UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 27, 1998
THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 1-1553 52-0248090
(State of Incorporation) (Commission File Number) (I.R.S. Employer Identi-
fication Number)
Towson, Maryland 21286
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-716-3900
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On January 27, 1998, the Corporation reported its earnings for the quarter and
year ended December 31, 1997, and announced a strategic repositioning, including
planned divestitures and global restructuring. On January 27, 1998, the
Corporation also announced that its Board of Directors had approved a stock
repurchase program. Attached to this Current Report on Form 8-K as Exhibit 99 is
a copy of the Corporation's press release dated January 27, 1998.
Forward Looking Statements
This Current Report on Form 8-K includes statements that constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and that are
intended to come within the safe harbor protection provided by those sections.
By their nature, all forward looking statements involve risk and uncertainties.
Actual results may differ materially from those contemplated by the forward
looking statements for a number of reasons, including but not limited to: market
acceptance of the new products introduced in 1997 and scheduled for introduction
in 1998; the level of sales generated from these new products relative to
expectations, based on the existing investments in productive capacity and
commitments of the Corporation to fund advertising and product promotions in
connection with the introduction of these new products; the ability of the
Corporation and its suppliers to meet scheduled timetables for new product
introductions; unforeseen competitive pressure or other difficulty in
penetrating new channels of distribution; adverse changes in currency exchange
rates or raw material commodity prices, both in absolute terms and relative to
competitors' risk profiles; delays in or unanticipated inefficiencies resulting
from manufacturing and administrative reorganization actions in progress or
contemplated by the strategic repositioning described in the press release dated
January 27, 1998; and the continuation of modest economic growth in the United
States and gradual improvement in the economic environment in Europe and Asia.
In addition to the foregoing, the Corporation's ability to realize the
anticipated benefits during 1998 and in the future of the restructuring program
undertaken in 1996 and to be undertaken as part of the strategic repositioning
of the Corporation is dependent upon current market conditions, as well as the
timing and effectiveness of the relocation or consolidation of production and
administrative processes. The ability to achieve certain sales and profitability
targets and cash flow projections also is dependent upon the Corporation's
ability to identify appropriate selected acquisitions that are complementary to
the repositioned business units at acquisition prices that are consistent with
these objectives.
There can be no assurance that the Corporation will consummate the sales of
the recreational products business, the glass container-forming and inspection
equipment business, and the household products business in North America, Latin
America, and Australia. Further, the Corporation's ability to realize the
aggregate net proceeds from the sales of such businesses in excess of $500
million is dependent upon market conditions at the time of these sales.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99 Press release of the Corporation dated January 27, 1998.
<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 hereunto duly authorized.
THE BLACK & DECKER CORPORATION
By /s/ THOMAS M. SCHOEWE
Thomas M. Schoewe
Senior Vice President
and Chief Financial Officer
Date: January 27, 1998
Contact: Barbara B. Lucas
Senior Vice President-Public Affairs
(410) 716-2980
F. Robert Hunter
Vice President-Investor Relations
(410) 716-3979
FOR IMMEDIATE RELEASE: Tuesday, January 27, 1998
SUBJECT: Black & Decker Reports Record Fourth-Quarter and Full-Year Results for
1997; Announces Strategic Repositioning Plan, Including Divestitures
and Global Restructuring; Adopts Stock Repurchase Program
TOWSON, MD - The Black & Decker Corporation (NYSE:BDK) today announced that
sales for the fourth quarter of 1997 increased 4% to $1.52 billion from $1.45
billion in the fourth quarter of 1996. Excluding the effects of foreign currency
translation, sales increased 8%. Earnings before taxes for the quarter increased
38% to $149.2 million from $108.2 million, excluding non-recurring charges, in
the same period of 1996. Net earnings were $97.0 million or $1.00 per diluted
share compared to $87.8 million or $.91 per diluted share, excluding
non-recurring charges and credits, in the previous year. Including non-recurring
charges and credits, net earnings in the fourth quarter of 1996 were $90.6
million or $.94 per diluted share.
For the full year, sales increased 1% (up 4% excluding the effects of
foreign exchange translation) to $4.94 billion from $4.91 billion in 1996.
Earnings before taxes rose 19% in 1997 to $349.5 million from $294.0 million,
excluding non-recurring charges and credits, a year earlier. The Corporation's
tax rate was 35% for the year compared to 24% in 1996. Despite the substantial
tax-rate increase, net earnings increased to $227.2 million or $2.35 per diluted
share compared to $223.4 million or $2.32 per diluted share, excluding
non-recurring credits and charges, in 1996. Including non-recurring items, net
earnings in 1996 were $229.6 million or $2.39 per diluted share.
(more)
<PAGE>
Page Two
The Corporation also announced a comprehensive strategic repositioning
plan designed to intensify focus on core operations, reduce costs, and improve
operating performance. The repositioning plan has three components:
(1) the divestiture of Household Products in North America, Latin
America, and Australia, as well as Emhart Glass and True Temper
Sports;
(2) a global restructuring program; and
(3) the repurchase of up to 10% of the outstanding shares of Black &
Decker common stock.
Related to the strategic repositioning, the Corporation has elected to
change the basis upon which it accounts for goodwill. The change, from the
undiscounted cash flow basis to the discounted cash flow basis, will result in a
non-cash charge of approximately $900 million in the first quarter of 1998. The
goodwill write-down will have the effect of reducing annual goodwill
amortization, which is not tax-deductible, by approximately $.28 per share based
on shares currently outstanding.
In addition to selling the non-strategic Emhart Glass and True Temper
Sports operations, the Corporation will divest its Household Products business
in North America, Latin America, and Australia. Over the years, this business
has generated inconsistent results and generally low returns, particularly in
Brazil and Australia, where household products represent a disproportionate
share of the Corporation's local operations. Exiting this business will
establish a more predictable, consistent earnings base for the Corporation.
Management expects the divestitures to be completed within the next six
months and estimates that aggregate net proceeds will be in excess of $500
million. The divestitures are expected to result in annual earnings dilution of
approximately $.30 per share based on shares currently outstanding.
(more)
<PAGE>
Page Three
The restructuring program, which is intended to reduce the
Corporation's cost structure substantially, will be implemented over a period of
two years. When completed, it is expected to generate annual savings of more
than $100 million, which will enhance the Corporation's ability to achieve its
average annual earnings-per-share growth target of 15%. The estimated pre-tax
cost of the program is approximately $250 million, of which the Corporation
expects nearly $200 million to be recorded in the first quarter of 1998 and the
remainder as the program progresses. In addition to the restructuring charges,
certain related non-recurring expenses will be recorded as operating costs
during the course of the program.
Approximately 3,000 positions, mostly from international operations, or
10% of the Corporation's total employment will be eliminated over the two-year
period through restructuring. Approximately $200 million or 80% of the total
estimated restructuring cost will be paid in cash, primarily to meet severance
obligations. The remaining portion will be a non-cash charge mainly reflecting
the write-down of assets.
The Board of Directors has authorized the Corporation to repurchase up
to 10% of its outstanding shares of common stock over the next two years.
Proceeds from the sale of businesses and free cash flow will be used to fund the
stock repurchase program. Approximately 95 million shares are currently
outstanding.
Commenting on the financial results for the year, Nolan D. Archibald,
Chairman and Chief Executive Officer, said, "Exceptionally strong fourth-quarter
performance helped to make 1997 a record year for Black & Decker. Sales and net
earnings, excluding non-recurring items in previous years, rose to the highest
levels in our history. Generally higher margins associated with new products,
together with more efficient manufacturing, tighter cost control, and reduced
borrowing expense, more than offset competitive price pressure and contributed
to an increase in earnings before taxes of 19% compared to the amount reported
last year, excluding non-recurring items. Consequently, despite an 11
percentage-point increase in our tax rate in 1997, earnings per share excluding
non-recurring items increased for the fifth consecutive year, yielding a nearly
30% compound annual growth rate for the five-year period.
(more)
<PAGE>
Page Four
"Power Tools and Accessories, Security Hardware, and Fastening and
Assembly Systems reported record sales and operating income for the year.
Innovative new products, strong market positions, and effective advertising and
promotional programs in all businesses contributed to our success.
"In Power Tools and Accessories, the most substantial gains for the
year occurred in North America. European operations also improved significantly
despite the negative impact of currency fluctuations in that region. Our Latin
American unit reported good progress overall despite difficult retail conditions
in Brazil, where household products account for most of our business. Results in
Asia were soft, largely because of economic turmoil.
"Although Asian markets are likely to remain weak for some time, we do
not expect this situation to have a significant effect on Black & Decker's
future results. The region accounted for less than 4% of our aggregate sales and
a considerably smaller proportion of total profits in 1997.
"DEWALT(R) professional product sales increased substantially during
1997, led by the new machinery and 18-volt reciprocating saw lines. Worldwide
sales of DEWALT products and product service approached $1 billion in 1997 and
have grown consistently at a double-digit rate each year since DEWALT was
launched in 1992. We also gained momentum in consumer markets, particularly in
North America, with very strong demand for the Wood Hawk(TM) circular saw, the
Wizard(TM) rotary tool line, and products powered by the VERSAPAK(R)
interchangeable battery system.
"Free cash flow of $150 million for 1997 exceeded our $100 million
target, despite an increase in inventory during the year to support higher
levels of customer service. This brings our average free cash flow to
approximately $135 million annually over the past four years."
Commenting on the strategic repositioning, Mr. Archibald said, "This
comprehensive plan represents a fundamental `retooling' of Black & Decker. It
will allow us to focus on our core businesses, accelerate growth, reduce costs
substantially, and achieve more consistent operating performance. Through this
strategic repositioning, we intend to become the world's preeminent manufacturer
and marketer of power tools, hardware, and building products.
(more)
<PAGE>
Page Five
"One of the first steps toward realizing this vision is to rationalize
our business mix. Therefore, we are aggressively pursuing the sale of Household
Products, Emhart Glass, and True Temper Sports. We have engaged investment
bankers to assist in these divestitures and expect to complete the transactions
within the next six months. In the meantime, we intend to operate each of these
businesses at its full potential.
"When the divestitures are completed, we will be in a position to focus
exclusively on core businesses to better leverage our competitive advantages in
new product development, brand management, and global distribution. We believe
that a repositioned Black & Decker, consisting of Power Tools and Accessories,
Security Hardware, Plumbing Products, and Fastening and Assembly Systems, can
grow sales at an average annual rate approaching double-digits. We expect to
achieve this accelerated growth through continued internal expansion,
supplemented by acquisitions that extend current product lines and add
complementary product categories. As we intensify product development efforts
and pursue selective acquisitions to fuel sales growth, we expect higher-margin
new products to increase to 25% to 35% of sales, up from approximately 20% in
1997.
"When completed, the restructuring program should generate savings of
more than $100 million annually to ensure that we reach our growth targets. It
also will enable us to redefine how we do business as we move into the next
century with more simplified operations and a tighter knit, more flexible global
organization. Over the 24-month period, we anticipate eliminating approximately
10% of our workforce, mostly from international operations, and approximately
15% of our total manufacturing floor space.
"The most comprehensive restructuring will occur in Power Tools and
Accessories, where plans call for rationalizing the manufacturing plant and
design center network. Having closed eight plants since 1992 in our various
businesses, we will soon begin to shut down four major plants and eliminate
certain design centers. Most power tool production will be transferred to other
existing facilities. Specific action plans have been developed, and details will
be announced as the program progresses. This rationalization alone will result
in reductions of approximately 10% of the workforce and 25% of the manufacturing
floor space in Power Tools and Accessories.
(more)
<PAGE>
Page Six
"We also intend to make sweeping changes in the way we operate that
business in Europe, going far beyond those made in recent years and creating a
truly pan-European operation. For example, we will consolidate distribution and
transportation; centralize finance, marketing, and support services; streamline
supply chain management; initiate cross-border key account management; and
invest in state-of-the-art SAP R/3 information systems similar to investments
being made in North America.
"While Power Tools and Accessories will sustain the most fundamental
change, all of our remaining businesses will participate in restructuring. We
will announce specific actions during the course of the program.
"The prospect of a more profitable sales mix from existing businesses
and acquisitions, together with benefits from high-impact restructuring actions,
reinforces our confidence in Black & Decker's ability to realize our goal of 13%
annualized return on sales by 1999 and to raise our target return to 15% in the
future. With our ROS at these higher levels, we will be in a much stronger
position to generate consistent improvement in earnings per share. Furthermore,
we believe that the repositioned Black & Decker, despite the sale of businesses,
will remain capable of generating a minimum of $100 million in average annual
free cash flow.
"A nearly 30% compound growth rate in earnings per share excluding
non-recurring items over the past five years is evidence of substantial
operating improvement at our company. Through comprehensive restructuring and a
steady stream of innovative new products, bolstered by state-of-the-art
information and business systems, we have a unique opportunity to establish a
base upon which to grow and prosper consistently for many years to come.
"The combined effect of the elimination of the volatile effect of
Household Products on our results, a single-minded focus on our core businesses,
a world-class cost structure, strong market positions and brand names, global
distribution, international growth prospects, and proven new product development
capability, signals a new era for Black & Decker."
(more)
<PAGE>
Page Seven
This release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. By their nature, all forward-looking statements involve
risks and uncertainties. For a more detailed discussion of the risks and
uncertainties that may affect Black & Decker's operating and financial results
and its ability to achieve the financial objectives discussed in this press
release, interested parties should review Black & Decker's reports filed with
the Securities and Exchange Commission, including the Current Report on Form
8-K, filed January 27, 1998.
Black & Decker is a global marketer and manufacturer of quality
products used in and around the home and for commercial applications.
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
December 31, 1997 December 31, 1996
------------------ ------------------
<S> <C> <C>
SALES $ 1,518.4 $ 1,454.8
Cost of goods sold 968.0 947.1
Selling, general, and administrative expenses 365.4 366.1
Restructuring costs - 9.7
------------------ ------------------
OPERATING INCOME 185.0 131.9
Interest expense (net of interest income) 30.7 29.1
Other expense 5.1 4.3
------------------ ------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 149.2 98.5
Income taxes 52.2 7.9
------------------ ------------------
EARNINGS FROM CONTINUING OPERATIONS 97.0 90.6
Earnings from discontinued operations - -
------------------ ------------------
NET EARNINGS $ 97.0 $ 90.6
================== ==================
NET EARNINGS PER COMMON SHARE - BASIC:
Earnings from continuing operations $ 1.02 $ .97
Earnings from discontinued operations - -
------------------ ------------------
NET EARNINGS PER COMMON SHARE - BASIC $ 1.02 $ .97
================== ==================
Shares Used in Computing Basic Earnings Per Share (in Millions) 94.8 93.2
================== ==================
NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Earnings from continuing operations $ 1.00 $ .94
Earnings from discontinued operations - -
------------------ ------------------
NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 1.00 $ .94
================== ==================
Shares Used in Computing Diluted Earnings Per Share (in Millions) 96.9 96.4
================== ==================
</TABLE>
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
December 31, 1997 December 31, 1996
------------------ ------------------
<S> <C> <C>
SALES $ 4,940.5 $ 4,914.4
Cost of goods sold 3,169.2 3,156.6
Selling, general, and administrative expenses 1,282.0 1,309.6
Restructuring costs - 91.3
------------------ ------------------
OPERATING INCOME 489.3 356.9
Interest expense (net of interest income) 124.6 135.4
Other expense 15.2 18.8
------------------ ------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 349.5 202.7
Income taxes 122.3 43.5
------------------ ------------------
EARNINGS FROM CONTINUING OPERATIONS 227.2 159.2
Earnings from discontinued operations (net of income
taxes of $55.6 for 1996) - 70.4
------------------ ------------------
NET EARNINGS $ 227.2 $ 229.6
================== ==================
NET EARNINGS PER COMMON SHARE - BASIC:
Earnings from continuing operations $ 2.40 $ 1.69
Earnings from discontinued operations - .79
------------------ ------------------
NET EARNINGS PER COMMON SHARE - BASIC $ 2.40 $ 2.48
================== ==================
Shares Used in Computing Basic Earnings Per Share (in Millions) 94.6 88.9
================== ==================
NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Earnings from continuing operations $ 2.35 $ 1.66
Earnings from discontinued operations - .73
------------------ ------------------
NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 2.35 $ 2.39
================== ==================
Shares Used in Computing Diluted Earnings Per Share (in Millions) 96.5 96.1
================== ==================
</TABLE>
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------ ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 246.8 $ 141.8
Trade receivables 931.4 672.4
Inventories 774.7 747.8
Other current assets 125.9 242.2
------------------ ------------------
TOTAL CURRENT ASSETS 2,078.8 1,804.2
------------------ ------------------
PROPERTY, PLANT, AND EQUIPMENT 915.1 905.8
GOODWILL 1,877.3 2,012.2
OTHER ASSETS 489.5 431.3
------------------ ------------------
$ 5,360.7 $ 5,153.5
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 178.3 $ 235.9
Current maturities of long-term debt 60.5 54.1
Trade accounts payable 372.0 380.7
Other accrued liabilities 761.8 835.9
------------------ ------------------
TOTAL CURRENT LIABILITIES 1,372.6 1,506.6
------------------ ------------------
LONG-TERM DEBT 1,623.7 1,415.8
DEFERRED INCOME TAXES 57.7 67.5
POSTRETIREMENT BENEFITS 304.2 310.3
OTHER LONG-TERM LIABILITIES 211.1 220.9
STOCKHOLDERS' EQUITY 1,791.4 1,632.4
------------------ ------------------
$ 5,360.7 $ 5,153.5
================== ==================
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL INFORMATION
(Millions of Dollars)
December 31, 1997 December 31, 1996
------------------ ------------------
<S> <C> <C>
Receivables sold under sale of receivables program $ - $ 212.0
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
December 31, 1997 December 31, 1996
------------------ ------------------
<S> <C> <C>
Depreciation and amortization $ 214.2 $ 214.6
================== ==================
Capital expenditures $ 203.1 $ 196.3
================== ==================
</TABLE>
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1997
ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS
(in millions of dollars)
<TABLE>
<CAPTION>
United
Consumer States Europe Other Total
<S> <C> <C> <C> <C>
Total Sales $ 841.6 $ 318.2 $ 172.8 $ 1,332.6
------- ------- ------- ---------
Unit Volume 13 % 11 % (3)% 10 %
Price (3)% (1)% - % (2)%
Currency - % (11)% (4)% (3)%
---- ---- ---- ----
10 % (1)% (7)% 5 %
---- ---- ---- ----
Commercial
Total Sales $ 79.5 $ 68.7 $ 37.6 $ 185.8
------ ------ ------ -------
Unit Volume 15 % (5)% 28 % 8 %
Price (2)% - % (1)% (1)%
Currency - % (10)% (6)% (5)%
---- ---- ---- ----
13 % (15)% 21 % 2 %
---- ---- ---- ----
Consolidated
Total Sales $ 921.1 $ 386.9 $ 210.4 $ 1,518.4
======= ======= ======= =========
Unit Volume 13 % 8 % 1 % 10 %
Price (3)% (1)% - % (2)%
Currency - % (10)% (4)% (4)%
---- ---- ---- ----
10 % (3)% (3)% 4 %
==== ==== ==== ====
</TABLE>
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1997
ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS
(in millions of dollars)
<TABLE>
<CAPTION>
United
Consumer States Europe Other Total
<S> <C> <C> <C> <C>
Total Sales $ 2,551.3 $ 1,104.6 $ 585.7 $ 4,241.6
--------- --------- ------- ---------
Unit Volume 6 % 5 % - % 5 %
Price (2)% (1)% - % (1)%
Currency - % (9)% (2)% (3)%
---- ---- ---- ----
4 % (5)% (2)% 1 %
---- ---- ---- ----
Commercial
Total Sales $ 304.4 $ 264.3 $ 130.2 $ 698.9
------- ------- ------- -------
Unit Volume 15 % (5)% 10 % 5 %
Price (1)% - % - % (1)%
Currency - % (9)% (7)% (5)%
---- ---- ---- ----
14 % (14)% 3 % (1)%
---- ---- ---- ----
Consolidated
Total Sales $ 2,855.7 $ 1,368.9 $ 715.9 $ 4,940.5
========= ========= ======= =========
Unit Volume 7 % 3 % 2 % 5 %
Price (2)% (1)% - % (1)%
Currency - % (9)% (3)% (3)%
---- ---- ---- ----
5 % (7)% (1)% 1 %
==== ==== ==== ====
</TABLE>
/CONTACT: Barbara B. Lucas, senior v.p.-public affairs, 410/716-2980, or F.
Robert Hunter, v.p.-investor relations, 410/716-3979, both of Black & Decker/
