<PAGE>
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
July 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 July 3, 1994: 84,274,554.
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>
<PAGE> - 2 -
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
INDEX - FORM 10-Q
July 3, 1994
Page
PART I - FINANCIAL INFORMATION
Consolidated Statement of Earnings
(Unaudited) - For the Three Months
and Six Months Ended
July 3, 1994, and July 4, 1993 . . . . . . . . . . 3
Consolidated Balance Sheet
- July 3, 1994 (Unaudited), and December 31, 1993 . . 4
Consolidated Statement of Cash Flows
(Unaudited) - For the Six Months Ended
July 3, 1994, and July 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 . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
<PAGE> - 3 -
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions, except per share data)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
JULY 3, JULY 4, JULY 3, JULY 4,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Product sales $1,015.8 $ 983.1 $1,910.1 $1,916.1
Information systems and services 205.4 172.8 395.6 339.6
-------- -------- -------- --------
TOTAL REVENUES 1,221.2 1,155.9 2,305.7 2,255.7
Cost of revenues
Products 644.2 631.7 1,215.4 1,229.3
Information systems and services 155.7 126.6 299.1 248.8
Marketing and administrative
expenses 337.0 322.0 639.1 634.9
-------- -------- -------- --------
Total operating costs and expenses 1,136.9 1,080.3 2,153.6 2,113.0
-------- -------- -------- --------
OPERATING INCOME 84.3 75.6 152.1 142.7
Interest expense (net of interest income) 47.8 45.0 91.7 85.9
Other expense 2.3 2.8 4.4 5.5
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 34.2 27.8 56.0 51.3
Income taxes 11.2 8.3 18.4 18.0
-------- -------- -------- --------
NET EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 23.0 19.5 37.6 33.3
Cumulative effect to January 1, 1993,
of change in accounting principle
for postemployment benefits - - - (29.2)
-------- -------- -------- --------
NET EARNINGS $ 23.0 $ 19.5 $ 37.6 $ 4.1
======== ======== ======== ========
NET EARNINGS (LOSS) APPLICABLE TO
COMMON SHARES $ 20.1 $ 16.6 $ 31.7 $ (1.8)
======== ======== ======== ========
NET EARNINGS (LOSS) PER COMMON SHARE:
Net earnings before cumulative effect of
change in accounting principle $ .24 $ .20 $ .38 $ .33
Cumulative effect adjustment for
postemployment benefits - - - (.35)
-------- -------- -------- --------
NET EARNINGS (LOSS) PER COMMON SHARE $ .24 $ .20 $ .38 $ (.02)
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ .10 $ .10 $ .20 $ .20
======== ======== ======== ========
Average Common Shares Outstanding 84.1 83.5 84.0 83.5
======== ======== ======== ========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE> - 4 -
<TABLE>
CONSOLIDATED BALANCE SHEET
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions)
<CAPTION>
JULY 3, DECEMBER 31,
1994 1993
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 88.3 $ 82.0
Trade accounts receivable 799.0 832.1
Inventories 833.2 728.9
Other current assets 116.9 121.1
-------- --------
TOTAL CURRENT ASSETS 1,837.4 1,764.1
-------- --------
PROPERTY, PLANT AND EQUIPMENT 810.8 796.2
GOODWILL 2,324.0 2,333.6
OTHER ASSETS 418.8 416.7
-------- --------
$5,391.0 $5,310.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 555.8 $ 332.3
Current maturity of long-term debt 5.6 163.1
Trade accounts payable 323.9 307.3
Other accrued liabilities 676.9 705.8
-------- --------
TOTAL CURRENT LIABILITIES 1,562.2 1,508.5
-------- --------
LONG-TERM DEBT 2,069.1 2,069.2
DEFERRED INCOME TAXES 50.3 47.9
POSTEMPLOYMENT BENEFITS 307.1 319.3
OTHER LONG-TERM LIABILITIES 329.1 316.8
STOCKHOLDERS' EQUITY
Convertible preferred stock, no par value:
Outstanding:
July 3, 1994 and Dec. 31, 1993
- 150,000 shares 150.0 150.0
Common stock, par value $.50 per share:
Outstanding:
July 3, 1994 - 84,274,554 shares
Dec. 31, 1993 - 83,845,194 shares 42.1 41.9
Capital in excess of par value 1,041.4 1,034.8
Retained deficit (42.6) (57.5)
Equity adjustment from translation (117.7) (120.3)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 1,073.2 1,048.9
-------- --------
$5,391.0 $5,310.6
======== ========
</TABLE>
See Notes to Consolidated Financial Statements<PAGE>
<PAGE> - 5 -
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Amounts in millions)
<CAPTION>
SIX MONTHS ENDED
---------------------------
JULY 3, JULY 4,
1994 1993
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 37.6 $ 4.1
Adjustments to reconcile net earnings
to cash flow from operating activities:
Non-cash charges:
Depreciation and amortization 102.9 102.4
Cumulative effect of change in accounting
principle - 29.2
Other (2.4) 2.7
Changes in selected working capital items:
Trade accounts receivable 96.4 92.6
Inventories (93.5) (146.5)
Trade accounts payable 12.0 9.1
Restructuring (16.6) (17.5)
Other assets and liabilities (61.7) (121.2)
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES BEFORE
SALE OF RECEIVABLES 74.7 (45.1)
Sale of receivables (52.0) (48.7)
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES 22.7 (93.8)
-------- --------
INVESTING ACTIVITIES
Proceeds from disposal of assets 6.3 -
Capital expenditures (75.0) (94.6)
Cash inflow from hedging activities 741.9 435.3
Cash outflow from hedging activities (749.0) (414.2)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES (75.8) (73.5)
-------- --------
CASH FLOW BEFORE FINANCING ACTIVITIES (53.1) (167.3)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 223.2 (18.1)
Proceeds from long-term debt
(including revolving credit facility) 1,046.6 1,134.4
Payments on long-term debt
(including revolving credit facility) (1,203.0) (916.7)
Issuance of equity interest in a subsidiary 4.3 -
Issuance of common stock 6.8 2.3
Cash dividends (22.6) (22.5)
-------- ---------
CASH FLOW FROM FINANCING ACTIVITIES 55.3 179.4
Effect of exchange rate changes on cash 4.1 (1.1)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 6.3 11.0
Cash and cash equivalents at beginning of period 82.0 66.3
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 88.3 $ 77.3
======== ========
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 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 and six-month periods
ended July 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 July 3, 1994, under its sale of receivables program, the
Corporation had sold $166.0 million of receivables compared to
$218.0 million at December 31, 1993. The discount on sale of
receivables is included in "Other expense." During the quarter,
the Corporation negotiated a seasonal expansion of the capacity
of the receivables sale program from $200 million to $275 million
for the period from October 1, 1994 through January 31, 1995.
<TABLE>
INVENTORIES
The components of inventory at the end of each period, in
millions of dollars, consisted of the following:
<CAPTION>
July 3, December 31,
1994 1993
<S> --------- ------------
<C> <C>
FIFO Cost
Raw materials and work-in-process $ 217.8 $ 206.2
Finished products 660.3 567.4
-------- --------
878.1 773.6
Excess of FIFO cost over LIFO
inventory value (44.9) (44.7)
-------- --------
$ 833.2 $ 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.
<TABLE>
GOODWILL
Goodwill at the end of each period, in millions of dollars, was
as follows:
<CAPTION>
July 3, December 31,
1994 1993
-------- -----------
<S> <C> <C>
Goodwill $2,725.4 $2,699.9
Less accumulated amortization 401.4 366.3
-------- --------
$2,324.0 $2,333.6
======== ========
</TABLE>
DEBT REFINANCING
In the first quarter of 1994, the Corporation issued $250
million of 7% Notes due February 1, 2006 and repaid its 8.375%
Notes due in 1997 and 5.75% deutsche mark bearer bonds that
matured in March 1994.
Subsequent to July 3, 1994 the Corporation reduced the
commitment available under the Corporation's principal credit
facility by $300 million to a maximum of $1.7 billion.
The Corporation has filed a shelf registration statement for
the issuance, from time to time, of up to $500 million in debt
securities, which may consist of debentures, notes or other
unsecured evidences of indebtedness. The debt securities may be
offered as a separate series in amounts, at prices, and on terms
to be determined by market conditions at the time of sale. The
net proceeds from the sale of the debt securities will be added
to the general funds of the Corporation and will be available for
general corporate purposes, which may include but are not limited
to refinancing of indebtedness, working capital and capital
expenditures.
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 Six Months Ended
---------------------- -----------------------
July 3, July 4, July 3, July 4,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest expense $ 49.7 $ 47.0 $ 95.7 $ 90.5
Interest (income) (1.9) (2.0) (4.0) (4.6)
-------- -------- -------- --------
$ 47.8 $ 45.0 $ 91.7 $ 85.9
======== ======== ======== ========
</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 $2.9 million and $5.9
million for the three-month and six-month periods ended July 3,
1994 and July 4, 1993, respectively, by the weighted average
number of common shares outstanding for each period.
CHANGE IN HEDGE POLICY
As more fully discussed in its Annual Report on Form 10-K for
the year ended December 31, 1993, the Corporation historically
has sought to reduce the effects of foreign currency fluctuations
on its net investments in foreign subsidiaries through the use of
foreign currency forward and option contracts. During the
quarter ended July 3, 1994, the Corporation reevaluated its
foreign currency hedge policy and concluded that the benefits of
its net investment hedging program no longer exceeded its costs.
Accordingly, the Corporation will hedge only a portion of its net
investment in subsidiaries.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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."
For the three-month period ended July 3, 1994, the Corporation
reported net earnings of $23.0 million or $.24 per common share
compared to $19.5 million or $.20 per common share for the three-
month period ended July 4, 1993. Last year's earnings per share
included a $.02 benefit related to a change in the Corporation's
full-year tax rate. For the six-month period ended July 3, 1994,
net earnings were $37.6 million or $.38 per common share compared
to $4.1 million or a loss of $.02 per common share for the six-
month period ended July 4, 1993. Excluding the cumulative effect
in 1993 of the adoption of SFAS No. 112, net earnings for the
six-month period ended July 4, 1993, were $33.3 million or $.33
per common share. The improvement in net earnings before the
cumulative effect of changes in accounting principle is
attributable to improved operating results, primarily in the
United States.
RESULTS OF OPERATIONS
Revenues
The following chart sets forth an analysis of changes in
revenues for the three-month and six-month periods ended July 3,
1994 and July 4, 1993.
<TABLE>
_______________________________________________________________________________________________
<CAPTION>
Analysis of Changes in Revenues ($Millions)
-------------------------------------------
Consolidated Three Months Ended Six Months Ended
------------ ------------------------ -----------------------
July 3, July 4, July 3, July 4,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <S> <S> <S> <S>
Total revenues $1,221.2 $1,155.9 $2,305.7 $2,255.7
Unit volume - Existing (1) 9 % 3 % 5 % 4 %
- Disposed (2) (2)% - (3)% -
Price 1 % 1 % 1 % 1 %
Currency (2)% (2)% (1)% (2)%
-------- -------- -------- --------
Change in total revenues 6% 2% 2% 3 %
_______________________________________________________________________________________________
(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.
</TABLE>
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 and six months ended
July 3, 1994 compared to the three months and six months ended
July 4, 1993, by geographic area for each business segment.
<PAGE>
<TABLE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
THREE AND SIX MONTHS ENDED JULY 3, 1994
ANALYSIS OF CHANGES IN REVENUES
(in millions of dollars)
<CAPTION>
United
States Europe Other Total
------ ------ ----- -----
3 MOS 6 MOS 3 MOS 6 MOS 3 MOS 6 MOS 3 MOS 6 MOS
----- ------- ----- ----- ----- ----- ----- -----
Consumer
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $486.1 $ 892.1 $260.1 $511.8 $121.3 $229.2 $ 867.5 $1,633.1
------ -------- ------ ------ ------ ------ -------- --------
Unit Volume - Existing 9 % 4 % 5 % 3 % 14 % 10 % 8 % 5 %
- Disposed (3)% (4)% - - (1)% (1)% (2)% (3)%
Price 1 % 2 % 1 % 1 % - 1 % 1 % 1 %
Currency - - (5)% (5)% (4)% (4)% (2)% (2)%
-- -- -- -- -- -- -- --
7 % 2 % 1 % (1)% 9 % 6 % 5 % 1 %
-- -- -- -- -- -- -- --
____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
Commercial
- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 66.3 $ 129.3 $ 59.7 $102.0 $ 22.3 $ 45.7 $148.3 $ 277.0
------ -------- ------ ------ ------ ------ ------ --------
Unit Volume - Existing 10 % 6 % 3 % (5)% (22)% (14)% 1 % (2)%
- Disposed (7)% (8)% (2)% (2)% (17)% (16)% (8)% (7)%
Price 1 % 1 % 1 % 1 % - - 1 % 1 %
Currency - - (4)% (4)% 3 % 5 % (1)% (1)%
-- -- -- -- -- -- -- --
4 % (1)% (2)% (10)% (36)% (25) % (7)% (9)%
-- -- -- -- --- -- -- --
____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
PRC
- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $205.4 $ 395.6 $ - $ - $ - $ - $ 205.4 $ 395.6
------ -------- ----- ------ ------ ------ -------- --------
Unit Volume - 19 % 17 % - - - - 19 % 17 %
-- -- -- -- -- -- -- --
____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
Consolidated
- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $757.8 $1,417.0 $319.8 $613.8 $143.6 $274.9 $1,221.2 $2,305.7
------ -------- ------ ------ ------ ------ -------- --------
Unit Volume - Existing 11 % 8 % 5 % 1 % 6 % 4 % 9 % 5 %
- Disposed (3)% (4)% (1)% - (5)% (4)% (2)% (3)%
Price 1 % 1 % 2 % 1 % - 1 % 1 % 1 %
Currency - - (5)% (5)% (3)% (2)% (2)% (1)%
-- -- -- -- -- -- -- --
Change in Total Revenues 9 % 5 % 1 % (3)% (2)% (1) % 6 % 2 %
-- -- -- -- -- -- -- --
____________________________________________________________________________________________________________________________
</TABLE>
Existing unit volume grew by 9% and 5% for the three-month and
six-month periods ended July 3, 1994. Continued strong revenue
growth in the Consumer segment and at PRC offset continuing
revenue shortfalls in the Commercial segment. Disposed unit
volume represents the effect of the sale of the Corbin Russwin
and Dynapert businesses during the fourth quarter of 1993.
Pricing actions modestly improved revenue comparisons to last
year but were offset by the negative effects of foreign exchange.
CONSUMER AND HOME IMPROVEMENT PRODUCTS
Existing unit volume in the Consumer segment increased by 8%
and 5% for the three-month and six-month periods ended July 3,
1994, as compared to the same periods last year. Strong revenue
growth continued in the Corporation's domestic consumer
businesses with double-digit sales increases in power tools,
accessories, and plumbing products. Within the Security Hardware
businesses, Kwikset continues to report revenue gains compared to
last year. Much of the revenue growth in these businesses is
attributable to recent new product introductions and to an
improving economy. This strong performance was partially offset,
however, by a decline in sales of domestic household products.
Sales of golf club shafts were essentially flat for the quarter
and down slightly for the six month period compared to last year.
Most of the Corporation's Consumer businesses in Europe, with
the exception of the businesses in the United Kingdom and Germany
which were flat to last year, showed moderate improvement during
the second quarter of 1994 as compared to last year with several
markets, particularly in Scandinavia, reporting double-digit
sales growth.
Performance of the Consumer businesses in other international
areas for the three-month and six-month periods was much improved
to last year with double-digit sales growth continuing in Latin
America and in the Asia Pacific regions. Also, Australia, Mexico
and Canada are beginning to show signs of improvement with sales
above last year for the second quarter of 1994.
COMMERCIAL AND INDUSTRIAL PRODUCTS
Existing unit volume in the Commercial segment for the three-
months ended July 3, 1994, was 1% ahead of the comparable period
of last year. For the six-month period, existing volume is still
below last year. The improved performance during the second
quarter was attributable to continued double-digit growth in the
domestic fastenings business, primarily on the strength of the
resurging automotive industry, and to improved performance in the
European fastenings business, particularly in Scandinavia and
Germany. The glass machinery business continues to be weak in
all geographic areas and offset much of the improvement.
However, orders in the glass machinery business during the first
six months of 1994 have increased over the corresponding period
last year, and backlog in this business was higher at July 3,
1994 than at December 31, 1993.
INFORMATION SYSTEMS AND SERVICES
PRC's total revenues for the three-month and six-month periods
ended July 3, 1994, grew by 19% and 17%, respectively, compared
to the same periods last year. Most of this improvement related
to revenues from the Super-Minicomputer Procurement (SMP)
contract with the United States Government.
EARNINGS
Operating income as a percentage of revenues for the three-
month and six-month periods ended July 3, 1994, was 6.9% and
6.6%, respectively, compared to 6.5% and 6.3% for the comparable
periods in 1993. This operating income improvement for both the
three-month and six-month periods occurred in most domestic
Consumer businesses and in the Commercial fastening business
while operating income in the Commercial glass machinery business
and in the golf club shaft business was below last year's levels.
Operating income at PRC also improved during the second quarter
in both dollars and as a percentage of sales.
Gross margin on product sales as a percentage of revenues for
the three-month and six-month periods ended July 3, 1994, was
36.6% and 36.4%, respectively, compared to 35.7% and 35.8% for
the comparable periods of 1993. This improvement occurred
primarily in the Consumer segment and in the fastening business
within the Commercial segment and was the result of improved
manufacturing efficiencies, continued overhead cost controls,
lower initial new product start-up costs, and the effect of the
sale of lower-margin businesses.
PRC's gross margin as a percentage of revenues for the three-
month and six-month periods was 24.2% and 24.4%, respectively,
compared to 26.7% for both periods last year. These lower
margins were primarily because of the dilutive effect during the
early stages of the SMP contract.
Marketing and administrative expenses as a percentage of total
revenues for the three-month and six-month periods ended July 3,
1994, were 27.6% and 27.7%, respectively, compared to 27.9% and
28.1% for the comparable periods of last year. Higher
promotional costs during the second quarter have been more than
offset by continuing cost cutting efforts at all levels within
the Corporation and by the leveraging effect of higher sales
volumes.
Net interest expense (interest expense less interest income)
for the three-month and six-month periods ended July 3, 1994, of
$47.8 million and $91.7 million, respectively, was higher than
the comparable periods of 1993 primarily because of higher
borrowing costs on approximately the same average debt level.
The Corporation maintains a portfolio of interest rate hedge
instruments for the purpose of managing interest rate exposure.
During the six-month period ended July 3, 1994, the Corporation's
variable rate debt to total debt decreased from 46% at
December 31, 1993, to 42% at July 3, 1994.
Other expense for the three-month and six-month periods ended
July 3, 1994 and July 4, 1993, primarily includes the discount on
the sale of receivables.
The Corporation's effective tax rate for the six months ended
July 3, 1994, was 33% compared to 35% for the comparable period
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 where the
Corporation can take advantage of net operating loss
carryforwards.
FINANCIAL CONDITION
In the Consolidated Statement of Cash Flows, operating
activities for the six months ended July 3, 1994, generated cash
of $22.7 million compared to a usage of $93.8 million for the
first six months of 1993. Net working capital reductions (i.e.,
trade receivables, inventories, and trade payables) generated
cash of $14.9 million this year compared to cash usage of $44.8
million last year. Improved inventory turns compared to last
year was the primary reason for the improvement in working
capital.
Other assets and liabilities were $59.5 million favorable to
last year, primarily the result of reduced spending on deferred
contract costs at PRC during 1994 compared to 1993, cash payments
to terminate certain interest rate hedges during the first
quarter of 1993 and lower tax payments during 1994 compared to
1993 due to a deposit of $29 million in 1993 related to tax
audits.
Investing activities for the six months ended July 3, 1994,
used cash of $75.8 million compared to $73.5 million last year.
Lower capital spending during the first six months of 1994 was
offset by net cash outflow related to the Corporation's hedging
activities compared to a net cash inflow last year. Capital
expenditures for the full year of 1994 are expected to be at
approximately the same level as 1993.
Financing activities generated cash of $55.3 million for the
six months ended July 3, 1994, compared to cash generated of
$179.4 million in the first six months of 1993 reflecting reduced
financing requirements in 1994 as a result of improved operating
cash flows.
During the first quarter of 1994, the Corporation issued $250
million of 7% Notes due February 1, 2006. The net 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. Over the first six months of 1994, average debt
maturity increased to 5.0 years from 4.8 years at December 31,
1993.
Because of the change in the Corporation's hedge policy, as
noted in the Notes to Consolidated Financial Statements, the
Corporation's net equity may fluctuate as foreign exchange rates
change relative to the United States dollar. This fluctuation
results from the effect of foreign exchange rate changes on the
unhedged portion of investments in foreign consolidated
subsidiaries. This change in policy is not expected to have any
effect on the results of operations and the effect of foreign
exchange rate changes is specifically excluded from the
calculation of the leverage ratio for purposes of the Credit
Facility.
The Corporation has filed a shelf registration statement for
the issuance, from time to time, of up to $500 million in debt
securities, which may consist of debentures, notes or other
unsecured evidences of indebtedness. The debt securities may be
offered as a separate series in amounts, at prices, and on terms
to be determined by market conditions at the time of sale. The
net proceeds from the sale of the debt securities will be added
to the general funds of the Corporation and will be available for
general corporate purposes, which may include but are not limited
to refinancing of indebtedness, working capital and capital
expenditures.
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. The Corporation's leverage ratio during the life of the
Credit Facility may not exceed 2.2 at the end of any fiscal
quarter. The cash flow coverage ratio calculated as of the end
of each fiscal quarter must be greater than 2.5 for any 12-month
period ending after December 31, 1993. At July 3, 1994, the
leverage ratio was 1.82 and the cash flow coverage ratio for the
12 months ended July 3, 1994, was 2.82. As of July 3, 1994, the
Corporation was in compliance with all covenants and provisions
of the Credit Facility.
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.
RESTRUCTURING
At the end of 1992, the Corporation commenced a restructuring
of certain of its operations and accrued costs of $142.4 million,
of which $98.9 million related to the decision to reorganize
Dynapert, the Corporation's printed circuit board assembly
business, including withdrawal from the manufacture of surface-
mount technology. The remainder of the 1992 restructuring plan
included a reduction of manufacturing capacity of other
businesses, predominantly in Europe, at a cost of $43.5 million.
During 1993, the Corporation substantially completed its
restructuring plan with respect to Dynapert by withdrawing from
the manufacture of surface-mount technology. In addition, during
the fourth quarter of 1993, the Corporation sold the Dynapert
through-hole business at a gain of $19.4 million and the Corbin
Russwin commercial hardware business at a gain of $15.9 million.
These gains were reflected as credits to restructuring costs in
1993. Restructuring costs for 1993 included a charge of $29.0
million for the closure and reorganization of certain
manufacturing sites.
The quantification of the major elements of each restructuring
plan, as initially established, is set forth below (in millions
of U.S. dollars):
<TABLE>
1992 1993
---- ----
<S> <C> <C>
Write-off of goodwill associated
with the Dynapert business $ 58.9 $ -
Estimated losses during the Corporation's
withdrawal from its Dynapert business 23.5 -
Employee severance and related costs 33.5 10.6
Write-down of property, plant and
equipment and related costs 9.5 13.2
Lease termination costs 7.1 -
Other 9.9 5.2
------ -----
Total Restructuring Costs $142.4 $29.0
====== =====
</TABLE>
Actions related to the 1992 and 1993 restructuring plans are
proceeding as planned and are expected to be substantially
completed during 1994. Total cash spending for restructuring
during 1994 is expected to be approximately $50 million, of which
approximately $17 million was spent in the first six months of
1994. The Corporation anticipates that the reductions 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.
<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 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 the
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 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.
Reference is made to the discussion in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993, and
Quarterly Report on Form 10-Q for the quarter ended April 3,
1994, of the litigation involving the claims by the Attorney
General of the State of California, the Natural Resources Defense
Council and the Environmental Law Foundation concerning the
applicability of California's Proposition 65 to faucets
manufactured and sold by the Corporation's Price Pfister
subsidiary and several other defendants. Subsequent to Judge
Bea's order rejecting the Attorney General's claims and granting
the Attorney General 20 days to amend his complaint to state a
cause of action under Proposition 65, the Attorney General filed
an appeal of Judge Bea's order. The Attorney General's appeal is
expected to be heard later this year.
In addition to the matters referenced in Items 1 and 3 of Part
I of the Annual Report on Form 10-K for the year ended
December 31, 1993, and Item 1 of Part II of Form 10-Q for the
quarter ended April 3, 1994, the Corporation's Price Pfister
subsidiary is a defendant in litigation commenced on June 1,
1994, in the United States District Court for the Eastern
District of Virginia (Civil Action No. 94-728A) by Masco
Corporation of Indiana. Masco alleges that Price Pfister's
manufacture, use and sale of its Genesis Model 42 series of
lavatory faucets infringes and induces infringement of Masco's
U.S. Design Patent No. 323,877, is unfair competition under
federal and Virginia law and infringes the trade dress rights
associated with lavatory faucets of Delta Faucet Company, a
division of Masco. Masco is seeking an injunction, delivery up
for destruction of offending items in Price Pfister's possession,
profits, damages (trebled), costs and attorneys' fees. The
Corporation believes that Masco's claims are without merit and
intends to defend vigorously against the imposition of liability
in this matter.
Price Pfister has filed a counterclaim for infringement by
Masco of Price Pfister's rights in U.S. Design Patent Nos.
329,911, 328,335, and 327,732, for unfair competition and patent
misuse under common and statutory law, for abuse of process, and
for trademark infringement under Price Pfister's U.S. Trademark
Registration No. 1,808,996 and trademark registrations of several
states. With respect to its counterclaims, Price Pfister seeks
an injunction, damages (trebled), attorneys' fees, delivery up
for destruction of Masco's molds or other manufacturing
equipment, costs and expenses. Masco has counterclaimed for
cancellation of Registration No. 1,808,996 and has also
instituted a separate Cancellation Proceeding before the U.S.
Patent and Trademark Office.
Masco has filed a motion to dismiss Price Pfister's state law
counterclaims and a motion for partial summary judgment of non-
infringement of the Price Pfister patents. Masco has also filed
a motion to sever and stay both Price Pfister's counterclaim for
infringement of Registration No. 1,808,996 and Masco's
counterclaim for cancellation thereof. A hearing on these
motions was held on August 12, 1994, at which time the Court
denied all of Masco's motions except for the motion to dismiss
Price Pfister's abuse of process claim. The motion to dismiss
Price Pfister's abuse of process claim was granted; a decision on
Price Pfister's unfair competition claim was postponed pending
further briefing. Price Pfister's design patent infringement and
state and federal trademark claims against Masco remain pending,
since Masco's motions to dismiss those claims were denied. Trial
on the claims and counterclaims in this matter presently is
scheduled to begin in October or November 1994. Management is
of the opinion that the ultimate resolution of this matter will
not have a material adverse effect on the Corporation's
consolidated financial position or results of operations.
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.
As of July 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 or results of operations.
Item 6 Exhibits and Reports on Form 8-K
Exhibit No. Description
11 Computation of Earnings Per Common Share.
99(a) Computation of Ratio of Earnings to Fixed Charges.
99(b) Computation of Leverage and Cash Flow Coverage Ratios.
The Corporation did not file any reports on Form 8-K during the
three-month period ended July 3, 1994.
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: August 17, 1994
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<PAGE>
<PAGE>
<TABLE>
Exhibit 11
THE BLACK & DECKER CORPORATION
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Millions of dollars, except per share data)
<CAPTION>
For Six Months Ended
--------------------
July 3, 1994 July 4, 1993
----------------- -----------------
Per Per
Amount Share Amount Share
------ ----- ------ -----
<S> <C> <C> <C> <C>
Primary:
- -------
Average shares outstanding 84.0 83.5
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 2) (Note 1)
-------- --------
Adjusted shares outstanding 84.0 83.5
===== ======
Net earnings $37.6 $ 4.1
Less preferred stock dividend 5.9 5.9
----- ------
Net earnings attributable to
common stock $31.7 $.38 $(1.8) $(.02)
===== ==== ====== ======
Fully Diluted: (Note 3)
- -------------
Average shares outstanding 84.0 83.5
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 2) (Note 1)
-------- ---------
Adjusted shares outstanding 84.0 83.5
Average shares assumed to be
converted through convertible
preferred stock 6.4 6.4
----- ------
Fully diluted average
shares outstanding 90.4 89.9
----- ------
Net earnings $37.6 $.42 $ 4.1 $ .05
===== ==== ====== ======
<FN>
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 six-
month period ended July 3, 1994 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>
<PAGE>
<PAGE>
<TABLE>
Exhibit 11
THE BLACK & DECKER CORPORATION
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Millions of dollars, except per share data)
<CAPTION>
For Three Months Ended
----------------------
July 3, 1994 July 4, 1993
----------------- -----------------
Per Per
Amount Share Amount Share
------ ----- ------ -----
<S> <C> <C> <C> <C>
Primary:
- -------
Average shares outstanding 84.1 83.5
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 1) (Note 1)
-------- --------
Adjusted shares outstanding 84.1 83.5
===== =====
Net earnings $23.0 $19.5
Less preferred stock dividend 2.9 2.9
----- -----
Net earnings attributable to
common stock $20.1 .24 $16.6 $.20
===== ==== ===== ====
Fully Diluted: (Note 2)
- -------------
Average shares outstanding 84.1 83.5
Dilutive stock options and
purchase plans--based on the
Treasury stock method using
the average market price (Note 1) (Note 1)
-------- ---------
Adjusted shares outstanding 84.1 83.5
Average shares assumed to be
converted through convertible
preferred stock 6.4 6.4
----- -----
Fully diluted average
shares outstanding 90.5 89.9
----- -----
Net earnings $23.0 $.25 $19.5 $.22
===== ==== ===== ====
<FN>
Notes: 1. Dilutive effect of common stock equivalents is less than 3% for the three-
month periods ended July 3, 1994, and July 4, 1993, and has not been shown.
2. The calculation of fully diluted earnings per share is anti-dilutive and,
therefore, is not presented in the financial statements.
</TABLE>
<PAGE>
EXHIBIT 99(a)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<PAGE>
<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 Six Months Ended
------------------ ----------------
July 3, 1994 July 3, 1994
------------ ------------
<S> <C> <C>
EARNINGS:
Earnings before income taxes,
extraordinary item, and
cumulative effects of changes
in accounting principles $ 34.2 $ 56.0
Interest expense 49.7 95.7
Portion of rent expense representative
of an interest factor 7.1 14.2
------ ------
Adjusted earnings before taxes and
fixed charges $ 91.0 $165.9
====== ======
FIXED CHARGES:
Interest expense $ 49.7 $ 95.7
Portion of rent expense representative
of an interest factor 7.1 14.2
------ ------
Total fixed charges $ 56.8 $109.9
====== ======
RATIO OF EARNINGS TO FIXED CHARGES 1.60 1.51
</TABLE>
<PAGE>
EXHIBIT 99(b)
COMPUTATION OF RATIOS
<PAGE>
<PAGE>
<TABLE>
Exhibit 99(b)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
Computation of Ratios
(Millions of Dollars)
<CAPTION>
July 3, 1994
------------
<S> <C>
A. Cash Flow Coverage Ratio
------------------------
1. EBITDA (Earnings before income taxes for such period as set forth on BDC's
consolidated statements of earnings for such period, minus [or plus] other
income [or expense] for such period to the extent included in earnings before
income taxes, plus Consolidated Net Interest Expense, plus all charges
in such period for depreciation and amortization as set forth in BDC's
consolidated statements of cash flows for such period, minus net income
of BFS to the extent such net income is derived from any business activity
unrelated to BDC or any subsidiary of BDC) for the period from July 5, 1993
to July 3, 1994, the Reporting Date. $ 506.9
--------
2. Consolidated Net Interest Expense (Total interest expense [including the
interest component of capital leases and Discount accrued during such
period] of BDC and its Subsidiaries for such period, plus all dividends
declared in such period on Mandatorily Redeemable Stock, minus total interest
income of BDC and its Subsidiaries) for the same period. $ 179.6
--------
3. Quotient obtained by dividing Line 1 by Line 2 2.82
--------
The calculation of the Cash Flow Coverage Ratio excludes all effects of FAS 106
FAS 109 and FAS 112 and unusual or non-recurring credits or charges.
B. Leverage Ratio
--------------
1. The sum, without duplication, of all Reported Debt less cash and cash
equivalents of BDC and its Consolidated Subsidiaries at such time, plus
all outstanding Mandatorily Redeemable Stock of BDC and its Subsidiaries
at such time, determined on a consolidated basis, plus all outstanding
obligations of other Persons for money borrowed (except employee obligations
not exceeding $10,000 in aggregate at such time outstanding) Guaranteed by,
or secured by a Lien on any assets of, BDC and its Subsidiaries at such
time, determined on a consolidated basis, plus the book value on the books
of the purchasers thereof of accounts receivable sold by BDC and its
Subsidiaries (other than to BDC or any of its Subsidiaries). $2,758.1
--------
2. Consolidated Net Worth at such time, minus cumulative consolidated net
income of BFS to the extent such net income is derived from any business
activity unrelated to BDC or any Subsidiary of BDC minus (or plus) the
amount by which the equity adjustment for foreign currency translations
used in determining Consolidated Net Worth at such time exceeds (is less
than) the amount thereof used in determining Consolidated Net Worth as
at September 27, 1992. $1,511.7
--------
3. Quotient obtained by dividing Line 1 by Line 2 1.82
--------
The calculation of the Leverage Ratio excludes all effects of FAS 106,
FAS 109 and FAS 112 and unusual or non-recurring credits or charges after
September 27, 1992.
Note: The information described herein is as of the last day of the
fiscal quarter ended July 3, 1994 (the Reporting Date).
Capitalized terms used herein shall have the meanings set forth
in the Credit Facility, dated as of November 18, 1992.
</TABLE>
