TOWSON, Md., July 26 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the second
quarter of 2007 were $118.0 million or $1.75 per diluted share, at the high
end of the Corporation's guidance for $1.70-to-$1.75 per diluted share. Net
earnings were $152.2 million or $1.98 per diluted share for the second
quarter of 2006.
Sales were $1.7 billion, flat to the second quarter of 2006. Foreign
currency translation had a positive 2% impact on sales. Free cash flow was
$300 million year-to-date, versus $138 million for the first six months of
2006.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented,
"Black & Decker met our earnings expectations in the second quarter despite
persistent challenges in the U.S. residential construction sector. As we
anticipated, significant commodity inflation caused a year-on-year decline
in operating margin and earnings. Our international divisions, however,
continued to deliver outstanding results, partially offsetting the domestic
headwinds.
"Sales in the Power Tools and Accessories segment decreased 2% for the
quarter. In the U.S., sell-through at key retailers improved versus the
first quarter, but remained below the prior-year level. As we expected, the
inventory increases by retailers that helped this business in the first
quarter did not continue. Sales in the U.S. Consumer Products Group
decreased at a mid single-digit rate, largely due to a decline in the
pressure washer category. Sales of consumer power tools, however, improved
significantly. The U.S. Industrial Products Group reported a high
single-digit rate of sales decline, reflecting weakness in the industrial
and construction channel. In the European business, strong growth by the
industrial division drove a mid single-digit sales increase. Sales also
increased by more than 20% in the rest of the world, led by continued
strength in Latin America. Operating margin for the Power Tools and
Accessories segment decreased to 12.4%, reflecting the lower sales base and
commodity cost pressure.
"Sales in the Hardware and Home Improvement segment decreased 3% for
the quarter. The lockset business, which is significantly tied to
residential construction, reported a double-digit rate of sales decline in
the U.S. The Price Pfister faucet business gained market share and grew
sales at a double- digit rate. Operating margin in the Hardware and Home
Improvement segment decreased to 12.0% for the quarter due to lower volume,
costs associated with new product launches, and commodity inflation.
"Sales in the Fastening and Assembly Systems segment increased 1% for
the quarter. The Asian business and European industrial division continued
to grow, but sales to the challenging automotive market decreased modestly.
Operating margin in this segment increased to 15.7% for the quarter.
"After posting very strong free cash flow in the first quarter, we
generated $163 million in the second quarter, bringing the year-to-date
total to $300 million. Favorable working capital drove year-to-date free
cash flow approximately $120 million above the prior-year level, even after
adjusting for an income tax payment in 2006 related to the repatriation of
foreign earnings. In addition, inventory decreased versus the second
quarter of 2006, excluding the effect of foreign currency translation.
"Looking ahead, we expect that the weak U.S. housing industry and
significant commodity inflation will continue to adversely affect our
earnings comparisons. For the third quarter, we again anticipate roughly
flat sales, including favorable foreign currency translation. Due to
ongoing margin pressure, we expect third-quarter diluted EPS in the range
of $1.40-to-$1.45. For the full year, we now expect diluted EPS in the
range of $6.35-to-$6.50. We also expect to convert at least 95% of
full-year net earnings to free cash flow.
"Through discipline and a focus on execution, Black & Decker has become
a stronger and more balanced company over the last five years. As a result,
we met our expectations this quarter and believe that we will continue to
weather the slowdown effectively. We are excited about new innovations such
as the next generation of industrial and consumer cordless tools and
advanced lockset technologies. Our strong cash flow gives us the ability to
expand into new categories through acquisitions and internal development,
as well as to enhance shareholder value through share repurchases. We are
well-positioned for the future and plan to deliver outstanding returns to
our shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.42 per share of the Corporation's outstanding
common stock payable September 28, 2007, to stockholders of record at the
close of business on September 14, 2007.
The Corporation will hold a conference call today at 10:00 a.m., E.T.,
to discuss second-quarter results and the outlook for the remainder of
2007. 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, 2006.
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
---------------------------------
July 1, 2007 July 2, 2006
-------------- --------------
SALES $ 1,699.9 $ 1,696.9
Cost of goods sold 1,112.0 1,093.8
Selling, general, and
administrative expenses 401.3 376.8
-------------- --------------
OPERATING INCOME 186.6 226.3
Interest expense
(net of interest income) 20.0 17.5
Other expense .2 .9
-------------- --------------
EARNINGS BEFORE INCOME TAXES 166.4 207.9
Income taxes 48.4 55.7
-------------- --------------
NET EARNINGS $ 118.0 $ 152.2
============== ==============
NET EARNINGS PER COMMON SHARE - BASIC $ 1.80 $ 2.03
============== ==============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 65.6 75.0
============== ==============
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.75 $ 1.98
============== ==============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 67.5 77.1
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
--------------------------------
July 1, 2007 July 2, 2006
-------------- --------------
SALES $ 3,277.1 $ 3,225.8
Cost of goods sold 2,128.6 2,079.1
Selling, general, and
administrative expenses 792.3 752.2
-------------- --------------
OPERATING INCOME 356.2 394.5
Interest expense
(net of interest income) 41.5 31.2
Other expense 1.3 .9
-------------- --------------
EARNINGS BEFORE INCOME TAXES 313.4 362.4
Income taxes 87.3 97.1
-------------- --------------
NET EARNINGS $ 226.1 $ 265.3
============== ==============
NET EARNINGS PER COMMON SHARE - BASIC $ 3.46 $ 3.51
============== ==============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 65.4 75.5
============== ==============
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 3.36 $ 3.42
============== ==============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 67.3 77.6
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Millions of Dollars)
July 1, 2007 December 31, 2006
------------------- -------------------
ASSETS
Cash and cash equivalents $ 262.0 $ 233.3
Trade receivables 1,232.5 1,149.6
Inventories 1,151.4 1,063.5
Other current assets 275.8 257.0
------------------- -------------------
TOTAL CURRENT ASSETS 2,921.7 2,703.4
------------------- -------------------
PROPERTY, PLANT, AND EQUIPMENT 598.3 622.2
GOODWILL 1,195.0 1,195.6
OTHER ASSETS 767.9 726.5
------------------- -------------------
$ 5,482.9 $ 5,247.7
=================== ===================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Short-term borrowings $ 99.0 $ 258.9
Current maturities of
long-term debt 150.2 150.2
Trade accounts payable 620.2 458.5
Other current liabilities 889.1 912.0
------------------- -------------------
TOTAL CURRENT LIABILITIES 1,758.5 1,779.6
------------------- -------------------
LONG-TERM DEBT 1,160.8 1,170.3
POSTRETIREMENT BENEFITS 490.5 482.4
OTHER LONG-TERM LIABILITIES 735.0 651.8
STOCKHOLDERS' EQUITY 1,338.1 1,163.6
------------------- -------------------
$ 5,482.9 $ 5,247.7
=================== ===================
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
July 1, 2007 Accessories Improvement Systems Total
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,242.6 $ 253.4 $ 176.4 $ 1,672.4
Segment profit (loss)
(for Consolidated,
operating income) 154.1 30.4 27.6 212.1
Depreciation and
amortization 24.6 6.0 5.3 35.9
Capital expenditures 14.7 5.9 4.7 25.3
Three Months Ended
July 2, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,266.8 $ 261.8 $ 174.2 $ 1,702.8
Segment profit (loss)
(for Consolidated,
operating income) 177.8 41.4 26.1 245.3
Depreciation and
amortization 26.4 6.4 4.9 37.7
Capital expenditures 18.7 3.5 3.2 25.4
Six Months Ended
July 1, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 2,390.7 $ 500.2 $ 348.8 $ 3,239.7
Segment profit (loss)
(for Consolidated,
operating income) 296.1 58.1 54.9 409.1
Depreciation and
amortization 48.7 13.2 10.3 72.2
Capital expenditures 27.4 10.7 7.0 45.1
Six Months Ended
July 2, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 2,392.4 $ 513.7 $ 345.2 $ 3,251.3
Segment profit (loss)
(for Consolidated,
operating income) 316.1 75.0 50.4 441.5
Depreciation and
amortization 53.0 12.2 9.6 74.8
Capital expenditures 38.6 5.1 5.9 49.6
Currency Corporate,
Three Months Ended Translation Adjustments,
July 1, 2007 Adjustments & Eliminations Consolidated
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 27.5 $ - $ 1,699.9
Segment profit (loss)
(for Consolidated,
operating income) 4.2 (29.7) 186.6
Depreciation and
amortization .5 .7 37.1
Capital expenditures .3 .9 26.5
Three Months Ended
July 2, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ (5.9) $ - $ 1,696.9
Segment profit (loss)
(for Consolidated,
operating income) (.5) (18.5) 226.3
Depreciation and
amortization (.3) .4 37.8
Capital expenditures (.1) .1 25.4
Six Months Ended
July 1, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 37.4 $ - $ 3,277.1
Segment profit (loss)
(for Consolidated,
operating income) 5.9 (58.8) 356.2
Depreciation and
amortization .8 1.3 74.3
Capital expenditures .4 1.1 46.6
Six Months Ended
July 2, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ (25.5) $ - $ 3,225.8
Segment profit (loss)
(for Consolidated,
operating income) (2.6) (44.4) 394.5
Depreciation and
amortization (.7) 1.1 75.2
Capital expenditures (.4) .1 49.3
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
--------------------------------------------------------------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
--------------------------------------------------------------------------
Segment profit for total reportable
business segments $ 212.1 $ 245.3 $ 409.1 $ 441.5
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 4.2 (.5) 5.9 (2.6)
Depreciation of Corporate property (.3) (.3) (.5) (.5)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation (5.0) (6.3) (9.8) (12.5)
Other adjustments booked in
consolidation directly related
to reportable business segments (4.9) (2.0) (3.6) (4.3)
Amounts allocated to businesses in
arriving at segment profit in
excess of (less than) Corporate
center operating expenses,
eliminations, and other amounts
identified above (19.5) (9.9) (44.9) (27.1)
-------------------------------------------------------------------------
Operating income 186.6 226.3 356.2 394.5
Interest expense, net of interest
income 20.0 17.5 41.5 31.2
Other expense .2 .9 1.3 .9
-------------------------------------------------------------------------
Earnings before income taxes $ 166.4 $ 207.9 $ 313.4 $ 362.4
=========================================================================
BASIS OF PRESENTATION
Adoption of New Accounting Standard Relating to Income Taxes:
-------------------------------------------------------------
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, 2006 (the 2006 Form 10-K), the
Corporation was required to adopt FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109, as of January 1, 2007, with any cumulative effect of the
change in accounting principles recognized as an adjustment to opening
retained earnings.
FIN 48 provides guidance for the recognition, derecognition and
measurement in financial statements of tax positions taken in previously
filed tax returns or tax positions expected to be taken in tax returns. FIN
48 requires an entity to recognize the financial statement impact of a tax
position when it is more likely than not that the position will be
sustained upon examination. If the tax position meets the
more-likely-than-not recognition threshold, the tax effect is recognized at
the largest amount of the benefit that is greater than fifty percent likely
of being realized upon ultimate settlement.
FIN 48 permits an entity to recognize interest related to tax
uncertainties as either income taxes or interest expense. FIN 48 also
permits an entity to recognize penalties related to tax uncertainties as
either income tax expense or within other expense classifications. As
anticipated and consistent with its past practice, the Corporation
recognized interest and penalties, if any, related to tax uncertainties as
income tax expense upon adoption of FIN 48. The Corporation recognized the
cumulative effect of the change in accounting principles required to adopt
FIN 48 effective as of January 1, 2007, as a reduction of opening retained
earnings in the amount of $7.3 million.
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 industrial
power tools and accessories, lawn and garden tools, and electric cleaning,
automotive, and lighting products, 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.
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
2006 Form 10-K, 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 2007. 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. Also, in addition to measuring its
cash flow generation and usage based upon operating, investing and
financial activities classifications established under GAAP, the
Corporation also measures its free cash flow. 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.
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, for the three- and six-month periods ended July
1, 2007 and the six-month period ended July 2, 2006, follows (dollars in
millions):
Three Months Ended Six Months Ended
July 1, July 1, July 2,
2007 2007 2006
---------- ---------- ----------
Cash flow from operating activities $ 189.7 $ 343.2 $ 181.0
Capital expenditures (26.5) (46.6) (49.3)
Proceeds from disposals of assets .1 3.7 6.0
---------- ---------- ----------
Free cash flow $ 163.3 $ 300.3 $ 137.7
========== ========== ==========
This press release includes a statement that free cash flow for the six
months ended July 1, 2007, as compared to the six months ended July 2,
2006, increased by approximately $120 million. That increase excludes tax
payments that occurred in 2006 associated with repatriating foreign
earnings under the American Jobs Creation Act.
SOURCE The Black & Decker Corporation
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CONTACT:
Mark M. Rothleitner, Vice President, Investor
Relations and Treasurer, +1-410-716-3979, or Roger A. Young, Vice
President, Investor and Media Relations, +1-410-716-3979, both of
The Black & Decker Corporation
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