TOWSON, Md., July 24 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the second
quarter of 2003 were $75.7 million or $0.97 per diluted share, a 20% increase
over diluted earnings per share of $0.81 in the second quarter of 2002. Sales
for the second quarter of 2003 were $1.12 billion, essentially flat to
$1.13 billion for the same period last year. Sales decreased 5% excluding the
effects of foreign currency translation.
Commenting on the results, Nolan D. Archibald, Chairman and Chief
Executive Officer, said, "We continued to improve gross margins significantly
in all of our business segments through our restructuring program and
productivity gains. Higher gross margins, combined with lower interest
expense and favorable exchange rates, resulted in double-digit earnings growth
on top of excellent growth in 2002. We achieved this improvement despite low
economic growth, inventory reductions by key retailers, and strong sales in
2002, all of which negatively affected our comparative sales performance.
"Our restructuring program is progressing well and continues to generate
significant cost savings. We have ceased production at both the Georgia
Kwikset plant and the Maryland power tools plant, and expect to vacate those
facilities well before year end. 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.
"Free cash flow was $101 million for the quarter, reflecting strong
earnings and a decrease in working capital. Inventory was $768 million at the
end of the quarter, a decrease of $46 million from the first quarter. Though
inventory was $76 million higher than the second quarter of 2002,
approximately two-thirds of this increase is due to currency translation, with
safety stock related to our restructuring program accounting for most of the
remainder. We reduced the safety stock during the second quarter and expect
that it will be eliminated by year end.
"Sales in the Power Tools and Accessories segment were down 6% for the
quarter, with decreases in North America and Europe, and an increase in the
rest of the world. Operating profit for the segment decreased 11% from the
second quarter last year, with a decline in North America partly offset by
gains in Europe, Latin America, and Asia.
"In the U.S., sales of both consumer and professional products decreased
at a high single-digit rate. While sell-through at key customers was up
overall in the quarter, sell-in lagged as these customers lowered their order
levels to reduce inventory. In addition, the U.S. business had a difficult
comparison to the double-digit sales growth rate in the second quarter of
2002.
"In Europe, sales decreased at a mid-single-digit rate, reflecting a
double-digit decline in sales of consumer tools. Weak sales in Germany and
France caused much of the decline. Professional tool sales declined slightly,
as new product successes were offset by slowing economic conditions. Our
restructuring program continued to improve margins, and operating profit
increased despite the sales decline.
"Sales in the Hardware and Home Improvement segment were down 2% for the
quarter. Sales in the Kwikset(R) security hardware business increased at a
mid-single-digit rate, which was more than offset by lower sales of Price
Pfister(R) plumbing products, reflecting previously announced shelf space
losses. Operating margins improved significantly for both Kwikset and Price
Pfister, driven by productivity and restructuring savings. As a result,
operating profit more than doubled for the segment. In the North American
business, operating margin exceeded 10% for the quarter.
"Sales in the Fastening and Assembly Systems segment were down 4% for the
quarter, with weakness in the North American automotive and industrial
markets. Strong sales in Asia and a rebound in the European industrial
business helped to mitigate the North American decline. Operating profit in
this segment also decreased 4% from the second quarter last year, as cost
containment efforts enabled us to maintain our outstanding operating margins.
"Looking forward, we expect economic conditions to remain weak in the
third quarter, especially in Europe. As a result, we anticipate a low
single-digit decline in sales, excluding currency translation. At current
foreign exchange rates, these projections would translate to flat or slightly
positive reported sales growth. Because we will continue reducing production
levels to manage inventory, we do not expect to improve upon the excellent
operating margins we posted in the third quarter last year. However, we are
seeing the benefits of good free cash flow, in the form of lower interest
expense and a lower share count, and therefore expect diluted earnings per
share in the $1.00-to-$1.05 range for the third quarter.
"For the full year, we anticipate a low single-digit decline in sales,
excluding currency translation, improved operating margins, and diluted
earnings per share in the $3.65-to-$3.75 range. The earnings ranges exclude
any remaining charges under the previously announced restructuring program, as
well as any effects of the planned acquisition of the Baldwin Hardware and
Weiser Lock businesses from Masco Corporation. We continue to anticipate
converting at least 80% of full-year net earnings to free cash flow.
"The key to Black & Decker's strong financial performance has been
excellent execution of our strategy and an emphasis on cash generation. We
will continue to capitalize on our market-leading brands, product development,
and end-user relationships, and to execute our restructuring program on plan
and on cost. By combining market leadership with operating excellence, Black
& Decker is well positioned for the economic recovery and should continue
delivering outstanding value to shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.12 per share of the Corporation's outstanding
common stock payable September 26, 2003, to stockholders of record at the
close of business on September 12, 2003.
The Corporation also announced that, effective July 28, 2003, it has
appointed The Bank of New York as the new transfer agent and registrar of the
Corporation's common stock. The Corporation believes that this appointment
will provide its stockholders with uninterrupted, reliable stock transfer
service. This change does not require any action by the Corporation's
stockholders.
The Corporation will hold a conference call today at 10:00 a.m., ET, to
discuss second-quarter results and the outlook for the remainder of 2003.
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, 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
---------------------------------
June 29, 2003 June 30, 2002
--------------- ---------------
SALES $ 1,119.7 $ 1,125.3
Cost of goods sold 720.0 746.8
Selling, general, and
administrative expenses 287.8 271.0
--------------- ---------------
OPERATING INCOME 111.9 107.5
Interest expense (net of interest income) 7.7 14.8
Other expense .5 2.2
--------------- ---------------
EARNINGS BEFORE INCOME TAXES 103.7 90.5
Income taxes 28.0 24.4
--------------- ---------------
NET EARNINGS $ 75.7 $ 66.1
=============== ===============
NET EARNINGS PER COMMON SHARE - BASIC $ .98 $ .82
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 77.6 80.5
=============== ===============
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ .97 $ .81
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 77.9 81.2
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
---------------------------------
June 29, 2003 June 30, 2002
--------------- ---------------
SALES $ 2,087.9 $ 2,077.0
Cost of goods sold 1,344.7 1,391.6
Selling, general, and
administrative expenses 558.0 515.7
--------------- ---------------
OPERATING INCOME 185.2 169.7
Interest expense (net of interest income) 19.8 30.6
Other expense 2.3 3.4
--------------- ---------------
EARNINGS BEFORE INCOME TAXES 163.1 135.7
Income taxes 44.0 36.6
--------------- ---------------
NET EARNINGS $ 119.1 $ 99.1
=============== ===============
NET EARNINGS PER COMMON SHARE - BASIC $ 1.53 $ 1.23
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.0 80.3
=============== ===============
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.52 $ 1.23
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 78.2 80.9
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
June 29, 2003 December 31, 2002
--------------- -------------------
ASSETS
Cash and cash equivalents $ 156.6 $ 517.1
Trade receivables 820.7 729.0
Inventories 768.1 748.9
Other current assets 215.0 198.9
--------------- -------------------
TOTAL CURRENT ASSETS 1,960.4 2,193.9
--------------- -------------------
PROPERTY, PLANT, AND EQUIPMENT 638.6 655.9
GOODWILL 749.6 729.1
OTHER ASSETS 560.9 551.6
--------------- -------------------
$ 3,909.5 $ 4,130.5
=============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 87.0 $ 4.6
Current maturities
of long-term debt .4 312.0
Trade accounts payable 316.3 343.2
Other accrued liabilities 762.1 793.6
--------------- -------------------
TOTAL CURRENT LIABILITIES 1,165.8 1,453.4
--------------- -------------------
LONG-TERM DEBT 936.1 927.6
DEFERRED INCOME TAXES 212.4 211.3
POSTRETIREMENT BENEFITS 421.5 409.0
OTHER LONG-TERM LIABILITIES 522.8 529.6
STOCKHOLDERS' EQUITY 650.9 599.6
--------------- -------------------
$ 3,909.5 $ 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
June 29, 2003 Accessories Improvement Systems Total
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 765.6 $ 192.1 $ 128.0 $ 1,085.7
Segment profit (loss)
(for Consolidated,
operating income) 85.1 18.1 18.4 121.6
Depreciation and amortization 19.8 7.9 3.9 31.6
Capital expenditures 15.4 5.8 2.9 24.1
Three Months Ended
June 30, 2002
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 815.0 $ 196.6 $ 132.7 $ 1,144.3
Segment profit (loss)
(for Consolidated,
operating income) 95.2 6.8 19.1 121.1
Depreciation and amortization 18.5 8.2 3.6 30.3
Capital expenditures 20.3 2.8 3.8 26.9
Six Months Ended
June 29, 2003
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,412.7 $ 364.7 $ 257.2 $ 2,034.6
Segment profit (loss)
(for Consolidated,
operating income) 142.8 33.1 36.8 212.7
Depreciation and amortization 39.6 16.0 7.6 63.2
Capital expenditures 30.3 13.5 6.4 50.2
Six Months Ended
June 30, 2002
-------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,467.0 $ 397.6 $ 258.6 $ 2,123.2
Segment profit (loss)
(for Consolidated,
operating income) 134.3 22.4 35.6 192.3
Depreciation and amortization 40.2 17.6 7.2 65.0
Capital expenditures 35.5 6.2 7.4 49.1
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Currency Corporate,
Three Months Ended Translation Adjustments,
June 29, 2003 Adjustments & Eliminations Consolidated
-------------------------------------------------------------------------
Sales to unaffiliated customers $ 34.0 $ _ $ 1,119.7
Segment profit (loss) (for
Consolidated, operating income) 4.3 (14.0) 111.9
Depreciation and amortization .8 3.8 36.2
Capital expenditures .8 .3 25.2
Three Months Ended
June 30, 2002
-------------------------------------------------------------------------
Sales to unaffiliated customers $ (19.0) $ _ $ 1,125.3
Segment profit (loss) (for
Consolidated, operating income) (1.6) (12.0) 107.5
Depreciation and amortization (.4) .7 30.6
Capital expenditures (.2) .1 26.8
Six Months Ended
June 29, 2003
-------------------------------------------------------------------------
Sales to unaffiliated customers $ 53.3 $ _ $ 2,087.9
Segment profit (loss) (for
Consolidated, operating income) 6.5 (34.0) 185.2
Depreciation and amortization 1.3 8.2 72.7
Capital expenditures .9 .5 51.6
Six Months Ended
June 30, 2002
-------------------------------------------------------------------------
Sales to unaffiliated customers $ (46.2) $ _ $ 2,077.0
Segment profit (loss) (for
Consolidated, operating income) (3.6) (19.0) 169.7
Depreciation and amortization (1.2) 1.0 64.8
Capital expenditures (.5) .3 48.9
The reconciliation of segment profit to the Corporation's earnings before
income taxes for each period, in millions of dollars, is as follows:
Three Months Ended Six Months Ended
-------------------------------------------------------------------------
June 29, June 30, June 29, June 30,
2003 2002 2003 2002
-------------------------------------------------------------------------
Segment profit for total reportable
business segments $121.6 $121.1 $212.7 $192.3
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 4.3 (1.6) 6.5 (3.6)
Depreciation of Corporate property (.2) (.7) (.5) (1.0)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation 3.7 8.7 7.3 19.0
Other adjustments booked in
consolidation directly related
to reportable business segments (1.2) 3.2 (11.2) (1.5)
Amounts allocated to businesses in
arriving at segment profit in
excess of (less than) Corporate
center operating expenses,
eliminations, and other amounts
identified above (16.3) (23.2) (29.6) (35.5)
-------------------------------------------------------------------------
Operating income 111.9 107.5 185.2 169.7
Interest expense, net of interest
income 7.7 14.8 19.8 30.6
Other expense .5 2.2 2.3 3.4
-------------------------------------------------------------------------
Earnings before income taxes $103.7 $90.5 $163.1 $135.7
=========================================================================
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
5% decrease in sales, excluding the effects of foreign currency translation,
for the second quarter of 2003, compared to the corresponding period in 2002,
represents the decrease in sales to unaffiliated customers of total reportable
business segments from $1,144.3 million during the second quarter of 2002 to
$1,085.7 million during the second quarter of 2003, both at the Corporation's
budgeted rates of exchange for 2003.
Free cash flow for the quarter ended 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
quarter ended June 29, 2003, follows (amounts in millions):
Cash flow from operating activities $121.0
Capital expenditures (25.2)
Proceeds from disposals of assets 4.7
-------
Free cash flow $100.5
=======
Diluted earnings per share for the third 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 $1.00 to $1.05 for the third quarter of 2003 and from $3.65
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 third 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 $3.46 (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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