TOWSON, Md., Oct. 23 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the third
quarter of 2002, excluding a $38.4 million pre-tax restructuring charge, were
$77.2 million, or $0.95 per diluted share. This represents a 46% increase
over diluted earnings per share of $0.65 in the third quarter of 2001 using
the new accounting standard for goodwill. Including the restructuring charge
($22.3 million after tax, or $0.27 per diluted share), net earnings for the
quarter were $54.9 million, or $0.68 per diluted share. The Corporation
reported net earnings of $46.2 million, or $0.57 per diluted share, for the
third quarter last year.
Sales for the third quarter of 2002 were $1,085.2 million, a 4% increase
over $1,039.2 million for the same period last year. Sales increased 2%
excluding the effects of foreign currency translation.
Inventory was $787 million at the end of the quarter, $91 million lower
than at the end of the third quarter last year. Free cash flow was
$50 million for the quarter and $168 million for the year to date, versus
$8 million for the first nine months of 2001.
The restructuring charge recorded in the quarter is part of the
comprehensive restructuring plan that the Corporation announced in January
2002. Significant actions covered by this charge include closing a Kwikset
facility in the United States, closing an accessories packaging facility in
England, transferring certain power tool production from England to the
Corporation's low-cost facility in the Czech Republic, and reducing headcount
in European operations. These actions are expected to be completed in late
2003. Approximately $19 million of the charge will be in cash, primarily
representing the cost of severance obligations and lease termination.
Including the $99.8 million charge recorded in the fourth quarter of 2001,
$138.2 million of pre-tax charges have been recorded for this restructuring
plan to date. The Corporation continues to expect that the total
restructuring will cost approximately $190 million before taxes and generate
annual savings in excess of $100 million upon completion.
Commenting on the third-quarter results, Nolan D. Archibald, Chairman and
Chief Executive Officer, said, "Strong profitability in our power tools and
accessories segment, especially in the U.S., enabled us to deliver earnings
significantly higher than the third quarter of 2001 and well above the range
that we had projected in July. Despite the uncertain economy, sales increased
in most of our businesses, which, coupled with higher operating margins,
enabled us to exceed expectations.
"Improved inventory management and strong free cash flow generation
continued in the third quarter. Inventory remained well below the 2001 level,
and we maintained high service levels to our customers. We have generated
$168 million of free cash flow in the first three quarters, and the fourth
quarter is historically a strong cash flow period for the Corporation.
"We are continuing to make progress on our restructuring plan by
transferring production to low-cost regions and increasing fabrication and
assembly output at our new low-cost plant in the Czech Republic. In addition,
manufacturing changes initiated this quarter for Kwikset and European Power
Tools and Accessories are significant incremental steps in the overall plan to
reduce our cost base. In total, the cost of the restructuring program and the
expected savings remain on plan, and we continue to anticipate approximately
$60 million of cost savings in 2003.
"Sales in the Power Tools and Accessories segment increased 4% over the
third quarter last year. This increase was primarily due to a double-digit
rate of sales growth in U.S. consumer products. The consumer business
benefited from new product launches and success in the mass merchant channel.
The U.S. DEWALT professional division also had strong sales, matching the
level of the third quarter of 2001, a period in which the business launched a
large number of high-volume new products. The power tools business in the
U.S. also benefited from large orders in preparation for fourth-quarter
promotions.
"In Europe, Power Tools and Accessories sales increased at a low single-
digit rate, as sales growth in professional tools outweighed a decline in
consumer tools. Sales increased in most European markets other than Germany.
In the rest of the world, Power Tools and Accessories sales were up at a mid
single-digit rate.
"Operating profit for Power Tools and Accessories increased significantly
from the third quarter last year, with strong improvement in both the U.S. and
Europe. These businesses both benefited from favorable manufacturing
absorption, lower warranty costs, and some net restructuring savings. Profits
in the rest of the world declined from the strong third quarter last year.
"Sales in the Hardware and Home Improvement segment were down 4% for the
quarter. As we expected, the loss of shelf space for Price Pfister plumbing
products at The Home Depot resulted in a significant sales decrease. This was
partly offset by a double-digit rate of sales growth in Kwikset security
hardware, reflecting the success of our brand and product repositioning
initiative. Operating profit for Hardware and Home Improvement declined from
the third quarter last year because of lower sales in both Price Pfister and
the European security hardware business. Kwikset's operating profit improved
significantly, due to lower selling, general and administrative expenses and
higher gross margins.
"Sales in the Fastening and Assembly Systems segment were up 4% for the
quarter. Sales in the automotive sector increased in Europe and North
America. Sales in the industrial sector increased in North America, but
remained weak in Europe. Operating profit in this segment increased from the
third quarter last year because of productivity improvement and lower material
costs.
"We are very pleased with our financial results and operating progress in
the third quarter. Looking forward, we continue to expect a strong double-
digit rate of earnings growth in the fourth quarter, driven by improving
operating margins on low single-digit sales growth. Our forecast reflects
challenges that include an uncertain economy, lower sales for Price Pfister,
higher inventory levels in distribution channels, and the effects of the U.S.
longshoremen's lockout at West Coast ports. Despite these challenges, we
expect that our momentum in the marketplace, higher return on sales and lower
interest expense will result in recurring diluted earnings per share for the
fourth quarter in the $.95-to-$1.05 range. This represents an increase from
our previous guidance, and an improvement of 19% to 31% from recurring diluted
earnings of $.80 per share excluding goodwill amortization in 2001.
"For the full year, we expect recurring diluted earnings per share to be
in the $3.13-to-$3.23 range. Because of strong cash generation so far this
year, we expect to convert over 100% of full-year net earnings to free cash
flow. We expect that our year-end inventory level will be similar to 2001,
reflecting additional safety stock required to implement our restructuring
program.
"Black & Decker's excellent results this year confirm that our continued
investment in brands, product development, and end-user relationships during
the difficult economic environment of 2001 and 2002 is paying off. As we
approach the holiday season, we are introducing many innovative products,
especially in the consumer and professional tool businesses. We are
progressing with additional actions under our restructuring program, while
maintaining world-class quality. Inventory management, free cash flow, and
operating improvement through Six Sigma remain critical elements of our
strategy. By combining market leadership with operating excellence, Black &
Decker is in an excellent position to capitalize on the economic recovery."
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 December 27, 2002, to stockholders of record at the close
of business on December 13, 2002.
The Corporation also announced that, due to the effect of lower interest
rates and lower stock market valuations on the funded status of its pension
plans, it expects to take a non-cash charge to stockholders' equity of
approximately $350 million in the fourth quarter of 2002. The charge will
have no impact on either earnings or cash flow in 2002.
The Corporation also announced that, in order to reduce account servicing
costs, it has implemented a convenient, low-cost Selling/Purchasing Program
for stockholders who, as of November 4, 2002, own fewer than 100 shares of
Black & Decker common stock. The program allows eligible stockholders to sell
all of their shares or purchase enough additional shares to reach exactly 100
shares. Participating stockholders will receive or pay a market-based price
per share. A processing fee of $0.50 per share will be charged, subject to a
maximum fee of $35. Depending on when their shares are sold, selling
stockholders may not be entitled to receive the dividend payable on
December 27, 2002. EquiServe Co., N.A. will manage the program, which is
scheduled to expire on January 10, 2003. Details of the program will be
mailed on or about November 12, 2002, to eligible stockholders.
The Corporation will hold a conference call today at 10:00 a.m., E.T., to
discuss third-quarter results and the outlook for the remainder of 2002.
Investors can listen to the 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 call to assure timely access. A replay of the
conference call will be available at http://www.bdk.com through the close of business
on October 30, 2002.
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 Black & Decker's reports filed with
the Securities and Exchange Commission, including the Current Report on Form
8-K, filed October 23, 2002.
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
---------------------------------------
September 29, 2002 September 30, 2001
------------------ ------------------
SALES $ 1,085.2 $ 1,039.2
Cost of goods sold 704.5 696.4
Selling, general, and
administrative expenses 259.0 253.8
Restructuring and exit costs 38.4 -
------------------ ------------------
OPERATING INCOME 83.3 89.0
Interest expense (net of
interest income) 14.2 20.4
Other expense 1.7 2.7
------------------ ------------------
EARNINGS BEFORE INCOME TAXES 67.4 65.9
Income taxes 12.5 19.7
------------------ ------------------
NET EARNINGS $ 54.9 $ 46.2
================== ==================
NET EARNINGS PER COMMON SHARE
- BASIC $ .68 $ .57
================== ==================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 80.5 80.8
================== ==================
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ .68 $ .57
================== ==================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.9 81.0
================== ==================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Nine Months Ended
---------------------------------------
September 29, 2002 September 30, 2001
------------------ ------------------
SALES $ 3,162.2 $ 3,050.9
Cost of goods sold 2,096.1 2,043.0
Selling, general, and
administrative expenses 774.7 762.3
Restructuring and exit costs 38.4 -
------------------ ------------------
OPERATING INCOME 253.0 245.6
Interest expense (net of
interest income) 44.8 65.5
Other expense 5.1 7.3
------------------ ------------------
EARNINGS BEFORE INCOME TAXES 203.1 172.8
Income taxes 49.1 51.8
------------------ ------------------
NET EARNINGS $ 154.0 $ 121.0
================== ==================
NET EARNINGS PER COMMON SHARE
- BASIC $ 1.92 $ 1.49
================== ==================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 80.4 81.0
================== ==================
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.90 $ 1.49
================== ==================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.9 81.4
================== ==================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
September 29, 2002 December 31, 2001
------------------ ------------------
ASSETS
Cash and cash equivalents $ 374.1 $ 244.5
Trade receivables 824.0 708.6
Inventories 787.3 712.2
Other current assets 200.5 227.0
------------------ ------------------
TOTAL CURRENT ASSETS 2,185.9 1,892.3
------------------ ------------------
PROPERTY, PLANT, AND EQUIPMENT 658.1 687.5
GOODWILL 726.5 710.4
OTHER ASSETS 778.8 724.0
------------------ ------------------
$ 4,349.3 $ 4,014.2
================== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Short-term borrowings $ 7.8 $ 12.3
Current maturities of long-term
debt 310.7 33.7
Trade accounts payable 418.0 312.7
Other accrued liabilities 762.3 711.9
------------------ ------------------
TOTAL CURRENT LIABILITIES 1,498.8 1,070.6
------------------ ------------------
LONG-TERM DEBT 927.0 1,191.4
DEFERRED INCOME TAXES 257.5 261.1
POSTRETIREMENT BENEFITS 233.8 238.0
OTHER LONG-TERM LIABILITIES 513.6 502.1
STOCKHOLDERS' EQUITY 918.6 751.0
------------------ ------------------
$ 4,349.3 $ 4,014.2
================== ==================
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
September 29, 2002 Accessories Improvement Systems Total
-------------------------------------------------------------------------
Sales to unaffiliated
customers $767.6 $177.6 $123.4 $1,068.6
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs) 105.6 10.5 18.5 134.6
Depreciation and amortization 19.7 7.3 3.5 30.5
Capital expenditures 16.3 2.4 1.6 20.3
Three Months Ended
September 30, 2001
-------------------------------------------------------------------------
Sales to unaffiliated
customers $741.2 $185.2 $118.1 $1,044.5
Segment profit (loss) (for
Consolidated, operating
income) 77.9 16.1 14.5 108.5
Depreciation and amortization 20.2 8.0 4.0 32.2
Capital expenditures 20.1 7.3 3.6 31.0
Nine Months Ended
September 29, 2002
-------------------------------------------------------------------------
Sales to unaffiliated
customers $2,209.9 $571.0 $376.2 $3,157.1
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs) 237.9 32.6 52.8 323.3
Depreciation and amortization 59.2 24.7 10.5 94.4
Capital expenditures 51.4 8.5 8.9 68.8
Nine Months Ended
September 30, 2001
-------------------------------------------------------------------------
Sales to unaffiliated
customers $2,121.5 $569.9 $362.1 $3,053.5
Segment profit (loss) (for
Consolidated, operating
income) 167.5 42.0 53.8 263.3
Depreciation and amortization 64.8 26.8 11.4 103.0
Capital expenditures 64.6 24.9 9.7 99.2
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Currency Corporate,
Translation Adjustments,
Three Months Ended Adjustments & Eliminations Consolidated
September 29, 2002
-------------------------------------------------------------------------
Sales to unaffiliated customers $16.6 $ - $1,085.2
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs) 1.4 (14.3) 121.7
Depreciation and amortization .5 .1 31.1
Capital expenditures .6 .4 21.3
Three Months Ended
September 30, 2001
-------------------------------------------------------------------------
Sales to unaffiliated customers $(5.3) $ - $1,039.2
Segment profit (loss) (for
Consolidated, operating
income) .1 (19.6) 89.0
Depreciation and amortization (.1) 6.3 38.4
Capital expenditures - - 31.0
Nine Months Ended
September 29, 2002
-------------------------------------------------------------------------
Sales to unaffiliated customers $5.1 $ - $3,162.2
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs) .8 (32.7) 291.4
Depreciation and amortization .4 1.1 95.9
Capital expenditures .7 .7 70.2
Nine Months Ended
September 30, 2001
-------------------------------------------------------------------------
Sales to unaffiliated customers $(2.6) $ - $3,050.9
Segment profit (loss) (for
Consolidated, operating
income) .7 (18.4) 245.6
Depreciation and amortization .4 19.4 122.8
Capital expenditures .5 .7 100.4
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 Nine Months Ended
------------------------------------------------------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2002 2001 2002 2001
------------------------------------------------------------------------
Segment profit for total
reportable business segments $134.6 $108.5 $323.3 $263.3
Items excluded from segment
profit:
Adjustment of budgeted
foreign exchange rates to
actual rates 1.4 .1 .8 .7
Depreciation of Corporate
property and, for 2001,
amortization of certain
goodwill (.1) (6.3) (1.1) (19.4)
Adjustment to businesses'
postretirement benefit
expenses booked in
consolidation 9.3 9.4 28.3 30.3
Other adjustments booked in
consolidation directly
related to reportable
business segments (2.1) (8.2) (3.6) (2.9)
Amounts allocated to businesses
in arriving at segment profit
in excess of (less than)
Corporate center operating
expenses, eliminations, and
other amounts identified above (21.4) (14.5) (56.3) (26.4)
------------------------------------------------------------------------
Operating income before
restructuring and exit costs 121.7 89.0 291.4 245.6
Restructuring and exit costs 38.4 - 38.4 -
------------------------------------------------------------------------
Operating income 83.3 89.0 253.0 245.6
Interest expense, net of
interest income 14.2 20.4 44.8 65.5
Other expense 1.7 2.7 5.1 7.3
------------------------------------------------------------------------
Earnings before income taxes $67.4 $65.9 $203.1 $172.8
========================================================================
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 the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2001, 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 exchange rates for 2002. 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, goodwill amortization (except for the amortization of goodwill
associated with certain acquisitions made by the Power Tools and Accessories
and Fastening and Assembly Systems segments), 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 sales 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.
SOURCE The 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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