SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
April 3, 1994 1-1553
THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0248090
(State of Incorporation) (I.R.S. Employer Identification Number)
701 East Joppa Road Towson, Maryland 21286
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 716-3900
Not Applicable
Former Address
Number of shares of common stock outstanding on April 3, 1994:
83,945,404.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days.
YES X NO
The exhibit index as required by item 601(a) of Regulation S-K is
included in this report.
<PAGE>
- 2 -
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
INDEX - FORM 10-Q
April 3, 1994
Page
PART I - FINANCIAL INFORMATION
Consolidated Statement of Earnings (Unaudited)
- For the Three Months Ended April 3, 1994,
and April 4, 1993 . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet (Unaudited)
- April 3, 1994, and December 31, 1993 . . . . . . . . 4
Consolidated Statement of Cash Flows (Unaudited)
- For the Three Months Ended April 3, 1994,
and April, 4, 1993 . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements (Unaudited). . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
<TABLE> - 3 -
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions, except per share data)
<CAPTION>
THREE MONTHS ENDED
APRIL 3, APRIL 4,
1994 1993
<S> <C> <C>
REVENUES
Product sales $ 894.4 $ 933.1
Information systems and services 190.2 166.8
-------- --------
TOTAL REVENUES 1,084.6 1,099.9
Cost of revenues
Products 570.7 597.8
Information systems and services 143.2 122.2
Marketing and administrative expenses 302.9 312.8
-------- --------
Total operating costs and expenses 1,016.8 1,032.8
-------- --------
OPERATING INCOME 67.8 67.1
Interest expense (net of interest income) 43.9 40.9
Other expense 2.1 2.6
-------- --------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 21.8 23.6
Income taxes 7.2 9.7
-------- --------
NET EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 14.6 13.9
Cumulative effect to January 1, 1993, of change in
accounting principle for postemployment benefits - (29.2)
-------- --------
NET EARNINGS (LOSS) $ 14.6 $ (15.3)
======== ========
NET EARNINGS (LOSS) APPLICABLE TO
COMMON SHARES $ 11.6 $ (18.3)
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE:
Net earnings before cumulative effect
of change in accounting principle .14 .13
<PAGE>
Cumulative effect adjustment for postemployment
benefits - (.35)
-------- --------
NET EARNINGS (LOSS) PER COMMON SHARE $ .14 $ (.22)
======== ========
DIVIDENDS PER COMMON SHARE $ .10 $ .10
======== ========
Average Common Shares Outstanding 83.9 83.4
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE> - 4 -
CONSOLIDATED BALANCE SHEET (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions)
<CAPTION>
APRIL 3, DECEMBER 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 75.1 $ 82.0
Trade receivables 818.4 832.1
Inventories 796.3 728.9
Other current assets 107.8 121.1
-------- --------
TOTAL CURRENT ASSETS 1,797.6 1,764.1
-------- --------
PROPERTY, PLANT AND EQUIPMENT 797.9 796.2
GOODWILL 2,324.0 2,333.6
OTHER ASSETS 419.5 416.7
-------- --------
$5,339.0 $5,310.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 296.9 $ 332.3
Current maturity of long-term debt 5.7 163.1
Trade accounts payable 295.5 307.3
Other accrued liabilities 648.5 705.8
-------- --------
TOTAL CURRENT LIABILITIES 1,246.6 1,508.5
-------- --------
LONG-TERM DEBT 2,363.5 2,069.2
DEFERRED INCOME TAXES 48.4 47.9
POSTEMPLOYMENT BENEFITS 322.6 319.3
OTHER LONG-TERM LIABILITIES 311.1 316.8
STOCKHOLDERS' EQUITY
Convertible preferred stock, no par value:
Outstanding:
April 3, 1994 and Dec. 31, 1993
- 150,000 shares 150.0 150.0
Common stock, par value $.50 per share:
Outstanding:
April 3, 1994 - 83,945,404 shares
Dec. 31, 1993 - 83,845,194 shares 42.0 41.9
<PAGE>
Capital in excess of par value 1,036.0 1,034.8
Retained earnings (deficit) (54.3) (57.5)
Equity adjustment from translation (126.9) (120.3)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 1,046.8 1,048.9
-------- --------
$5,339.0 $5,310.6
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE> - 5 -
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions)
<CAPTION>
THREE MONTHS ENDED
APRIL 3, APRIL 4,
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ 14.6 $ (15.3)
Adjustments to reconcile net earnings (loss)
to cash flow from operating activities:
Non-cash charges:
Depreciation and amortization 51.0 50.6
Cumulative effect of change in accounting
principle - 29.2
Changes in selected working capital items:
Trade accounts receivables 68.4 82.6
Inventories (63.2) (91.0)
Trade accounts payables (12.5) 19.9
Restructuring (8.4) (7.7)
Other assets and liabilities (73.5) (107.3)
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
BEFORE SALE OF RECEIVABLES (23.6) (39.0)
Sale of receivables (53.0) (47.2)
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES (76.6) (86.2)
-------- --------
INVESTING ACTIVITIES
Proceeds from disposal of assets 2.0 -
Capital expenditures (34.3) (48.1)
Cash inflow from hedging activities 411.7 215.7
Cash outflow from hedging activities (401.7) (192.5)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES (22.3) (24.9)
-------- --------
CASH FLOW BEFORE FINANCING ACTIVITIES (98.9) (111.1)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 8.9 (108.5)
Proceeds from long-term debt
(including revolving credit facility) 946.6 940.6
Payments on long-term debt
(including revolving credit facility) (853.9) (690.5)
Issuance of common stock 1.2 .5
Cash dividends (11.3) (11.3)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES 91.5 130.8
<PAGE>
Effect of exchange rate changes on cash .5 (4.0)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6.9) 15.7
Cash and cash equivalents at beginning of period 82.0 66.3
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 75.1 $ 82.0
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form
10-Q and do not include all the information and notes required
by generally accepted accounting principles for complete
financial statements. In the opinion of management, the
unaudited consolidated financial statements include all
adjustments consisting only of normal recurring accruals
considered necessary for a fair presentation of the financial
position and the results of operations. Prior year results
have been restated to include a net cumulative charge for the
adoption, as of January 1, 1993, of Statement of Financial
Accounting Standard (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits."
Operating results for the three-month period ended April 3,
1994, are not necessarily indicative of the results that may be
expected for a full fiscal year. For further information,
refer to the consolidated financial statements and notes
included in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1993.
SALE OF RECEIVABLES
At April 3, 1994, under its sale of receivables program, the
Corporation had sold $165.0 million of receivables compared to
$218.0 million at December 31, 1993. The discount on sale of
receivables is included in "Other expense."
<PAGE>
INVENTORIES
The components of inventory at the end of each period, in
millions of dollars, consisted of the following:
<TABLE>
<CAPTION>
April 3, December 31,
1994 1993
<S> <C> <C>
FIFO Cost
Raw materials and work-in-process $ 214.7 $ 206.2
Finished products 625.0 567.4
--------- --------
839.7 773.6
Excess of FIFO cost over LIFO
inventory value (43.4) (44.7)
--------- --------
$ 796.3 $ 728.9
========= ========
</TABLE>
Inventories are stated at the lower of cost or market. The
cost of United States inventories is based primarily on the
last-in, first-out (LIFO) method; foreign inventories are
valued on the first-in, first-out (FIFO) method.
GOODWILL
Goodwill at the end of each period, in millions of dollars,
was as follows:
<TABLE>
<CAPTION>
April 3, December 31,
1994 1993
<S> <C> <C>
Goodwill $2,707.8 $2,699.9
Less accumulated amortization 383.8 366.3
-------- --------
$2,324.0 $2,333.6
======== ========
</TABLE>
DEBT REFINANCING
In February 1993, the Corporation filed a shelf registration
statement for the issuance, from time to time, of up to $1
billion of debt securities. Under this shelf registration
statement, the Corporation issued $500 million of 7.50% Notes
due April 1, 2003, in April 1993; $250 million of 6.625% Notes
due November 15, 2000, in November 1993; and $250 million of 7%
Notes due February 1, 2006, in January 1994. Net proceeds from
the sale of the Notes were used to reduce borrowings under the
Corporation's principal bank credit facility.
<PAGE>
INTEREST EXPENSE (Net of Interest Income)
Interest expense (net of interest income) for each period, in
millions of dollars, consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
April 3, April 4,
1994 1993
<S> <C> <C>
Interest expense $ 46.0 $ 43.5
Interest (income) (2.1) (2.6)
-------- --------
$ 43.9 $ 40.9
======== ========
</TABLE>
NET EARNINGS PER COMMON SHARE
Net earnings per common share for each period presented are
computed by dividing net earnings applicable to common shares,
which are after preferred dividends of $3.0 million, for each
of the periods ended April 3, 1994 and April 4, 1993, by the
weighted average number of common shares outstanding for each
period. Fully diluted earnings per share are not materially
different from earnings per common share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
OVERVIEW
Prior year results have been restated to reflect the
cumulative charge in connection with the adoption, as of
January 1, 1993, of Statement of Financial Accounting Standard
(SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits."
The Corporation reported net earnings of $14.6 million or
$.14 per common share for the three-month period ended April 3,
1994, compared to a net loss of $15.3 million or $.22 per
common share for the three-month period ended April 4, 1993.
Excluding the cumulative effect in 1993 of the adoption of SFAS
No. 112, net earnings for the three-month period ended April 4,
1993, were $13.9 million or $.13 per common share. The
improvement in net earnings is attributable to improved
operating results, primarily in the United States, and a
reduced effective tax rate.
RESULTS OF OPERATIONS
Revenues
The following chart sets forth an analysis of changes in
revenues for the three-month periods ended April 3, 1994 and
April 4, 1993.
<TABLE>
Analysis of Changes in Revenues ($Millions)
Consolidated Three Months Ended
April 3, April 4,
1994 1993
<S> <C> <C>
Total revenues $1,084.6 $1,099.9
Unit volume - Existing (1) 2 % 5 %
- Disposed (2) (3)% -
Price 1 % 1 %
Currency (1)% (3)%
Change in total revenues (1)% 3 %
</TABLE>
(1) Existing - Reflects the change in unit volume for
businesses where period-to-period comparability exists.
(2) Disposed - Reflects the change in total revenues for
businesses that were included in prior year results but
subsequently have been sold.
<PAGE>
The Corporation operates in three business segments:
Consumer and Home Improvement Products (Consumer), including
consumer and professional power tools and accessories,
household products, security hardware, lawn and garden and
outdoor recreational products, plumbing products, and product
service; Commercial and Industrial Products (Commercial),
including fastening systems and glass container-making
equipment; and Information Systems and Services (PRC),
including government and commercial information systems
development, consulting, and other related contract services.
The following chart sets forth an analysis of the change in
revenues for the three months ended April 3, 1994, compared to
the three months ended April 4, 1993, by geographic area for
each business segment.
<PAGE>
<TABLE>
Analysis of Changes in Revenues ($Millions)
United
States Europe Other Total
<S> <C> <C> <C> <C>
Consumer
Total Revenues $406.2 $251.7 $107.9 $ 765.8
______ ______ ______ ________
Unit Volume - Existing - - 7 % 1 %
- Disposed (5)% - (1)% (3)%
Price 2 % 1 % - 1 %
Currency - (5)% (4)% (2)%
______ ______ ______ ________
(3)% (4)% 2 % (3)%
______ ______ ______ ________
Commercial
Total Revenues $ 62.9 $ 42.3 $ 23.4 $ 128.6
______ ______ ______ ________
Unit Volume - Existing 2 % (16)% (5)% (5)%
- Disposed (10)% (1)% (13)% (7)%
Price 1 % 1 % - -
Currency - (4)% 7 % -
______ ______ ______ ________
(7)% (20)% (11)% (12)%
______ ______ ______ ________
PRC
Total Revenues $190.2 - - $ 190.2
______ ______ ______ ________
Unit Volume 14 % - - 14 %
______ ______ ______ ________
Consolidated
Total Revenues $659.3 $294.0 $131.3 $1,084.6
______ ______ ______ ________
Unit Volume - Existing 4 % (3)% 5 % 2 %
- Disposed (4)% - (4)% (3)%
Price 1 % 1 % - 1 %
Currency - (5)% (1)% (1)%
______ ______ ______ ________
<PAGE>
Change in total revenues 1 % (7)% - % (1)%
______ ______ ______ ________
</TABLE>
Existing unit volume for the Corporation grew by 2% for the
three-month period ended April 3, 1994, compared to the first
quarter of 1993. Disposed unit volume represents the effect of
the sale of the Corbin Russwin and Dynapert business units
during the fourth quarter of 1993. Pricing actions modestly
improved revenue comparisons to last year, but were offset by
negative effects of the stronger United States dollar against
most European currencies.
Existing unit volume in the Consumer segment for the three
months ended April 3, 1994, grew by 1% compared to last year.
Results were mixed in this segment, with domestic power tools,
accessories, security hardware, and plumbing products well
ahead of last year's revenues led by continuing strong
performance of DeWalt power tools and accessories product
line, Titan and Kwikset locksets and the recently introduced
PowerShot stapler. This strong performance was offset,
however, by declines in sales of domestic household products
and golf club shafts. The household products market remains
soft, with the severe weather conditions on the East Coast in
January and February affecting the order patterns of several
major retailers. This severe weather and the continuing market
shift from premium steel shafts to composite shafts adversely
affected the Corporation's golf club shaft business. As noted
in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993, the Corporation is assessing
opportunities to expand its share of the composite shaft market
while reducing its reliance on the steel market. To this end,
the Corporation has announced that it will close its Seneca,
South Carolina, plant during the second quarter of 1994 and
consolidate all of its steel shaft manufacturing in Amory,
Mississippi. The costs associated with this plant closing were
accrued in 1993. Performance of the Consumer businesses in
Europe and other areas was also mixed with a strong performance
from Scandinavia, Latin America, and the Asia Pacific regions.
Sales of Consumer products in the Latin America and Asia
Pacific regions continue to grow at a rapid 20% to 30% rate.
This growth was offset substantially by continuing weakness in
the United Kingdom, Mexico and Australia. Brazil, although
still volatile, reported volume growth during the first quarter
of 1994 compared to the first quarter of 1993.
Existing unit volume in the Commercial segment for the three
months ended April 3, 1994, was 5% below the first quarter of
1993 as most businesses outside the United States continued to
struggle. The Glass businesses in Europe and the Far East
remain weak and were the major contributors to this decline.
The Fastening businesses reported a slight increase in volume
primarily on the strength of the resurging automobile industry
<PAGE>
in the United States. The Fastening businesses in Europe are
also showing signs of recovery, particularly in Scandinavia;
however, the Japanese market remains depressed.
PRC's total revenues for the three months ended April 3,
1994, grew by 14% compared to the first quarter of 1993. Most
of this improvement was from revenues generated from the Super-
Minicomputer Procurement (SMP) contract with the United States
government. There were no SMP revenues in the first quarter of
1993.
Earnings
Total operating income as a percentage of revenues for the
three months ended April 3, 1994, was 6.2% compared to 6.1% for
the first quarter of 1993. Operating income performance in
most domestic consumer businesses improved compared to the
first quarter of last year, while operating income in the
Commercial businesses was generally below last year's levels.
Excluding the one-time favorable effects of a contract
settlement in the first quarter of last year, PRC's operating
income was double last year's level.
Gross margin as a percentage of revenues for the three months
ended April 3, 1994, was 34.2% compared to 34.5% for the first
quarter of 1993. Gross margin on product sales (excluding PRC)
was 36.2% compared to 35.9% for last year. This increase was
in the Consumer segment and was primarily the result of lower
initial start-up costs associated with new product
introductions, improved manufacturing efficiencies, and the
effect of the sale of lower margined businesses. The
improvement in the Consumer segment, however, was offset by the
continued volume-related gross margin deterioration in the
Commercial segment.
PRC's lower margin was primarily because of the dilutive
effect of the SMP business, which is expected to produce a
lower margin during the early stages of the contract, and the
effect on last year of the favorable contract settlement
referenced above.
Marketing and administrative expenses as a percentage of
total revenues were 27.9% for the three months ended April 3,
1994, compared to 28.4% for the first quarter of 1993.
Specific cost-cutting programs have been put in place in all
operations. These programs, coupled with lower new product
marketing and promotional costs compared to last year's level,
have improved the expense ratio as a percentage of sales.
Net interest expense (interest expense less interest income)
for the three months ended April 3, 1994, is higher than the
comparable period of 1993 primarily because of higher borrowing
costs on approximately the same average debt level as the first
quarter of last year. The Corporation maintains a portfolio of
<PAGE>
interest rate hedge instruments for the purpose of managing
interest rate exposure. During the quarter, the Corporation
increased its protection against rising interest rates by
adding $350 million in hedges to the portfolio. The addition
of these hedges has had the effect of reducing the
Corporation's variable rate debt to total debt ratio at April
3, 1994, to 39% compared to 46% at December 31, 1993.
Other expense for the three months ended April 3, 1994 and
April 4, 1993, primarily includes the discount on sale of
receivables.
The Corporation's effective tax rate for the three months
ended April 3, 1994, was 33% compared to 41% for the first
quarter of last year. The lower rate for 1994 was the result
of a change in the mix between foreign and domestic earnings,
primarily due to improved operating earnings in the United
States.
FINANCIAL CONDITION
In the Consolidated Statement of Cash Flows, operating
activities for the three months ended April 3, 1994, used cash
of $76.6 million compared to $86.2 million for the first
quarter of 1993. Net working capital requirements (i.e., trade
receivables, inventories, and trade payables) used cash of $7.3
million this year compared to cash provided of $11.5 million
last year. An improved inventory position (less of an increase
compared to last year) was more than offset by less favorable
receivable collections due to some extended payment terms
primarily in the domestic household products business and the
timing of payments on several large contracts at PRC. Reduced
trade payable levels also contributed to a net use of working
capital. Other assets and liabilities were $33.8 million
favorable to last year, primarily the result of reduced
spending on deferred contract costs at PRC during the first
quarter of 1994 compared to 1993, cash payments to terminate
certain interest rate hedges during the first quarter of 1993
and lower tax payments during the first quarter of 1994
compared to 1993.
Investing activities for the three months ended April 3,
1994, used cash of $22.3 million compared to $24.9 million last
year. Substantially lower capital spending during the first
quarter of 1994 was offset by reduced net cash inflow related
to the Corporation's hedging activities. Capital expenditures
for the full year of 1994 are expected to be at approximately
the same level as 1993.
Financing activities generated cash of $91.5 million for the
three months ended April 3, 1994, compared to cash generated of
$130.8 million in the first quarter of 1993. During the first
quarter of 1994, the Corporation issued $250 million of 7%
Notes due February 1, 2006 under its shelf registration
<PAGE>
statement. These proceeds were used to reduce borrowings under
the Corporation's principal bank credit facility (the Credit
Facility). Also, during the first quarter of 1994, the
Corporation called its 8.375% Notes due in 1997 and repaid the
5.75% deutsche mark bearer bonds that matured in March 1994.
During the first quarter of 1994, average debt maturity
increased to 5.5 years from 4.8 years at December 31, 1993.
At the end of 1992, the Corporation announced a restructuring
of various of its operations. This included costs associated
with the restructuring and eventual sale of Dynapert, the
reduction of manufacturing capacity primarily in Europe, and
the closure and reorganization of additional manufacturing
sites in the United States and elsewhere. The restructuring of
Dynapert was substantially completed during 1993 and culminated
with the sale of the Dynapert through-hole business at a gain,
which was recognized in 1993. The remainder of the
restructuring plan is proceeding as planned and, along with the
plant closings announced at the end of 1993, is expected to be
substantially completed during 1994. Total cash spending for
restructuring and plant closings during 1994 is expected to be
approximately $50 million of which approximately $8 million was
spent in the first quarter. The Corporation anticipates that
the reduction in manufacturing capacity through plant closings
and reorganizations will result in cost reductions, comprised
primarily of reduced labor costs and depreciation expense, of
approximately $20 million in 1994 and approximately $40 million
annually thereafter. These actions are part of the
Corporation's continuing effort to identify opportunities to
improve its manufacturing cost structure.
The Credit Facility includes certain covenants that require
the Corporation to meet specified minimum cash flow coverage
and maximum leverage (debt to equity) ratios during the term of
the loan. As of April 3, 1994, the Corporation was in
compliance with all covenants and provisions of the Credit
Facility.
The Corporation expects to continue to meet the covenants
imposed by the Credit Facility over the next 12 months.
Meeting the cash flow coverage ratio, however, is dependent
upon future earnings, interest rates, and debt levels, each of
which can have a significant impact on the ratio.
The Corporation will continue to have cash requirements to
support working and fixed capital needs, to pay interest, to
service debt, and to complete previously announced operational
consolidation and reorganization plans. In order to meet these
cash requirements, the Corporation intends to use internally
generated funds and to borrow under the Credit Facility or
under short-term borrowing facilities. Management believes
that cash generated from these sources will be adequate to meet
the Corporation's cash requirements over the next 12 months.
<PAGE>
THE BLACK & DECKER CORPORATION
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
The Corporation is involved in various lawsuits in the
ordinary course of business. These lawsuits primarily involve
claims for damages arising out of the use of the Corporation's
products and allegations of patent and trademark infringement.
The Corporation is also involved in litigation and
administrative proceedings involving employment matters and
commercial disputes. Some of these lawsuits include claims for
punitive as well as compensatory damages. The Corporation,
using current product sales data and historical trends,
actuarially calculates the estimate of its current exposure for
product liability. The Corporation is insured for product
liability claims for amounts in excess of established
deductibles and accrues for the estimated liability as
described above up to the limits of the deductibles. All other
claims and lawsuits are handled on a case-by-case basis.
The Corporation also is involved in lawsuits and
administrative proceedings with respect to claims involving the
discharge of hazardous substances into the environment.
Certain of these claims assert damages and liability for
remedial investigations and cleanup costs with respect to sites
at which the Corporation has been identified as a potentially
responsible party under federal and state environmental laws
and regulations (off-site). Other matters involve sites that
the Corporation currently owns and operates or has previously
sold (on-site). For off-site claims, the Corporation makes an
assessment of the cost involved based on environmental studies,
prior experience at similar sites, and the experience of other
named parties. The Corporation also considers the ability of
other parties to share costs, the percentage of the
Corporation's exposure relative to all other parties, and the
effects of inflation on these estimated costs. For on-site
matters associated with properties currently owned, an
assessment is made as to whether an investigation and
remediation would be required under applicable federal and
state law. For on-site matters associated with properties
previously sold, the Corporation considers the terms of sale as
well as applicable federal and state laws to determine if the
Corporation has any remaining liability. If the Corporation is
<PAGE>
determined to have potential liability for properties currently
owned or previously sold, an estimate is made of the total cost
of investigation and remediation and other potential costs
associated with the site.
In addition to the environmental matters referenced in Item 1
of Part I of the Annual Report on Form 10-K for the year ended
December 31, 1993, the Corporation has been investigating
certain environmental matters at the NEMEF security hardware
facility in the Netherlands. The NEMEF facility has been a
manufacturing operation since 1921. During building
construction in 1990, soil and groundwater contamination were
discovered on the property. Investigations to understand the
full extent of the contamination were undertaken at that time,
and those investigations are continuing. The Corporation has
been working with consultants and local authorities to develop
a comprehensive remediation plan in conjunction with
neighboring property owners. It is anticipated that a
remediation plan will be presented to the local authorities in
the Netherlands within the next six months.
Reference is made to the discussion in the Corporation's
Annual Report on Form 10-K for the year ended December 31,
1993, of the litigation involving the claims by the Attorney
General of the State of California, the Natural Resources
Defense Council ("NRDC") and the Environmental Law Foundation
("ELF") concerning the applicability of California's
Proposition 65 to faucets manufactured and sold by the
Corporation's Price Pfister subsidiary and several other
defendants. On May 5, 1994, Judge Bea of the California
Superior Court for the City and County of San Francisco issued
an order rejecting the Attorney General's claims that lead
which leaches from faucets constitutes a prohibited discharge
of lead into water or onto or into land where the lead will
pass or is at least likely to pass into a source of drinking
water. Judge Bea's order granted the Attorney General 20 days
to amend his complaint to state a cause of action under
Proposition 65. In the companion case involving similar claims
by the NRDC and the ELF, Judge Cahill of the California
Superior Court for the City and County of San Francisco denied
defendants' challenges to the standing of the NRDC and the ELF
to bring these claims and refused to stay the proceedings
pending resolution of the claims by the Attorney General.
The Corporation's estimate of the costs associated with
legal, product liability, and environmental exposures is
accrued if, in management's judgment, the likelihood of a loss
is probable. These accrued liabilities are not discounted.
Insurance recoveries for environmental and certain general
liability claims are not recognized until realized.
<PAGE>
As of April 3, 1994, the Corporation had no known probable
but inestimable exposures for awards and assessments in
connection with environmental matters and other litigation and
administrative proceedings that could have a material effect on
the Corporation's consolidated financial position, results of
operations, or liquidity.
Management is of the opinion that the amounts accrued for
awards or assessments in connection with the environmental
matters and other litigation and administrative proceedings to
which the Corporation is a party are adequate and, accordingly,
ultimate resolution of these matters will not have a material
adverse effect on the Corporation's consolidated financial
position.
Item 2 Submission of Matters to a Vote of Security Holder
The 1994 Annual Meeting of Stockholders was held on April 26,
1994, for the election of directors and to ratify the selection
of Ernst & Young as independent public accountants for the
Corporation for fiscal year 1994. A total of 70,595,662 of the
90,250,181 votes entitled to be cast at the meeting were
present in person or by proxy. At the meeting, the
stockholders:
(1) Elected the following directors:
Number of
Number of Shares--
Shares Voted AUTHORITY
Directors FOR WITHHELD
Nolan D. Archibald 70,004,304 591,358
Alonzo G. Decker, Jr. 70,045,660 550,002
Barbara L. Bowles 70,009,304 586,358
Malcolm Candlish 70,071,107 524,555
Anthony Luiso 70,067,538 528,124
J. Dean Muncaster 70,067,734 527,928
Lawrence R. Pugh 70,045,660 550,002
Mark H. Willes 70,076,249 519,413
M. Cabell Woodward, Jr. 70,063,854 531,808
(2) Ratified the selection of Ernst & Young as independent
public accountants for the Corporation for fiscal year
1994 by an affirmative vote of 70,132,162; shares voted
against ratification were 205,821 and shares abstained
were 257,679.
No other matters were submitted to a vote of the stockholders
at the meeting.
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
Exhibit No. Description
4(a) Indenture dated as of March 24, 1993, by and between The
Black & Decker Corporation and Security Trust Company,
National Association, included in the Corporation's
Current Report on Form 8-K filed with the Commission on
March 26, 1993, is incorporated herein by reference.
4(b) Form of 7% Notes due February 1, 2006, included in the
Corporation's Current Report on Form 8-K filed with the
Commission on January 20, 1994, is incorporated herein by
reference.
11 Computation of Earnings Per Share.
99(a) Computation of Ratio of Earnings to Fixed Charges.
REPORTS ON FORM 8-K
The Corporation filed a Current Report on Form 8-K with the
Commission on January 20, 1994. The Current Report on Form 8-K
was filed pursuant to Item 5 of Form 8-K and reported the sale
by the Corporation of $250,000,000 aggregate principal amount
of the Corporation's 7% Notes due February 1, 2006.
All other items were not applicable.
<PAGE>
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 thereunto duly
authorized.
THE BLACK & DECKER CORPORATION
By: THOMAS M. SCHOEWE
Thomas M. Schoewe
Vice President and
Chief Financial Officer
Principal Accounting Officer
By: STEPHEN F. REEVES
Stephen F. Reeves
Corporate Controller
Date: May 17, 1994
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<PAGE>
<TABLE>
Exhibit 11
THE BLACK & DECKER CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars, except per share data)
For Three Months Ended
----------------------
April 3, 1994 April 4, 1993
----------------- -----------------
Per Per
Amount Share Amount Share
------ ----- ------ -----
<S> <C> <C> <C> <C>
Primary:
- -------
Average shares outstanding 83.9 83.4
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 2) (Note 1)
-------- --------
Adjusted shares outstanding 83.9 83.4
===== ======
Net earnings $14.6 $(15.3)
Less preferred stock dividend 3.0 3.0
----- ------
Net earnings attributable to
common stock $11.6 $.14 $(18.3) $(.22)
===== ==== ====== =====
Fully Diluted: (Note 3)
- -------------
Average shares outstanding 83.9 83.4
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 2) (Note 1)
-------- --------
Adjusted shares outstanding 83.9 83.4
Average shares assumed to be
converted through convertible
preferred stock 6.4 6.4
----- ------
Fully diluted average
shares outstanding 90.3 89.8
----- ------
Net earnings $14.6 $.16 $(15.3) $(.17)
===== ==== ====== =====
Notes: 1. Stock options and purchase plans are anti-dilutive and, therefore, are not
presented here.
2. Dilutive effect of common stock equivalents is less than 3% for the three-
month periods ended April 3, 1994, and April 4, 1993, and has not been
shown.
3. The calculation of fully diluted earnings per share is anti-dilutive and,
therefore, is not presented in the financial statements.
</TABLE>
EXHIBIT 99(a)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<PAGE>
<TABLE>
EXHIBIT 99(a)
THE BLACK & DECKER CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of dollars, except ratios)
<CAPTION>
Three Months Ended
------------------
April 3, 1994
-------------
<S> <C>
EARNINGS:
Earnings before income taxes and cumulative
effects of changes in accounting principles $ 21.8
Interest expense 46.0
Portion of rent expense representative of an
interest factor 7.1
------
Adjusted earnings before taxes and fixed charges $ 74.9
======
FIXED CHARGES:
Interest expense $ 46.0
Portion of rent expense representative of an
interest factor 7.1
------
Total fixed charges $ 53.1
======
RATIO OF EARNINGS TO FIXED CHARGES 1.41
</TABLE>
