Black & Decker Reports $1.58 Earnings Per Share for Second Quarter

Tag : Industrial Power Tools
The Black & Decker Corporation (NYSE: BDK) today announcedthat net earnings for the second quarter of 2008 were $96.7 millionor $1.58 per diluted share, versus $118.0 million or $1.75 perdiluted share for the second quarter of 2007.
Sales decreased 3% for the quarter to $1.6 billion, including apositive 5% impact from foreign currency translation. Free cashflow was $157 million for the second quarter and $46 millionyear-to-date.
Nolan D. Archibald , Chairman and Chief Executive Officer, commented, "Black &Decker's operating performance this quarter met our expectations,despite ongoing challenges in key markets and rising commoditycosts. A favorable tax rate contributed approximately $0.12 todiluted earnings per share for the quarter, enabling us to exceedour EPS guidance. Weak demand in the U.S. and slowing conditions inparts of Western Europe, however, resulted in lower sales andearnings than in 2007.
"Sales in the Power Tools and Accessories segment decreased 10% forthe quarter. In the U.S. Industrial Products Group, sales decreasedat a double-digit rate, reflecting the continued slowdown inresidential construction and remodeling. In the U.S. ConsumerProducts Group, sales decreased more than 25%. Lower demand wascompounded by the ongoing effect of lost pressure washer listingsand the impact of the transition from Firestorm(R) toPorter-Cable(R) branded products at a key customer. Thistransition, plus other product listing gains and favorablecomparisons, should help the U.S. businesses narrow the salesdecline in the second half. In Europe, sales decreased at a midsingle-digit rate, due to slowing economic conditions in parts ofWestern Europe, partly offset by growth in Eastern Europe. LatinAmerican sales continued to grow more than 20%, and operations inCanada and Asia also posted sales gains. Operating margin decreasedto 7.9% for the Power Tools and Accessories segment, driven bylower sales volume and component cost inflation.
"Sales in the Hardware and Home Improvement segment decreased 5%for the quarter. This represents an improvement versus the firstquarter, partly due to order timing. Sales of Kwikset(R) andWeiser(R) products in the U.S. decreased at a mid single-digitrate, with strong results at a key customer mitigating the impactof the housing downturn in other channels. The U.S. faucet businesshad a low single-digit rate of sales decline, as reductions in theconstruction channel were largely offset by improvement at retail.Operating margin in the Hardware and Home Improvement segmentdecreased from the 2007 level to 9.3%, also primarily due to lowervolume, but improved sequentially versus the first quarter.
"In the Fastening and Assembly Systems segment, sales were flat forthe quarter. North American sales decreased due to a sharp declinein automotive production levels. All other geographic regionsposted strong growth. The segment's operating margin increasedslightly to 16.0% for the quarter.
"We are pleased with the $157 million of free cash flow generatedin the second quarter. Historically, our cash generation isstronger in the second half than the first, and therefore, wecontinue to expect a 100% conversion rate of full-year net earningsto free cash flow. We repurchased approximately one million sharesof stock, at a cost well below the average closing price for thequarter. Through the first six months, we have repurchased nearlythree million shares, or 5% of the shares outstanding.
"Looking ahead, we recognize the challenging environment, andcontinue to expect a mid-to-high single-digit rate of organic salesdecline for the third quarter and full year. Our cost reductionefforts remain on track, but the forecast for component inflationhas increased somewhat since our April estimate. Therefore, we nowexpect full-year diluted EPS in the range of $5.25-to-$5.45 pershare, excluding the first-quarter restructuring charge of $0.20per share. For the third quarter, we expect diluted EPS in therange of $1.30-to-$1.40.
"Two years into a severe downturn, Black & Decker stilldelivers solid profitability, generates outstanding cash flow, andmaintains a strong balance sheet. We continue to launch innovativenew products and leverage our leading brands across the globe. Ourmanagement team is taking the right steps to reduce costs indifficult times and to position the company for growth when ourmarkets turn around. We believe the disciplined execution of ourstrategy will create lasting value for our shareholders."
The Corporation also announced that its Board of Directors declareda quarterly cash dividend of $0.42 per share of the Corporation'soutstanding common stock payable September 26, 2008, tostockholders of record at the close of business on September 12,2008.
The Corporation will hold a conference call today at 10:00 a.m.,E.T., to discuss second-quarter results and the outlook for theremainder of 2008. Investors can listen to the conference call byvisiting http://www.bdk.com and clicking on the icon labeled "Live Webcast." Listeners shouldlog-in at least ten minutes prior to the beginning of the event toensure timely access. A replay of the call will be available at http://www.bdk.com .
This release includes forward-looking statements within the meaningof Section 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934. By their nature, allforward-looking statements involve risks and uncertainties. For amore detailed discussion of the risks and uncertainties that mayaffect Black & Decker's operating and financial results and itsability to achieve the financial objectives discussed in this pressrelease, interested parties should review the "Risk Factors"sections in Black & Decker's reports filed with the Securitiesand Exchange Commission, including the Annual Report on Form 10-Kfor the fiscal year ended December 31, 2007.
This release contains non-GAAP financial measures within themeaning of Regulation G promulgated by the Securities and ExchangeCommission. Included with this release is a reconciliation of thedifferences between these non-GAAP financial measures with the mostdirectly comparable financial measures calculated in accordancewith GAAP.
Black & Decker is a leading global manufacturer and marketer ofpower tools and accessories, hardware and home improvementproducts, and technology-based fastening systems.
The Corporation operates in three reportable business segments:Power Tools and Accessories, Hardware and Home Improvement, andFastening and Assembly Systems. The Power Tools and Accessoriessegment has worldwide responsibility for the manufacture and saleof consumer and industrial power tools and accessories, lawn andgarden products, and electric cleaning, automotive, lighting, andhousehold products, as well as for product service. In addition,the Power Tools and Accessories segment has responsibility for thesale of security hardware to customers in Mexico, Central America,the Caribbean, and South America; and for the sale of plumbingproducts to customers outside the United States and Canada. TheHardware and Home Improvement segment has worldwide responsibilityfor the manufacture and sale of security hardware (except for thesale of security hardware in Mexico, Central America, theCaribbean, and South America). The Hardware and Home Improvementsegment also has responsibility for the manufacture of plumbingproducts and for the sale of plumbing products to customers in theUnited States and Canada. The Fastening and Assembly Systemssegment has worldwide responsibility for the manufacture and saleof fastening and assembly systems.
The profitability measure employed by the Corporation and its chiefoperating decision maker for making decisions about allocatingresources to segments and assessing segment performance is segmentprofit (for the Corporation on a consolidated basis, operatingincome before restructuring and exit costs). In general, segmentsfollow the same accounting policies as those described in Note 1 ofNotes to Consolidated Financial Statements included in Item 8 ofthe Corporation's Annual Report on Form 10-K for the year endedDecember 31, 2007, except with respect to foreign currencytranslation and except as further indicated below. The financialstatements of a segment's operating units located outside of theUnited States, except those units operating in highly inflationaryeconomies, are generally measured using the local currency as thefunctional currency. For these units located outside of the UnitedStates, segment assets and elements of segment profit aretranslated using budgeted rates of exchange. Budgeted rates ofexchange are established annually and, once established, all priorperiod segment data is restated to reflect the current year'sbudgeted rates of exchange. The amounts included in the precedingtable under the captions "Reportable Business Segments" and"Corporate, Adjustments, & Eliminations" are reflected at theCorporation's budgeted rates of exchange for 2008. The amountsincluded in the preceding table under the caption "CurrencyTranslation Adjustments" represent the difference betweenconsolidated amounts determined using those budgeted rates ofexchange and those determined based upon the rates of exchangeapplicable under accounting principles generally accepted in theUnited States.
Segment profit excludes interest income and expense, non-operatingincome and expense, adjustments to eliminate intercompany profit ininventory, and income tax expense. In addition, segment profitexcludes restructuring and exit costs. In determining segmentprofit, expenses relating to pension and other postretirementbenefits are based solely upon estimated service costs. Corporateexpenses, as well as certain centrally managed expenses, includingexpenses related to share-based compensation, are allocated to eachreportable segment based upon budgeted amounts. While sales andtransfers between segments are accounted for at cost plus areasonable profit, the effects of intersegment sales are excludedfrom the computation of segment profit. Intercompany profit ininventory is excluded from segment assets and is recognized as areduction of cost of goods sold by the selling segment when therelated inventory is sold to an unaffiliated customer. Because theCorporation compensates the management of its various businesseson, among other factors, segment profit, the Corporation may electto record certain segment-related expense items of an unusual ornon-recurring nature in consolidation rather than reflect suchitems in segment profit. In addition, certain segment-related itemsof income or expense may be recorded in consolidation in one periodand transferred to the various segments in a later period.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION GDISCLOSURE:
To supplement its consolidated financial statements presented inaccordance with accounting principles generally accepted in theUnited States (GAAP), the Corporation provides additional measuresof operating results, net earnings, and earnings per share adjustedto exclude certain costs, expenses, and gains and losses. Also, inaddition to measuring its cash flow generation and usage based uponoperating, investing and financing activities classificationsestablished under GAAP, the Corporation also measures its free cashflow. The Corporation believes that these non-GAAP financialmeasures are appropriate to enhance understanding of its pastperformance as well as prospects for its future performance.
This press release contains non-GAAP financial measures within themeaning of Regulation G promulgated by the Securities and ExchangeCommission. A reconciliation of the differences between thesenon-GAAP financial measures with the most directly comparablefinancial measures calculated in accordance with GAAP follows.