TOWSON, Md., April 24 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the first
quarter of 2003 were $43.4 million or $0.55 per diluted share, a 34% increase
over diluted earnings per share of $0.41 in the first quarter of 2002. Sales
for the first quarter of 2003 were $968 million, up 2% from $952 million for
the same period last year. Sales decreased 3% excluding the effects of
foreign currency translation.
Commenting on the results, Nolan D. Archibald, Chairman and Chief
Executive Officer, said, "Despite a very weak global economic environment
during the quarter, we were able to grow sales in both our U.S. consumer power
tools and accessories division and our fastening and assembly systems segment.
In addition, operating margin improved significantly in each of our business
segments, as our Six Sigma and restructuring programs continued to deliver
positive results. This margin improvement enabled us to deliver earnings
significantly higher than in the first quarter of 2002.
"We are also pleased with the progress of our restructuring program.
During the quarter, our Mexican facility continued to add professional tool
lines, and the transfer of tool assembly from the U.K. to our Czech plant is
proceeding on plan. We continue to anticipate incremental savings of
approximately $35 million in 2003 and $40 million in 2004, which, combined
with $25 million in 2002, will yield $100 million of total annualized savings.
"Sales in the Power Tools and Accessories segment were essentially flat to
the first quarter last year, with flat North American sales, a small decrease
in Europe, and an increase in the rest of the world. Operating profit for the
segment increased 47% from the first quarter last year, with strong
improvement in both the U.S. and Europe. Six Sigma and restructuring program
benefits were the primary reasons for the operating margin increase.
"In the U.S., sales of consumer products increased at a double-digit rate,
with strong sales growth in lawn and garden products and power tools. This
growth was driven by demand for new products, such as a new Grass Hog(R)
automatic-feed trimmer/edger, and the continued success of the Bulls Eye(TM)
auto-leveling laser line and stud finder. DEWALT(R) professional division
sales decreased in the U.S., due to the weak economic environment, especially
in the industrial sector, compounded by adverse weather conditions.
"In Europe, sales decreased modestly during the quarter, largely because
of lower consumer tool sales in Germany and France. Professional tool sales
were flat to last year, reflecting low construction activity. Gross margin
and operating profit were up dramatically, with improvement driven by
restructuring benefits and favorable currency.
"Sales in the Hardware and Home Improvement segment were down 14% for the
quarter. Sales of Price Pfister(R) plumbing products decreased significantly
as the result of previously announced shelf space losses. We are pleased to
announce, however, that Price Pfister's product listings will increase
approximately 75% at Lowe's stores. We expect that this reset, which will
start in the second quarter, should begin to offset the previously announced
volume losses. Sales in the Kwikset(R) security hardware business declined,
largely due to promotional activity at home centers which drove sales in the
first quarter of 2002. Operating profit for Hardware and Home Improvement
decreased a modest 4% from the first quarter last year, as a significant
improvement in operating margin mitigated the effect of lower sales volume.
"Sales in the Fastening and Assembly Systems segment were up 3% for the
quarter, reflecting gains in both the automotive and industrial sectors,
particularly in Asia. Operating profit in this segment increased 12% from the
first quarter last year because of improvements in manufacturing productivity.
"Free cash flow, which is typically negative in the first quarter, was
negative $147 million, reflecting higher inventory and the payment of 2002
year-end accrued liabilities. The inventory increase from the first quarter
of 2002 reflects currency translation, safety stock related to our
restructuring program, and lower-than-expected sales. We anticipate that the
safety stock will begin to diminish in the second quarter and will be
effectively eliminated by year end. In addition, we repurchased 2.0 million
shares of our stock during the quarter and repaid $310 million of maturing
debt on April 1.
"Looking forward, assuming continued weak economic conditions, we
anticipate flat or slightly lower sales for the second quarter, excluding
currency translation. For the full year, we expect roughly flat sales before
currency translation, aided by second-half gains at Price Pfister. At current
foreign exchange rates, these projections would translate to low single-digit
sales growth for the second quarter and full year. We expect restructuring
and Six Sigma savings to drive an increase in operating margin, and interest
expense should be favorable to 2002. As a result, we expect diluted earnings
per share to be in the $0.90-to-$0.95 range for the second quarter and in the
$3.60-to-$3.75 range for the full year, excluding any remaining charges under
the previously announced restructuring program. We continue to anticipate
converting at least 80% of full-year net earnings to free cash flow.
"Black & Decker's strong financial performance reflects excellent
execution of manufacturing and commercial initiatives. We continue to invest
in brands, product development, and end-user relationships, and to
successfully execute our restructuring program. By combining market
leadership with operating excellence, Black & Decker is well positioned to
continue delivering outstanding value to shareholders."
The Corporation will hold a conference call today at 10:00 a.m., E.T., to
discuss first-quarter results and the outlook for the remainder of 2003. In
addition, the Corporation will hold an analysts/bankers meeting on Tuesday,
May 13, 2003, beginning at 8:30 a.m., E.T. Investors can listen to the events
by visiting http://www.bdk.com and clicking on the icon labeled "Live Webcast."
Listeners should log-in at least ten minutes prior to the beginning of the
event to assure timely access. Replays of the events will be available at
http://www.bdk.com.
This release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. By their nature, all forward-looking statements involve
risks and uncertainties. For a more detailed discussion of the risks and
uncertainties that may affect Black & Decker's operating and financial results
and its ability to achieve the financial objectives discussed in this press
release, interested parties should review the "Forward-Looking Statements"
sections in Black & Decker's reports filed with the Securities and Exchange
Commission, including the Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. Included
with this release is a reconciliation of the differences between these non-
GAAP financial measures with the most directly comparable financial measures
calculated in accordance with GAAP.
Black & Decker is a leading global manufacturer and marketer of power
tools and accessories, hardware and home improvement products, and technology-
based fastening systems.
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
----------------------------------
March 30, 2003 March 31, 2002
---------------- ----------------
SALES $ 968.2 $ 951.7
Cost of goods sold 624.7 644.8
Selling, general, and
administrative expenses 270.2 244.7
---------------- ----------------
OPERATING INCOME 73.3 62.2
Interest expense (net of interest income) 12.1 15.8
Other expense 1.8 1.2
---------------- ----------------
EARNINGS BEFORE INCOME TAXES 59.4 45.2
Income taxes 16.0 12.2
---------------- ----------------
NET EARNINGS $ 43.4 $ 33.0
================ ================
NET EARNINGS PER COMMON SHARE - BASIC $ .55 $ .41
================ ================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.3 80.1
================ ================
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ .55 $ .41
================ ================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 78.5 80.6
================ ================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
March 30, 2003 December 31, 2002
---------------- -------------------
ASSETS
Cash and cash equivalents $ 286.7 $ 517.1
Trade receivables 747.0 729.0
Inventories 813.9 748.9
Other current assets 209.3 198.9
---------------- -------------------
TOTAL CURRENT ASSETS 2,056.9 2,193.9
---------------- -------------------
PROPERTY, PLANT, AND EQUIPMENT 648.9 655.9
GOODWILL 734.9 729.1
OTHER ASSETS 548.5 551.6
---------------- -------------------
$ 3,989.2 $ 4,130.5
================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 5.9 $ 4.6
Current maturities of long-term debt 309.9 312.0
Trade accounts payable 366.4 343.2
Other accrued liabilities 673.3 793.6
---------------- -------------------
TOTAL CURRENT LIABILITIES 1,355.5 1,453.4
---------------- -------------------
LONG-TERM DEBT 924.5 927.6
DEFERRED INCOME TAXES 211.5 211.3
POSTRETIREMENT BENEFITS 411.8 409.0
OTHER LONG-TERM LIABILITIES 528.5 529.6
STOCKHOLDERS' EQUITY 557.4 599.6
---------------- -------------------
$ 3,989.2 $ 4,130.5
================ ===================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Reportable Business Segments
-----------------------------------------------
Power Hardware Fastening
Three Months Ended Tools & & Home & Assembly
March 30, 2003 Accessories Improvement Systems Total
-------------------------------------------------------------------------
Sales to unaffiliated
customers $647.1 $172.6 $129.2 $948.9
Segment profit (loss)
(for Consolidated,
operating income) 57.7 15.0 18.4 91.1
Depreciation and amortization 19.8 8.1 3.7 31.6
Capital expenditures 14.9 7.7 3.5 26.1
Three Months Ended
March 31, 2002
-------------------------------------------------------------------------
Sales to unaffiliated
customers $652.0 $201.0 $125.9 $978.9
Segment profit (loss)
(for Consolidated,
operating income) 39.1 15.6 16.5 71.2
Depreciation and amortization 21.7 9.4 3.6 34.7
Capital expenditures 15.2 3.4 3.6 22.2
Currency Corporate,
Three Months Ended Translation Adjustments,
March 30, 2003 Adjustments & Eliminations Consolidated
-------------------------------------------------------------------------
Sales to unaffiliated customers $19.3 $_ $968.2
Segment profit (loss) (for
Consolidated, operating income) 2.2 (20.0) 73.3
Depreciation and amortization .5 4.4 36.5
Capital expenditures .1 .2 26.4
Three Months Ended
March 31, 2002
-------------------------------------------------------------------------
Sales to unaffiliated customers ($27.2) $_ $951.7
Segment profit (loss) (for
Consolidated, operating income) (2.0) (7.0) 62.2
Depreciation and amortization (.8) .3 34.2
Capital expenditures (.3) .2 22.1
The reconciliation of segment profit to the Corporation's earnings before
income taxes, in millions of dollars, is as follows:
Three Months Ended
-------------------------------------------------------------------------
March 30, 2003 March 31, 2002
-------------------------------------------------------------------------
Segment profit for total
reportable business segments $91.1 $71.2
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 2.2 (2.0)
Depreciation of Corporate property (.3) (.3)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation 3.6 10.3
Other adjustments booked in
consolidation directly related to
reportable business segments (10.0) (4.7)
Amounts allocated to businesses in
arriving at segment profit in excess
of (less than) Corporate center
operating expenses, eliminations,
and other amounts identified above (13.3) (12.3)
--------------------------------------------------------------------------
Operating income 73.3 62.2
Interest expense, net of interest income 12.1 15.8
Other expense 1.8 1.2
-------------------------------------------------------------------------
Earnings before income taxes $59.4 $45.2
=========================================================================
BASIS OF PRESENTATION:
The Corporation operates in three reportable business segments: Power
Tools and Accessories, Hardware and Home Improvement, and Fastening and
Assembly Systems. The Power Tools and Accessories segment has worldwide
responsibility for the manufacture and sale of consumer and professional power
tools and accessories, electric cleaning and lighting products, and electric
lawn and garden tools, as well as for product service. In addition, the Power
Tools and Accessories segment has responsibility for the sale of security
hardware to customers in Mexico, Central America, the Caribbean, and South
America; for the sale of plumbing products to customers outside the United
States and Canada; and for sales of household products. The Hardware and Home
Improvement segment has worldwide responsibility for the manufacture and sale
of security hardware (except for the sale of security hardware in Mexico,
Central America, the Caribbean, and South America). It also has
responsibility for the manufacture of plumbing products and for the sale of
plumbing products to customers in the United States and Canada. The Fastening
and Assembly Systems segment has worldwide responsibility for the manufacture
and sale of fastening and assembly systems.
The Corporation assesses the performance of its reportable business
segments based upon a number of factors, including segment profit. In
general, segments follow the same accounting policies as those described in
Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2002,
except with respect to foreign currency translation and except as further
indicated below. The financial statements of a segment's operating units
located outside of the United States, except those units operating in highly
inflationary economies, are generally measured using the local currency as the
functional currency. For these units located outside of the United States,
segment assets and elements of segment profit are translated using budgeted
rates of exchange. Budgeted rates of exchange are established annually and,
once established, all prior period segment data is restated to reflect the
current year's budgeted rates of exchange. The amounts included in the
preceding tables under the captions "Reportable Business Segments" and
"Corporate, Adjustments, & Eliminations" are reflected at the Corporation's
budgeted rates of exchange for 2003. The amounts included in the preceding
tables under the caption "Currency Translation Adjustments" represent the
difference between consolidated amounts determined using those budgeted rates
of exchange and those determined based upon the rates of exchange applicable
under accounting principles generally accepted in the United States.
Segment profit excludes interest income and expense, non-operating income
and expense, adjustments to eliminate intercompany profit in inventory and
income tax expense. In addition, segment profit excludes restructuring and
exit costs. In determining segment profit, expenses relating to pension and
other postretirement benefits are based solely upon estimated service costs.
Corporate expenses, as well as certain centrally managed expenses, are
allocated to each reportable segment based upon budgeted amounts. While sales
and transfers between segments are accounted for at cost plus a reasonable
profit, the effects of intersegment sales are excluded from the computation of
segment profit. Intercompany profit in inventory is excluded from segment
assets and is recognized as a reduction of cost of goods sold by the selling
segment when the related inventory is sold to an unaffiliated customer.
Because the Corporation compensates the management of its various businesses
on, among other factors, segment profit, the Corporation may elect to record
certain segment-related expense items of an unusual or non-recurring nature
in consolidation rather than reflect such items in segment profit. In
addition, certain segment-related items of income or expense may be recorded
in consolidation in one period and transferred to the various segments in a
later period.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE:
To supplement its consolidated financial statements presented in
accordance with accounting principles generally accepted in the United States
(GAAP), the Corporation provides additional measures of operating results, net
earnings, and earnings per share adjusted to exclude certain costs, expenses,
and gains and losses, as well as to exclude effects of changes in foreign
currency exchange rates on sales. The Corporation believes that these non-
GAAP financial measures are appropriate to enhance understanding of its past
performance as well as prospects for its future performance.
This press release contains non-GAAP financial measures within the meaning
of Regulation G promulgated by the Securities and Exchange Commission. A
reconciliation of the differences between these non-GAAP financial measures
with the most directly comparable financial measures calculated in accordance
with GAAP follows.
Sales, excluding the effects of foreign currency translation:
As more fully described in this press release under the caption
"Supplemental Information About Business Segments-Basis of Presentation,"
elements of segment profit, including sales, for units located outside of the
United States are generally measured using the local currency as the
functional currency. For these units, sales are translated using budgeted
rates of exchange. Budgeted rates of exchange are established annually and,
once established, all prior period segment data is restated to reflect the
current year's budgeted rates of exchange. Amounts included on the line
entitled "Sales to unaffiliated customers" under the heading "Reportable
Business Segments" in the first table under the caption "Supplemental
Information About Business Segments" are reflected at the Corporation's
budgeted rates of exchange for 2003. The reference in this press release to a
3% decrease in sales, excluding the effects of foreign currency translation,
for the first quarter of 2003, compared to the corresponding period in 2002,
represents the decrease in sales to unaffiliated customers of total reportable
business segments from $978.9 million during the first quarter of 2002 to
$948.9 million during the first quarter of 2003, both at the Corporation's
budgeted rates of exchange for 2003.
Free cash flow for the quarter ended March 30, 2003:
The calculation of free cash flow, which is defined by the Corporation as
cash flow from operating activities, less capital expenditures, plus proceeds
from the disposal of assets (excluding proceeds from business sales), for the
quarter ended March 30, 2003, follows (amounts in millions):
Cash flow from operating activities $(120.4)
Capital expenditures (26.4)
Proceeds from disposals of assets .2
--------
Free cash flow $(146.6)
========
Diluted earnings per share for the second quarter 2003 and full year 2003:
This press release includes forward-looking statements with respect to
management's expectation that the Corporation's diluted earnings per share
would range from $.90 to $.95 for the second quarter of 2003 and from $3.60 to
$3.75 for the full year. The aforementioned ranges exclude the after-tax
effects of restructuring and exit costs that may be recognized in 2003 under
the Corporation's previously announced restructuring program.
As more fully described in the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2002, the Corporation believes that additional
pre-tax restructuring charges of approximately $20 million could be recognized
over the remaining life of its restructuring program, which as currently
envisioned, will be implemented in 2003 and 2004. Given the nature and
duration of this restructuring plan, charges to be incurred in 2003 and 2004
are subject to varying degrees of estimation associated with key assumptions,
such as actual timing of execution, currency impacts, general economic
conditions, and other variables. As a result, up to $20 million of additional
pre-tax restructuring charge may be recorded during 2003, including a portion
in the second quarter. Were the Corporation to record the entire $20 million
pre-tax restructuring charge in 2003, diluted earnings per share would be
reduced by approximately $.19. As a result, management expects that the
Corporation's diluted earnings per share for the full year 2003 would range
from $3.41 (assuming that the entire $20 million pre-tax restructuring charge
was recorded) to $3.75 (assuming that no additional pre-tax restructuring
charge was recorded).
SOURCE Black & Decker Corporation
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CONTACT:
Barbara B. Lucas, Senior Vice President -
Public Affairs, +1-410-716-2980, or Mark M. Rothleitner, Vice
President - Investor Relations and Treasurer, +1-410-716-3979,
both of Black & Decker
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