Contact: Barbara B. Lucas
Senior Vice President - Public Affairs
410-716-2980
Mark M. Rothleitner
Vice President - Investor Relations
and Treasurer
410-716-3979
FOR IMMEDIATE RELEASE: Thursday, April 24, 2003
Subject: Black & Decker Reports 34% Improvement in Earnings Per Share to $0.55
for First Quarter 2003
Towson, MD - The Black & Decker Corporation (NYSE: BDK) today announced that net
earnings for the first quarter of 2003 were $43.4 million or $0.55 per diluted
share, a 34% increase over diluted earnings per share of $0.41 in the first
quarter of 2002. Sales for the first quarter of 2003 were $968 million, up 2%
from $952 million for the same period last year. Sales decreased 3% excluding
the effects of foreign currency translation.
Commenting on the results, Nolan D. Archibald, Chairman and Chief Executive
Officer, said, "Despite a very weak global economic environment during the
quarter, we were able to grow sales in both our U.S. consumer power tools and
accessories division and our fastening and assembly systems segment. In
addition, operating margin improved significantly in each of our business
segments, as our Six Sigma and restructuring programs continued to deliver
positive results. This margin improvement enabled us to deliver earnings
significantly higher than in the first quarter of 2002.
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Page Two
"We are also pleased with the progress of our restructuring program. During
the quarter, our Mexican facility continued to add professional tool lines, and
the transfer of tool assembly from the U.K. to our Czech plant is proceeding on
plan. We continue to anticipate incremental savings of approximately $35 million
in 2003 and $40 million in 2004, which, combined with $25 million in 2002, will
yield $100 million of total annualized savings.
"Sales in the Power Tools and Accessories segment were essentially flat to
the first quarter last year, with flat North American sales, a small decrease in
Europe, and an increase in the rest of the world. Operating profit for the
segment increased 47% from the first quarter last year, with strong improvement
in both the U.S. and Europe. Six Sigma and restructuring program benefits were
the primary reasons for the operating margin increase.
"In the U.S., sales of consumer products increased at a double-digit rate,
with strong sales growth in lawn and garden products and power tools. This
growth was driven by demand for new products, such as a new Grass Hog(R)
automatic-feed trimmer/edger, and the continued success of the Bulls Eye(TM)
auto-leveling laser line and stud finder. DEWALT(R) professional division sales
decreased in the U.S., due to the weak economic environment, especially in the
industrial sector, compounded by adverse weather conditions.
"In Europe, sales decreased modestly during the quarter, largely because of
lower consumer tool sales in Germany and France. Professional tool sales were
flat to last year, reflecting low construction activity. Gross margin and
operating profit were up dramatically, with improvement driven by restructuring
benefits and favorable currency.
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Page Three
"Sales in the Hardware and Home Improvement segment were down 14% for the
quarter. Sales of Price Pfister(R) plumbing products decreased significantly as
the result of previously announced shelf space losses. We are pleased to
announce, however, that Price Pfister's product listings will increase
approximately 75% at Lowe's stores. We expect that this reset, which will start
in the second quarter, should begin to offset the previously announced volume
losses. Sales in the Kwikset(R) security hardware business declined, largely due
to promotional activity at home centers which drove sales in the first quarter
of 2002. Operating profit for Hardware and Home Improvement decreased a modest
4% from the first quarter last year, as a significant improvement in operating
margin mitigated the effect of lower sales volume.
"Sales in the Fastening and Assembly Systems segment were up 3% for the
quarter, reflecting gains in both the automotive and industrial sectors,
particularly in Asia. Operating profit in this segment increased 12% from the
first quarter last year because of improvements in manufacturing productivity.
"Free cash flow, which is typically negative in the first quarter, was
negative $147 million, reflecting higher inventory and the payment of 2002
year-end accrued liabilities. The inventory increase from the first quarter of
2002 reflects currency translation, safety stock related to our restructuring
program, and lower-than-expected sales. We anticipate that the safety stock will
begin to diminish in the second quarter and will be effectively eliminated by
year end. In addition, we repurchased 2.0 million shares of our stock during the
quarter and repaid $310 million of maturing debt on April 1.
"Looking forward, assuming continued weak economic conditions, we
anticipate flat or slightly lower sales for the second quarter, excluding
currency translation. For the full year, we expect roughly flat sales before
currency translation, aided by second-half gains at Price Pfister. At current
foreign exchange rates, these projections would translate to low single-digit
sales growth for the second quarter and full year. We expect restructuring and
Six Sigma savings to drive an increase in operating margin, and interest expense
should be favorable to 2002. As a result, we expect diluted earnings per share
to be in the $0.90-to-$0.95 range for the second quarter and in the
$3.60-to-$3.75 range for the full year, excluding any remaining charges under
the previously announced restructuring program. We continue to anticipate
converting at least 80% of full-year net earnings to free cash flow.
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Page Four
"Black & Decker's strong financial performance reflects excellent execution
of manufacturing and commercial initiatives. We continue to invest in brands,
product development, and end-user relationships, and to successfully execute our
restructuring program. By combining market leadership with operating excellence,
Black & Decker is well positioned to continue delivering outstanding value to
shareholders."
The Corporation will hold a conference call today at 10:00 a.m., E.T., to
discuss first-quarter results and the outlook for the remainder of 2003. In
addition, the Corporation will hold an analysts/bankers meeting on Tuesday, May
13, 2003, beginning at 8:30 a.m., E.T. Investors can listen to the events by
visiting www.bdk.com and clicking on the icon labeled "Live Webcast." Listeners
should log-in at least ten minutes prior to the beginning of the event to assure
timely access. Replays of the events will be available at www.bdk.com.
This release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. By their nature, all forward-looking statements involve
risks and uncertainties. For a more detailed discussion of the risks and
uncertainties that may affect Black & Decker's operating and financial results
and its ability to achieve the financial objectives discussed in this press
release, interested parties should review the "Forward-Looking Statements"
sections in Black & Decker's reports filed with the Securities and Exchange
Commission, including the Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. Included
with this release is a reconciliation of the differences between these non-GAAP
financial measures with the most directly comparable financial measures
calculated in accordance with GAAP.
Black & Decker is a leading global manufacturer and marketer of power tools
and accessories, hardware and home improvement products, and technology-based
fastening systems.
# # #
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
-----------------------------------
March 30, 2003 March 31, 2002
--------------- ---------------
SALES $ 968.2 $ 951.7
Cost of goods sold 624.7 644.8
Selling, general, and
administrative expenses 270.2 244.7
--------------- ---------------
OPERATING INCOME 73.3 62.2
Interest expense (net of
interest income) 12.1 15.8
Other expense 1.8 1.2
--------------- ---------------
EARNINGS BEFORE INCOME TAXES 59.4 45.2
Income taxes 16.0 12.2
--------------- ---------------
NET EARNINGS $ 43.4 $ 33.0
=============== ===============
NET EARNINGS PER COMMON SHARE
- BASIC $ .55 $ .41
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.3 80.1
=============== ===============
NET EARNINGS PER COMMON SHARE
- ASSUMING DILUTION $ .55 $ .41
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 78.5 80.6
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
March 30, December 31,
2003 2002
--------------- ---------------
ASSETS
Cash and cash equivalents $ 286.7 $ 517.1
Trade receivables 747.0 729.0
Inventories 813.9 748.9
Other current assets 209.3 198.9
--------------- ---------------
TOTAL CURRENT ASSETS 2,056.9 2,193.9
--------------- ---------------
PROPERTY, PLANT, AND EQUIPMENT 648.9 655.9
GOODWILL 734.9 729.1
OTHER ASSETS 548.5 551.6
--------------- ---------------
$ 3,989.2 $ 4,130.5
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 5.9 $ 4.6
Current maturities of long-term debt 309.9 312.0
Trade accounts payable 366.4 343.2
Other accrued liabilities 673.3 793.6
--------------- ---------------
TOTAL CURRENT LIABILITIES 1,355.5 1,453.4
--------------- ---------------
LONG-TERM DEBT 924.5 927.6
DEFERRED INCOME TAXES 211.5 211.3
POSTRETIREMENT BENEFITS 411.8 409.0
OTHER LONG-TERM LIABILITIES 528.5 529.6
STOCKHOLDERS' EQUITY 557.4 599.6
--------------- ---------------
$ 3,989.2 $ 4,130.5
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS
(Millions of Dollars)
Reportable Business Segments
-----------------------------------------------
Power Hardware Fastening Currency Corporate,
Tools & & Home & Assembly Translation Adjustments,
Three Months Ended March 30, 2003 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $647.1 $172.6 $129.2 $948.9 $19.3 $ - $968.2
Segment profit (loss) (for Consoli-
dated, operating income) 57.7 15.0 18.4 91.1 2.2 (20.0) 73.3
Depreciation and amortization 19.8 8.1 3.7 31.6 .5 4.4 36.5
Capital expenditures 14.9 7.7 3.5 26.1 .1 .2 26.4
Three Months Ended March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $652.0 $201.0 $125.9 $978.9 ($27.2) $ - $951.7
Segment profit (loss) (for Consoli-
dated, operating income) 39.1 15.6 16.5 71.2 (2.0) (7.0) 62.2
Depreciation and amortization 21.7 9.4 3.6 34.7 (.8) .3 34.2
Capital expenditures 15.2 3.4 3.6 22.2 (.3) .2 22.1
The reconciliation of segment profit to the Corporation's earnings before
income taxes, in millions of dollars, is as follows:
Three Months Ended
- --------------------------------------------------------------------------------
March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------
Segment profit for total reportable
business segments $91.1 $71.2
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 2.2 (2.0)
Depreciation of Corporate property (.3) (.3)
Adjustment to businesses' post-
retirement benefit expenses
booked in consolidation 3.6 10.3
Other adjustments booked in
consolidation directly related to
reportable business segments (10.0) (4.7)
Amounts allocated to businesses in arriving
at segment profit in excess of (less
than) Corporate center operating
expenses, eliminations, and other
amounts identified above (13.3) (12.3)
- --------------------------------------------------------------------------------
Operating income 73.3 62.2
Interest expense, net of interest income 12.1 15.8
Other expense 1.8 1.2
- --------------------------------------------------------------------------------
Earnings before income taxes $59.4 $45.2
================================================================================
Basis of Presentation:
- ----------------------
The Corporation operates in three reportable business segments: Power Tools
and Accessories, Hardware and Home Improvement, and Fastening and Assembly
Systems. The Power Tools and Accessories segment has worldwide responsibility
for the manufacture and sale of consumer and professional power tools and
accessories, electric cleaning and lighting products, and electric lawn and
garden tools, as well as for product service. In addition, the Power Tools and
Accessories segment has responsibility for the sale of security hardware to
customers in Mexico, Central America, the Caribbean, and South America; for the
sale of plumbing products to customers outside the United States and Canada; and
for sales of household products. The Hardware and Home Improvement segment has
worldwide responsibility for the manufacture and sale of security hardware
(except for the sale of security hardware in Mexico, Central America, the
Caribbean, and South America). It also has responsibility for the manufacture of
plumbing products and for the sale of plumbing products to customers in the
United States and Canada. The Fastening and Assembly Systems segment has
worldwide responsibility for the manufacture and sale of fastening and assembly
systems.
The Corporation assesses the performance of its reportable business
segments based upon a number of factors, including segment profit. In general,
segments follow the same accounting policies as those described in Note 1 of
Notes to Consolidated Financial Statements included in Item 8 of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2002,
except with respect to foreign currency translation and except as further
indicated below. The financial statements of a segment's operating units located
outside of the United States, except those units operating in highly
inflationary economies, are generally measured using the local currency as the
functional currency. For these units located outside of the United States,
segment assets and elements of segment profit are translated using budgeted
rates of exchange. Budgeted rates of exchange are established annually and, once
established, all prior period segment data is restated to reflect the current
year's budgeted rates of exchange. The amounts included in the preceding tables
under the captions "Reportable Business Segments" and "Corporate, Adjustments, &
Eliminations" are reflected at the Corporation's budgeted rates of exchange for
2003. The amounts included in the preceding tables under the caption "Currency
Translation Adjustments" represent the difference between consolidated amounts
determined using those budgeted rates of exchange and those determined based
upon the rates of exchange applicable under accounting principles generally
accepted in the United States.
Segment profit excludes interest income and expense, non-operating income
and expense, adjustments to eliminate intercompany profit in inventory and
income tax expense. In addition, segment profit excludes restructuring and exit
costs. In determining segment profit, expenses relating to pension and other
postretirement benefits are based solely upon estimated service costs. Corporate
expenses, as well as certain centrally managed expenses, are allocated to each
reportable segment based upon budgeted amounts. While sales and transfers
between segments are accounted for at cost plus a reasonable profit, the effects
of intersegment sales are excluded from the computation of segment profit.
Intercompany profit in inventory is excluded from segment assets and is
recognized as a reduction of cost of goods sold by the selling segment when the
related inventory is sold to an unaffiliated customer. Because the Corporation
compensates the management of its various businesses on, among other factors,
segment profit, the Corporation may elect to record certain segment-related
expense items of an unusual or non-recurring nature in consolidation rather than
reflect such items in segment profit. In addition, certain segment-related items
of income or expense may be recorded in consolidation in one period and
transferred to the various segments in a later period.
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure:
- --------------------------------------------------------------------------
To supplement its consolidated financial statements presented in accordance
with accounting principles generally accepted in the United States (GAAP), the
Corporation provides additional measures of operating results, net earnings, and
earnings per share adjusted to exclude certain costs, expenses, and gains and
losses, as well as to exclude effects of changes in foreign currency exchange
rates on sales. The Corporation believes that these non-GAAP financial measures
are appropriate to enhance understanding of its past performance as well as
prospects for its future performance.
This press release contains non-GAAP financial measures within the meaning
of Regulation G promulgated by the Securities and Exchange Commission. A
reconciliation of the differences between these non-GAAP financial measures with
the most directly comparable financial measures calculated in accordance with
GAAP follows.
Sales, excluding the effects of foreign currency translation:
As more fully described in this press release under the caption
"Supplemental Information About Business Segments--Basis of Presentation",
elements of segment profit, including sales, for units located outside of the
United States are generally measured using the local currency as the functional
currency. For these units, sales are translated using budgeted rates of
exchange. Budgeted rates of exchange are established annually and, once
established, all prior period segment data is restated to reflect the current
year's budgeted rates of exchange. Amounts included on the line entitled "Sales
to unaffiliated customers" under the heading "Reportable Business Segments" in
the first table under the caption "Supplemental Information About Business
Segments" are reflected at the Corporation's budgeted rates of exchange for
2003. The reference in this press release to a 3% decrease in sales, excluding
the effects of foreign currency translation, for the first quarter of 2003,
compared to the corresponding period in 2002, represents the decrease in sales
to unaffiliated customers of total reportable business segments from $978.9
million during the first quarter of 2002 to $948.9 million during the first
quarter of 2003, both at the Corporation's budgeted rates of exchange for 2003.
Free cash flow for the quarter ended March 30, 2003:
The calculation of free cash flow, which is defined by the Corporation as
cash flow from operating activities, less capital expenditures, plus proceeds
from the disposal of assets (excluding proceeds from business sales), for the
quarter ended March 30, 2003, follows (amounts in millions):
Cash flow from operating activities $(120.4)
Capital expenditures (26.4)
Proceeds from disposals of assets .2
--------
Free cash flow $(146.6)
========
Diluted earnings per share for the second quarter 2003 and full year 2003:
This press release includes forward-looking statements with respect to
management's expectation that the Corporation's diluted earnings per share would
range from $.90 to $.95 for the second quarter of 2003 and from $3.60 to $3.75
for the full year. The aforementioned ranges exclude the after-tax effects of
restructuring and exit costs that may be recognized in 2003 under the
Corporation's previously announced restructuring program.
As more fully described in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 2002, the Corporation believes that additional
pre-tax restructuring charges of approximately $20 million could be recognized
over the remaining life of its restructuring program, which as currently
envisioned, will be implemented in 2003 and 2004. Given the nature and duration
of this restructuring plan, charges to be incurred in 2003 and 2004 are subject
to varying degrees of estimation associated with key assumptions, such as actual
timing of execution, currency impacts, general economic conditions, and other
variables. As a result, up to $20 million of additional pre-tax restructuring
charge may be recorded during 2003, including a portion in the second quarter.
Were the Corporation to record the entire $20 million pre-tax restructuring
charge in 2003, diluted earnings per share would be reduced by approximately
$.19. As a result, management expects that the Corporation's diluted earnings
per share for the full year 2003 would range from $3.41 (assuming that the
entire $20 million pre-tax restructuring charge was recorded) to $3.75 (assuming
that no additional pre-tax restructuring charge was recorded).