TOWSON, Md., July 19 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings from continuing
operations for the second quarter of 2004 were a record $121.8 million or
$1.50 per diluted share, a 56% increase versus the second quarter of 2003.
Sales from continuing operations were a record $1.3 billion, an increase of
19%, or 11% excluding the effects of foreign currency translation and
acquisitions. Free cash flow was $198 million, an improvement of $98 million
over the second quarter of 2003.
The Corporation also announced that it has signed an agreement to purchase
the Tools Group from Pentair, Inc. (NYSE: PNR) for approximately $775 million
in cash. The Tools Group, with 2003 sales of $1.08 billion and operating
profit of $82 million, includes the Porter-Cable, Delta, DeVilbiss Air Power,
Oldham Saw, and FLEX businesses. The transaction, which is subject to
regulatory clearances and customary closing conditions, is expected to close
later in 2004.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented, "We
are very pleased to announce both record results and an ideal bolt-on
acquisition with excellent strategic and financial benefits. The businesses
we will acquire from Pentair focus on the large and profitable professional
power tool market in North America and are an excellent fit with our DEWALT
division. This acquisition will add well-respected brands to our portfolio
and expand our offerings in product lines where we have relatively low market
share, including woodworking equipment, compressors, pressure washers, and
nailers. In addition, it will give us a stronger presence throughout our
distribution network, particularly in the industrial/construction channel.
"Black & Decker has an outstanding track record of creating value across
its business portfolio. We have built leading market positions by applying
our core strengths of product innovation, brand management, strong customer
relationships, and end-user focus. In addition, by combining businesses,
rationalizing manufacturing, and eliminating duplicate costs, we have
significantly reduced costs and streamlined our operations. We will leverage
these proven strengths to add value to the acquired businesses. By nearly
doubling the sales volume of our North American professional business, we will
also have better scale to improve the profitability of the combined group. We
expect to realize $65 million of annual cost savings by the end of 2007, and
anticipate that the acquisition will be highly accretive to earnings per
share. We expect accretion of approximately $0.50 per share in 2005, followed
by an incremental $0.25 in both 2006 and 2007, for a total of $1.00 per share.
This acquisition has a very positive net present value and should be accretive
to our return on capital employed by 2007.
"In addition to announcing this acquisition, our company had a record
second quarter. We have now grown earnings per share by more than 19% for
nine consecutive quarters. All three of our business segments grew sales at
double-digit rates before acquisitions and currency translation. Operating
margin increased more than 300 basis points, reflecting the benefit of sales
volume leverage and continued restructuring savings.
"Sales and operating profit in the Power Tools and Accessories segment
increased 11% and 43%, respectively. In the U.S., sales of DEWALT(R)
professional products increased at a double-digit rate for the third
consecutive quarter, with gains in all major distribution channels and product
categories. Sales of Black & Decker consumer products also increased at a
double-digit rate, led by lasers, cordless drills, and lawn and garden
products. Sales increased at a double-digit rate in Asia and at a mid-single-
digit rate in Europe and Latin America.
"Sales in the Hardware and Home Improvement segment increased 10%
excluding the acquisition of Baldwin Hardware Corporation and Weiser Lock
Corporation, with Kwikset sales growing at a mid-single-digit rate and Price
Pfister sales growing more than 20%. Productivity, restructuring savings, and
higher sales volume resulted in dramatic increases in operating margin and
operating profit over the second quarter of 2003.
"Sales in the Fastening and Assembly Systems segment increased 15%, or 11%
excluding the acquisition of MasterFix. Sales increased in all key divisions
and product lines and were particularly strong in the North American
industrial division and in Asia. Operating profit in this segment increased
13%, as operating margin held nearly flat despite commodity price increases.
"Looking forward, we remain optimistic about our new products, market
positions, and the North American economy. Despite facing much tougher
comparisons, we are forecasting a low-to-mid-single-digit rate of sales growth
excluding currency translation and acquisitions for the third quarter, and a
mid-single-digit rate for the full year. For both the third quarter and the
full year, we anticipate a double-digit sales growth rate including currency
and acquisitions. Operating margins should continue to improve, but not as
dramatically as in the first half of the year. Therefore, we anticipate
diluted earnings per share from continuing operations in the ranges of $1.25-
to-$1.30 for the third quarter and $5.05-to-$5.15 for the full year. We
continue to expect that we will convert at least 90% of full-year net earnings
to free cash flow.
"By combining top market positions with operating excellence, Black &
Decker has grown its earnings and cash flow dramatically over the last three
years and continued that trend in the second quarter. The acquisition
announced today is a unique opportunity to take further advantage of our core
strengths, and represents the beginning of a new growth phase for our company.
By executing our strategy and wisely investing our cash flow, we intend to
continue generating outstanding returns for our shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.21 per share of the Corporation's outstanding
common stock payable September 24, 2004, to stockholders of record at the
close of business on September 10, 2004.
The Corporation will now hold the conference call, originally scheduled
for Thursday, July 22, 2004, today at 10:30 a.m., E.T., to discuss second-
quarter results, the outlook for the remainder of 2004, and the pending
acquisition. 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
assure 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 "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, 2003.
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
---------------------------------
June 27, 2004 June 29, 2003
--------------- ---------------
SALES $ 1,297.6 $ 1,090.1
Cost of goods sold 810.0 699.4
Selling, general, and
administrative expenses 316.0 280.4
Restructuring and exit costs - .4
--------------- ---------------
OPERATING INCOME 171.6 109.9
Interest expense (net of interest
income) 4.5 7.7
Other expense .2 .6
--------------- ---------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 166.9 101.6
Income taxes 45.1 26.9
--------------- ---------------
NET EARNINGS FROM CONTINUING OPERATIONS 121.8 74.7
Earnings (loss) from discontinued
operations (net of income taxes) (.2) 1.0
--------------- ---------------
NET EARNINGS $ 121.6 $ 75.7
=============== ===============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 1.53 $ .96
Discontinued operations - .02
--------------- ---------------
NET EARNINGS PER COMMON SHARE - BASIC $ 1.53 $ .98
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 79.4 77.6
=============== ===============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 1.50 $ .96
Discontinued operations - .01
--------------- ---------------
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.50 $ .97
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.9 77.9
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
---------------------------------
June 27, 2004 June 29, 2003
--------------- ---------------
SALES $ 2,390.5 $ 2,029.3
Cost of goods sold 1,500.1 1,303.3
Selling, general, and
administrative expenses 611.1 543.4
Restructuring and exit costs - .6
--------------- ---------------
OPERATING INCOME 279.3 182.0
Interest expense (net of interest
income) 9.7 19.8
Other expense 1.0 2.3
--------------- ---------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 268.6 159.9
Income taxes 72.5 42.1
--------------- ---------------
NET EARNINGS FROM CONTINUING OPERATIONS 196.1 117.8
DISCONTINUED OPERATIONS (NET OF
INCOME TAXES):
Earnings of discontinued operations .4 1.3
Gain on sale of discontinued operations
(net of impairment charge of $24.4) 11.7 -
--------------- ---------------
NET EARNINGS FROM DISCONTINUED OPERATIONS 12.1 1.3
--------------- ---------------
NET EARNINGS $ 208.2 $ 119.1
=============== ===============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 2.49 $ 1.51
Discontinued operations .15 .02
--------------- ---------------
NET EARNINGS PER COMMON SHARE - BASIC $ 2.64 $ 1.53
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.9 78.0
=============== ===============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 2.44 $ 1.51
Discontinued operations .15 .01
--------------- ---------------
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 2.59 $ 1.52
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.2 78.2
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
June 27, 2004 December 31, 2003
-------------- -------------------
ASSETS
Cash and cash equivalents $ 526.1 $ 308.2
Trade receivables 929.7 808.6
Inventories 836.2 709.9
Current assets of discontinued
operations 64.6 160.2
Other current assets 204.0 216.1
-------------- -------------------
TOTAL CURRENT ASSETS 2,560.6 2,203.0
-------------- -------------------
PROPERTY, PLANT, AND EQUIPMENT 615.4 660.2
GOODWILL 777.5 771.7
OTHER ASSETS 563.6 587.6
-------------- -------------------
$ 4,517.1 $ 4,222.5
============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ .1 $ .1
Current maturities of long-term debt .4 .4
Trade accounts payable 506.2 379.8
Current liabilities of discontinued
operations 28.3 38.0
Other accrued liabilities 834.3 893.8
-------------- -------------------
TOTAL CURRENT LIABILITIES 1,369.3 1,312.1
-------------- -------------------
LONG-TERM DEBT 900.1 915.6
DEFERRED INCOME TAXES 177.3 179.8
POSTRETIREMENT BENEFITS 458.6 451.9
OTHER LONG-TERM LIABILITIES 516.9 516.6
STOCKHOLDERS' EQUITY 1,094.9 846.5
-------------- -------------------
$ 4,517.1 $ 4,222.5
============== ===================
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
June 27, 2004 Accessories Improvement Systems Total
--------------------------------------------------------------------------
Sales to unaffiliated
customers $876.3 $235.9 $152.0 $1,264.2
Segment profit (loss)
(for Consolidated,
operating income) 124.9 41.6 21.9 188.4
Depreciation and amortization 19.4 7.6 4.1 31.1
Capital expenditures 16.8 5.4 2.2 24.4
Three Months Ended
June 29, 2003
--------------------------------------------------------------------------
Sales to unaffiliated
customers $786.2 $166.0 $132.0 $1,084.2
Segment profit (loss)
(for Consolidated,
operating income before
restructuring and exit costs) 87.3 16.9 19.3 123.5
Depreciation and amortization 20.2 6.7 4.0 30.9
Capital expenditures 15.7 5.1 3.1 23.9
Six Months Ended
June 27, 2004
--------------------------------------------------------------------------
Sales to unaffiliated
customers $1,565.9 $456.3 $290.4 $2,312.6
Segment profit (loss)
(for Consolidated,
operating income) 199.0 73.3 40.3 312.6
Depreciation and amortization 38.7 15.2 8.3 62.2
Capital expenditures 31.1 8.3 4.5 43.9
Six Months Ended
June 29, 2003
--------------------------------------------------------------------------
Sales to unaffiliated
customers $1,452.6 $312.2 $265.2 $2,030.0
Segment profit (loss)
(for Consolidated,
operating income before
restructuring and exit costs) 146.8 29.9 38.6 215.3
Depreciation and amortization 40.3 13.5 7.8 61.6
Capital expenditures 30.9 12.4 6.6 49.9
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Currency Corporate,
Three Months Ended Translation Adjustments,
June 27, 2004 Adjustments & Eliminations Consolidated
--------------------------------------------------------------------------
Sales to unaffiliated customers $33.4 $ - $1,297.6
Segment profit (loss) (for
Consolidated, operating income) 3.3 (20.1) 171.6
Depreciation and amortization .8 2.2 34.1
Capital expenditures .5 .4 25.3
Three Months Ended
June 29, 2003
--------------------------------------------------------------------------
Sales to unaffiliated customers $5.9 $ - $1,090.1
Segment profit (loss)
(for Consolidated, operating income
before restructuring and exit costs) 1.0 (14.2) 110.3
Depreciation and amortization .1 3.8 34.8
Capital expenditures .1 .3 24.3
Six Months Ended
June 27, 2004
--------------------------------------------------------------------------
Sales to unaffiliated customers $77.9 $ - $2,390.5
Segment profit (loss) (for
Consolidated, operating income) 6.8 (40.1) 279.3
Depreciation and amortization 2.0 5.0 69.2
Capital expenditures 1.2 .6 45.7
Six Months Ended
June 29, 2003
--------------------------------------------------------------------------
Sales to unaffiliated customers $(.7) $ - $2,029.3
Segment profit (loss)
(for Consolidated, operating income
before restructuring and exit costs) .8 (33.5) 182.6
Depreciation and amortization .1 8.2 69.9
Capital expenditures (.1) .5 50.3
The reconciliation of segment profit to the Corporation's earnings from
continuing operations before income taxes for each period, in millions of
dollars, is as follows:
Three Months Ended Six Months Ended
--------------------------------------------------------------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
--------------------------------------------------------------------------
Segment profit for total reportable
business segments $188.4 $123.5 $312.6 $215.3
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 3.3 1.0 6.8 .8
Depreciation of Corporate property (.3) (.2) (.7) (.5)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation .2 3.9 .3 7.7
Other adjustments booked in
consolidation directly related
to reportable business segments (3.4) (1.2) (5.5) (10.0)
Amounts allocated to businesses in
arriving at segment profit in excess
of (less than) Corporate center
operating expenses, eliminations,
and other amounts identified above (16.6) (16.7) (34.2) (30.7)
--------------------------------------------------------------------------
Operating income before
restructuring and exit costs 171.6 110.3 279.3 182.6
Restructuring and exit costs - .4 - .6
--------------------------------------------------------------------------
Operating income 171.6 109.9 279.3 182.0
Interest expense, net of interest
income 4.5 7.7 9.7 19.8
Other expense .2 .6 1.0 2.3
--------------------------------------------------------------------------
Earnings from continuing
operations before income taxes $166.9 $101.6 $268.6 $159.9
==========================================================================
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). On September 30, 2003,
the Corporation acquired Baldwin Hardware Corporation and Weiser Lock
Corporation. These acquired businesses are included in the Hardware and Home
Improvement segment. 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 January 2004, the Corporation sold two components of its European
security hardware business. The divested businesses and the remaining portion
that is expected to be sold in 2004 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 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, 2003,
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 2004. 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 and of acquired businesses 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 and acquired
businesses:
-------------------------------------------------------------------------
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 2004. The reference in this press release to an
11% increase in sales, excluding the effects of foreign currency translation
and acquired businesses, for the second quarter of 2004, compared to the
corresponding period in 2003, is determined as follows (dollars in millions):
Three Months Ended
June 27, June 29,
2004 2003
-------- --------
Sales $1,297.6 $1,090.1
Currency translation adjustment (33.4) (5.9)
-------- --------
Sales as translated
at budgeted rates of exchange 1,264.2 1,084.2
Sales of acquired businesses as translated at
budgeted rates of exchange (58.1) -
-------- --------
Sales excluding foreign currency and acquired
businesses $1,206.1 $1,084.2
======== ========
Free cash flow for the three months ended June 27, 2004 and June 29, 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
quarters ended June 27, 2004 and June 29, 2003, follows (dollars in millions):
Three Months Ended
June 27, June 29,
2004 2003
-------- --------
Cash flow from operating activities $209.0 $121.0
Capital expenditures (including capital
expenditures of discontinued operations) (25.7) (25.2)
Proceeds from disposals of assets 14.7 4.7
-------- --------
Free cash flow $198.0 $100.5
======== ========
Hardware and Home Improvement segment sales, excluding the effects of the
acquired businesses:
-------------------------------------------------------------------------
This press release indicates that the Hardware and Home Improvement
segment reported a 10% sales increase for the three months ended June 27,
2004, as compared to the corresponding period in the prior year, excluding the
acquisition of Baldwin and Weiser. The determination of the aforementioned
growth in sales, excluding the acquisition of Baldwin and Weiser, is
determined by deducting $52.8 million of sales of the acquired businesses that
were recognized during the three-month period ended June 27, 2004.
Fastening and Assembly Systems segment sales, excluding the effects of the
acquired business:
--------------------------------------------------------------------------
This press release indicates that the Fastening and Assembly Systems
segment reported an 11% sales increase for the three months ended June 27,
2004, as compared to the corresponding period in the prior year, excluding the
acquisition of MasterFix. The determination of the aforementioned growth in
sales, excluding the acquisition of MasterFix, is determined by deducting
$5.3 million of sales of the acquired business that were recognized during the
three-month period ended June 27, 2004.
SOURCE The Black & Decker Corporation
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Public Affairs, +1-410-716-2980, or Mark M. Rothleitner, Vice
President, Investor Relations and Treasurer, +1-410-716-3979
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