2016 Year in Review

Building on high performance

We have both financial and non-financial top-quartile performance in our sights. Our engine for operational excellence, SFS, is evolving to encompass the opportunities of “Industry 4.0” intelligent manufacturing and supply chain management. SFS 2.0 has brought focus and investment to driving commercial excellence and functional transformation, seeking step-change impact in how our front lines and back offices perform.

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Driving Top-Quartile Performance

Historically, we have outperformed our peers and the markets over time in a number of financial, operational and sustainability metrics, including the key metric of total shareholder return. We continue to do so. In fact, during the last several years of a virtual no-growth economy in Europe, our Tools & Storage franchise posted an average 7% annual organic growth rate. We intend to carry this legacy forward, fueled by a passion to win and a culture of high performance, driving above-market organic growth supplemented with strategic acquisitions while setting new standards for socially responsible performance. Our current goal is to double our revenues by 2022, and we have an established track record of hitting our goals.

Fueling Growth in a Low Growth World

We believe we have the means and the discipline to deliver above-market growth and margin expansion in all our businesses over the long term. It starts with leveraging our SFS 2.0 operating system, harnessing investments in breakthrough innovation, digital excellence and commercial excellence to drive 4%–6% annual organic revenue growth in a 2%–3% growth world. With FLEXVOLT, our disruptive new system, the first SFS 2.0 breakthrough has launched. Our acquisitions of the Craftsman brand and of Newell Tools bring complementary product lines, new channels and additional brand power to our leading global franchise in Tools & Storage. We are already on our way and see compelling opportunities ahead.

Jaguar Land Rover Chooses STANLEY Engineered Fastening

In the largest automotive order in STANLEY Engineered Fastening history, Jaguar Land Rover named us as its single source supplier of self-piercing rivets and systems for their new Land Rover Discovery and Land Rover Defender series. The vehicles will be produced at the company’s new greenfield site in Slovakia (its first venture into a standalone manufacturing facility outside of the UK) as well as in its Solihull, UK facility. In an exhaustive review of suppliers, Jaguar Land Rover based its decision on a number of factors, including our “best in class” quality, innovation and global capability as a full service supplier, with total cost of ownership as a guiding criterion.

Commercial Excellence

Commercial Excellence focuses on superior execution across seven interrelated and interdependent customer-facing areas: customer insights, innovation and product management, brand and marketing, pricing and promotion, sales force deployment and effectiveness, channel programs and the customer experience. All seven of these pillars were mobilized to bring FLEXVOLT to market and are being optimized in our businesses to help drive sustainable revenue growth.

“SFS 2.0 provides a competitive advantage on behalf of our customers. Its elements ensure we deliver on time, on cost, on quality… that we eliminate waste furthest from our customers to fund investment in our customers… that we lead and are relevant digitally… that we develop innovation that exceeds all others, even the demanding needs of our end users… and finally that everything we do starts and ends with our customers. All of this can be done, but only done by the best people in the world all moving in the same direction. This is what we do every day without fail.”

Jeffery D. Ansell
Executive Vice President & Group Executive, Global Tools & Storage,
Executive Sponsor of Commercial Excellence

Optimizing the
Rollout of
FLEXVOLT

The global launch of FLEXVOLT is the largest, most global and most digitally enabled product rollout in the history of Stanley Black & Decker and of any of our brands. The launch commenced simultaneously in multiple countries and markets, across multiple product lines, with the intent of rapidly developing a sizable installed base. This is a dramatic departure from our usual practice of starting with one product line in one region and working outward, but in keeping with the battery’s disruptive, market-shaking potential. The world-class rollout involved multiple channels and organizational layers, and was built on intensive collaboration between our Commercial Excellence, Digital Excellence and Breakthrough Innovation groups.

When FLEXVOLT proved to be a viable, market-ready concept, we had a little over a year to develop the go-to-market plan. To prepare our distributors and major customers, we developed an off-site Innovation Showcase and built out the story through a series of practical end user applications. More than 9,000 individuals representing a thousand distributors and companies from 20 countries have experienced first-hand just how revolutionary this “power of corded” flexible new battery system will be.

Wherever end users work, learn and play, we gave FLEXVOLT a presence both digitally and physically. We engaged distributors. We leveraged existing brand sponsorships at sporting events—wherever a DeWALT banner flew, it became one for FLEXVOLT. We provided information, materials and tools to vocational institutes.

FLEXVOLT is SFS 2.0 in action.

For more on the innovation of FLEXVOLT, see our Building On Innovation page.

45

Days

And 10K hours to build out a world-class launch facility

120M

Impressions

in 24 hours following media event

250+

Customers

From 26 countries visited the launch facility in first 8 months

Continually
Raising the Bar
On Operational
Excellence

Core SFS keeps taking our operations to new levels of performance. In 2016, we exceeded 10 working capital turns, a longtime and greatly ambitious goal. The year also saw us reach agreement to acquire Newell Tools, our first multi-billion-dollar acquisition since we formed Stanley Black & Decker in 2010. SFS has been and will continue to be an integral part of our ability to integrate new acquisitions successfully.

The Evolution
Of Excellence

“Operational excellence remains a hallmark of our business. Driven by the rigor and discipline of SFS, we have surpassed 10 working capital turns, a goal that some outside our business once saw as purely aspirational. As our global supply chain evolves, we will apply best-in-world digital technologies to assure we maintain our competitive edge. Continual improvement is simply who we are.”

Steven J. Stafstrom
Vice President, Operations, Global Tools & Storage and Global Emerging Markets,
Executive Sponsor of Core SFS

Core SFS Expands to Encompass “Industry 4.0”

In light of this return to growth by acquisition and in anticipation of significant integration activity, we have refreshed our onboarding materials which introduce new employees to the critical operational discipline of SFS. We are also building up our core SFS capabilities in complexity management. As we have learned, the need to strip excess complexity out of the business is critical to a successful integration.

What is new for core SFS, is that we are re-gearing it for this new era of “Industry 4.0” in which technologies like the Internet of Things (IoT), robotics, machine learning, additive manufacturing and advanced analytics are transforming manufacturing and the supply chain of forward-looking industrials. A whole new tranche of factory floor technologies and of new means for visibility and control along the supply chain need to be understood, integrated and optimized. Industry 4.0 improves quality and throughput and drives down the cost of manufacturing while raising capabilities. As we expand globally and seek to "make where we sell" we are looking at revolutionary and more agile ways of manufacturing.

The “smart factory” of the future is being reconceived and built today, using manufacturing execution systems, next generation sensors and other data-driven IoT advances to marry digital innovations with the physical power of making useful things. The supply chain of the future is also being built today. We are collaborating with our partners to transform visibility and responsiveness across the value chain, end to end.

$1B+

Of working capital

Freed up by SFS
Since its inception

$1B+

Of working capital

Freed up by SFS
Since its inception

Functional Transformation

~$1000M

Benefit

Targeted
Through 2018

~1000

Acquisitions

Over the last
15 Years

Transforming our back-office systems, processes and culture has the bottom-line potential to fund every other aspect of SFS 2.0 while also enabling the functions to support our growth and margin expansion plans. We are in the process of rethinking and retooling our support functions, with a “clean sheet” zero-based approach. Our initial focus has been on Information Technology and Finance, which have the largest spend and therefore the greatest potential for transformative impact, but work has also begun in Human Resources and Procurement.

We became a global diversified industrial through acquisitions—approximately 100 acquisitions completed over the last 15 years. And while we have proven expertise in integrating new companies and driving transformative operational efficiencies, there is still tremendous room for efficiency improvement in the back-office. We continue to make progress towards unleashing the potential of shared services. As an example, Information Technology is now centralized, working on consolidating vendor contracts and leveraging scale to return value as part of implementing a multi-year technology plan.

This disciplined process of centralization, simplification, standardization and consolidation will deliver great value to the organization and our shareholders.

Functional transformation enables significant cost savings while making our back-office platforms more scalable for growth. Those savings are partially being reinvested in growth (organic and inorganic) and partially dropping through to margin expansion.

“We have zeroed in on opportunities to generate significant savings in our back office by changing the way our functions work. This is a significant task which requires IT capital and talented resources; however, it isn’t experimental or innovative work, just practical simplification and optimization. These savings will help fund several of our growth-oriented SFS 2.0 initiatives.”

Donald Allan, Jr.
Executive Vice President & Chief Financial Officer,
Executive Sponsor of Functional Transformation

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