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) October 3, 1999
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
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 name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On October 19, 1999, the Corporation reported its earnings for the three and
nine months ended October 3, 1999. Attached to this Current Report on Form 8-K
as Exhibit 99 is a copy of the Corporation's related press release dated October
19, 1999.
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 risks 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 1998 and 1999 and
scheduled for introduction in the balance of 1999; 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 of new product introductions; unforeseen competitive pressure or
other difficulty in maintaining mutually beneficial relationships with key
distributors or 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 Corporation's Annual Report on Form 10-K for the year ended December 31,
1998, as updated in the Corporation's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999; the degree of working capital investment required to
meet customer service levels; gradual improvement in the economic environment in
Asia and Latin America; and economic growth in North America which more than
offsets economic softness in Europe.
In addition to the foregoing, the Corporation's ability to realize the
anticipated benefits of the restructuring actions undertaken in 1998 and 1999 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 realize the benefits inherent in the
balance of the restructuring actions is dependent on the selection and
implementation of economically viable projects in addition to the restructuring
actions taken to date. 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 Corporation's existing businesses at acquisition prices that are consistent
with these objectives.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99 Press Release of the Corporation dated October 19, 1999.
<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/ STEPHEN F. REEVES
Stephen F. Reeves
Vice President and Controller
Contact: Barbara B. Lucas
Senior Vice President - Public Affairs
410/716-2980
F. Robert Hunter, III
Vice President - Investor Relations
410/716-3979
FOR IMMEDIATE RELEASE: Tuesday, October 19, 1999
SUBJECT: Black & Decker's Third-Quarter Sales by Retained Businesses Rise 9%
Excluding Foreign Exchange; Earnings Per Share Increase 21% on
Comparable Basis to Record Level
TOWSON, MD - The Black & Decker Corporation (NYSE:BDK) announced today
that sales by retained businesses in the third quarter of 1999 reached a record
level of $1.131 billion, an increase of 7% over comparable sales in the same
period of 1998. Excluding the effects of foreign currency translation,
third-quarter sales increased 9%. Including the effects of business divestitures
and foreign currency translation, reported sales of $1.111 billion for the
quarter were slightly higher than last year's level of $1.108 billion. For the
first nine months of 1999, sales by retained businesses increased 7% over the
same period of 1998, or 9% excluding the effects of foreign currency
translation. Reported nine-month sales declined 3% due to divestitures and
foreign currency translation.
Net earnings for the third quarter of 1999 rose to $75.3 million or a
record level of 85 cents per diluted share. In the same quarter of 1998, net
earnings were $65.1 million or 70 cents per diluted share, excluding
non-recurring items consisting of a $9.2 million (10 cents per share) gain on
sale of businesses and a $7.7 million (8 cents per share) after-tax
restructuring charge. The 21% increase in earnings per share resulted from
operating improvements and lower average outstanding shares of the Corporation's
stock due to a stock repurchase program.
(more)
<PAGE>
Page Two
For the first nine months of 1999, net earnings were $185.2 million or
$2.09 per diluted share. In the same period last year, the Corporation reported
a net loss of $846.4 million or $9.06 per share. Excluding non-recurring items
consisting of a $900 million write-off of goodwill, a $107.7 million after-tax
restructuring charge, and a $13.4 million after-tax gain on sale of businesses
and including the dilutive effect of options for the first nine months of 1998,
net earnings would have been $147.9 million or $1.55 per diluted share for the
period. Therefore, comparable earnings per share for the first nine months of
1999 improved 35%. The increase was due to operating improvements, lower
restructuring-related costs, lower borrowing costs, and lower average
outstanding shares.
Commenting on the results, Nolan D. Archibald, Chairman and Chief
Executive Officer, said, "This was Black & Decker's strongest third quarter
ever, as evidenced by record levels of sales and earnings per share. With
increases of 8% in sales and 32% in profits, the Power Tools and Accessories
segment surpassed even the excellent performance that it achieved in the second
quarter. These results were driven by our North American business, where sales
of both DEWALT(R) professional tools and Black & Decker(R) consumer tools
continued to grow at double-digit rates. Popular new products, including the
jobsite charger/radio by DEWALT, and FireStorm(TM) high-performance cordless
drills, Mouse(TM) sander/polishers, and DustBuster(R) cordless vacuums by Black
& Decker, together with strong partnerships with key retailers have contributed
to our success. As we enter the largest selling season of the year with a wide
array of new products, we are encouraged by early indications from end users and
major retailers, including The Home Depot, Lowe's, and Wal*Mart.
"Outstanding performance in North America more than compensated for
flat Power Tools and Accessories sales in Europe, where solid growth in some
countries was offset by continued weakness in Germany. In the rest of the world,
sales were up slightly. Six Sigma projects and manufacturing productivity gains
around the world had a significant impact on this segment's financial and
operating results.
(more)
<PAGE>
Page Three
"Sales in the Hardware and Home Improvement segment increased 5% and
profits were up 6% over last year's third-quarter levels. Profits improved
dramatically at Price Pfister plumbing products on a 5% increase in sales. Sales
also rose 5% at Kwikset security hardware. We expect increased profitability in
Hardware and Home Improvement as we continue to execute our manufacturing
productivity and restructuring plans and consider additional steps to improve
our cost structure and customer service levels.
"The Fastening and Assembly Systems segment maintained a long-standing
positive trend with increases of 11% in sales and 12% in profits for the
quarter. Innovative new products, global networking, intense customer focus, and
continuous improvement in productivity are driving excellent performance in this
high-margin business.
"We are particularly pleased that the Corporation's return on sales
climbed to 12.4% in the quarter, nearly one percentage-point higher than the
comparable level last year. This performance puts us on track to reach our
return-on-sales goal of 12% for the full year and positions us to achieve 15%
ROS over the longer term.
"Year-to-date free cash flow was a use of $75 million. This increase
from a use of $12 million last year was related directly to a planned increase
in inventory to support customer service requirements and strong sales growth
that we continue to experience, particularly in our North American Power Tools
business, as we prepare for the holiday season. With prospects for increased
productivity and good sales growth, we anticipate healthy cash flow during the
fourth quarter and believe that our company is capable of generating
approximately $200 million of free cash flow for the full year.
(more)
<PAGE>
Page Four
"Our outlook for the remainder of the year remains optimistic. We are
encouraged by a positive response in the North American marketplace to our new
products. We have aggressive merchandising programs in place in major home
centers and mass merchants to ensure maximum exposure and appeal to end users,
and we will be supporting our sales efforts with national television
advertising. Our Power Tools business in North America remains very strong, and
we expect continued improvement in Europe and other foreign markets.
Restructuring activities, together with Six Sigma initiatives which are being
fully deployed throughout our company, are strengthening our manufacturing
processes and improving product quality while reducing costs. We also are
investing in long-term growth by adding engineering and end-user marketing
resources to enhance our ability to develop and promote successful new
products."
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 October 19, 1999.
Black & Decker is a leading global manufacturer and marketer of power
tools, hardware, and home improvement products used in and around the home and
for commercial applications.
* * *
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
--------------------------------------
October 3, 1999 September 27, 1998
----------------- ------------------
SALES $ 1,110.6 $ 1,107.7
Cost of goods sold 694.0 709.0
Selling, general, and
administrative expenses 278.9 270.1
Restructuring and exit costs - 14.2
Gain on sale of businesses - 26.9
----------------- ------------------
OPERATING INCOME 137.7 141.3
Interest expense (net of
interest income) 26.2 29.1
Other expense 0.8 3.8
----------------- ------------------
EARNINGS BEFORE INCOME TAXES 110.7 108.4
Income taxes 35.4 41.8
----------------- ------------------
NET EARNINGS $ 75.3 $ 66.6
================= ==================
NET EARNINGS PER COMMON SHARE - BASIC $ 0.87 $ 0.73
================= ==================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 87.0 90.9
================= ==================
NET EARNINGS PER COMMON SHARE -
ASSUMING DILUTION $ 0.85 $ 0.72
================= ==================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 88.3 92.6
================= ==================
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(Dollars in Millions Except Per Share Amounts)
Nine Months Ended
--------------------------------------
October 3, 1999 September 27, 1998
----------------- ------------------
SALES $ 3,173.3 $ 3,285.7
Cost of goods sold 1,993.4 2,139.2
Selling, general, and
administrative expenses 836.7 835.5
Write-off of goodwill - 900.0
Restructuring and exit costs - 154.2
Gain on sale of businesses - 63.4
----------------- ------------------
OPERATING INCOME (LOSS) 343.2 (679.8)
Interest expense (net of
interest income) 70.9 87.3
Other expense - 6.2
----------------- ------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 272.3 (773.3)
Income taxes 87.1 73.1
----------------- ------------------
NET EARNINGS (LOSS) $ 185.2 $ (846.4)
================= ==================
NET EARNINGS (LOSS) PER COMMON SHARE -
BASIC $ 2.13 $ (9.06)
================= ==================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 87.1 93.4
================= ==================
NET EARNINGS (LOSS) PER COMMON SHARE -
ASSUMING DILUTION $ 2.09 $ (9.06)
================= ==================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 88.4 93.4
================= ==================
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
(Millions of Dollars)
October 3, 1999 September 27, 1998
--------------- -------------------
ASSETS
Cash and cash equivalents $ 142.5 $ 143.3
Trade receivables 851.7 804.3
Inventories 864.3 739.9
Current assets of business
held for sale - 21.1
Other current assets 200.5 179.8
--------------- -------------------
TOTAL CURRENT ASSETS 2,059.0 1,888.4
--------------- -------------------
PROPERTY, PLANT, AND EQUIPMENT 718.2 717.4
GOODWILL 746.0 762.0
NON-CURRENT ASSETS OF BUSINESS
HELD FOR SALE - 101.1
OTHER ASSETS 630.3 489.2
--------------- -------------------
$ 4,153.5 $ 3,958.1
=============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 428.0 $ 61.0
Current maturities of long-term debt 58.8 60.4
Trade accounts payable 431.0 361.2
Current liabilities of business
held for sale - 8.3
Other accrued liabilities 731.7 773.9
--------------- -------------------
TOTAL CURRENT LIABILITIES 1,649.5 1,264.8
--------------- -------------------
LONG-TERM DEBT 1,058.4 1,671.3
DEFERRED INCOME TAXES 276.8 55.0
POSTRETIREMENT BENEFITS 262.0 265.5
OTHER LONG-TERM LIABILITIES 230.5 183.8
STOCKHOLDERS' EQUITY 676.3 517.7
--------------- -------------------
$ 4,153.5 $ 3,958.1
=============== ===================
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL BALANCE SHEET INFORMATION (Unaudited)
INVENTORY DETAIL
(Millions of Dollars)
October 3, 1999 September 27, 1998
--------------- ------------------
Power Tools & Accessories (a) $ 702.7 $ 584.9
Hardware & Home Improvement 151.1 155.1
Fastening & Assembly Systems 52.9 51.0
Corporate & Eliminations (42.4) (51.1)
--------------- ------------------
Total $ 864.3 $ 739.9
=============== ==================
(a) Consists of the following:
North America $ 363.2 $ 248.6
Europe 245.2 222.0
Other 94.3 114.3
--------------- ------------------
Total Power Tools & Accessories $ 702.7 $ 584.9
=============== ==================
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS (Unaudited)
(Millions of Dollars)
Reportable Business Segments
--------------------------------------------
Power Hardware Fastening
Tools & Home &
Three Months Ended & Improve- Assembly
October 3, 1999 Accessories ment Systems Total
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $ 785.3 $226.3 $119.7 $1,131.3
Segment profit (loss) (for
Consolidated, operating income) 97.0 33.9 19.9 150.8
Depreciation and amortization 18.8 8.1 3.9 30.8
Capital expenditures 28.0 8.9 7.7 44.6
Three Months Ended
September 27, 1998
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $ 729.8 $216.2 $108.3 $1,054.3
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs, and gain on
sale of businesses) 73.6 32.0 17.7 123.3
Depreciation and amortization 20.8 7.1 3.4 31.3
Capital expenditures 15.5 9.6 4.7 29.8
Nine Months Ended
October 3, 1999
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $2,189.6 $656.2 $ 374.1 $3,219.9
Segment profit (loss) (for
Consolidated, operating income) 223.3 88.7 63.5 375.5
Depreciation and amortization 61.1 25.5 11.6 98.2
Capital expenditures 71.4 25.7 16.3 113.4
Nine Months Ended
September 27, 1998
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $2,024.1 $620.5 $ 344.2 $2,988.8
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs, write-off of
goodwill, and gain on sale
of businesses) 172.0 88.6 57.8 318.4
Depreciation and amortization 65.3 19.7 10.2 95.2
Capital expenditures 46.0 23.2 10.8 80.0
<PAGE>
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS (Unaudited)
(Millions of Dollars)
Corporate,
Adjust-
Currency ments,
Three Months Ended All Translation & Elimi- Consoli-
October 3, 1999 Others Adjustments nations dated
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $ -- $ (20.7) $ -- $1,110.6
Segment profit (loss) (for
Consolidated, operating income) -- (2.3) (10.8) 137.7
Depreciation and amortization -- (.6) 6.9 37.1
Capital expenditures -- (1.1) -- 43.5
Three Months Ended
September 27, 1998
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $ 67.6 $ (14.2) $ -- $1,107.7
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs, and gain on
sale of businesses) 4.3 (1.1) 2.1 128.6
Depreciation and amortization -- (.4) 7.0 37.9
Capital expenditures 3.2 (.5) .1 32.6
Nine Months Ended
October 3, 1999
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $ -- $ (46.6) $ -- $3,173.3
Segment profit (loss) (for
Consolidated, operating income) -- (5.0) (27.3) 343.2
Depreciation and amortization -- (1.4) 20.9 117.7
Capital expenditures -- (2.2) .2 111.4
Nine Months Ended
September 27, 1998
- ------------------------------------------------------------------------------
Sales to unaffiliated customers $333.6 $ (36.7) $ -- $3,285.7
Segment profit (loss) (for
Consolidated, operating
income before restructuring
and exit costs, write-off of
goodwill, and gain on sale
of businesses) 16.5 (4.5) (19.4) 311.0
Depreciation and amortization -- (1.1) 20.4 114.5
Capital expenditures 13.1 (1.1) .4 92.4
<PAGE>
The reconciliation of segment profit to the Corporation's earnings (loss)
before income taxes for each period, in millions of dollars, is as follows:
Three Months Ended
- ------------------------------------------------------------------------------
October 3, September 27,
1999 1998
- ------------------------------------------------------------------------------
Segment profit for total reportable business segments $150.8 $123.3
Segment profit for all other businesses -- 4.3
Items excluded from segment profit:
Adjustment of budgeted foreign exchange rates to
actual rates (2.3) (1.1)
Depreciation of Corporate property and amortization
of goodwill (6.9) (7.0)
Adjustment to businesses' postretirement benefit
expenses booked in consolidation 5.2 8.2
Adjustment to eliminate net interest and
non-operating expenses from results of certain
operations in Brazil, Mexico, Venezuela, and
Turkey .1 1.6
Other adjustments booked in consolidation directly
related to reportable business segments (6.4) .3
Amounts allocated to businesses in arriving at segment
profit in excess of (less than) Corporate center
operating expenses, eliminations, and other amounts
identified above (2.8) (1.0)
- ------------------------------------------------------------------------------
Operating income before restructuring and exit costs,
write-off of goodwill, and gain on sale of
businesses 137.7 128.6
Restructuring and exit costs -- 14.2
Write-off of goodwill -- --
Gain on sale of businesses -- 26.9
- ------------------------------------------------------------------------------
Operating income (loss) 137.7 141.3
Interest expense, net of interest income 26.2 29.1
Other expense .8 3.8
- ------------------------------------------------------------------------------
Earnings (loss) before taxes $110.7 $108.4
==============================================================================
<PAGE>
Nine Months Ended
- ------------------------------------------------------------------------------
October 3, September 27,
1999 1998
- ------------------------------------------------------------------------------
Segment profit for total reportable business segments $375.5 $318.4
Segment profit for all other businesses -- 16.5
Items excluded from segment profit:
Adjustment of budgeted foreign exchange rates to
actual rates (5.0) (4.5)
Depreciation of Corporate property and amortization
of goodwill (20.9) (20.4)
Adjustment to businesses' postretirement benefit
expenses booked in consolidation 21.8 24.7
Adjustment to eliminate net interest and
non-operating expenses from results of certain
operations in Brazil, Mexico, Venezuela, and
Turkey 1.2 4.2
Other adjustments booked in consolidation directly
related to reportable business segments (10.0) (18.7)
Amounts allocated to businesses in arriving at segment
profit in excess of (less than) Corporate center
operating expenses, eliminations, and other amounts
identified above (19.4) (9.2)
- ------------------------------------------------------------------------------
Operating income before restructuring and exit costs,
write-off of goodwill, and gain on sale of
businesses 343.2 311.0
Restructuring and exit costs -- 154.2
Write-off of goodwill -- 900.0
Gain on sale of businesses -- 63.4
- ------------------------------------------------------------------------------
Operating income (loss) 343.2 (679.8)
Interest expense, net of interest income 70.9 87.3
Other expense -- 6.2
- ------------------------------------------------------------------------------
Earnings (loss) before taxes $272.3 $(773.3)
==============================================================================
<PAGE>
Basis of Presentation:
The Corporation operates in three reportable business segments: Power
Tools and Accessories, Hardware and Home Improvement (formerly "Building
Products"), and Fastening and Assembly Systems. The Power Tools and
Accessories segment has worldwide responsibility for the manufacture and sale
of consumer and professional power tools and accessories, cleaning and
lighting products, and electric lawn and garden tools, as well as for product
service. In addition, the Power Tools and Accessories segment has
responsibility for the sale of plumbing products to customers outside the
United States and Canada and for sales of the retained household products
business. The Hardware and Home Improvement segment has worldwide
responsibility for the manufacture and sale of security hardware and for the
manufacture of plumbing products as well as responsibility for the sale of
plumbing products to customers in the United States and Canada. The Fastening
and Assembly Systems segment has worldwide responsibility for the manufacture
and sale of fastening and assembly systems.
The Corporation also operated several businesses that do not constitute
reportable business segments. These businesses included the manufacture and
sale of glass container-forming and inspection equipment, as well as
recreational and household products. In 1998, the Corporation completed the
sale or recapitalization of its glass container-forming and inspection
equipment business, Emhart Glass; its recreational products business, True
Temper Sports; and its household products business (excluding certain assets
associated with the Corporation's cleaning and lighting products) in North
America, Latin America (excluding Brazil), and Australia. Because True Temper
Sports, Emhart Glass, and the household products business in North America,
Latin America (excluding Brazil), and Australia are not treated as
discontinued operations under generally accepted accounting principles, they
remain a part of the Corporation's reported results from continuing
operations, and the results of operations and financial positions of these
businesses have been included in the consolidated financial statements through
the dates of consummation of the respective transactions. Amounts relating to
these businesses are included in the segment table above under the caption
"All Others." The results of the household products business included under
the caption "All Others" are based upon certain assumptions and allocations.
The household products businesses sold during 1998 were jointly operated with
the cleaning and lighting products businesses retained by the Corporation.
Further, the Corporation's divested household products businesses in Australia
and Latin America (excluding Brazil) were operated jointly with the
Corporation's power tools and accessories businesses. Accordingly, the results
of the household products businesses included in the segment table under the
caption "All Others" were determined using certain assumptions and allocations
that the Corporation believes are reasonable under the circumstances.
The Corporation assesses the performance of its reportable business
segments based upon a number of factors, including segment profit. In general,
segments follow the same accounting policies as those described in Note 1 of
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1998, except with respect to foreign currency translation and except as
further indicated below. The financial statements of a segment's operating
units located outside the United States, except those units operating in
highly inflationary economies, are measured using the local currency as the
functional currency. For these units located outside the United States,
segment assets and elements of segment profit are translated using budgeted
rates of exchange. Budgeted rates of exchange are established annually, and
once established all prior period segment data is restated to reflect the
newly established budgeted rates of exchange. The amounts included in the
segment table above under the captions "Reportable Business Segments," "All
Others," and "Corporate, Adjustments, & Eliminations" are reflected at the
Corporation's current budgeted exchange rates. The amounts included in the
segment table above under the caption "Currency Translation Adjustments"
represent the difference between consolidated amounts determined using
budgeted rates of exchange and those determined based upon the rates of
exchange applicable under accounting principles generally accepted in the
United States.
Segment profit excludes interest income and expense, non-operating income
and expense, goodwill amortization, adjustments to eliminate intercompany
profit in inventory, and income tax expense. In addition, segment profit
excludes restructuring and exit costs and, for 1998, the write-off of goodwill
and gain on sale of businesses. For certain operations located in Brazil,
Mexico, Venezuela, and Turkey, segment profit is reduced by net interest
expense and non-operating expenses. In determining segment profit, expenses
relating to pension and other postretirement benefits are based solely upon
estimated service costs. Corporate expenses are allocated to each segment
based upon budgeted amounts. No corporate expenses have been allocated to
divested businesses. While sales and transfers between segments are accounted
for at cost plus a reasonable profit, the effects of intersegment sales are
excluded from the computation of segment profit. Intercompany profit in
inventory is excluded from segment assets and is recognized as a reduction of
cost of sales by the selling segment when the related inventory is sold to an
unaffiliated customer. Because the Corporation compensates the management of
its various businesses on, among other factors, segment profit, the
Corporation may elect to record certain segment-related expense items of an
unusual or nonrecurring nature in consolidation rather than reflect such items
in segment profit. In addition, certain segment-related items of income or
expense may be recorded in consolidation in one period and transferred to the
Corporation's various segments in a later period.
