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: Tuesday, April 20, 2004
Subject: Black & Decker Reports 69% Improvement in Earnings Per Share From
Continuing Operations to a Record $0.93 for First Quarter 2004
Towson, MD - The Black & Decker Corporation (NYSE: BDK) today announced that net
earnings from continuing operations for the first quarter of 2004 were a record
$74.3 million or $0.93 per diluted share, a 69% increase over diluted earnings
per share of $0.55 in the first quarter of 2003. Including discontinued
operations, which reflect a net gain on the sale of discontinued operations,
diluted earnings per share were $1.09 for the quarter.
Sales from continuing operations for the first quarter of 2004 were $1.09
billion, a 16% increase over $0.94 billion for the same period last year. Sales
increased 5% excluding the effects of foreign currency translation and
acquisitions.
Inventory of continuing operations was $790 million at quarter-end,
virtually flat to the first quarter of 2003. Excluding the effects of foreign
currency translation and acquisitions, inventory decreased approximately $80
million. Free cash flow improved $72 million over the first quarter of 2003 to
negative $75 million.
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Page Two
Commenting on the results, Nolan D. Archibald, Chairman and Chief Executive
Officer, said, "Our strong market positions, together with an improving economy,
drove sales growth at a high single-digit rate before acquisitions in our North
American businesses. We are especially pleased with results in the DEWALT
Professional Products division, which answered competitive challenges with a
double-digit rate of sales growth.
"Operating margin increased more than 200 basis points, reflecting the
continued success of our restructuring program and the benefit of sales volume
leverage. As a result, earnings per share grew more than 19% for the eighth
consecutive quarter and exceeded our initial guidance.
"Sales in the Power Tools and Accessories segment increased 3% for the
quarter, with a high single-digit rate of growth in the Americas. Sales in
Europe decreased at a high single-digit rate, due to weak economic conditions
and higher back orders. Segment operating profit increased 25% for the quarter,
led by the North American business.
"In the U.S., sales of DEWALT(R) professional products increased in all
major distribution channels and product categories, resulting in a double-digit
growth rate for the second straight quarter. DEWALT benefited from new products,
such as cordless impact wrenches and reciprocating saws, as well as a line of
laser optical instruments. Sales of Black & Decker consumer products increased
at a low single-digit rate, with strong tool sales partly offset by unfavorable
timing of orders for lawn and garden products. For the total U.S. power tools
and accessories business, sell-through at large retailers grew at a double-digit
rate for the third consecutive quarter.
"Sales in the Hardware and Home Improvement segment increased 14% excluding
the acquisition of Baldwin Hardware Corporation and Weiser Lock Corporation.
Kwikset sales grew at a double-digit rate, driven by demand in the retail
channel. Price Pfister sales rose nearly 20%, due to strong acceptance of the
enhanced product offerings at a major retailer. Productivity, restructuring
savings, and higher sales volume resulted in a dramatic increase in operating
margin over the first quarter of 2003. Operating profit more than doubled, due
to higher margins and the acquisition.
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Page Three
"Sales in the Fastening and Assembly Systems segment increased 4%, led by a
double-digit growth rate in Asia. Outside of Asia, industrial division sales
increased at a mid-single-digit rate, and automotive division sales increased
slightly despite declining automotive production. Operating profit in this
segment decreased 5%, largely due to unfavorable mix and costs associated with
closing a small manufacturing facility. Late in the quarter, we acquired the
MasterFix Group, an industrial fastening company with operations in Europe and
Asia. We expect this business to generate annualized sales of approximately $20
million.
"Two key operating initiatives--the restructuring program and the
integration of Baldwin and Weiser with our Kwikset security hardware
business--are on track to meet or exceed our financial targets. The
restructuring program, which began in 2002 and is in its final phase, generated
approximately $20 million of savings in the quarter, and we continue to expect
incremental savings of at least $45 million in 2004 and $10 million in 2005. In
addition, we continue to estimate that the security hardware integration plan
will yield $25 million of total annualized savings upon completion. In 2004, the
plan is expected to require at least $15 million of restructuring-related
expenses. Savings from the integration, however, combined with lower
restructuring-related expenses, should result in a $20 million improvement in
operating income in 2005 and an additional $20 million improvement in 2006.
"Looking forward, we remain optimistic about our market positions and
encouraged by the improving North American economy. For both the second quarter
and the full year, we are forecasting a mid-single-digit rate of sales growth
excluding currency translation and acquisitions, or a double-digit growth rate
including those factors. Restructuring benefits and volume leverage should
continue to improve our operating margins, and, therefore, we anticipate diluted
earnings per share from continuing operations in the ranges of $1.20-to-$1.25
for the second quarter and $4.70-to-$4.85 for the full year. We continue to
expect that we will convert at least 90% of full-year net earnings to free cash
flow.
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Page Four
"Black & Decker delivered excellent results for all key metrics--strong
sales growth, higher operating margin, better free cash flow, and dramatic
earnings improvement. We have a full new-product pipeline for 2004, which we
will support with powerful brands, broad distribution, and industry-leading
end-user focus to maintain market leadership. By combining top market positions
with operating excellence, Black & Decker is benefiting from the improving
economy and is in a strong position 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 2004.
Investors can listen to the conference call 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. A replay of the
call 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, 2003.
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 28, 2004 March 30, 2003
--------------- ---------------
SALES $ 1,092.9 $ 939.2
Cost of goods sold 690.1 603.9
Selling, general, and
administrative expenses 295.1 263.0
Restructuring and exit costs - .2
--------------- ---------------
OPERATING INCOME 107.7 72.1
Interest expense (net of
interest income) 5.2 12.1
Other expense .8 1.7
--------------- ---------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 101.7 58.3
Income taxes 27.4 15.2
--------------- ---------------
NET EARNINGS FROM CONTINUING OPERATIONS 74.3 43.1
DISCONTINUED OPERATIONS (NET OF
INCOME TAXES):
Earnings of discontinued operations .6 .3
Gain on sale of discontinued
operations (net of impairment
charge of $24.4) 11.7 -
--------------- ---------------
NET EARNINGS FROM DISCONTINUED OPERATIONS 12.3 .3
--------------- ---------------
NET EARNINGS $ 86.6 $ 43.4
=============== ===============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ .94 $ .55
Discontinued operations .16 -
--------------- ---------------
NET EARNINGS PER COMMON SHARE
- BASIC $ 1.10 $ .55
=============== ===============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.4 78.3
=============== ===============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ .93 $ .55
Discontinued operations .16 -
--------------- ---------------
NET EARNINGS PER COMMON SHARE
- ASSUMING DILUTION $ 1.09 $ .55
=============== ===============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 79.5 78.5
=============== ===============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
March 28, December 31,
2004 2003
--------------- ---------------
ASSETS
Cash and cash equivalents $ 321.7 $ 308.2
Trade receivables 889.2 808.6
Inventories 789.7 709.9
Current assets of discontinued operations 68.6 160.2
Other current assets 232.4 216.1
--------------- ---------------
TOTAL CURRENT ASSETS 2,301.6 2,203.0
--------------- ---------------
PROPERTY, PLANT, AND EQUIPMENT 650.7 660.2
GOODWILL 779.9 771.7
OTHER ASSETS 600.0 587.6
--------------- ---------------
$ 4,332.2 $ 4,222.5
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 4.8 $ .1
Current maturities of long-term debt .4 .4
Trade accounts payable 460.1 379.8
Current liabilities of discontinued
operations 30.2 38.0
Other accrued liabilities 757.9 893.8
--------------- ---------------
TOTAL CURRENT LIABILITIES 1,253.4 1,312.1
--------------- ---------------
LONG-TERM DEBT 922.5 915.6
DEFERRED INCOME TAXES 182.1 179.8
POSTRETIREMENT BENEFITS 465.0 451.9
OTHER LONG-TERM LIABILITIES 515.1 516.6
STOCKHOLDERS' EQUITY 994.1 846.5
--------------- ---------------
$ 4,332.2 $ 4,222.5
=============== ===============
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 28, 2004 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $689.6 $220.4 $138.4 $1,048.4 $44.5 $ - $1,092.9
Segment profit (loss) (for Consoli-
dated, operating income) 74.1 31.7 18.4 124.2 3.5 (20.0) 107.7
Depreciation and amortization 19.3 7.6 4.2 31.1 1.2 2.8 35.1
Capital expenditures 14.3 2.9 2.3 19.5 .7 .2 20.4
Three Months Ended March 30, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $666.4 $146.2 $133.2 $945.8 ($6.6) $ - $939.2
Segment profit (loss) (for Consoli-
dated, operating income
before restructuring and
exit costs) 59.5 13.0 19.3 91.8 (.2) (19.3) 72.3
Depreciation and amortization 20.1 6.8 3.8 30.7 - 4.4 35.1
Capital expenditures 15.2 7.3 3.5 26.0 (.2) .2 26.0
The reconciliation of segment profit to the Corporation's earnings from
continuing operations before income taxes, in millions of dollars, is as
follows:
Three Months Ended
- --------------------------------------------------------------------------------
March 28, 2004 March 30, 2003
- --------------------------------------------------------------------------------
Segment profit for total reportable
business segments $124.2 $ 91.8
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 3.5 (.2)
Depreciation of Corporate property (.4) (.3)
Adjustment to businesses' post-
retirement benefit expenses
booked in consolidation .1 3.8
Other adjustments booked in
consolidation directly related
to reportable business segments (2.1) (8.8)
Amounts allocated to businesses in arriving
at segment profit in excess of (less
than) Corporate center operating
expenses, eliminations, and other
amounts identified above (17.6) (14.0)
- --------------------------------------------------------------------------------
Operating income before restructuring
and exit costs 107.7 72.3
Restructuring and exit costs - .2
- --------------------------------------------------------------------------------
Operating income 107.7 72.1
Interest expense, net of interest income 5.2 12.1
Other expense .8 1.7
- --------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $101.7 $ 58.3
================================================================================
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). On September 30, 2003, the Corporation acquired
Baldwin Hardware Corporation and Weiser Lock Corporation. These acquired
businesses are included in the Hardware and Home Improvement segment. 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.
In January 2004, the Corporation sold two components of its European
security hardware business. The divested businesses and the remaining portion
that is expected to be sold in 2004 are treated as discontinued operations in
the Corporation's consolidated financial statements. Sales, segment profit,
depreciation and amortization, and capital expenditures set forth in the
preceding tables exclude the results of the discontinued operations.
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, 2003,
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
2004. 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 and of acquired businesses on sales and inventories. 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 and acquired
- --------------------------------------------------------------------------------
businesses:
- ----------
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
2004. The reference in this press release to a 5% increase in sales, excluding
the effects of foreign currency translation and acquired businesses, for the
first quarter of 2004, compared to the corresponding period in 2003, is
determined as follows (dollars in millions):
Three Months Ended
March 28, March 30,
2004 2003
--------------- ---------------
Sales $1,092.9 $939.2
Currency translation adjustment (44.5) 6.6
--------------- ---------------
Sales as translated at budgeted
rates of exchange 1,048.4 945.8
Sales of acquired businesses as
translated at budgeted rates
of exchange (54.8) -
--------------- ---------------
Sales excluding foreign currency
and acquired businesses $ 993.6 $945.8
=============== ===============
Hardware and Home Improvement segment sales, excluding the effects of the
- --------------------------------------------------------------------------------
acquired businesses:
- -------------------
This press release indicates that the Hardware and Home Improvement segment
reported a 14% sales increase for the quarter ended March 28, 2004 as compared
to the corresponding quarter in the prior year, excluding the acquisition of
Baldwin and Weiser. The determination of the aforementioned growth in sales,
excluding the acquisition of Baldwin and Weiser, is determined by deducting
$54.1 million of sales of the acquired businesses that were recognized for the
quarter ended March 28, 2004.
Inventory, excluding the effects of foreign currency translation and acquired
- --------------------------------------------------------------------------------
businesses:
- ----------
The calculation of the $80 million reduction in inventory from continuing
operations, excluding the effects of foreign currency translation and
acquisitions, as of March 28, 2004 as compared to March 30, 2003, follows
(dollars in millions):
March 28, March 30,
2004 2003
--------------- ---------------
Inventory (continuing operations) $789.7 $788.7
Currency translation adjustment (at
budgeted rates of exchange) (36.7) 5.4
Inventory of acquired businesses
as translated at budgeted rates of
exchange (38.4) -
--------------- ---------------
Inventory excluding foreign currency and
acquired businesses $714.6 $794.1
=============== ===============
Free cash flow for the quarters ended March 28, 2004 and 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
quarters ended March 28, 2004 and March 30, 2003, follows (dollars in millions):
Three Months Ended
March 28, March 30,
2004 2003
--------------- ---------------
Cash flow from operating activities $(54.8) $(120.4)
Capital expenditures (including
capital expenditures of
discontinued operations) (20.7) (26.4)
Proceeds from disposals of assets .7 .2
--------------- ---------------
Free cash flow $(74.8) $(146.6)
=============== ===============