UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
February
3, 2010
Date of
Report (Date of earliest event reported)
THE
BLACK & DECKER CORPORATION
(Exact
name of registrant as specified in its charter)
|
Maryland
|
1-01553
|
52-0248090
|
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer
Identification
No.)
|
|
701
East Joppa Road
|
||
|
Towson,
Maryland
|
21286
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(410)
716-3900
|
|
(Registrant’s
telephone number, including area
code)
|
Not
Applicable
(Former
name, former address, and former fiscal year, if changed since last
report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR
240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR
240.13e-4(c))
- 2 -
ITEM
2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION;
ITEM
7.01 REGULATION FD DISCLOSURE.
On
February 3, 2010, the Corporation reported its earnings for the three months and
year ended December 31, 2009. Attached to this Current Report on Form 8-K as
Exhibit 99 is a copy of the Corporation’s related press release dated February
3, 2010. The information furnished under Items 2.02 and 7.01 shall not be deemed
filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, except as shall be expressly set forth by specific reference in a
filing.
Non-GAAP
Financial Measures
The press
release attached as Exhibit 99 contains non-GAAP financial measures within the
meaning of Regulation G promulgated by the Securities and Exchange Commission.
The Corporation believes that these non-GAAP financial measures provide
information that is useful to the users of its financial information regarding
the Corporation’s financial condition and results of operations. Additionally,
the Corporation uses these non-GAAP measures to evaluate its past performance,
reportable business segments, and prospects for future
performance. The Corporation believes it is appropriate to present
this non-GAAP financial information for the following reasons:
|
·
|
The
Corporation provides certain measures of operating results, net earnings,
and earnings per share adjusted to exclude certain costs, expenses, and
gains and losses. The Corporation believes that this information is
helpful in understanding period-over-period operating results separate and
apart from items that may, or could, have a disproportional positive or
negative impact on the Corporation’s results of operations in any
particular period. The Corporation also utilizes certain of these measures
to compensate certain management personnel of the
Corporation.
|
|
·
|
In
addition to measuring its cash flow based upon operating, investing, and
financing activities classifications established under accounting
principles generally accepted in the United States, the Corporation also
measures its net cash generation. The Corporation defines net cash
generation as free cash flow (defined as cash flow from operating
activities, less capital expenditures, plus proceeds from the disposal of
assets) and cash flows from net investment hedging activities. The
Corporation believes net cash generation provides supplemental information
about the Corporation’s ability to fund its working capital needs and
capital expenditures, and to pay interest and service debt. The
Corporation also utilizes this measure to compensate certain management
personnel of the Corporation.
|
While the
Corporation believes that these non-GAAP financial measures are useful in
evaluating the Corporation, this information should be considered as
supplemental in nature and not as a substitute for or superior to the related
financial information prepared in accordance with GAAP. Further, these non-GAAP
financial measures may differ from similar measures presented by other
companies.
- 3 -
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit
99 Press Release of the
Corporation dated February 3, 2010.
Exhibit
99 shall not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, except as shall be expressly set forth
by specific reference in a filing.
Forward-Looking
Statements
This
Current Report on Form 8-K contains “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 that are intended to come within the safe harbor
protection provided by those statutes. By their nature, all forward-looking
statements involve risks and uncertainties, and actual results may differ
materially from those contemplated by the forward-looking statements. More
detailed discussions of the risks and uncertainties that may affect the
Corporation’s operating and financial results are included in the “Risk Factors”
sections of the Corporation’s reports filed with the Securities and Exchange
Commission, including the Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.
- 4 -
THE
BLACK & DECKER CORPORATION
S
I G N A T U R E S
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
|
THE
BLACK & DECKER CORPORATION
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|||
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By:
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/s/
CHRISTINA M. MCMULLEN
|
||
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Christina
M. McMullen
|
|||
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Vice
President and Controller
|
|||
Date:
February 3, 2010
|
Contact:
|
Mark
M. Rothleitner
|
|
|
Vice
President
|
||
|
Investor
Relations and Treasurer
|
||
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410-716-3979
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||
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Roger
A. Young
|
||
|
Vice
President
|
||
|
Investor
and Media Relations
|
||
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410-716-3979
|
FOR
IMMEDIATE RELEASE: Wednesday, February 3, 2010
|
Subject:
|
Black
& Decker Announces Fourth-Quarter and Full-Year 2009
Results
|
Towson,
MD – The Black & Decker Corporation (NYSE: BDK) today announced
fourth-quarter and full-year 2009 results. Highlights
include:
|
·
|
Fourth-quarter
net earnings per diluted share of $.55, or $1.24 excluding expenses
related to the proposed merger with The Stanley Works, significantly above
the Corporation’s guidance.
|
|
·
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Full-year
net cash generation of $584 million, versus $390 million in
2008.
|
|
·
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Net
debt of $632 million at year-end, nearly a 50% reduction from the prior
year.
|
|
·
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Over
$1 billion of cash at year-end.
|
Net
earnings for the fourth quarter of 2009 were $33.9 million or $.55 per diluted
share, versus $43.7 million or $.72 per diluted share for the fourth quarter of
2008. Fourth-quarter net earnings reflect $58.8 million of pre-tax
expenses related to the proposed merger with The Stanley Works in 2009 and a
$20.8 million pre-tax restructuring charge in 2008. Excluding these
items, fourth-quarter net earnings per diluted share were $1.24 for 2009, versus
$.96 for 2008.
(more)
Page
Two
For the
full year 2009, net earnings were $132.5 million or $2.17 per diluted share,
versus $293.6 million or $4.77 per diluted share for 2008. Excluding
expenses related to the proposed merger, as well as pre-tax restructuring
charges of $11.9 million in 2009 and $54.7 million in 2008, full-year net
earnings per diluted share were $3.01 for 2009, versus $5.41 for
2008.
Sales
decreased 6% for the quarter to $1.3 billion, including a positive 4% impact
from foreign currency translation. For the full year, sales decreased
22% to $4.8 billion, including a negative 3% impact from foreign currency
translation. Net cash generation was $584 million for the full year,
versus $390 million in 2008.
Nolan D.
Archibald, Chairman and Chief Executive Officer, commented, “Sales in the
quarter exceeded our expectations in all three of our business
segments. While our end markets generally remain difficult, we
benefited from improved economic activity in selected regions and businesses, as
well as inventory restocking in some channels. Solid operating
leverage on the better-than-expected sales, combined with ongoing cost control
efforts, produced outstanding results. While 2009 was a very
challenging year, we delivered profits well above our initial forecast and very
strong net cash generation. As we prepare to merge with The Stanley
Works, Black & Decker is well-positioned to take advantage of the economic
recovery and to achieve profitable growth.
“Sales in
the Power Tools and Accessories segment decreased 11% for the
quarter. In the U.S. Industrial Products Group, sales declined
approximately 20%, reflecting continued weakness in both residential and
commercial construction. Sales decreased at a double-digit rate in
the U.S. Consumer Products Group, partly due to timing of orders in the lawn and
garden category. In Europe, sales decreased at a high single-digit
rate, representing a meaningful improvement from the trend earlier in the
year. Sales increased modestly in Latin America and Asia, but
decreased at a double-digit rate in Canada. Ongoing cost reductions
and component cost deflation enabled the segment to improve its operating margin
sharply to 11.3%.
(more)
Page
Three
“For the
full year, sales in the Power Tools and Accessories segment decreased
19%. This was driven by declines of approximately 25% in the U.S.
Industrial Products Group, Europe and Canada. Sales declined at
single-digit rates in the U.S. Consumer Products Group and in the rest of the
world. Operating margin for the year of 7.4% was flat to 2008, as the
impact of lower sales volume was offset by cost reduction efforts
and favorable pricing.
“Sales in
the Hardware and Home Improvement segment decreased 4% for the
quarter. Lockset sales in the U.S. were nearly flat, reflecting
stabilization of demand in most key channels and a comparison to weak results in
the prior year. Sales of faucets in the U.S. decreased at a
double-digit rate versus the prior year, but were roughly flat to the third
quarter. For the full year, sales decreased 15% for the segment, with
double-digit rates of decline for both locks and faucets. Due to
successful cost initiatives and lower commodity prices, operating margin for the
segment increased to 11.5% for the quarter and 10.2% for the full
year.
“Sales
decreased 2% for the quarter in the Fastening and Assembly Systems segment,
which showed progress from earlier in the year due to improved auto
production. While demand remained weak in Japan, other key regions
posted roughly flat sales this quarter. Operating margin of 11.3% was
better than in the third quarter, due to volume leverage and commodity
deflation, but was below the prior-year level. For the full year,
sales decreased 24% and operating margin fell to 7.4%, primarily due to the
automotive industry collapse early in the year.
“Costs
related to the proposed Stanley merger of $58.8 million include
employment-related change-in-control costs triggered by the signing of the
merger agreement, as well as legal and advisory fees. The tax rate in
the fourth quarter was below the rate assumed in our earnings guidance, due to
the geographical mix of earnings and the leveraging effect of improved earnings
on the fixed cost components of tax expense. Our earnings in the
prior year also benefited from a relatively low tax rate, due to the recognition
of several discrete items.
(more)
Page
Four
“Net cash
generation of $584 million for the full year was significantly better than we
expected and nearly $200 million higher than in 2008. Our team worked
hard to drive down working capital and exercised discipline over capital
spending. This strong cash generation, coupled with the proceeds from
option exercises, resulted in net debt of $632 million and cash of nearly $1.1
billion at year-end.
“Looking
ahead, we anticipate a modest improvement this year in many of our
markets. Our robust new product line-up, including expanded offerings
in the lawn and garden and concrete portfolios, will help us take advantage of
more favorable economic conditions. However, we remain cautious due
to ongoing pressure in some sectors, notably U.S. commercial
construction. Overall, we expect a mid single-digit sales increase in
the first quarter, as we benefit from the comparison to retail inventory
adjustments in 2009, and a low single-digit growth rate for the full year, both
including favorable currency translation. Our operating margin should
improve by at least 200 basis points year-on-year in the first quarter and by
approximately 100 to 150 basis points for the full year, excluding
merger-related expenses and restructuring charges. Our guidance is on
a stand-alone basis, excluding any impact of the proposed Stanley
merger. Due to the pending transaction, we are not providing EPS
guidance.
“Black
& Decker has a proud, hundred-year heritage of innovation and
success. We are excited to be joining forces with Stanley, another
company with iconic brands and a long tradition of excellence. Both
companies continue to make progress towards closing of the transaction, and
integration planning is under way. We enter this new era with
outstanding products, strong distribution, low-cost operations and a healthy
financial position. We believe that the combination will both
preserve Black & Decker’s legacy and create new opportunities for our
customers, shareholders and employees.”
The
Corporation will hold a conference call today at 10:00 a.m., E.T., to discuss
fourth-quarter results and the outlook for 2010. 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 ensure timely
access. A replay of the call will be available at http://www.bdk.com.
(more)
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 “Risk Factors” 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,
2008.
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,
2009
|
December
31,
2008
|
|||||||
|
SALES
|
$ | 1,301.3 | $ | 1,377.8 | ||||
|
Cost
of goods sold
|
828.1 | 943.0 | ||||||
|
Selling,
general, and administrative expenses
|
352.5 | 354.1 | ||||||
|
Merger-related
expenses
|
58.8 | – | ||||||
|
Restructuring
and exit costs
|
– | 20.8 | ||||||
|
OPERATING
INCOME
|
61.9 | 59.9 | ||||||
|
Interest
expense (net of interest income)
|
22.7 | 17.7 | ||||||
|
Other
income
|
(1.6 | ) | (2.4 | ) | ||||
|
EARNINGS
BEFORE INCOME TAXES
|
40.8 | 44.6 | ||||||
|
Income
taxes
|
6.9 | .9 | ||||||
|
NET
EARNINGS
|
$ | 33.9 | $ | 43.7 | ||||
|
NET
EARNINGS PER COMMON SHARE - BASIC
|
$ | .56 | $ | .72 | ||||
|
Shares
Used in Computing Basic Earnings Per Share (in Millions)
|
60.2 | 59.3 | ||||||
|
NET
EARNINGS PER COMMON SHARE - ASSUMING DILUTION
|
$ | .55 | $ | .72 | ||||
|
Shares
Used in Computing Diluted Earnings Per Share (in Millions)
|
61.0 | 59.7 | ||||||
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars
in Millions Except Per Share Amounts)
|
Year
Ended
|
||||||||
|
December
31,
2009
|
December
31,
2008
|
|||||||
|
SALES
|
$ | 4,775.1 | $ | 6,086.1 | ||||
|
Cost
of goods sold
|
3,188.6 | 4,087.7 | ||||||
|
Selling,
general, and administrative expenses
|
1,266.4 | 1,521.6 | ||||||
|
Merger-related
expenses
|
58.8 | – | ||||||
|
Restructuring
and exit costs
|
11.9 | 54.7 | ||||||
|
OPERATING
INCOME
|
249.4 | 422.1 | ||||||
|
Interest
expense (net of interest income)
|
83.8 | 62.4 | ||||||
|
Other
income
|
(4.8 | ) | (5.0 | ) | ||||
|
EARNINGS
BEFORE INCOME TAXES
|
170.4 | 364.7 | ||||||
|
Income
taxes
|
37.9 | 71.1 | ||||||
|
NET
EARNINGS
|
$ | 132.5 | $ | 293.6 | ||||
|
NET
EARNINGS PER COMMON SHARE - BASIC
|
$ | 2.18 | $ | 4.83 | ||||
|
Shares
Used in Computing Basic Earnings Per Share (in Millions)
|
59.6 | 59.8 | ||||||
|
NET
EARNINGS PER COMMON SHARE - ASSUMING DILUTION
|
$ | 2.17 | $ | 4.77 | ||||
|
Shares
Used in Computing Diluted Earnings Per Share (in Millions)
|
59.9 | 60.6 | ||||||
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
(Dollars
in Millions)
|
December
31,
2009
|
December
31,
2008
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 1,083.2 | $ | 277.8 | ||||
|
Trade
receivables
|
832.8 | 924.6 | ||||||
|
Inventories
|
777.1 | 1,024.2 | ||||||
|
Other
current assets
|
308.8 | 377.0 | ||||||
|
TOTAL
CURRENT ASSETS
|
3,001.9 | 2,603.6 | ||||||
|
PROPERTY,
PLANT, AND EQUIPMENT
|
473.4 | 527.9 | ||||||
|
GOODWILL
|
1,230.0 | 1,223.2 | ||||||
|
OTHER
ASSETS
|
789.9 | 828.6 | ||||||
| $ | 5,495.2 | $ | 5,183.3 | |||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Short-term
borrowings
|
$ | – | $ | 83.3 | ||||
|
Current
maturities of long-term debt
|
– | .1 | ||||||
|
Trade
accounts payable
|
403.2 | 453.1 | ||||||
|
Other
current liabilities
|
792.7 | 947.4 | ||||||
|
TOTAL
CURRENT LIABILITIES
|
1,195.9 | 1,483.9 | ||||||
|
LONG-TERM
DEBT
|
1,715.0 | 1,444.7 | ||||||
|
POSTRETIREMENT
BENEFITS
|
760.4 | 669.4 | ||||||
|
OTHER
LONG-TERM LIABILITIES
|
524.8 | 460.5 | ||||||
|
STOCKHOLDERS'
EQUITY
|
1,299.1 | 1,124.8 | ||||||
| $ | 5,495.2 | $ | 5,183.3 | |||||
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars
in Millions)
|
Year
Ended
|
||||||||
|
December
31,
2009
|
December
31,
2008
|
|||||||
|
OPERATING
ACTIVITIES
|
||||||||
|
Net
earnings
|
$ | 132.5 | $ | 293.6 | ||||
|
Adjustments
to reconcile net earnings to cash flow from operating
activities:
|
||||||||
|
Non-cash
charges and credits:
|
||||||||
|
Depreciation
and amortization
|
128.0 | 136.6 | ||||||
|
Stock-based
compensation
|
69.8 | 29.1 | ||||||
|
Amortization
of actuarial losses and prior service cost
|
15.3 | 14.8 | ||||||
|
Restructuring
and exit costs
|
11.9 | 54.7 | ||||||
|
Other
|
(7.5 | ) | .3 | |||||
|
Changes
in selected working capital items
|
||||||||
|
(net
of effects of businesses acquired):
|
||||||||
|
Trade
receivables
|
127.2 | 132.5 | ||||||
|
Inventories
|
273.3 | 67.9 | ||||||
|
Trade
accounts payable
|
(53.1 | ) | (47.9 | ) | ||||
|
Other
current liabilities
|
(102.2 | ) | (141.8 | ) | ||||
|
Restructuring
spending
|
(39.8 | ) | (25.3 | ) | ||||
|
Other
assets and liabilities
|
(69.8 | ) | (89.1 | ) | ||||
|
CASH
FLOW FROM OPERATING ACTIVITIES
|
485.6 | 425.4 | ||||||
|
INVESTING
ACTIVITIES
|
||||||||
|
Capital
expenditures
|
(63.1 | ) | (98.8 | ) | ||||
|
Proceeds
from disposal of assets
|
3.2 | 20.4 | ||||||
|
Purchase
of business, net of cash acquired
|
– | (25.7 | ) | |||||
|
Cash
outflow associated with purchase of previously acquired
business
|
(1.4 | ) | – | |||||
|
Cash
inflow from hedging activities
|
196.0 | 72.4 | ||||||
|
Cash
outflow from hedging activities
|
(38.2 | ) | (29.7 | ) | ||||
|
CASH
FLOW FROM INVESTING ACTIVITIES
|
96.5 | (61.4 | ) | |||||
|
FINANCING
ACTIVITIES
|
||||||||
|
Net
decrease in short-term borrowings
|
(84.3 | ) | (246.0 | ) | ||||
|
Proceeds
from issuance of long-term debt
|
||||||||
|
(net
of debt issue costs of $2.7 and $.3, respectively)
|
343.1 | 224.7 | ||||||
|
Payments
on long-term debt
|
(50.1 | ) | (.2 | ) | ||||
|
Purchase
of common stock
|
(13.4 | ) | (202.3 | ) | ||||
|
Issuance
of common stock
|
62.6 | 8.6 | ||||||
|
Cash
dividends
|
(47.3 | ) | (101.8 | ) | ||||
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
210.6 | (317.0 | ) | |||||
|
Effect
of exchange rate changes on cash
|
12.7 | (23.9 | ) | |||||
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
805.4 | 23.1 | ||||||
|
Cash
and cash equivalents at beginning of period
|
277.8 | 254.7 | ||||||
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 1,083.2 | $ | 277.8 | ||||
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS
SEGMENTS
(Dollars
in Millions)
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
December
31,
|
December
31,
|
|||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Sales
to Unaffiliated Customers:
|
||||||||||||||||
|
Power
Tools and Accessories
|
$ | 909.8 | $ | 1,026.8 | $ | 3,471.5 | $ | 4,286.6 | ||||||||
|
Hardware
and Home Improvement
|
200.7 | 209.0 | 755.4 | 891.6 | ||||||||||||
|
Fastening
and Assembly Systems
|
154.9 | 158.4 | 536.6 | 703.2 | ||||||||||||
|
Total
Reportable Business Segments
|
1,265.4 | 1,394.2 | 4,763.5 | 5,881.4 | ||||||||||||
|
Currency
Translation Adjustments
|
35.9 | (16.4 | ) | 11.6 | 204.7 | |||||||||||
|
Consolidated
|
$ | 1,301.3 | $ | 1,377.8 | $ | 4,775.1 | $ | 6,086.1 | ||||||||
|
Segment
Profit (Loss) – for
Consolidated, Operating
|
||||||||||||||||
|
Income before Merger-Related Expenses and
|
||||||||||||||||
|
Restructuring
and Exit Costs:
|
||||||||||||||||
|
Power
Tools and Accessories
|
$ | 102.8 | $ | 58.9 | $ | 257.3 | $ | 317.4 | ||||||||
|
Hardware
and Home Improvement
|
23.1 | 11.9 | 76.9 | 75.8 | ||||||||||||
|
Fastening
and Assembly Systems
|
17.5 | 19.1 | 39.5 | 106.0 | ||||||||||||
|
Total
Reportable Business Segments
|
143.4 | 89.9 | 373.7 | 499.2 | ||||||||||||
|
Currency
Translation Adjustments
|
7.4 | 1.8 | 13.5 | 29.4 | ||||||||||||
|
Corporate,
Adjustments, and
Eliminations
|
(30.1 | ) | (11.0 | ) | (67.1 | ) | (51.8 | ) | ||||||||
|
Consolidated
|
$ | 120.7 | $ | 80.7 | $ | 320.1 | $ | 476.8 | ||||||||
BASIS
OF PRESENTATION:
Business
Segments:
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 industrial power tools and accessories,
lawn and garden products, and electric cleaning, automotive, lighting, and
household products, 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; and for
the sale of plumbing products to customers outside the United States and Canada.
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). 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.
The
profitability measure employed by the Corporation and its chief operating
decision maker for making decisions about allocating resources to segments and
assessing segment performance is segment profit (for the Corporation on a
consolidated basis, operating income before merger-related expenses and
restructuring and exit costs). 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, 2008, 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 sales and elements of segment profit are
translated using budgeted rates of exchange. Budgeted rates of exchange are
established annually and, once established, all prior period segment data is
restated to reflect the current year's budgeted rates of exchange. The amounts
included in the preceding table for the Corporation’s business segments and on
the line entitled “Corporate, Adjustments, and Eliminations” are reflected at
the Corporation’s budgeted rates of exchange for 2009. The amounts included in
the preceding table on the line entitled “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 merger-related expenses and
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, including expenses related to share-based compensation, 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. Also, in addition to measuring its cash flow based upon operating,
investing and financing activities classifications established under GAAP, the
Corporation also measures its net cash generation. 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,
excluding merger-related expenses and restructuring costs:
The calculation of net earnings and
diluted earnings per share for the three months and years ended December 31,
2009 and 2008, excluding: (1) for the three months and year ended December 31,
2009, pre-tax merger-related expenses of $58.8 million; (2) for the three months
ended December 31, 2008, pre-tax restructuring and exit costs of $20.8 million;
and (3) for the years ended December 31, 2009 and 2008, pre-tax restructuring
and exit costs of $11.9 million and $54.7 million; respectively, follows
(dollars in millions except per share amounts):
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
2009
|
December
31,
2008
|
December
31,
2009
|
December
31,
2008
|
|||||||||||||
|
Net
earnings
|
$ | 33.9 | $ | 43.7 | $ | 132.5 | $ | 293.6 | ||||||||
|
Excluding:
|
||||||||||||||||
|
Merger-related expenses, net of tax
|
42.6 | – | 42.6 | – | ||||||||||||
|
Restructuring
and exit costs, net of tax
|
– | 14.8 | 8.4 | 39.6 | ||||||||||||
|
Net
earnings, excluding merger-related
expenses
and restructuring and exit
costs
|
$ | 76.5 | $ | 58.5 | $ | 183.5 | $ | 333.2 | ||||||||
|
Net
earnings available to common
stockholders,
excluding merger-
related
expenses
and restructuring
and
exit costs
|
$ | 75.9 | $ | 57.5 | $ | 180.3 | $ | 328.0 | ||||||||
|
Diluted
earnings per common share
|
$ | .55 | $ | .72 | $ | 2.17 | $ | 4.77 | ||||||||
|
Excluding:
|
||||||||||||||||
|
Merger-related expenses, net of tax,
per
common
share – assuming
dilution
|
.69 | – | .70 | – | ||||||||||||
|
Restructuring and exit costs, net of
tax,
per
common share – assuming
dilution
|
– | .24 | .14 | .64 | ||||||||||||
|
Net
earnings, excluding merger-related
expenses and restructuring and
exit
cost
per common share – assuming
dilution
|
$ | 1.24 | $ | .96 | $ | 3.01 | $ | 5.41 | ||||||||
|
Shares
used in computing diluted
earnings
per share (in millions)
|
61.0 | 59.7 | 59.9 | 60.6 |
Free cash
flow:
The calculation of net cash
generation, which is defined by the Corporation as free cash flow (defined as
cash flow from operating activities, less capital expenditures, plus proceeds
from the disposal of assets) and cash flow from net investment hedging
activities for the years ended December 31, 2009, and December 31, 2008, is as
follows (dollars in millions):
|
Year
Ended
|
||||||||
|
December 31,
2009
|
December 31, 2008 | |||||||
|
Cash
flow from operating activities
|
$ | 485.6 | $ | 425.4 | ||||
|
Capital
expenditures
|
(63.1 | ) | (98.8 | ) | ||||
|
Proceeds
from disposals of assets
|
3.2 | 20.4 | ||||||
|
Free cash flow
|
425.7 | 347.0 | ||||||
|
Cash
inflow from net investment hedging activities
|
196.0 | 72.4 | ||||||
|
Cash
outflow from net investment hedging activities
|
(38.2 | ) | (29.7 | ) | ||||
|
Net cash
generation
|
$ | 583.5 | $ | 389.7 | ||||
Operating margins, excluding
merger-related expenses and restructuring costs:
This press release includes a
forward-looking statement with respect to management’s expectation that the
Corporation’s operating margin should improve by at least 200 basis points in
the first quarter of 2010, and by approximately 100 to 150 basis points for the
full year, excluding merger-related expenses and restructuring
charges. Management’s expectation regarding the improvement in
operating margin excludes restructuring and exit costs of $11.9 million that
were recognized in the first quarter of 2009 and $58.8 million of merger-related
expenses that were recognized in the fourth quarter of
2009. Management’s expectation regarding the improvement in operating
margin also excludes any merger-related expenses that may be recognized in 2010.
As noted in this press release, management’s expectations are for the
Corporation on a stand-alone basis, excluding the impact of the proposed Stanley
merger.