TOWSON, Md., April 27 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings from continuing
operations for the first quarter of 2006 were $113.1 million or $1.45 per
diluted share. This represents an 11% increase over $1.31 per diluted share
in the first quarter of 2005, excluding a favorable insurance settlement.
Reported net earnings from continuing operations were $1.74 per diluted
share for the first quarter of 2005.
Sales from continuing operations increased 1% for the quarter to a
record $1.5 billion, following a 15% organic sales increase in the first
quarter of 2005. The March acquisition of Vector Products, Inc. contributed
1% to sales in the quarter, effectively offsetting the impact of the FLEX
business divestiture in late 2005. Foreign currency translation had a
negative 2% impact on sales.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented,
"Black & Decker increased sales and operating income in all three business
segments, despite commodity cost inflation and a particularly challenging
comparison to prior-year results. We continue to benefit from cost
reduction efforts and effective use of our strong free cash flow. By
beating our sales target and increasing operating margin 60 basis points,
we had solid growth in operating profits and exceeded our EPS guidance.
"Sales in the Power Tools and Accessories segment rose 2% for the
quarter. Outstanding sales in Europe and Latin America enabled the segment
to post an increase on top of 17% organic sales growth in the same period
of 2005. European sales grew solidly, despite the divestiture of FLEX, due
to the strength of DEWALT(R) tools and lawn and garden products such as the
new Alligator(TM) lopper. The U.S. Industrial Products Group, which drove
the segment's exceptional performance in 2005, increased sales slightly
this quarter. This group benefited from DEWALT's continued success,
particularly in the independent channel, and additional listings of
Porter-Cable and Delta woodworking tools. Sales in the U.S. Consumer
Products Group decreased modestly, as lower sales in the pressure washer
and lawn and garden lines were nearly offset by gains in Black & Decker(R)
consumer tools and the acquisition of Vector. Operating margin for the
Power Tools and Accessories segment increased 30 basis points to 12.3% due
to international margin improvements.
"Sales in the Hardware and Home Improvement segment increased 3% for
the quarter. Sales in the lockset business grew at a mid single-digit rate,
driven by strong demand for Kwikset products. The Price Pfister faucet
business, which gained significant retail listings in the first quarter of
2005, grew sales slightly this quarter. Operating margin improved to 13.3%
in this segment, with cost savings from manufacturing rationalization
outweighing the impact of raw material inflation.
"The Fastening and Assembly Systems segment increased sales 2% for the
quarter, due to solid growth in the international automotive divisions.
Sales in the North American automotive division were flat, reflecting
increased market penetration in a challenging business environment.
Operating margin was 14.3%, and operating profit increased slightly for the
quarter.
"Free cash flow was negative $23 million for the quarter, versus a
positive $40 million in the prior year. This comparison was affected by an
income tax payment in 2006 related to repatriation of foreign earnings and
by a large insurance settlement received in 2005. Excluding these one-time
items, free cash flow increased more than $30 million versus the prior
year. We continued to deploy our cash to create value for our shareholders
during the quarter by acquiring Vector, repurchasing 1.8 million shares of
stock, and increasing our dividend 36%.
"Looking ahead, we continue to expect solid growth in 2006. We remain
confident that DEWALT's 36-volt line of lithium-ion tools, which arrives in
stores later this quarter, will reinforce our cordless leadership position.
Combined with the Vector acquisition, this launch and other new products
should help us grow sales at a mid single-digit rate for the second quarter
and full year. Although raw material prices have continued to rise,
particularly for the Hardware and Home Improvement segment, we still plan
to modestly improve operating margins for the year. Therefore, we expect
that our higher-than-expected performance in the first quarter will read
through to the full year, resulting in diluted EPS from continuing
operations in the range of $7.30-to-$7.45. For the second quarter, we
expect diluted EPS from continuing operations in the range of
$1.95-to-$2.00. Excluding non-recurring items in 2005, our guidance
represents EPS growth of 8% to 11% for the full year and 6% to 9% for the
second quarter. In addition, we remain committed to converting at least 90%
of full-year net earnings to free cash flow.
"Black & Decker extended its track record of outstanding financial
performance this quarter. This success validates many of the changes we
have made over the past five years. By achieving more balanced
profitability across the company, we were able to capitalize on our
international sales growth. Through our focus on cash flow and stewardship
of capital, we expanded solid operating income growth into outstanding
earnings per share. Since 2001, we have reduced fixed assets while growing
sales more than 50%, reflecting a shift to a more variable cost model that
reduces our risk. These structural improvements, combined with our core
strengths - brands, innovation, end-user focus, and strong customer
relationships - enable us to grow earnings consistently. By executing our
proven strategy, we believe we can continue to deliver superior returns to
our shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.38 per share of the Corporation's outstanding
common stock payable June 30, 2006, to stockholders of record at the close
of business on June 16, 2006.
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 2006.
Investors can listen to the conference call 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 ensure timely
access. A replay of the call 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 "Risk
Factors" 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, 2005.
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
--------------------------------
April 2, 2006 April 3, 2005
-------------- --------------
SALES $ 1,528.9 $ 1,519.3
Cost of goods sold 985.3 983.8
Selling, general, and
administrative expenses 375.4 377.2
-------------- --------------
OPERATING INCOME 168.2 158.3
Interest expense (net of interest
income) 13.7 9.2
Other income - (53.5)
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 154.5 202.6
Income taxes 41.4 58.6
-------------- --------------
NET EARNINGS FROM CONTINUING OPERATIONS 113.1 144.0
Earnings of discontinued operations
(net of income taxes) - .8
-------------- --------------
NET EARNINGS $ 113.1 $ 144.8
============== ==============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 1.49 $ 1.79
Discontinued operations - .01
-------------- --------------
NET EARNINGS PER COMMON SHARE - BASIC $ 1.49 $ 1.80
============== ==============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 76.0 80.5
============== ==============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 1.45 $ 1.74
Discontinued operations - .01
-------------- --------------
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.45 $ 1.75
============== ==============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 78.2 82.8
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
April 2, 2006 December 31, 2005
-------------- ------------------
ASSETS
Cash and cash equivalents $ 364.0 $ 967.6
Trade receivables 1,181.3 1,130.6
Inventories 1,129.0 1,049.1
Other current assets 218.1 200.1
-------------- ------------------
TOTAL CURRENT ASSETS 2,892.4 3,347.4
-------------- ------------------
PROPERTY, PLANT, AND EQUIPMENT 659.4 668.8
GOODWILL 1,187.9 1,115.7
OTHER ASSETS 737.0 710.5
-------------- ------------------
$ 5,476.7 $ 5,842.4
============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 454.4 $ 566.9
Current maturities of long-term debt .4 155.3
Trade accounts payable 554.9 466.8
Other current liabilities 890.1 1,061.2
-------------- ------------------
TOTAL CURRENT LIABILITIES 1,899.8 2,250.2
-------------- ------------------
LONG-TERM DEBT 1,019.8 1,030.3
DEFERRED INCOME TAXES 199.7 188.5
POSTRETIREMENT BENEFITS 428.1 419.0
OTHER LONG-TERM LIABILITIES 400.4 391.2
STOCKHOLDERS' EQUITY 1,528.9 1,563.2
-------------- ------------------
$ 5,476.7 $ 5,842.4
============== ==================
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
April 2, 2006 Accessories Improvement Systems Total
--------------------------------------------------------------------------
Sales to unaffiliated
customers $1,113.3 $250.6 $170.2 $1,534.1
Segment profit (loss)
(for Consolidated,
operating income) 137.0 33.3 24.3 194.6
Depreciation and
amortization 26.3 5.8 4.7 36.8
Capital expenditures 19.6 1.6 2.7 23.9
Three Months Ended
April 3, 2005
--------------------------------------------------------------------------
Sales to unaffiliated
customers $1,090.3 $242.3 $166.7 $1,499.3
Segment profit (loss)
(for Consolidated,
operating income) 131.5 29.5 24.0 185.0
Depreciation and
amortization 25.5 6.3 4.6 36.4
Capital expenditures 18.3 5.4 2.5 26.2
Currency Corporate,
Three Months Ended Translation Adjustments,
April 2, 2006 Adjustments & Eliminations Consolidated
--------------------------------------------------------------------------
Sales to unaffiliated customers ($5.2) $ - $1,528.9
Segment profit (loss) (for
Consolidated, operating income) (.9) (25.5) 168.2
Depreciation and amortization (.1) .7 37.4
Capital expenditures - - 23.9
Three Months Ended
April 3, 2005
--------------------------------------------------------------------------
Sales to unaffiliated customers $20.0 $ - $1,519.3
Segment profit (loss) (for
Consolidated, operating income) 2.8 (29.5) 158.3
Depreciation and amortization .5 1.8 38.7
Capital expenditures .2 .2 26.6
The reconciliation of segment profit to the Corporation's earnings from
continuing operations before income taxes, in millions of dollars, is as
follows:
Three Months Ended
-------------------------------------------------------------------------
April 2, 2006 April 3, 2005
-------------------------------------------------------------------------
Segment profit for total reportable
business segments $194.6 $185.0
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates (.9) 2.8
Depreciation of Corporate property (.2) (.2)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation (6.2) (3.9)
Other adjustments booked in
consolidation directly related
to reportable business segments (2.3) (.8)
Amounts allocated to businesses in
arriving at segment profit in
excess of (less than) Corporate center
operating expenses, eliminations, and
other amounts identified above (16.8) (24.6)
-------------------------------------------------------------------------
Operating income 168.2 158.3
Interest expense, net of interest income 13.7 9.2
Other income - (53.5)
-------------------------------------------------------------------------
Earnings from continuing
operations before income taxes $154.5 $202.6
=========================================================================
BASIS OF PRESENTATION:
Adoption of New Accounting Standard for Share-Based Payment:
------------------------------------------------------------
As more fully 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, 2005, the Corporation was required to
adopt Statement of Financial Accounting Standards No. 123 (revised 2004)
(SFAS No. 123R), Share-Based Payment, effective January 1, 2006. SFAS No.
123R requires the Corporation to expense share-based payments, including
employee stock options, based on their fair value. SFAS No. 123R permits
public companies to adopt its requirements using one of two methods. As
previously disclosed, the Corporation anticipated adopting SFAS No. 123R
under the modified retrospective method. The modified retrospective method
permits entities to restate all prior periods presented based on the
amounts previously recognized under SFAS No. 123, Accounting for
Stock-Based Compensation, for purposes of pro forma disclosures. As
permitted by SFAS No. 123, the Corporation previously accounted for
share-based payments to employees under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, using the intrinsic value
method and, as such, generally recognized no compensation costs for
employee stock options.
The Corporation adopted SFAS No. 123R effective January 1, 2006, using
the modified retrospective method of adoption. All prior periods were
adjusted to give effect to the fair-value-based method of accounting for
awards granted on or after January 1, 1996. Accordingly, the Consolidated
Statement of Earnings and Supplemental Information about Business Segments
for the three months ended April 3, 2005, and the Consolidated Balance
Sheet as of December 31, 2005, have been adjusted to reflect the adoption
of SFAS No. 123R for share-based payments under the modified retrospective
method.
SFAS No. 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow,
rather than as an operating cash flow as previously presented. Upon
adoption in 2006, the Corporation adjusted its prior Consolidated
Statements of Cash Flows to reflect this classification. The Corporation's
computation of free cash flow, a non-GAAP financial measure within the
meaning of Regulation G promulgated by the Securities and Exchange
Commission, for the three months ended April 3, 2005, has been adjusted to
reflect this adjustment to "Cash flow from operating activities."
Business Segments:
------------------
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
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. On March
1, 2006, the Corporation acquired Vector Products, Inc. This acquired
business is included in the Power Tools and Accessories segment. 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). The
Hardware and Home Improvement segment 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.
In November 2005, the Corporation sold its DOM security hardware
businesses. The divested businesses are treated as discontinued operations
in the Corporation's consolidated financial statements. Sales, segment
profit, depreciation and amortization, and capital expenditures set forth
in the preceding tables exclude the results of the discontinued operations.
The profitability measure employed by the Corporation and its chief
operating decision maker for making decisions about allocating resources to
segments and assessing segment performance is segment profit (for the
Corporation on a consolidated basis, operating income). 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,
2005, 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 table under the captions "Reportable
Business Segments" and "Corporate, Adjustments, & Eliminations" are
reflected at the Corporation's budgeted rates of exchange for 2006. The
amounts included in the preceding table 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 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, including expenses related to share-based compensation,
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. 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.
Diluted earnings per share from continuing operations, excluding the
insurance settlement:
--------------------------------------------------------------------
The calculation of diluted earnings per share from continuing
operations for the three months ended April 2, 2006 and April 3, 2005,
excluding a favorable $55 million pre-tax insurance settlement in 2005,
follows (dollars in millions except per share amounts):
Three Months Ended
April 2, April 3,
2006 2005
--------- ---------
Net earnings from continuing operations $ 113.1 $ 144.0
Excluding:
Insurance settlement, net of tax - (35.8)
--------- ---------
Net earnings from continuing operations,
excluding the insurance settlement $ 113.1 $ 108.2
========= =========
Diluted earnings per common share from
continuing operations $ 1.45 $ 1.74
Excluding:
Insurance settlement, net of tax,
per common share - assuming dilution - (.43)
--------- ---------
Net earnings from continuing operations,
excluding the insurance settlement,
per common share - assuming dilution $ 1.45 $ 1.31
========= =========
Shares used in computing diluted earnings
per share (in millions) 78.2 82.8
========= =========
Free cash flow:
---------------
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 three months ended April 2, 2006 and April 3, 2005, follows
(dollars in millions):
Three Months Ended
April 2, April 3,
2006 2005
--------- ---------
Cash flow from operating activities $ (4.8) $ 66.5
Capital expenditures (23.9) (26.7)
Proceeds from disposals of assets 5.6 .3
--------- ---------
Free cash flow $ (23.1) $ 40.1
========= =========
Capital expenditures and proceeds from the disposal of assets for the
three months ended April 3, 2005, include amounts associated with
discontinued operations.
This press release includes a statement that free cash flow, excluding
one-time items, for the three months ended April 2, 2006 as compared to the
three months ended April 3, 2005, increased by more than $30 million. That
increase excludes any tax payments that occurred in the first quarter of
2006 associated with repatriating foreign earnings under the American Jobs
Creation Act of 2004 (AJCA) and the $55 million of proceeds from the
insurance settlement that occurred in the first quarter of 2005.
This press release includes a forward-looking statement with respect to
management's commitment to convert at least 90% of full-year net earnings
to free cash flow. That conversion ratio excludes from free cash flow any
tax payments associated with repatriating foreign earnings under the AJCA.
Diluted earnings per share for the full year 2006:
--------------------------------------------------
This press release includes a forward-looking statement with respect to
management's expectation that the Corporation's diluted earnings per share
from continuing operations, excluding non-recurring items in 2005, would
grow 8% to 11% for the full year 2006. In determining the 8% to 11%
increase, earnings per share from continuing operations for 2005 excludes
the effect of the favorable $55 million pre-tax ($35.8 million after-tax)
insurance settlement that occurred in the first quarter and excludes the
$51.2 million incremental tax expense to repatriate foreign earnings under
the AJCA that occurred in the fourth quarter.
SOURCE The Black & Decker Corporation
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President, Investor and Media Relations, +1-410-716-3979, both of
Black & Decker
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