationships ranged between 10 and 15 years. ACTUAL AND PRO-FORMA IMPACT FROM ACQUISITIONS Actual Impact from Acquisitions The net sales and net loss from the 2019 acquisitions included in the Company's Consolidated Statements of Operations for the year ended December 28, 2019 are shown in the table below. The net loss includes amortization relating to intangible assets recorded upon acquisition, inventory step-up charges, transaction costs, and other integration-related costs.
(Millions of Dollars) | 2019
Net sales | $ | 291.1 |
Net loss attributable to common shareowners | $ | (1.7 | )
Pro-forma Impact from Acquisitions The following table presents supplemental pro-forma information as if the 2019 acquisitions had occurred on December 31, 2017 and the 2018 acquisitions had occurred on January 1, 2017. The pro-forma consolidated results are not necessarily indicative of what the Company’s consolidated net sales and net earnings would have been had the Company completed the acquisitions on the aforementioned dates. In addition, the pro-forma consolidated results do not purport to project the future results of the Company.
(Millions of Dollars, except per share amounts) | 2019 |  | 2018
Net sales | $ | 14,524.6 |  |  | $ | 14,448.6 |
Net earnings attributable to common shareowners | 977.8 |  |  | 620.3 |
Diluted earnings per share | $ | 6.49 |  |  | $ | 4.09 |
2019 Pro-forma Results The 2019 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2019 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 December 30, 2018 to the acquisition dates.
• | Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 30, 2018 to the acquisition date of IES Attachments.
• | Because the 2019 acquisitions were assumed to occur on December 31, 2017, there were no acquisition-related costs or inventory step-up charges factored into the 2019 pro-forma year, as such expenses would have occurred in the first year following the assumed acquisition date.
2018 Pro-forma Results The 2018 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2018 and 2019 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 December 31, 2017 to the acquisition dates of the 2018 acquisitions and for the year ended December 29, 2018 for the 2019 acquisitions.
• | Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 31, 2017 to the acquisition date of Nelson and for the year ended December 29, 2018 for the IES acquisition.
• | Additional expense for acquisition-related costs and inventory step-up charges relating to the 2019 acquisitions, as such expenses would have been incurred during the year ended December 29, 2018.
• Because the 2018 acquisitions were assumed to occur on January 1, 2017, there were no acquisition-related costs or inventory step-up charges factored into the 2018 pro-forma period, as such expenses relating to the 2018 acquisitions would have occurred in the first year following the assumed acquisition date.

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