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: Wednesday, January 26, 2005
Subject: Black & Decker Reports Record Sales and Earnings for Fourth Quarter
and Full Year 2004; Generates Record $526 Million Free Cash Flow
Towson, MD - The Black & Decker Corporation (NYSE: BDK) today announced that net
earnings from continuing operations for the fourth quarter of 2004 were a record
$133.7 million or $1.60 per diluted share, versus $96.2 million or $1.23 per
diluted share in the fourth quarter of 2003. Excluding restructuring charges in
the prior year, diluted earnings per share from continuing operations increased
22%. For the full year 2004, net earnings from continuing operations were a
record $441.1 million or $5.40 per diluted share, versus $287.2 million or $3.68
per diluted share in 2003. Excluding restructuring charges in the prior year,
full-year diluted earnings per share from continuing operations increased 36%.
Sales from continuing operations increased 29% for the quarter to a record
$1.73 billion, and increased 20% to a record $5.40 billion for the full year.
Sales of existing businesses increased 10% and 11% in the quarter and full year,
respectively, and acquisitions contributed 19% and 9%, respectively. Foreign
currency translation had a positive impact on sales of 2% for the quarter and 3%
for the full year.
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Page Two
The Corporation generated a record $526 million of free cash flow, up from
$480 million in 2003. Free cash flow set a record for the third year in a row
and exceeded net earnings for the fourth consecutive year.
Nolan D. Archibald, Chairman and Chief Executive Officer, commented, "2004
was a year of outstanding growth for Black & Decker, with record sales, earnings
and free cash flow. Organic sales grew impressively in both the fourth quarter
and the full year, led by the U.S. DEWALT division. We augmented our organic
sales growth with the acquisitions of Baldwin Hardware and Weiser Lock in late
2003 and the Porter-Cable and Delta Tools Group in late 2004. Operating margins
continued to increase, due to excellent execution of our restructuring program
and strong sales volume. Our record free cash flow helped us limit our net debt
increase to less than $100 million and reduce the ratio of net debt to total
capital from 42% to 31%, while investing approximately $775 million in the
Porter-Cable and Delta Tools Group acquisition. We extended our track record of
operating improvement and consistent performance, posting an eleventh straight
quarter of 18% or better EPS growth. Finally, our shareholders benefited from
stock performance in the top 3% of the S&P 500. By all key measures, 2004 was an
excellent year.
"It was also an outstanding year with respect to our bolt-on acquisition
strategy. The Porter-Cable and Delta Tools Group acquisition, which we completed
in early October, continues the expansion we began with Baldwin and Weiser. Both
strategically and financially compelling, this transaction strengthens our
position in the attractive industrial market through great brands, a
complementary product line, greater presence in key channels, and the
opportunity to leverage our core strengths of innovation and end-user focus. Our
track record in restructuring and our ongoing success in integrating Baldwin and
Weiser give us confidence that we can realize $65 million of synergies and $1.00
of EPS accretion by the end of 2007.
"Sales in the Power Tools and Accessories segment increased 33% for the
quarter, including 7% in existing businesses. The U.S. DEWALT and Black & Decker
divisions grew sales at a high single-digit rate this quarter. DEWALT sales were
strong in all major channels, reflecting innovative new products in the cordless
and nailer lines. Popularity of our cordless tools, lasers and measurement
products, including the new AutoTape(TM) automatic tape measure, drove the
increase for the Black & Decker consumer business. DEWALT led our sales gains in
Europe, with higher sales of hammers and new products including the cordless
nailer.
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Page Three
"Operating margins improved 30 basis points for the Power Tools and
Accessories segment for the quarter, with restructuring savings and productivity
outweighing the addition of the lower-margin Porter-Cable and Delta Tools Group.
Margins were particularly strong in North America and also improved in Europe.
The integration of the acquisition is proceeding as planned, and the profit
contribution of the acquired business met our expectations.
"For the full year, sales in the Power Tools and Accessories segment
increased 15%, including an 8% impact of the Porter-Cable and Delta Tools Group
acquisition, as organic sales increased in all geographic regions. The U.S.
DEWALT division grew full-year sales at double-digit rates in all major
channels. Operating margins in the segment improved 170 basis points, including
a 40-basis-point negative impact from the acquisition.
"Sales in the Hardware and Home Improvement segment increased 10% for the
quarter. Baldwin, Weiser, and Price Pfister all posted double-digit sales
increases, and Kwikset sales increased at a low single-digit rate. Throughout
this segment, we have successfully launched new styles and strengthened our
positions at key retailers. Operating profit decreased due to a decline at
Kwikset, reflecting higher raw material prices, non-recurring costs of a
merchandizing re-set at a key retailer, and restructuring-related costs
associated with the rationalization of lockset manufacturing. This
rationalization effort is on track to improve margins in 2005.
"For the full year, sales in the Hardware and Home Improvement segment
increased 34%, driven by outstanding sales at Price Pfister, a mid-single-digit
growth rate at Kwikset, and the 23% impact of the Baldwin and Weiser
acquisition. Volume leverage and productivity gains resulted in 220 basis points
of operating margin improvement.
"Sales in the Fastening and Assembly Systems segment increased 11% for both
the quarter and full year, with the MasterFix acquisition contributing 3% to the
increase in both time periods. For the quarter, sales increased in most key
divisions and product lines, and were particularly strong in Asia. Sales in the
North American automotive division grew at a high single-digit rate, despite
production decreases by key customers. Operating profit in this segment
increased 1% and 3% for the quarter and full year, respectively, as commodity
price increases mitigated the impact of higher sales volume.
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Page Four
"Looking forward, we are excited by the opportunity in 2005 to build on our
momentum. Demand for our products remains strong, and with tougher comparisons
in mind, we are forecasting low to mid-single-digit sales growth, excluding
currency translation and acquisitions. Including these factors, we expect a
sales growth rate in the high teens. Operating margin in our existing business
should increase modestly, with benefits of cost saving initiatives largely
offset by pressure from raw material costs, pension costs, and stock option
expense. We continue to expect that the Porter-Cable and Delta Tools Group
acquisition will add $0.40 to earnings per share. As a result, we anticipate a
fourth straight year of double-digit growth, with diluted earnings per share
from continuing operations in the ranges of $5.95-to-$6.10 for the full year and
$1.05-to-$1.10 for the first quarter. In addition, we expect to convert at least
90% of full-year net earnings to free cash flow.
"In 2004, Black & Decker combined record sales, record earnings, and record
free cash flow with a very compelling acquisition, all of which contributed to a
shareholder return in the top 3% of the S&P 500. We believe 2005 presents
additional opportunity for growth. Our track record of meeting commitments and
improving our businesses gives us confidence that our cost initiatives and
innovation will continue to generate outstanding earnings growth in 2005 and
beyond. Our strong free cash flow will enable us to continue creating
shareholder value by making bolt-on acquisitions, returning cash to shareholders
through share repurchases and dividends, or reducing debt. We have been good
stewards of capital and expanded our leading market positions, setting the stage
for a promising future. Our strategy is working, and we will focus on executing
that strategy to deliver superior returns to our investors."
The Corporation will hold a conference call today at 10:00 a.m., E.T., to
discuss fourth-quarter and full-year results and the outlook for 2005. 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.
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Page Five
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
-------------------------------
December 31, December 31,
2004 2003
-------------- --------------
SALES $ 1,725.4 $ 1,337.6
Cost of goods sold 1,123.6 863.6
Selling, general, and
administrative expenses 409.9 325.0
Restructuring and exit costs - 10.0
-------------- --------------
OPERATING INCOME 191.9 139.0
Interest expense (net of
interest income) 8.3 7.8
Other expense .4 -
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 183.2 131.2
Income taxes 49.5 35.0
-------------- --------------
NET EARNINGS FROM CONTINUING OPERATIONS 133.7 96.2
Earnings of discontinued operations
(net of income taxes) 1.6 3.3
-------------- --------------
NET EARNINGS $ 135.3 $ 99.5
============== ==============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 1.65 $ 1.24
Discontinued operations .02 .04
-------------- --------------
NET EARNINGS PER COMMON SHARE -
BASIC $ 1.67 $ 1.28
============== ==============
Shares Used in Computing Basic Earnings
Per Share (in Millions) 81.1 77.8
============== ==============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 1.60 $ 1.23
Discontinued operations .02 .04
-------------- --------------
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 1.62 $ 1.27
============== ==============
Shares Used in Computing Diluted Earnings
Per Share (in Millions) 83.8 78.5
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
Year Ended
-------------------------------
December 31, December 31,
2004 2003
-------------- --------------
SALES $ 5,398.4 $ 4,482.7
Cost of goods sold 3,432.9 2,887.1
Selling, general, and
administrative expenses 1,336.3 1,135.3
Restructuring and exit costs - 31.6
-------------- --------------
OPERATING INCOME 629.2 428.7
Interest expense (net of
interest income) 22.1 35.2
Other expense 2.8 2.6
-------------- --------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 604.3 390.9
Income taxes 163.2 103.7
-------------- --------------
NET EARNINGS FROM CONTINUING OPERATIONS 441.1 287.2
DISCONTINUED OPERATIONS (NET OF INCOME TAXES):
Earnings of discontinued operations 2.2 5.8
Gain on sale of discontinued operations
(net of impairment charge of $24.4) 12.7 -
-------------- --------------
NET EARNINGS FROM DISCONTINUED OPERATIONS 14.9 5.8
-------------- --------------
NET EARNINGS $ 456.0 $ 293.0
============== ==============
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ 5.53 $ 3.69
Discontinued operations .19 .07
-------------- --------------
NET EARNINGS PER COMMON SHARE -
BASIC $ 5.72 $ 3.76
============== ==============
Shares Used in Computing Basic Earnings
Per Share (in Millions) 79.8 77.9
============== ==============
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ 5.40 $ 3.68
Discontinued operations .19 .07
-------------- --------------
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 5.59 $ 3.75
============== ==============
Shares Used in Computing Diluted Earnings
Per Share (in Millions) 81.6 78.2
============== ==============
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
December 31, December 31,
2004 2003
-------------- --------------
ASSETS
Cash and cash equivalents $ 514.4 $ 308.2
Trade receivables 1,046.6 808.6
Inventories 981.8 709.9
Current assets of discontinued operations 70.8 160.2
Other current assets 313.6 216.1
-------------- --------------
TOTAL CURRENT ASSETS 2,927.2 2,203.0
-------------- --------------
PROPERTY, PLANT, AND EQUIPMENT 754.6 660.2
GOODWILL 1,184.0 771.7
OTHER ASSETS 665.0 587.6
-------------- --------------
$ 5,530.8 $ 4,222.5
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 1.1 $ .1
Current maturities of long-term debt .5 .4
Trade accounts payable 466.9 379.8
Current liabilities of discontinued operations 29.9 38.0
Other current liabilities 1,294.2 893.8
-------------- --------------
TOTAL CURRENT LIABILITIES 1,792.6 1,312.1
-------------- --------------
LONG-TERM DEBT 1,200.6 915.6
DEFERRED INCOME TAXES 171.1 179.8
POSTRETIREMENT BENEFITS 423.4 451.9
OTHER LONG-TERM LIABILITIES 384.4 516.6
STOCKHOLDERS' EQUITY 1,558.7 846.5
-------------- --------------
$ 5,530.8 $ 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 December 31, 2004 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $1,246.9 $254.8 $153.5 $1,655.2 $ 70.2 $ - $1,725.4
Segment profit (loss) (for Consoli-
dated, operating income) 158.0 33.9 22.0 213.9 8.6 (30.6) 191.9
Depreciation and amortization 26.8 5.9 4.1 36.8 .9 1.8 39.5
Capital expenditures 28.9 8.7 5.0 42.6 1.0 .2 43.8
Three Months Ended December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $ 937.3 $231.6 $138.6 $1,307.5 $ 30.1 $ - $1,337.6
Segment profit (loss) (for Consoli-
dated, operating income
before restructuring and exit costs) 116.3 38.2 21.8 176.3 2.2 (29.5) 149.0
Depreciation and amortization 20.5 6.2 3.7 30.4 .6 1.7 32.7
Capital expenditures 15.9 3.9 4.1 23.9 .7 .1 24.7
Year Ended December 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $3,667.2 $959.4 $586.3 $5,212.9 $185.5 $ - $5,398.4
Segment profit (loss) (for Consoli-
dated, operating income) 478.2 145.2 79.8 703.2 19.5 (93.5) 629.2
Depreciation and amortization 85.9 27.2 16.6 129.7 3.8 9.0 142.5
Capital expenditures 74.9 25.9 13.2 114.0 2.9 .9 117.8
Year Ended December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $3,198.4 $718.1 $530.1 $4,446.6 $ 36.1 $ - $4,482.7
Segment profit (loss) (for Consoli-
dated, operating income
before restructuring and exit costs) 361.2 93.2 77.6 532.0 2.6 (74.3) 460.3
Depreciation and amortization 82.0 24.4 15.4 121.8 .9 10.7 133.4
Capital expenditures 69.8 17.1 13.8 100.7 1.0 .8 102.5
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 Year Ended
- --------------------------------------------------------------------------------------------------------
December 31, December 31, December 31, December 31,
2004 2003 2004 2003
- --------------------------------------------------------------------------------------------------------
Segment profit for total reportable
business segments $213.9 $176.3 $703.2 $532.0
Items excluded from segment profit:
Adjustment of budgeted foreign
exchange rates to actual rates 8.6 2.2 19.5 2.6
Depreciation of Corporate property (.2) (.3) (1.2) (1.1)
Adjustment to businesses'
postretirement benefit expenses
booked in consolidation .4 3.9 .8 15.4
Other adjustments booked in
consolidation directly related to
reportable business segments (1.4) (6.0) (10.0) (15.0)
Amounts allocated to businesses in
arriving at segment profit in excess
of (less than) Corporate center
operating expenses, eliminations,
and other amounts identified above (29.4) (27.1) (83.1) (73.6)
- --------------------------------------------------------------------------------------------------------
Operating income before restructuring
and exit costs 191.9 149.0 629.2 460.3
Restructuring and exit costs - 10.0 - 31.6
- --------------------------------------------------------------------------------------------------------
Operating income 191.9 139.0 629.2 428.7
Interest expense, net of interest income 8.3 7.8 22.1 35.2
Other expense .4 - 2.8 2.6
- --------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $183.2 $131.2 $604.3 $390.9
========================================================================================================
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. On October 4, 2004, the Corporation acquired
the Tools Group from Pentair, Inc. This acquired business is included in the
Power Tools and Accessories segment. The Hardware and Home Improvement segment
has worldwide responsibility for the manufacture and sale of security hardware
(except for the sale of security hardware in Mexico, Central America, the
Caribbean, and South America). 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 held for sale 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. 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.
Diluted earnings per share from continuing operations, excluding restructuring
- --------------------------------------------------------------------------------
charges:
- -------
The calculation of diluted earnings per share from continuing operations,
excluding restructuring charges for the three months and the years ended
December 31, 2004 and 2003, follows (dollars in millions except per share
amounts):
Three Months Ended
December 31, December 31,
2004 2003
-------------- --------------
Net earnings from continuing operations $ 133.7 $ 96.2
Excluding:
Restructuring and exit costs, net of tax - 6.5
-------------- --------------
Net earnings from continuing operations,
excluding restructuring and exit costs $ 133.7 $ 102.7
============== ==============
Diluted earnings per common share from
continuing operations $ 1.60 $ 1.23
Excluding:
Restructuring and exit costs, net of tax,
per common share - assuming dilution - .08
-------------- --------------
Net earnings from continuing operations,
excluding restructuring and exit costs,
per common share - assuming dilution $ 1.60 $ 1.31
============== ==============
Shares used in computing diluted earnings
per share (in millions) 83.8 78.5
============== ==============
Year Ended
December 31, December 31,
2004 2003
-------------- --------------
Net earnings from continuing operations $ 441.1 $ 287.2
Excluding:
Restructuring and exit costs, net of tax - 22.1
-------------- --------------
Net earnings from continuing operations,
excluding restructuring and exit costs $ 441.1 $ 309.3
============== ==============
Diluted earnings per common share from
continuing operations $ 5.40 $ 3.68
Excluding:
Restructuring and exit costs, net of tax,
per common share - assuming dilution - .28
-------------- --------------
Net earnings from continuing operations,
excluding restructuring and exit costs,
per common share - assuming dilution $ 5.40 $ 3.96
============== ==============
Shares used in computing diluted earnings
per share (in millions) 81.6 78.2
============== ==============
Free cash flow for the years ended December 31, 2004 and 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
years ended December 31, 2004 and 2003, follows (dollars in millions):
Year Ended
December 31, December 31,
2004 2003
-------------- --------------
Cash flow from operating activities $ 619.1 $ 570.6
Capital expenditures (119.4) (105.8)
Proceeds from disposals of assets 26.4 15.0
-------------- --------------
Free cash flow $ 526.1 $ 479.8
============== ==============
Capital expenditures and proceeds from disposal of assets include amounts
associated with discontinued operations.