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: Monday, July 19, 2004
Subject: Black & Decker Reports a Record $1.50 Earnings Per Share From
Continuing Operations for Second Quarter 2004; Signs Agreement to
Acquire Pentair's Tools Group for $775 million; Declares Regular
Quarterly Cash Dividend
Towson, MD - The Black & Decker Corporation (NYSE: BDK) today announced that net
earnings from continuing operations for the second quarter of 2004 were a record
$121.8 million or $1.50 per diluted share, a 56% increase versus the second
quarter of 2003. Sales from continuing operations were a record $1.3 billion, an
increase of 19%, or 11% excluding the effects of foreign currency translation
and acquisitions. Free cash flow was $198 million, an improvement of $98 million
over the second quarter of 2003.
The Corporation also announced that it has signed an agreement to purchase
the Tools Group from Pentair, Inc. (NYSE: PNR) for approximately $775 million in
cash. The Tools Group, with 2003 sales of $1.08 billion and operating profit of
$82 million, includes the Porter-Cable, Delta, DeVilbiss Air Power, Oldham Saw,
and FLEX businesses. The transaction, which is subject to regulatory clearances
and customary closing conditions, is expected to close later in 2004.
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Page Two
Nolan D. Archibald, Chairman and Chief Executive Officer, commented, "We
are very pleased to announce both record results and an ideal bolt-on
acquisition with excellent strategic and financial benefits. The businesses we
will acquire from Pentair focus on the large and profitable professional power
tool market in North America and are an excellent fit with our DEWALT division.
This acquisition will add well-respected brands to our portfolio and expand our
offerings in product lines where we have relatively low market share, including
woodworking equipment, compressors, pressure washers, and nailers. In addition,
it will give us a stronger presence throughout our distribution network,
particularly in the industrial/construction channel.
"Black & Decker has an outstanding track record of creating value across
its business portfolio. We have built leading market positions by applying our
core strengths of product innovation, brand management, strong customer
relationships, and end-user focus. In addition, by combining businesses,
rationalizing manufacturing, and eliminating duplicate costs, we have
significantly reduced costs and streamlined our operations. We will leverage
these proven strengths to add value to the acquired businesses. By nearly
doubling the sales volume of our North American professional business, we will
also have better scale to improve the profitability of the combined group. We
expect to realize $65 million of annual cost savings by the end of 2007, and
anticipate that the acquisition will be highly accretive to earnings per share.
We expect accretion of approximately $0.50 per share in 2005, followed by an
incremental $0.25 in both 2006 and 2007, for a total of $1.00 per share. This
acquisition has a very positive net present value and should be accretive to our
return on capital employed by 2007.
"In addition to announcing this acquisition, our company had a record
second quarter. We have now grown earnings per share by more than 19% for nine
consecutive quarters. All three of our business segments grew sales at
double-digit rates before acquisitions and currency translation. Operating
margin increased more than 300 basis points, reflecting the benefit of sales
volume leverage and continued restructuring savings.
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Page Three
"Sales and operating profit in the Power Tools and Accessories segment
increased 11% and 43%, respectively. In the U.S., sales of DEWALT(R)
professional products increased at a double-digit rate for the third consecutive
quarter, with gains in all major distribution channels and product categories.
Sales of Black & Decker consumer products also increased at a double-digit rate,
led by lasers, cordless drills, and lawn and garden products. Sales increased at
a double-digit rate in Asia and at a mid-single-digit rate in Europe and Latin
America.
"Sales in the Hardware and Home Improvement segment increased 10% excluding
the acquisition of Baldwin Hardware Corporation and Weiser Lock Corporation,
with Kwikset sales growing at a mid-single-digit rate and Price Pfister sales
growing more than 20%. Productivity, restructuring savings, and higher sales
volume resulted in dramatic increases in operating margin and operating profit
over the second quarter of 2003.
"Sales in the Fastening and Assembly Systems segment increased 15%, or 11%
excluding the acquisition of MasterFix. Sales increased in all key divisions and
product lines and were particularly strong in the North American industrial
division and in Asia. Operating profit in this segment increased 13%, as
operating margin held nearly flat despite commodity price increases.
"Looking forward, we remain optimistic about our new products, market
positions, and the North American economy. Despite facing much tougher
comparisons, we are forecasting a low-to-mid-single-digit rate of sales growth
excluding currency translation and acquisitions for the third quarter, and a
mid-single-digit rate for the full year. For both the third quarter and the full
year, we anticipate a double-digit sales growth rate including currency and
acquisitions. Operating margins should continue to improve, but not as
dramatically as in the first half of the year. Therefore, we anticipate diluted
earnings per share from continuing operations in the ranges of $1.25-to-$1.30
for the third quarter and $5.05-to-$5.15 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
"By combining top market positions with operating excellence, Black &
Decker has grown its earnings and cash flow dramatically over the last three
years and continued that trend in the second quarter. The acquisition announced
today is a unique opportunity to take further advantage of our core strengths,
and represents the beginning of a new growth phase for our company. By executing
our strategy and wisely investing our cash flow, we intend to continue
generating outstanding returns for our shareholders."
The Corporation also announced that its Board of Directors declared a
quarterly cash dividend of $0.21 per share of the Corporation's outstanding
common stock payable September 24, 2004, to stockholders of record at the close
of business on September 10, 2004.
The Corporation will now hold the conference call, originally scheduled for
Thursday, July 22, 2004, today at 10:30 a.m., E.T., to discuss second-quarter
results, the outlook for the remainder of 2004, and the pending acquisition.
Investors can listen to the conference call by visiting http://www.bdk.com and
clicking on the icon labeled "Live Webcast." Listeners should log-in at least
ten minutes prior to the beginning of the event to assure timely access. A
replay of the call will be available at http://www.bdk.com.
This release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. By their nature, all forward-looking statements involve
risks and uncertainties. For a more detailed discussion of the risks and
uncertainties that may affect Black & Decker's operating and financial results
and its ability to achieve the financial objectives discussed in this press
release, interested parties should review the "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
---------------------------------
June 27, 2004 June 29, 2003
-------------- --------------
SALES $ 1,297.6 $ 1,090.1
Cost of goods sold 810.0 699.4
Selling, general, and
administrative expenses 316.0 280.4
Restructuring and exit costs - .4
------------- --------------
OPERATING INCOME 171.6 109.9
Interest expense (net of
interest income) 4.5 7.7
Other expense .2 .6
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 166.9 101.6
Income taxes 45.1 26.9
-------------- --------------
NET EARNINGS FROM CONTINUING OPERATIONS 121.8 74.7
Earnings (loss) from discontinued
operations (net of income taxes) (.2) 1.0
-------------- --------------
NET EARNINGS $ 121.6 $ 75.7
============== ==============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 1.53 $ .96
Discontinued operations - .02
-------------- --------------
NET EARNINGS PER COMMON SHARE
- BASIC $ 1.53 $ .98
============== ==============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 79.4 77.6
============== ==============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 1.50 $ .96
Discontinued operations - .01
-------------- --------------
NET EARNINGS PER COMMON SHARE
- ASSUMING DILUTION $ 1.50 $ .97
============== ==============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.9 77.9
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
---------------------------------
June 27, 2004 June 29, 2003
-------------- --------------
SALES $ 2,390.5 $ 2,029.3
Cost of goods sold 1,500.1 1,303.3
Selling, general, and
administrative expenses 611.1 543.4
Restructuring and exit costs - .6
-------------- --------------
OPERATING INCOME 279.3 182.0
Interest expense (net of
interest income) 9.7 19.8
Other expense 1.0 2.3
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 268.6 159.9
Income taxes 72.5 42.1
-------------- --------------
NET EARNINGS FROM CONTINUING OPERATIONS 196.1 117.8
DISCONTINUED OPERATIONS (NET OF
INCOME TAXES):
Earnings of discontinued operations .4 1.3
Gain on sale of discontinued
operations(net of impairment
charge of $24.4) 11.7 -
-------------- --------------
NET EARNINGS FROM DISCONTINUED OPERATIONS 12.1 1.3
-------------- --------------
NET EARNINGS $ 208.2 $ 119.1
============== ==============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 2.49 $ 1.51
Discontinued operations .15 .02
-------------- --------------
NET EARNINGS PER COMMON SHARE
- BASIC $ 2.64 $ 1.53
============== ==============
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.9 78.0
============== ==============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 2.44 $ 1.51
Discontinued operations .15 .01
-------------- --------------
NET EARNINGS PER COMMON SHARE
- ASSUMING DILUTION $ 2.59 $ 1.52
============== ==============
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 80.2 78.2
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
June 27, December 31,
2004 2003
-------------- --------------
ASSETS
Cash and cash equivalents $ 526.1 $ 308.2
Trade receivables 929.7 808.6
Inventories 836.2 709.9
Current assets of discontinued
operations 64.6 160.2
Other current assets 204.0 216.1
-------------- --------------
TOTAL CURRENT ASSETS 2,560.6 2,203.0
-------------- --------------
PROPERTY, PLANT, AND EQUIPMENT 615.4 660.2
GOODWILL 777.5 771.7
OTHER ASSETS 563.6 587.6
-------------- --------------
$ 4,517.1 $ 4,222.5
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ .1 $ .1
Current maturities of long-term debt .4 .4
Trade accounts payable 506.2 379.8
Current liabilities of discontinued
operations 28.3 38.0
Other accrued liabilities 834.3 893.8
-------------- --------------
TOTAL CURRENT LIABILITIES 1,369.3 1,312.1
-------------- --------------
LONG-TERM DEBT 900.1 915.6
DEFERRED INCOME TAXES 177.3 179.8
POSTRETIREMENT BENEFITS 458.6 451.9
OTHER LONG-TERM LIABILITIES 516.9 516.6
STOCKHOLDERS' EQUITY 1,094.9 846.5
-------------- --------------
$ 4,517.1 $ 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 June 27, 2004 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $ 876.3 $235.9 $152.0 $1,264.2 $ 33.4 $ - $1,297.6
Segment profit (loss) (for Consoli-
dated, operating income) 124.9 41.6 21.9 188.4 3.3 (20.1) 171.6
Depreciation and amortization 19.4 7.6 4.1 31.1 .8 2.2 34.1
Capital expenditures 16.8 5.4 2.2 24.4 .5 .4 25.3
Three Months Ended June 29, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $ 786.2 $166.0 $132.0 $1,084.2 $ 5.9 $ - $1,090.1
Segment profit (loss) (for Consoli-
dated, operating income
before restructuring and exit costs) 87.3 16.9 19.3 123.5 1.0 (14.2) 110.3
Depreciation and amortization 20.2 6.7 4.0 30.9 .1 3.8 34.8
Capital expenditures 15.7 5.1 3.1 23.9 .1 .3 24.3
Six Months Ended June 27, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $1,565.9 $ 456.3 $ 290.4 $2,312.6 $ 77.9 $ - $2,390.5
Segment profit (loss) (for Consoli-
dated, operating income) 199.0 73.3 40.3 312.6 6.8 (40.1) 279.3
Depreciation and amortization 38.7 15.2 8.3 62.2 2.0 5.0 69.2
Capital expenditures 31.1 8.3 4.5 43.9 1.2 .6 45.7
Six Months Ended June 29, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $1,452.6 $ 312.2 $ 265.2 $2,030.0 $ (.7) $ - $2,029.3
Segment profit (loss) (for Consoli-
dated, operating income
before restructuring and exit costs) 146.8 29.9 38.6 215.3 .8 (33.5) 182.6
Depreciation and amortization 40.3 13.5 7.8 61.6 .1 8.2 69.9
Capital expenditures 30.9 12.4 6.6 49.9 (.1) .5 50.3
The reconciliation of segment profit to the Corporation's earnings from
continuing operations before income taxes for each period, in millions of
dollars, is as follows:
Three Months Ended Six Months Ended
- --------------------------------------------------------------------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
- --------------------------------------------------------------------------------
Segment profit for total reportable
business segments $188.4 $123.5 $312.6 $215.3
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 3.3 1.0 6.8 .8
Depreciation of Corporate property (.3) (.2) (.7) (.5)
Adjustment to businesses' post-
retirement benefit expenses
booked in consolidation .2 3.9 .3 7.7
Other adjustments booked in
consolidation directly related
to reportable business segments (3.4) (1.2) (5.5) (10.0)
Amounts allocated to businesses in
arriving at segment profit in
excess of (less than) Corporate
center operating expenses,
eliminations, and other amounts
identified above (16.6) (16.7) (34.2) (30.7)
- --------------------------------------------------------------------------------
Operating income before
restructuring and exit costs 171.6 110.3 279.3 182.6
Restructuring and exit costs - .4 - .6
- --------------------------------------------------------------------------------
Operating income 171.6 109.9 279.3 182.0
Interest expense, net of interest income 4.5 7.7 9.7 19.8
Other expense .2 .6 1.0 2.3
- --------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $166.9 $101.6 $268.6 $159.9
================================================================================
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. 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 an 11% increase in sales, excluding
the effects of foreign currency translation and acquired businesses, for the
second quarter of 2004, compared to the corresponding period in 2003, is
determined as follows (dollars in millions):
Three Months Ended
June 27, June 29,
2004 2003
-------------- --------------
Sales $ 1,297.6 $ 1,090.1
Currency translation adjustment (33.4) (5.9)
------------- --------------
Sales as translated at budgeted
rates of exchange 1,264.2 1,084.2
Sales of acquired businesses as
translated at budgeted rates
of exchange (58.1) -
-------------- --------------
Sales excluding foreign currency
and acquired businesses $ 1,206.1 $ 1,084.2
============== ==============
Free cash flow for the three months ended June 27, 2004 and June 29, 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 June 27, 2004 and June 29, 2003, follows (dollars in millions):
Three Months Ended
June 27, June 29,
2004 2003
-------------- --------------
Cash flow from operating activities $ 209.0 $ 121.0
Capital expenditures (including
capital expenditures of
discontinued operations) (25.7) (25.2)
Proceeds from disposals of assets 14.7 4.7
-------------- --------------
Free cash flow $ 198.0 $ 100.5
============== ==============
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 10% sales increase for the three months ended June 27, 2004, as
compared to the corresponding period 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 $52.8 million of sales of the acquired businesses that were
recognized during the three-month period ended June 27, 2004.
Fastening and Assembly Systems segment sales, excluding the effects of the
- --------------------------------------------------------------------------------
acquired business:
- -----------------
This press release indicates that the Fastening and Assembly Systems
segment reported an 11% sales increase for the three months ended June 27, 2004,
as compared to the corresponding period in the prior year, excluding the
acquisition of MasterFix. The determination of the aforementioned growth in
sales, excluding the acquisition of MasterFix, is determined by deducting $5.3
million of sales of the acquired business that were recognized during the
three-month period ended June 27, 2004.