Continuing to Deliver Top-Quartile Performance
SFS 2.0 differentiates our performance and supports our day-to-day execution. Digital Excellence, Breakthrough Innovation, Commercial Excellence, Core SFS and Functional Transformation work in concert to sustain above-market organic growth, support margin expansion and deliver strong free cash flow generation.
Our well-established value creation model has produced strong shareholder returns. It starts with our world class brands, attractive growth platforms, and scalable and defensible franchises. Importantly, it leverages the power of SFS 2.0 — enabling the achievement of the Company’s long-term financial objectives.
We also employ an investor-friendly capital allocation approach. Our historical practice, which we intend to continue, has been to return 50% of our capital to shareholders in the form of dividends and/or opportunistic share repurchases, with the remaining 50% earmarked for acquisitions to further strengthen our business portfolio and fuel growth.
Our strategy, value creation model and operating system have shown a level of consistency through the past decade plus, but have also grown and evolved as times have changed.
Growth Catalysts: 2018 and Beyond
Leveraging SFS 2.0, we are executing on a series of growth catalysts that we believe will sustain our above-market growth potential for the foreseeable future.
FLEXVOLT, our recent breakthrough innovation initiative, represents the fastest adoption for a new product launch in DEWALT’s history. It is powered by a flexible battery system that delivers 60 or 120 volts for high power tools and three times the runtime when the 60-volt battery is used within our 20-volt power tool system. This innovative product launch was a high growth driver in 2017, and is also stimulating incremental demand for our 20-volt cordless offerings. We will continue to expand this system in the future with the ultimate goal of eliminating the need for cords on jobsites and thus making a dramatic and positive impact on worker safety and efficiency.
The Craftsman transaction gives Stanley Black & Decker the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings channels. In 2017, we successfully pursued retail partnerships with a major home center, a formidable co-op hardware retailer and the leading e-commerce player. We focused on developing 2018 commercial plans, designing an impressive and comprehensive product portfolio, adding capacity and preparing the supply chain to support our second-half rollout. We are working with passion and excitement to enable this iconic brand with its proud and beloved history to soon reclaim its rightful place in American homes, garages, factories and automotive shops.
To support the overall growth in the tools business and the rollout of the Craftsman brand, we continue to expand our US manufacturing footprint. Stanley Black & Decker has been a proud US manufacturer for 175 years and in fact has added more than 1,200 jobs in the US over the past three years. Looking ahead, we expect to add 1.5 million square feet of new manufacturing and distribution capacity in 2018, which will support our goal to increase US tools production to 50% of our total US tools volume over the next three years.
The Newell Tools acquisition integration continues to proceed on or ahead of plan, which makes us confident that we will achieve our targeted $80–$90 million in cost synergies. We are now turning our attention to capturing the revenue synergies from the Lenox and Irwin brands by leveraging these products within our global customer base and bringing new offerings to enhance organic growth within Tools & Storage.
In December, we reached an agreement to purchase the industrial business of Nelson Fastener Systems. This bolt-on transaction will enhance Engineered Fastening’s presence in general industrial end markets, expand its portfolio of highly engineered fastening solutions, and deliver cost synergies.
We continue to be encouraged by the prospects for value creation within the M&A pipeline. Our focus remains on strengthening the core through bolt-on transactions within Tools & Storage, Industrial and Security, as well as pursuing adjacency opportunities that possess sound industrial logic and fit with our value creation model.
In addition, we continue to invest in additional opportunities aligned with our SFS 2.0 operating system. We are optimistic that we will be able to commercialize these Breakthrough Innovation, Commercial Excellence and Digital Excellence programs to generate additional growth prospects in the future.