TOWSON, Md., Oct. 25 /PRNewswire-FirstCall/ -- The Black & Decker
Corporation (NYSE: BDK) today announced that net earnings for the third
quarter of 2007 were $104.6 million or $1.59 per diluted share, versus the
Corporation's guidance for $1.40-to-$1.45 per diluted share. Net earnings
were $125.1 million or $1.74 per diluted share for the third quarter of
2006.
Sales increased 1% for the quarter to $1.6 billion. Foreign currency
translation had a positive 2% impact on sales. Free cash flow was $413
million year-to-date, versus $320 million for the first nine months of
2006.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented,
"Solid growth in many of our businesses, combined with favorable currency,
enabled Black & Decker to increase sales despite weak markets in North
America. As projected, EPS declined from the prior year level, due in large
part to commodity inflation. EPS exceeded our guidance, however, primarily
because of better sales.
"Sales in the Power Tools and Accessories segment decreased 3% for the
quarter. This reflected lower sales in North America, mitigated by
outstanding results in other regions. Sales in the U.S. Industrial Products
Group decreased at a mid single-digit rate, primarily due to weakness in
the industrial and construction channel. In the U.S. Consumer Products
Group, sales decreased at a double-digit rate. This business experienced
only a modest decline in sell-through at home improvement retailers. Order
rates, however, decreased significantly, largely due to timing of new
product launches and weakness in our automotive and electronic portfolio.
Our European business posted a double-digit rate of sales increase, its
best organic growth in many years. Sales in the rest of the world also
increased at a double-digit rate, with strong gains in both Latin America
and Asia. The negative effects of commodity inflation and lower sales
volume, primarily in the U.S. consumer business, resulted in operating
margin decreasing to 10.2% for the Power Tools and Accessories segment.
"Sales in the Hardware and Home Improvement segment increased 6% for
the quarter. The lockset business posted sales growth despite the U.S.
housing slowdown, driven by price increases and Kwikset's SmartSeries
products. The Price Pfister faucet business benefited from successful new
products at a key retailer and grew sales at a double-digit rate for the
second straight quarter. Operating margin in the Hardware and Home
Improvement segment decreased to 12.3% due to commodity inflation and costs
to support new product listings.
"Sales in the Fastening and Assembly Systems segment increased 7% for
the quarter. Continued strength in Asia was complemented by strong
equipment sales in the global automotive division. Operating margin in this
segment increased to 15.5% for the quarter, reflecting volume leverage and
favorable mix.
"Cash generation and stewardship of capital continue to be core
strengths for Black & Decker. We generated $113 million of free cash flow
in the third quarter, bringing the year-to-date total to $413 million. This
remains well above the level through the first nine months of 2006, even
after adjusting for an income tax payment in 2006 related to the
repatriation of foreign earnings. Over the past five years, we have
consistently set new records for free cash flow and used it effectively for
acquisitions, share repurchases and dividends to enhance shareholder value.
As we announced last week, Black & Decker repurchased 4.3 million shares of
stock this quarter. In addition, our Board of Directors increased the share
repurchase authorization by 4.0 million shares, leaving approximately 4.9
million shares authorized for repurchase. This decision reflects the
Board's confidence in our future cash flow and ability to deploy it wisely.
"Looking ahead, we do not expect near-term improvement in the U.S.
housing industry or a particularly robust holiday season. However, we
should benefit from new product launches and a favorable comparison to the
fourth quarter of 2006, when our customers dramatically reduced their
inventory levels. For the fourth quarter, we expect that sales will
increase, with modest organic growth and positive foreign currency
translation. We expect diluted EPS to increase in the fourth quarter, to a
range of $1.55-to-$1.65 per share. Due to our third-quarter performance, we
are raising our full-year guidance for diluted EPS to the range of
$6.50-to-$6.60. We also expect to convert over 100% of full-year net
earnings to free cash flow.
"Black & Decker has successfully executed a strategy to become a more
balanced company. These efforts have helped us weather the U.S. housing
slowdown and minimize the volatility of our results. In a year when U.S.
housing starts will likely decrease more than 20%, we expect to report
sales growth and roughly flat EPS. With new products such as DEWALT's
expanded Nano(TM) offerings, the Black & Decker VPX(TM) line and Kwikset's
SmartKey(TM), our widely-recognized innovation advantage is as strong as
ever. We have built value for our shareholders through the effective use of
cash, and will continue to be disciplined stewards of capital. We have
strong prospects for the future and plan to deliver outstanding returns to
our shareholders."
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 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
------------------------------------
September 30, 2007 October 1, 2006
------------------ ----------------
SALES $ 1,633.6 $ 1,610.2
Cost of goods sold 1,077.7 1,052.1
Selling, general, and
administrative expenses 391.4 365.6
------------------ ----------------
OPERATING INCOME 164.5 192.5
Interest expense (net of
interest income) 19.9 20.7
Other expense .9 .9
------------------ ----------------
EARNINGS BEFORE INCOME TAXES 143.7 170.9
Income taxes 39.1 45.8
------------------ ----------------
NET EARNINGS $ 104.6 $ 125.1
================== ================
NET EARNINGS PER COMMON
SHARE - BASIC $ 1.63 $ 1.79
================== ================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 64.2 70.1
================== ================
NET EARNINGS PER COMMON
SHARE - ASSUMING DILUTION $ 1.59 $ 1.74
================== ================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 65.8 71.9
================== ================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Dollars in Millions Except Per Share Amounts)
Nine Months Ended
------------------------------------
September 30, 2007 October 1, 2006
------------------ ----------------
SALES $ 4,910.7 $ 4,836.0
Cost of goods sold 3,206.3 3,131.2
Selling, general, and
administrative expenses 1,183.7 1,117.8
------------------ ----------------
OPERATING INCOME 520.7 587.0
Interest expense (net of
interest income) 61.4 51.9
Other expense 2.2 1.8
------------------ ----------------
EARNINGS BEFORE INCOME TAXES 457.1 533.3
Income taxes 126.4 142.9
------------------ ----------------
NET EARNINGS $ 330.7 $ 390.4
================== ================
NET EARNINGS PER COMMON
SHARE - BASIC $ 5.09 $ 5.30
================== ================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 65.0 73.7
================== ================
NET EARNINGS PER COMMON
SHARE - ASSUMING DILUTION $ 4.95 $ 5.16
================== ================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 66.8 75.7
================== ================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Millions of Dollars)
September 30, 2007 December 31, 2006
------------------ -----------------
ASSETS
Cash and cash equivalents $ 222.1 $ 233.3
Trade receivables 1,241.8 1,149.6
Inventories 1,250.4 1,063.5
Other current assets 306.4 257.0
------------------ -----------------
TOTAL CURRENT ASSETS 3,020.7 2,703.4
------------------ -----------------
PROPERTY, PLANT, AND EQUIPMENT 586.7 622.2
GOODWILL 1,198.7 1,195.6
OTHER ASSETS 777.9 726.5
------------------ -----------------
$ 5,584.0 $ 5,247.7
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 510.5 $ 258.9
Current maturities of long-term debt .2 150.2
Trade accounts payable 653.5 458.5
Other current liabilities 978.0 912.0
------------------ -----------------
TOTAL CURRENT LIABILITIES 2,142.2 1,779.6
------------------ -----------------
LONG-TERM DEBT 1,169.4 1,170.3
POSTRETIREMENT BENEFITS 492.2 482.4
OTHER LONG-TERM LIABILITIES 723.7 651.8
STOCKHOLDERS' EQUITY 1,056.5 1,163.6
------------------ -----------------
$ 5,584.0 $ 5,247.7
================== =================
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
------------------------------------------------
(Millions of Dollars)
Reportable Business Segments
----------------------------------------------
Power Hardware Fastening
Tools & & Home & Assembly
Accessories Improvement Systems Total
Three Months Ended
September 30, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,159.7 $ 266.5 $ 170.4 $ 1,596.6
Segment profit (loss) (for
Consolidated, operating
income) 118.5 32.7 26.3 177.5
Depreciation and amortization 24.2 4.6 5.0 33.8
Capital expenditures 19.4 4.4 4.8 28.6
Three Months Ended
October 1, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 1,197.9 $ 252.5 $ 159.7 $ 1,610.1
Segment profit (loss) (for
Consolidated, operating
income) 145.4 35.6 22.6 203.6
Depreciation and amortization 30.1 6.1 4.7 40.9
Capital expenditures 19.3 4.4 3.1 26.8
Nine Months Ended
September 30, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 3,550.4 $ 766.7 $ 519.2 $ 4,836.3
Segment profit (loss) (for
Consolidated, operating
income) 414.6 90.8 81.2 586.6
Depreciation and amortization 72.9 17.8 15.3 106.0
Capital expenditures 46.8 15.1 11.8 73.7
Nine Months Ended
October 1, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 3,590.3 $ 766.2 $ 504.9 $ 4,861.4
Segment profit (loss) (for
Consolidated, operating
income) 461.5 110.6 73.0 645.1
Depreciation and amortization 83.1 18.3 14.3 115.7
Capital expenditures 57.9 9.5 9.0 76.4
Currency Corporate,
Translation Adjustments,
Adjustments & Eliminations Consolidated
Three Months Ended
September 30, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 37.0 $ - $ 1,633.6
Segment profit (loss) (for
Consolidated, operating
income) 4.9 (17.9) 164.5
Depreciation and amortization .7 .5 35.0
Capital expenditures .6 (.4) 28.8
Three Months Ended
October 1, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ .1 $ - $ 1,610.2
Segment profit (loss) (for
Consolidated, operating
income) .2 (11.3) 192.5
Depreciation and amortization - .6 41.5
Capital expenditures - .1 26.9
Nine Months Ended
September 30, 2007
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ 74.4 $ - $ 4,910.7
Segment profit (loss) (for
Consolidated, operating
income) 10.8 (76.7) 520.7
Depreciation and amortization 1.5 1.8 109.3
Capital expenditures 1.0 .7 75.4
Nine Months Ended
October 1, 2006
--------------------------------------------------------------------------
Sales to unaffiliated
customers $ (25.4) $ - $ 4,836.0
Segment profit (loss) (for
Consolidated, operating
income) (2.4) (55.7) 587.0
Depreciation and amortization (.7) 1.7 116.7
Capital expenditures (.4) .2 76.2
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
--------------------------------------------------------------------------
September 30, October 1, September 30, October 1,
2007 2006 2007 2006
--------------------------------------------------------------------------
Segment profit for total
reportable business
segments $ 177.5 $ 203.6 $ 586.6 $ 645.1
Items excluded from
segment profit:
Adjustment of budgeted
foreign exchange rates
to actual rates 4.9 .2 10.8 (2.4)
Depreciation of Corporate
property (.2) (.2) (.7) (.7)
Adjustment to businesses'
postretirement benefit
expenses booked in
consolidation (5.0) (6.4) (14.8) (18.9)
Other adjustments booked in
consolidation directly
related to reportable
business segments 4.6 5.6 1.0 1.3
Amounts allocated to
businesses in arriving at
segment profit in excess of
(less than) Corporate center
operating expenses,
eliminations, and other
amounts identified above (17.3) (10.3) (62.2) (37.4)
--------------------------------------------------------------------------
Operating income 164.5 192.5 520.7 587.0
Interest expense, net of
interest income 19.9 20.7 61.4 51.9
Other expense .9 .9 2.2 1.8
--------------------------------------------------------------------------
Earnings before income
taxes $ 143.7 $ 170.9 $ 457.1 $ 533.3
==========================================================================
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 nine-month periods ended
September 30, 2007 and the nine-month period ended October 1, 2006, follows
(dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30, October 1,
2007 2007 2006
-------- -------- --------
Cash flow from operating
activities $ 141.6 $ 484.8 $ 387.3
Capital expenditures (28.8) (75.4) (76.2)
Proceeds from disposals
of assets .3 4.0 9.1
-------- -------- --------
Free cash flow $ 113.1 $ 413.4 $ 320.2
======== ======== ========
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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