UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 1, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-1553
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THE BLACK & DECKER CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 52-0248090
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
701 East Joppa Road Towson, Maryland 21286
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(Address of principal executive offices) (Zip Code)
(410) 716-3900
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X YES NO
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The number of shares of Common Stock outstanding as of April 27, 2001:
81,272,970
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The exhibit index as required by item 601(a) of Regulation S-K is included in
this report.
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THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
INDEX - FORM 10-Q
April 1, 2001
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings (Unaudited)
For the Three Months Ended April 1, 2001 and April 2, 2000 3
Consolidated Balance Sheet
April 1, 2001 (Unaudited) and December 31, 2000 4
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Three Months Ended April 1, 2001 and April 2, 2000 5
Consolidated Statement of Cash Flows (Unaudited)
For the Three Months Ended April 1, 2001 and April 2, 2000 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
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April 1, 2001 April 2, 2000
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Sales $979.0 $1,037.6
Cost of goods sold 636.4 674.6
Selling, general, and administrative expenses 270.2 271.5
Gain on sale of business -- 20.1
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Operating Income 72.4 111.6
Interest expense (net of interest income) 22.4 23.8
Other expense 2.7 .4
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Earnings Before Income Taxes 47.3 87.4
Income taxes 14.2 27.2
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Net Earnings $ 33.1 $ 60.2
=======================================================================================
Net Earnings Per Common Share - Basic $ .41 $ .70
=======================================================================================
Shares Used in Computing Basic Earnings Per Share
(in Millions) 81.1 86.0
=======================================================================================
Net Earnings Per Common Share - Assuming
Dilution $ .40 $ .69
=======================================================================================
Shares Used in Computing Diluted Earnings Per Share
(in Millions) 81.7 86.9
=======================================================================================
Dividends Per Common Share $ .12 $ .12
=======================================================================================
See Notes to Consolidated Financial Statements (Unaudited)
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CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amount)
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April 1, 2001
(Unaudited) December 31, 2000
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Assets
Cash and cash equivalents $ 149.3 $ 135.0
Trade receivables 754.7 783.1
Inventories 877.8 844.0
Other current assets 194.7 199.9
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Total Current Assets 1,976.5 1,962.0
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Property, Plant, and Equipment 745.0 748.1
Goodwill 711.1 717.2
Other Assets 693.2 662.4
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$4,125.8 $4,089.7
======================================================================================
Liabilities and Stockholders' Equity
Short-term borrowings $ 556.9 $ 402.9
Current maturities of long-term debt 38.8 47.7
Trade accounts payable 340.7 367.6
Other accrued liabilities 691.7 814.1
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Total Current Liabilities 1,628.1 1,632.3
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Long-Term Debt 772.9 798.5
Deferred Income Taxes 219.7 221.0
Postretirement Benefits 250.4 240.6
Other Long-Term Liabilities 487.7 479.8
Common Stock Under Equity Forwards 25.5 25.1
Stockholders' Equity
Common stock, par value $.50 per share 40.6 40.2
Capital in excess of par value 585.0 560.0
Retained earnings 287.3 264.0
Accumulated other comprehensive income (loss) (171.4) (171.8)
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Total Stockholders' Equity 741.5 692.4
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$4,125.8 $4,089.7
======================================================================================
See Notes to Consolidated Financial Statements (Unaudited)
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amounts)
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Accumulated
Outstanding Capital in Other Total
Common Par Excess of Retained Comprehensive Stockholders'
Shares Value Par Value Earnings Income (Loss) Equity
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Balance at December 31, 1999 87,190,240 $43.6 $843.3 $ 21.9 $(107.7) $801.1
Comprehensive income:
Net earnings -- -- -- 60.2 -- 60.2
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax) -- -- -- -- (.2) (.2)
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Comprehensive income (loss) -- -- -- 60.2 (.2) 60.0
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Cash dividends ($.12 per share) -- -- -- (10.2) -- (10.2)
Purchase and retirement of
common stock (net of 255,791
shares issued under equity
forwards) (2,185,209) (1.1) (90.3) -- -- (91.4)
Common stock issued under
employee benefit plans 96,404 -- 3.3 -- -- 3.3
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Balance at April 2, 2000 85,101,435 $42.5 $756.3 $ 71.9 $(107.9) $762.8
=====================================================================================================================
Balance at December 31, 2000 80,343,094 $40.2 $560.0 $264.0 $(171.8) $692.4
Comprehensive income:
Net earnings -- -- -- 33.1 -- 33.1
Cumulative effect of accounting
change (net of tax) -- -- -- -- (.7) (.7)
Net gain on derivative
instruments (net of tax) -- -- -- -- 5.4 5.4
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax) -- -- -- -- (4.3) (4.3)
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Comprehensive income -- -- -- 33.1 .4 33.5
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Cash dividends ($.12 per share) -- -- -- (9.8) -- (9.8)
Common stock retired under
equity forwards (240,276) (.1) .1 -- -- --
Common stock under equity
forwards -- -- (.4) -- -- (.4)
Common stock issued under
employee benefit plans 1,157,152 .5 25.3 -- -- 25.8
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Balance at April 1, 2001 81,259,970 $40.6 $585.0 $287.3 $(171.4) $741.5
=====================================================================================================================
See Notes to Consolidated Financial Statements (Unaudited)
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CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions)
Three Months Ended
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April 1, 2001 April 2, 2000
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Operating Activities
Net earnings $ 33.1 $ 60.2
Adjustments to reconcile net earnings to
cash flow from operating activities:
Gain on sale of business -- (20.1)
Non-cash charges and credits:
Depreciation and amortization 43.3 42.3
Other (1.8) (4.2)
Changes in selected working capital items:
Trade receivables 33.7 27.0
Inventories (29.7) (68.0)
Trade accounts payable (26.9) 39.9
Restructuring spending (3.4) (4.5)
Changes in other assets and liabilities (122.0) (91.1)
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Cash Flow From Operating Activities (73.7) (18.5)
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Investing Activities
Proceeds from sale of business -- 25.0
Proceeds from disposal of assets .2 1.1
Capital expenditures (38.8) (66.6)
Cash inflow from hedging activities 15.4 75.1
Cash outflow from hedging activities (15.8) (76.8)
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Cash Flow From Investing Activities (39.0) (42.2)
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Cash Flow Before Financing Activities (112.7) (60.7)
Financing Activities
Net increase in short-term borrowings 153.0 144.6
Payments on long-term debt (40.1) (3.8)
Purchase of common stock -- (91.4)
Issuance of common stock 22.6 5.9
Cash dividends (9.8) (10.2)
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Cash Flow From Financing Activities 125.7 45.1
Effect of exchange rate changes on cash 1.3 (.7)
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Increase (Decrease) In Cash And Cash Equivalents 14.3 (16.3)
Cash and cash equivalents at beginning of period 135.0 147.3
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Cash And Cash Equivalents At End Of Period $ 149.3 $ 131.0
=======================================================================================
See Notes to Consolidated Financial Statements (Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Black & Decker Corporation and Subsidiaries
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the unaudited
consolidated financial statements include all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation of the
financial position and the results of operations.
Operating results for the three-month period ended April 1, 2001, are not
necessarily indicative of the results that may be expected for a full fiscal
year. For further information, refer to the consolidated financial statements
and notes included in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2000.
Certain amounts presented for the three months ended April 2, 2000, have
been reclassified to conform to the 2001 presentation.
NOTE 2: CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2001, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended. SFAS No. 133 requires that the Corporation
recognize all derivatives on the balance sheet at fair value and establishes
criteria for designation and effectiveness of hedging relationships. At the time
of its adoption of SFAS No. 133 on January 1, 2001, the Corporation recognized
an after-tax reduction of $.7 million to other comprehensive income, a component
of stockholders' equity, as a cumulative effect adjustment.
The Corporation is exposed to market risks arising from changes in interest
rates. With products and services marketed in over 100 countries and with
manufacturing sites in ten countries, the Corporation also is exposed to risks
arising from changes in foreign currency rates. The Corporation uses derivatives
principally in the management of interest rate and foreign currency exposure. It
does not utilize derivatives that contain leverage features. On the date on
which the Corporation enters into a derivative, the derivative is designated as
a hedge of the identified exposure. The Corporation formally documents all
relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various hedge
transactions. In this documentation, the Corporation specifically identifies the
asset, liability, firm commitment, forecasted transaction, or net investment
that has been designated as the hedged item and states how the hedging
instrument is expected to reduce the risks related to the hedged item. The
Corporation measures effectiveness of its hedging relationships both at hedge
inception and on an ongoing basis.
For each derivative instrument that is designated and qualifies as a fair
value hedge, the gain or loss on the derivative instrument as well as the
offsetting loss or gain on the hedged item attributable to the hedged risk are
recognized in current earnings during the period of the change in fair values.
For each derivative instrument that is designated and qualifies as a cash flow
hedge, the effective portion of the gain or loss on the derivative instrument is
reported as a component of other comprehensive income and reclassified into
earnings in the same period or
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periods during which the hedged transaction affects earnings. The remaining gain
or loss on the derivative instrument in excess of the cumulative change in the
present value of future cash flows of the hedged item, if any, is recognized in
current earnings during the period of change. For hedged forecasted
transactions, hedge accounting is discontinued if the forecasted transaction is
no longer probable of occurring, and previously deferred hedging gains or losses
would be recorded to earnings immediately. For derivatives that are designated
and qualify as hedges of net investments in subsidiaries located outside the
United States, the gain or loss is reported in other comprehensive income as
part of the cumulative translation adjustment to the extent the derivative is
effective. For derivative instruments not designated as hedging instruments, the
gain or loss is recognized in current earnings during the period of change.
Interest Rate Risk Management: The Corporation manages its interest rate
risk, primarily through the use of interest rate swap agreements, in order to
achieve a cost-effective mix of fixed and variable rate indebtedness. It seeks
to issue debt opportunistically, whether at fixed or variable rates, at the
lowest possible costs. The Corporation may, based upon its assessment of the
future interest rate environment, elect to manage its interest rate risk
associated with changes in the fair value of its indebtedness, or the future
cash flows associated with its indebtedness, through the use of interest rate
swaps.
The Corporation has designated each of its outstanding interest rate swap
agreements as fair value hedges of the underlying fixed rate obligation. The
fair value of the interest rate swap agreements is recorded in other assets or
other long-term liabilities with a corresponding increase or decrease in the
fixed rate obligation. The changes in the fair value of the interest rate swap
agreements and the underlying fixed rate obligations are recorded as equal and
offsetting unrealized gains and losses in the interest expense and other expense
components of the statement of earnings. The Corporation has structured all
existing interest rate swap agreements to be 100% effective. As a result, there
is no current impact to earnings resulting from hedge ineffectiveness.
The amounts exchanged by the counterparties to interest rate swap
agreements normally are based upon the notional amounts and other terms,
generally related to interest rates, of the derivatives. While notional amounts
of interest rate swaps form part of the basis for the amounts exchanged by the
counterparties, the notional amounts are not themselves exchanged and,
therefore, do not represent a measure of the Corporation's exposure as an end
user of derivatives.
The Corporation's portfolio of interest rate swaps instruments as of April
1, 2001, and December 31, 2000, consisted of $588.0 million notional amounts of
fixed to variable rate swaps with a weighted-average fixed rate receipt of
6.17%. The fair value of interest rate swaps as of April 1, 2001, and December
31, 2000, was a net gain of $10.3 million and a net loss of $4.2 million,
respectively. Credit exposure on interest rate swaps at April 1, 2001, was $12.6
million. No credit exposure on interest rate swaps existed at December 31, 2000.
Foreign Currency Management: The Corporation enters into various foreign
currency contracts in managing its foreign currency exchange risk. Generally,
the foreign currency contracts have maturity dates of less than eighteen months.
The contractual amounts of foreign currency derivatives, principally forward
exchange contracts and purchased options, generally are exchanged by the
counterparties. The Corporation's foreign currency derivatives are designated
to, and generally are denominated in the currencies of, the underlying
exposures. To minimize the volatility of reported equity, the Corporation may
hedge, on a limited basis, a portion of its net investment in subsidiaries
located outside the United States through the use of
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foreign currency forward contracts and purchased foreign currency options.
Through its foreign currency hedging activities, the Corporation seeks to
minimize the risk that cash flows resulting from the sales of products
manufactured in a currency different from that of the selling subsidiary will be
affected by changes in exchange rates. The Corporation responds to foreign
exchange movements through various means, such as pricing actions, changes in
cost structure, and changes in hedging strategies.
The Corporation hedges its foreign currency transaction exposure, as well
as certain forecasted transactions, based on management's judgment, generally
through forward exchange and option contracts. Some of the contracts involve the
exchange of two foreign currencies according to the local needs of the
subsidiary. Some natural hedges also are used to mitigate transaction and
forecasted exposures.
The fair value of the forward exchange and option contracts at April 1,
2001, was a net gain of $5.1 million. The fair value of foreign currency related
derivatives are generally included in the Consolidated Balance Sheet in other
current assets and other accrued liabilities. The earnings impact of cash flow
hedges relating to forecasted purchases of inventory is generally reported in
cost of sales to match the underlying transaction being hedged. Realized and
unrealized gains and losses on these instruments are deferred in other
comprehensive income until the underlying transaction is recognized in earnings.
The earnings impact of cash flow hedges relating to the variability in cash
flows associated with foreign currency denominated assets and liabilities is
reported in cost of sales or other expense depending on the nature of the assets
or liabilities being hedged. The amounts deferred in other comprehensive income
associated with these instruments generally relate to foreign currency spot-rate
to forward-rate differentials and are recognized in earnings over the term of
the hedge. The discount or premium relating to cash flow hedges associated with
foreign currency denominated assets and liabilities is recognized in net
interest expense over the life of the hedge.
At April 1, 2001, the Corporation has recognized $4.7 million (net of taxes
of $2.6 million) of net deferred hedging gains in accumulated other
comprehensive income. During the three months ended April 1, 2001, the
Corporation reclassified $.2 million of net deferred hedging gains to earnings
from accumulated other comprehensive income, principally amounts included in the
January 1, 2001, transition adjustment. At April 1, 2001, the Corporation
expects to reclassify $4.7 million of pre-tax gains on derivative instruments
from accumulated other comprehensive income to earnings during the next twelve
months.
Hedge ineffectiveness and the portion of derivative gains or losses
excluded from the assessments of hedge effectiveness related to the
Corporation's outstanding cash flow hedges that were recorded to earnings during
the quarter ended April 1, 2001, were a net loss of $1.8 million. This amount
principally relates to the change in the time value of purchased options that is
excluded from the assessment of hedge effectiveness and is included in cost of
sales in the Consolidated Statement of Earnings.
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NOTE 3: INVENTORIES
The components of inventory at the end of each period, in millions of dollars,
consisted of the following:
April 1, 2001 December 31, 2000
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FIFO cost:
Raw materials and work-in-process $ 225.7 $ 219.6
Finished products 658.9 627.9
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884.6 847.5
Excess of FIFO cost over LIFO
inventory value (6.8) (3.5)
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$ 877.8 $ 844.0
================================================================================
Inventories are stated at the lower of cost or market. The cost of United
States inventories is based primarily on the last-in, first-out (LIFO) method;
all other inventories are based on the first-in, first-out (FIFO) method.
NOTE 4: GOODWILL
Goodwill at the end of each period, in millions of dollars, was as follows:
April 1, 2001 December 31, 2000
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Goodwill $ 1,301.0 $ 1,300.5
Less accumulated amortization 589.9 583.3
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$ 711.1 $ 717.2
================================================================================
NOTE 5: LONG-TERM DEBT
Indebtedness of subsidiaries of the Corporation in the aggregate principal
amounts of $330.2 million and $599.6 million were included in the Consolidated
Balance Sheet at April 1, 2001, and December 31, 2000, respectively, under the
captions short-term borrowings, current maturities of long-term debt, and
long-term debt.
As more fully described in Note 12 of Notes to Consolidated Financial
Statements, in April 2001, the Corporation replaced its expiring unsecured
revolving credit facilities with two new unsecured revolving credit facilities.
NOTE 6: INTEREST EXPENSE (NET OF INTEREST INCOME)
Interest expense (net of interest income) for each period, in millions of
dollars, consisted of the following:
Three Months Ended
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April 1, 2001 April 2, 2000
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Interest expense $ 34.6 $ 35.1
Interest (income) (12.2) (11.3)
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$ 22.4 $ 23.8
================================================================================
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NOTE 7: OTHER EXPENSE
Other expense of $2.7 million for the three months ended April 1, 2001,
consisted primarily of dividends related to preferred shares of a subsidiary.
For additional information on the subsidiary's preferred shares, which were
issued during the fourth quarter of 2000, see Note 12 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, 2000. Other expense for the three
months ended April 2, 2000, was not material.
NOTE 8: BUSINESS SEGMENTS
The following table provides selected financial data for the Corporation's
business segments (in millions of dollars):
Reportable Business Segments
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Power Hardware Fastening Currency Corporate,
Tools & & Home & Assembly Translation Adjustments,
Three Months Ended April 1, 2001 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
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Sales to unaffiliated customers $656.4 $200.9 $123.5 $ 980.8 $ (1.8) $ - $ 979.0
Segment profit (loss) (for
Consolidated, operating income) 35.0 17.4 19.5 71.9 (.2) .7 72.4
Depreciation and amortization 23.2 9.9 3.8 36.9 (.1) 6.5 43.3
Capital expenditures 25.9 9.4 3.3 38.6 (.3) .5 38.8
Three Months Ended April 2, 2000
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Sales to unaffiliated customers $679.9 $200.5 $132.3 $1,012.7 $ 24.9 $ - $1,037.6
Segment profit (loss) (for
Consolidated, operating income
before gain on sale of business) 53.2 19.1 22.3 94.6 2.3 (5.4) 91.5
Depreciation and amortization 21.0 9.8 3.9 34.7 .9 6.7 42.3
Capital expenditures 51.0 7.1 6.9 65.0 1.4 .2 66.6
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 the retained portion of the household products business. 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, 2000,
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
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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 exchange rates for 2001. 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.
Note 16 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,
2000, reflected the translation of certain segment data at the Corporation's
budgeted rates of exchange for 2000. For informational purposes, the Corporation
has included in its Current Report on Form 8-K, filed on April 23, 2001,
selected unaudited supplemental information about its business segments for
2000, 1999, and 1998 updated to reflect the translation of elements of segment
profit and certain other segment data at the Corporation's budgeted rates of
exchange for 2001.
Segment profit excludes interest income and expense, non-operating income
and expense, goodwill amortization, adjustments to eliminate intercompany profit
in inventory, and income tax expense. In addition, segment profit excludes
restructuring and exit costs and the gain on sale of business. For certain
operations located in Brazil, Mexico, Venezuela, and Turkey, segment profit is
reduced by net interest expense and non-operating expenses. In determining
segment profit, expenses relating to pension and other postretirement benefits
are based solely upon estimated service costs. Corporate 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.
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The reconciliation of segment profit to the Corporation's earnings before
income taxes, in millions of dollars, is as follows:
Three Months Ended
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April 1, 2001 April 2, 2000
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Segment profit for total reportable business segments $ 71.9 $ 94.6
Items excluded from segment profit:
Adjustment of budgeted foreign exchange rates
to actual rates (.2) 2.3
Depreciation of Corporate property and
amortization of goodwill (6.5) (6.7)
Adjustment to businesses' postretirement benefit
expenses booked in consolidation 11.0 9.5
Adjustment to eliminate net interest and non-operating
expenses from results of certain operations in Brazil,
Mexico, Venezuela, and Turkey .2 .1
Other adjustments booked in consolidation directly
related to reportable business segments 4.4 (7.0)
Amounts allocated to businesses in arriving at segment profit
in excess of (less than) Corporate center operating expenses,
eliminations, and other amounts identified above (8.4) (1.3)
- ------------------------------------------------------------------------------------------------------
Operating income before gain on sale of business 72.4 91.5
Gain on sale of business -- 20.1
- ------------------------------------------------------------------------------------------------------
Operating income 72.4 111.6
Interest expense, net of interest income 22.4 23.8
Other expense 2.7 .4
- ------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 47.3 $ 87.4
======================================================================================================
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NOTE 9: GAIN ON SALE OF BUSINESS
In connection with the recapitalization of its recreational products business,
True Temper Sports, in 1998, the Corporation retained approximately 6% of
preferred and common stock of the recapitalized company, now known as True
Temper Corporation (True Temper), valued at approximately $4 million. In
addition, the Corporation received a senior, increasing-rate discount note
payable by True Temper, in an initial accreted amount of $25.0 million. Due to
True Temper's highly leveraged position and the lack of an active market for its
note, the Corporation established a full reserve for the note. For further
information about the recapitalization of True Temper, see Note 19 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, 2000.
During the first quarter of 2000, the Corporation sold its remaining
interest in True Temper, together with the note payable by True Temper, for
$25.0 million and recognized a pre-tax gain of $20.1 million.
NOTE 10: EARNINGS PER SHARE
The computations of basic and diluted earnings per share for each period are as
follows:
Three Months Ended
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(Amounts in Millions Except Per Share Data) April 1, 2001 April 2, 2000
- --------------------------------------------------------------------------------
Numerator:
Net earnings $ 33.1 $ 60.2
================================================================================
Denominator:
Average number of common shares outstanding
for basic earnings per share 81.1 86.0
Employee stock options and stock issuable
under employee benefit plans .6 .9
- --------------------------------------------------------------------------------
Average number of common shares outstanding
for diluted earnings per share 81.7 86.9
================================================================================
Basic earnings per share $ .41 $ .70
================================================================================
Diluted earnings per share $ .40 $ .69
================================================================================
As of April 1, 2001, approximately 6.3 million options to purchase shares
of common stock, with a weighted-average exercise price of $46.96, were
outstanding, but were not included in the computation of diluted earnings per
share because the effect would be anti-dilutive. These options were
anti-dilutive because the related exercise price was greater than the average
market price of the common shares during the quarter.
NOTE 11: COMMON STOCK UNDER EQUITY FORWARDS
As more fully discussed in Note 13 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, 2000, the Corporation has entered into two agreements (the
"Agreements") under which the Corporation may enter into forward purchase
contracts on its common stock. The Agreements provide the
-15-
Corporation with two purchase alternatives: a standard forward purchase contract
and a forward purchase contract subject to a cap (a "capped forward contract").
During the three months ended April 1, 2001, quarterly settlements occurred
on standard forward purchase contracts with respect to 691,186 shares of the
Corporation's common stock, resulting in a net receipt of 169,485 shares of
common stock. In addition, settlements occurred on capped forward contracts with
respect to 750,000 shares of the Corporation's common stock, resulting in a net
receipt of 70,791 shares of common stock. At each settlement date, the
Corporation elected net share settlement.
At April 1, 2001, standard forward purchase contracts with respect to
521,701 shares of the Corporation's common stock, with a weighted-average
forward price of $48.96 per share, were outstanding under the Agreements. These
contracts mature in November 2001. At April 1, 2001, $25.5 million, representing
the amount that would have been payable by the Corporation upon full physical
settlement of those 521,701 shares as of that date, have been classified as
common stock under equity forwards in the Consolidated Balance Sheet. There are
no capped forward contracts outstanding as of April 1, 2001.
NOTE 12: SUBSEQUENT EVENTS
In April 2001, the Corporation replaced its expiring unsecured revolving credit
facilities with a $975 million unsecured revolving credit facility that expires
in April 2006 and a $390 million 364-day unsecured revolving credit facility
(the Credit Facilities). The 364-day revolving credit facility provides for
annual renewals upon request by the Corporation and approval by the lending
banks. Under the Credit Facilities, the Corporation has the option of borrowing
at the London Interbank Offered Rate ("LIBOR") plus a specified percentage, or
at other variable rates set forth therein. The Credit Facilities provide that
the interest rate margin over LIBOR, initially set at .475% and .500%,
respectively, for each of the two individual facilities, will increase or
decrease based upon changes in the ratings of the Corporation's long-term senior
unsecured debt.
In addition to interest payable on the principal amount of indebtedness
outstanding from time to time under the Credit Facilities, the Corporation is
required to pay an annual facility fee to each bank, initially equal to .150%
and .125%, respectively, of the amount of each bank's commitment, whether used
or unused. The Corporation is also required to pay a utilization fee under each
facility, initially equal to .125%, applied to the outstanding balance when
borrowings under the respective facility exceeds 50% of the facility. The Credit
Facilities provide that both the facility fee and the utilization fee will
increase or decrease based upon changes in the ratings of the Corporation's
long-term senior unsecured debt.
The Credit Facilities include various customary covenants, including
covenants limiting the ability of the Corporation and its subsidiaries to pledge
assets or incur liens on assets, and financial covenants requiring the
Corporation to maintain specified leverage and interest coverage ratios.
-16-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Corporation reported net earnings of $33.1 million, or $.40 per share on a
diluted basis, for the three-month period ended April 1, 2001, compared to net
earnings of $60.2 million, or $.69 per share on a diluted basis, for the
three-month period ended April 2, 2000. As more fully described in Note 9 of
Notes to Consolidated Financial Statements, earnings for the three-month period
ended April 2, 2000, included a pre-tax gain of $20.1 million ($13.1 million net
of tax) related to the 1998 recapitalization of True Temper Sports. Excluding
this non-recurring gain, net earnings for the three-month period ended April 2,
2000, would have been $47.1 million, or $.54 per share on a diluted basis,
compared to net earnings of $33.1 million, or $.40 per share on a diluted basis,
for the three-month period ended April 1, 2001.
In the discussion and analysis of financial condition and results of
operations that follows, the Corporation generally attempts to list contributing
factors in order of significance to the point being addressed.
RESULTS OF OPERATIONS
SALES
The following chart sets forth an analysis of the consolidated changes in sales
for the three-month periods ended April 1, 2001, and April 2, 2000:
ANALYSIS OF CHANGES IN SALES
- --------------------------------------------------------------------------------
For the Three Months Ended
(Dollars in Millions) April 1, 2001 April 2, 2000
- --------------------------------------------------------------------------------
Total sales $979.0 $1,037.6
Unit volume (2)% 10 %
Price (1)% (1)%
Currency (3)% (3)%
- --------------------------------------------------------------------------------
Change in total sales (6)% 6 %
================================================================================
Total consolidated sales for the three months ended April 1, 2001,
decreased by 6% from the 2000 level. Total unit volume decreased by 2% during
the quarter ended April 1, 2001, from the same period in 2000, as a result of
unfavorable economic conditions and the reduction of inventories by retailers in
North America and Europe. Those negative factors were somewhat mitigated by
sales in the first quarter of 2001 of two businesses acquired by the Power Tools
and Accessories segment in June and December 2000. The Corporation anticipates
that the impact of the economic slowdown in the United States will continue to
negatively impact its sales over the near term. Pricing actions taken in
response to customer and competitive pressures had a 1% negative effect on sales
for the first quarter of 2001 as compared to the corresponding period in 2000.
The negative effects of a stronger dollar compared to other foreign currencies,
particularly the Euro and pound sterling, caused a 3% decrease in the
Corporation's consolidated sales during the first quarter of 2001 as compared to
the corresponding period in 2000.
-17-
EARNINGS
Operating income for the three months ended April 1, 2001, was $72.4 million
compared to operating income of $111.6 million for the corresponding period in
2000. Excluding the effect of the $20.1 million gain on sale of business
recognized in the first quarter of 2000, operating income decreased by 20.9%,
from $91.5 million, or 8.8% of sales, for the first quarter of 2000 to $72.4
million, or 7.4% of sales, for the first quarter of 2001.
Gross margin as a percentage of sales was 35.0% for the quarter ended April
1, 2001, which was consistent with the quarter ended April 2, 2000, reflecting
productivity improvements offset by negative pricing actions taken by the
Corporation, in response to both customer and competitive pressures. The
Corporation anticipates lower gross margins in the near term as a result of a
reduction in manufacturing volumes in response to both the economic slowdown in
the United States and Europe and the Corporation's efforts to reduce inventory
levels.
Selling, general, and administrative expenses as a percentage of sales
increased from 26.2% for the quarter ended April 2, 2000, to 27.6% for the
quarter ended April 1, 2001. While the Corporation was able to reduce selling,
general and administrative expenses by $1.3 million for the quarter ended April
1, 2001, through cost containment efforts, those expenses as a percentage of
sales increased due to the lower sales base for the quarter ended April 1, 2001.
Net interest expense (interest expense less interest income) for the
three-month period ended April 1, 2001, was $22.4 million as compared to $23.8
million for the three-month period ended April 2, 2000. The decrease in net
interest expense during the first quarter of 2001 as compared to the first
quarter of 2000 was primarily the result of lower debt balances.
Other expense for the three-month period ended April 1, 2001 was $2.7
million as compared to $.4 million for the corresponding period in 2000. The
increase in other expense was primarily the result of dividends on a
subsidiary's preferred shares. Those preferred shares were issued in December
2000.
The Corporation recognized income tax expense of $14.2 million on pre-tax
earnings of $47.3 million, which equates to a reported tax rate of 30%, for the
three months ended April 1, 2001. The Corporation recognized income tax expense
of $27.2 million on pre-tax earnings of $87.4 million, which equates to an
effective tax rate of 31%, for the first quarter of 2000. Excluding the income
tax expense of $7.0 million recognized on the gain on the sale of a business,
the Corporation's effective tax rate would have been 30% for the first quarter
of 2000.
The Corporation reported net earnings of $33.1 million, or $.40 per share
on a diluted basis, for the three-month period ended April 1, 2001, compared to
net earnings of $60.2 million, or $.69 per share on a diluted basis, for the
three-month period ended April 2, 2000. Excluding the gain on the sale of
business, net earnings for the three-month period ended April 2, 2000, would
have been $47.1 million, or $.54 per share on a diluted basis.
BUSINESS SEGMENTS
As more fully described in Note 8 of Notes to Consolidated Financial Statements,
the Corporation operates in three reportable business segments: Power Tools and
Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems.
-18-
Power Tools and Accessories
Segment sales and profit for the Power Tools and Accessories segment, determined
on the basis described in Note 8 of Notes to Consolidated Financial Statements,
were as follows (in millions of dollars):
For the Three Months Ended
- --------------------------------------------------------------------------------
April 1, 2001 April 2, 2000
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $656.4 $679.9
Segment profit 35.0 53.2
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Power Tools and Accessories segment
during the first quarter of 2001 decreased 3% from the 2000 level. Sales of
power tools and accessories in North America declined at a mid-single-digit
rate. This decline was mainly driven by a low double-digit rate of decline in
sales of professional power tools and accessories due, in part, to unfavorable
economic conditions in the United States and to actions taken by certain major
customers to reduce inventory levels. These negative factors were partially
offset by the incremental sales associated with two newly acquired businesses.
Sales of consumer power tools and accessories in North America declined at a low
single-digit rate as the negative impact of a slowing North American economy was
partially offset by additional sales stemming from the successful launch of
several new outdoor products, including a new line of electric lawn mowers and
the new 14.4 volt cordless Hedge Hog(R) trimmer.
Sales in Europe decreased slightly in the first quarter of 2001 from the
corresponding period in 2000, as sales of consumer power tools and outdoor
products were negatively impacted by slowing economic conditions in Europe,
continued price pressure from Asian imports, and high inventory levels in retail
channels coming into the year. This decline in sales of consumer products was
substantially offset by double-digit growth in sales of professional power tools
and accessories in the quarter. That growth partly resulted from the continued
transition from the ELU(R) to the DeWALT(R) brand in Europe.
Sales in other geographic areas increased at a double-digit rate for the
first quarter of 2001 over the prior year level as higher sales were achieved in
substantially all product categories.
Segment profit as a percentage of sales for the Power Tools and Accessories
segment was 5.3% in the first quarter of 2001 compared to 7.8% in the first
quarter of 2000. This decline was due to the impact of higher selling, general
and administrative expenses in the first quarter of 2001 and a lower sales base.
Those higher expenses in the first quarter of 2001 were primarily in the North
American professional power tools and accessories business, due to additional
expenses related to recently acquired businesses and increased research and
development spending, and in Europe, primarily as a result of higher
distribution and transportation expenses.
-19-
Hardware and Home Improvement
Segment sales and profit for the Hardware and Home Improvement segment,
determined on the basis described in Note 8 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
For the Three Months Ended
- --------------------------------------------------------------------------------
April 1, 2001 April 2, 2000
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $200.9 $200.5
Segment profit 17.4 19.1
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Hardware and Home Improvement
segment were flat for the three months ended April 1, 2001, compared to the 2000
level. While sales of security hardware in North America increased at a
mid-single-digit rate in the first quarter of 2001 over the corresponding period
in 2000, that increase was offset by decreased sales of plumbing products during
the first quarter of 2001. During the first quarter of 2000, sales of security
hardware in North America were negatively impacted by a line review at a major
customer. During the first quarter of 2001, the impact of that line review and
unfavorable economic conditions was offset by new listings gained by the
business in other product lines. Sales of plumbing products decreased during the
quarter due to unfavorable economic conditions and inventory actions by some
retailers.
Segment profit as a percentage of sales for the Hardware and Home
Improvement segment was 8.7% in the first three months of 2001 compared to 9.5%
in the corresponding period of 2000. Segment profit as a percentage of sales was
negatively impacted by a decline in gross margin during the quarter ended April
1, 2001. The decrease in gross margin was a result of manufacturing
inefficiencies and overhead absorption issues associated with manufacturing
transition issues in the North American security hardware business and with
lower production volumes of plumbing products.
Fastening and Assembly Systems
Segment sales and profit for the Fastening and Assembly Systems segment,
determined on the basis described in Note 8 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
For the Three Months Ended
- --------------------------------------------------------------------------------
April 1, 2001 April 2, 2000
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $123.5 $132.3
Segment profit 19.5 22.3
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Fastening and Assembly Systems
segment decreased by 7% in the first quarter of 2001 from the 2000 level, due to
lower sales to automotive and industrial customers in North America, partially
offset by double-digit rates of growth in sales of automotive products in Europe
and industrial products in Asia.
Segment profit as a percentage of sales for the Fastening and Assembly
Systems segment decreased from 16.9% in the first quarter of 2000 to 15.8% in
2001. Gross margin as a percentage of sales for the quarter improved slightly
due to productivity improvements. However, this improvement in gross margin for
the first quarter of 2001 was offset by higher selling, general and
-20-
administrative expenses as a percentage of sales, as flat selling, general and
administrative expenses were leveraged over a lower sales base.
RESTRUCTURING ACTIVITY
A summary of restructuring activity during the three-month period ended April 1,
2001, is as follows (in millions of dollars):
Utilization of Reserve
Reserve at ---------------------- Reserve at
December 31, 2000 Cash Non-Cash April 1, 2001
- --------------------------------------------------------------------------------
Severance benefits $29.7 $(2.8) $ -- $26.9
Other charges 4.4 (.6) -- 3.8
- --------------------------------------------------------------------------------
Total $34.1 $(3.4) $ -- $30.7
================================================================================
The Corporation remains committed to continuous productivity improvement
and continues to evaluate opportunities to reduce fixed costs and eliminate
excess capacity.
FINANCIAL CONDITION
Operating activities used cash of $73.7 million for the three months ended April
1, 2001, compared to $18.5 million of cash used in the corresponding period in
2000. The higher cash usage was primarily a result of higher income tax payments
and lower net earnings during the quarter ended April 1, 2001.
The Corporation reviews certain working capital metrics. For example, the
Corporation evaluates its accounts receivable and inventory levels through the
computation of days sales outstanding and inventory turnover ratio,
respectively. The number of days sales outstanding at April 1, 2001,
approximated the number of days sales outstanding at April 2, 2000. Inventory
turns at April 1, 2001, however, decreased in comparison to the comparable
period in 2000 as a result of a higher investment in inventory by the
Corporation to improve service levels with its customers. Although service
levels improved during the first quarter of 2001, the Corporation believes that
it should be able to maintain adequate service levels and reduce its overall
investment in inventory. While the Corporation expects inventory levels to rise
during the next two quarters in support of both seasonal sales activity and
anticipated significant new product introductions in the second half of 2001,
the Corporation's goal is to end 2001 with inventories at or slightly below the
prior year's level.
Investing activities for the three months ended April 1, 2001, used cash of
$39.0 million compared to $42.2 million of cash used for the corresponding
period in 2000. The decrease in cash usage was primarily due to lower capital
expenditures during the first quarter of 2001 compared to the corresponding
period in 2000, offset by the Corporation's receipt of $25.0 million related to
the True Temper recapitalization in 2000 as more fully described in Note 9 of
Notes to Consolidated Financial Statements.
On April 30, 2001, the Corporation acquired Bamal Corporation, a
distributor of fastening products, for $34.0 million. Under the purchase
agreement, the purchase price may be adjusted depending on the closing balance
sheet. The results of Bamal, a component of the Fastening and Assembly Systems
segment, will be included in the consolidated financial statements from the date
of acquisition and are not expected to be material to the Corporation's results
during 2001.
-21-
Financing activities provided cash of $125.7 million for the three-month
period ended April 1, 2001, compared to cash provided of $45.1 million during
the first three months of 2000. The increase in cash provided is primarily the
result of lower cash expenditures for stock repurchases during the first quarter
of 2001. During the three months ended April 1, 2001, the Corporation did not
repurchase any shares of its common stock. During the same period in 2000, the
Corporation repurchased 2,441,000 shares of its common stock at an aggregate
cost of $91.4 million.
Future share repurchases are anticipated, in part to reduce the dilutive
effect of stock issuances under various stock-based employee benefit plans. At
April 1, 2001, the Corporation had remaining authorization from its Board of
Directors to repurchase an additional 2,996,595 shares of its common stock.
In addition to measuring its cash flow generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statement of Cash Flows, the Corporation also measures its free cash flow. Free
cash flow, a measure commonly employed by the financial community, 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). During the three months ended April 1, 2001, the Corporation
had negative free cash flow of $112.3 million compared to negative free cash
flow of $84.0 million for the corresponding period in 2000.
The variable rate debt to total debt ratio, after taking interest rate
hedges into account, was 71% at April 1, 2001, compared to 65% at December 31,
2000. Average debt maturity was 4.8 years at April 1, 2001, compared to 5.4
years at December 31, 2000.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a
safe harbor for forward-looking statements made by or on behalf of the
Corporation. The Corporation and its representatives may, from time to time,
make written or verbal forward-looking statements, including statements
contained in the Corporation's filings with the Securities and Exchange
Commission and in its reports to stockholders. Generally, the inclusion of the
words "believe," "expect," "intend," "estimate," "anticipate," "will," and
similar expressions identify statements that constitute "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 and that are intended to come
within the safe harbor protection provided by those sections. All statements
addressing operating performance, events, or developments that the Corporation
expects or anticipates will occur in the future, including statements relating
to sales growth, earnings or earnings per share growth, and market share, as
well as statements expressing optimism or pessimism about future operating
results, are forward-looking statements within the meaning of the Reform Act.
The forward-looking statements are and will be based upon management's
then-current views and assumptions regarding future events and operating
performance, and are applicable only as of the dates of such statements. The
Corporation undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
By their nature, all forward-looking statements involve risk and
uncertainties. Actual results may differ materially from those contemplated by
the forward-looking statements for a number of reasons, including but not
limited to those factors identified in Item 1(f) of Part I of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 2000.
-22-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required under this Item is contained in Item 7 of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 2000, under the
caption "Hedging Activities", and in Item 8 of that report in Notes 1 and 9 of
Notes to Consolidated Financial Statements, and is incorporated by reference
herein.
-23-
THE BLACK & DECKER CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Corporation is involved in various lawsuits in the ordinary course of
business. The lawsuits primarily involve claims for damages arising out of the
use of the Corporation's products and allegations of patent and trademark
infringement. The Corporation is also involved in litigation and administrative
proceedings involving employment matters and commercial disputes. Some of these
lawsuits include claims for punitive as well as compensatory damages. The
Corporation, using current product sales data and historical trends, actuarially
calculates the estimate of its current exposure for product liability claims for
amounts in excess of established deductibles and accrues for the estimated
liability up to the limits of the deductibles. All other claims and lawsuits are
handled on a case-by-case basis.
Pursuant to authority granted under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the United States
Environmental Protection Agency (EPA) has issued a National Priority List (NPL)
of sites at which action is to be taken by the EPA or state authorities to
mitigate the risk of release of hazardous substances into the environment. The
Corporation is engaged in continuing activities with regard to various sites on
the NPL and other sites covered under CERCLA. The Corporation also is engaged in
site investigations and remedial activities to address environmental
contamination from past operations at current and former manufacturing
facilities in the United States and abroad. To minimize the Corporation's
potential liability with respect to these sites, when appropriate, management
has undertaken, among other things, active participation in steering committees
established at the sites and has agreed to remediation through consent orders
with the appropriate government agencies. Due to uncertainty over the
Corporation's involvement in some of the sites, uncertainty over the remedial
measures to be adopted at various sites and facilities, and the fact that
imposition of joint and several liability with the right of contribution is
possible under CERCLA and other laws and regulations, the liability of the
Corporation with respect to any site at which remedial measures have not been
completed cannot be established with certainty. On the basis of periodic reviews
conducted with respect to these sites, however, the Corporation has established
appropriate liability accruals.
The Corporation's estimate of the costs associated with legal, product
liability, and environmental exposures is accrued if, in management's judgment,
the likelihood of a loss is probable. These accrued liabilities are not
discounted. Insurance recoveries for environmental and certain general liability
claims are not recognized until realized.
As of April 1, 2001, the Corporation had no known probable but inestimable
exposures for awards and assessments in connection with environmental matters
and other litigation and administrative proceedings that could have a material
effect on the Corporation. Management is of the opinion that the amounts accrued
for awards or assessments in connection with environmental matters and other
litigation and administrative proceedings to which the Corporation is a party
are
-24-
adequate and, accordingly, ultimate resolution of these matters will not
have a material adverse effect on the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2001 Annual Meeting of Stockholders was held on April 25, 2001, for the
election of directors, to ratify the selection of Ernst & Young LLP as
independent public accountants for the Corporation for fiscal year 2001, to
amend and re-approve The Black & Decker Performance Equity Plan, to re-approve
The Black & Decker Executive Annual Incentive Plan, and to act on certain
stockholder proposals. A total of 70,828,553 of the 81,458,923 votes entitled to
be cast at the meeting were present in person or by proxy. At the meeting, the
stockholders:
(1) Elected the following directors:
Number of Shares Number of Shares
Directors Voted For Authority Withheld
-----------------------------------------------------------------------
Nolan D. Archibald 69,761,927 1,066,626
Norman R. Augustine 69,837,454 991,099
Barbara L. Bowles 69,759,494 1,069,059
M. Anthony Burns 69,803,190 1,025,363
Malcolm Candlish 69,827,987 1,000,566
Manuel A. Fernandez 69,837,117 991,436
Anthony Luiso 69,829,394 999,159
Mark H. Willes 69,825,240 1,003,313
(2) Ratified the selection of Ernst & Young LLP as independent public
accountants for the Corporation for fiscal year 2001 by an affirmative
vote of 69,982,008; votes against ratification were 531,009; and
abstentions were 315,536.
(3) Amended and re-approved The Black & Decker Performance Equity Plan by
an affirmative vote of 64,317,509; votes against ratification were
5,864,069; and abstentions were 646,975.
(4) Re-approved The Black & Decker Executive Annual Incentive Plan by an
affirmative vote of 67,516,418; votes against ratification were
2,762,016; and abstentions were 550,119.
(5) Rejected Stockholder Proposal 1, which was opposed by the Board of
Directors, by a negative vote of 52,485,420; affirmative votes for the
stockholder proposal were 6,179,575; abstentions were 3,167,269; and
broker non-votes were 8,996,289.
(6) Rejected Stockholder Proposal 2, which was opposed by the Board of
Directors, by a negative vote of 48,352,576; affirmative votes for the
stockholder proposal were 12,671,542; abstentions were 808,146; and
broker non-votes were 8,996,289.
-25-
(7) Rejected Stockholder Proposal 3, which was opposed by the Board of
Directors, by a negative vote of 58,483,333; affirmative votes for the
stockholder proposal were 2,485,066; abstentions were 863,865; and
broker non-votes were 8,996,289.
No other matters were submitted to a vote of the stockholders at the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
10 The Black & Decker Performance Equity Plan, as
amended, included in the definitive Proxy Statement
for the 2001 Annual Meeting of Stockholders of the
Corporation dated March 5, 2001, is incorporated
herein by reference.
12 Computation of Ratios.
On January 25, 2001, the Corporation filed a Current Report on Form 8-K with the
Commission. That Current Report on Form 8-K, filed pursuant to Item 9 of that
Form, stated that, on January 25, 2001, the Corporation had reported its
earnings for the three and twelve months ended December 31, 2000.
On March 26, 2001, the Corporation filed a Current Report on Form 8-K with the
Commission. That Current Report on Form 8-K, filed pursuant to Item 9 of that
Form, contained a copy of an information release issued on March 23, 2001, by
the Corporation's DeWALT business announcing the introduction of a new product
category.
The Corporation did not file any other reports on Form 8-K during the
three-month period ended April 1, 2001.
All other items were not applicable.
-26-
THE BLACK & DECKER CORPORATION
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BLACK & DECKER CORPORATION
By /s/ MICHAEL D. MANGAN
---------------------
Michael D. Mangan
Senior Vice President and Chief Financial Officer
Principal Accounting Officer
By /s/ CHRISTINA M. McMULLEN
-------------------------
Christina M. McMullen
Vice President and Controller
Date: May 15, 2001
