UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 2003
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-1553
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THE BLACK & DECKER CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 52-0248090
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
701 East Joppa Road Towson, Maryland 21286
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(Address of principal executive offices) (Zip Code)
(410) 716-3900
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, and former fiscal year, if changed since last
report.)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X YES NO
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The number of shares of Common Stock outstanding as of April 25, 2003:
77,595,093
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The exhibit index as required by item 601(a) of Regulation S-K is included in
this report.
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THE BLACK & DECKER CORPORATION
INDEX - FORM 10-Q
March 30, 2003
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings (Unaudited)
For the Three Months Ended March 30, 2003 and March 31, 2002 3
Consolidated Balance Sheet
March 30, 2003 (Unaudited) and December 31, 2002 4
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Three Months Ended March 30, 2003 and March 31, 2002 5
Consolidated Statement of Cash Flows (Unaudited)
For the Three Months Ended March 30, 2003 and March 31, 2002 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
CERTIFICATIONS 25
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amounts)
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Three Months Ended
March 30, 2003 March 31, 2002
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Sales $968.2 $951.7
Cost of goods sold 624.7 644.8
Selling, general, and administrative expenses 270.2 244.7
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Operating Income 73.3 62.2
Interest expense (net of interest income) 12.1 15.8
Other expense 1.8 1.2
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Earnings Before Income Taxes 59.4 45.2
Income taxes 16.0 12.2
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Net Earnings $ 43.4 $ 33.0
================================================================================
Net Earnings Per Common Share -- Basic $ .55 $ .41
================================================================================
Shares Used in Computing Basic
Earnings Per Share (in Millions) 78.3 80.1
================================================================================
Net Earnings Per Common Share --
Assuming Dilution $ .55 $ .41
================================================================================
Shares Used in Computing Diluted
Earnings Per Share (in Millions) 78.5 80.6
================================================================================
Dividends Per Common Share $ .12 $ .12
================================================================================
See Notes to Consolidated Financial Statements (Unaudited).
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CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amount)
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March 30, 2003
(Unaudited) December 31, 2002
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Assets
Cash and cash equivalents $ 286.7 $ 517.1
Trade receivables 747.0 729.0
Inventories 813.9 748.9
Other current assets 209.3 198.9
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Total Current Assets 2,056.9 2,193.9
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Property, Plant, and Equipment 648.9 655.9
Goodwill 734.9 729.1
Other Assets 548.5 551.6
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$3,989.2 $4,130.5
================================================================================
Liabilities and Stockholders' Equity
Short-term borrowings $ 5.9 $ 4.6
Current maturities of long-term debt 309.9 312.0
Trade accounts payable 366.4 343.2
Other accrued liabilities 673.3 793.6
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Total Current Liabilities 1,355.5 1,453.4
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Long-Term Debt 924.5 927.6
Deferred Income Taxes 211.5 211.3
Postretirement Benefits 411.8 409.0
Other Long-Term Liabilities 528.5 529.6
Stockholders' Equity
Common stock, par value $.50 per share 38.8 39.8
Capital in excess of par value 473.7 550.1
Retained earnings 558.4 524.3
Accumulated other comprehensive income (loss) (513.5) (514.6)
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Total Stockholders' Equity 557.4 599.6
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$3,989.2 $4,130.5
================================================================================
See Notes to Consolidated Financial Statements (Unaudited).
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
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Accumulated
Outstanding Capital in Other Com- Total
Common Par Excess of Retained prehensive Stockholders'
Shares Value Par Value Earnings Income (Loss) Equity
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Balance at December 31, 2001 79,829,641 $39.9 $566.6 $333.2 $(188.7) $751.0
Comprehensive income:
Net earnings -- -- -- 33.0 -- 33.0
Net gain on derivative
instruments (net of tax) -- -- -- -- .2 .2
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax) -- -- -- -- (19.9) (19.9)
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Comprehensive income -- -- -- 33.0 (19.7) 13.3
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Cash dividends ($.12 per share) -- -- -- (9.6) -- (9.6)
Common stock issued under
employee benefit plans 586,854 .3 18.5 -- -- 18.8
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Balance at March 31, 2002 80,416,495 $40.2 $585.1 $356.6 $(208.4) $773.5
====================================================================================================================================
Balance at December 31, 2002 79,604,786 $39.8 $550.1 $524.3 $(514.6) $599.6
Comprehensive income:
Net earnings -- -- -- 43.4 -- 43.4
Net loss on derivative
instruments (net of tax) -- -- -- -- (.2) (.2)
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax) -- -- -- -- 1.3 1.3
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Comprehensive income -- -- -- 43.4 1.1 44.5
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Cash dividends ($.12 per share) -- -- -- (9.3) -- (9.3)
Purchase and retirement of
common stock (2,011,570) (1.0) (76.5) -- -- (77.5)
Common stock issued under
employee benefit plans 1,377 -- .1 -- -- .1
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Balance at March 30, 2003 77,594,593 $38.8 $473.7 $558.4 $(513.5) $557.4
====================================================================================================================================
See Notes to Consolidated Financial Statements (Unaudited).
-6-
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions)
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Three Months Ended
March 30, 2003 March 31, 2002
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Operating Activities
Net earnings $ 43.4 $ 33.0
Adjustments to reconcile net earnings to cash
flow from operating activities:
Non-cash charges and credits:
Depreciation and amortization 36.5 34.2
Other 1.8 1.4
Changes in selected working capital items:
Trade receivables (11.2) (24.4)
Inventories (58.4) 6.0
Trade accounts payable 21.2 31.2
Restructuring spending (15.7) (7.5)
Other assets and liabilities (138.0) (11.4)
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Cash Flow From Operating Activities (120.4) 62.5
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Investing Activities
Proceeds from disposal of assets .2 2.3
Capital expenditures (26.4) (22.1)
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Cash Flow From Investing Activities (26.2) (19.8)
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Cash Flow Before Financing Activities (146.6) 42.7
Financing Activities
Net increase (decrease) in short-term borrowings 1.3 (.3)
Payments on long-term debt (.9) (30.5)
Purchase of common stock (77.5) -
Issuance of common stock - 14.3
Cash dividends (9.3) (9.6)
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Cash Flow From Financing Activities (86.4) (26.1)
Effect of exchange rate changes on cash 2.6 (.9)
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(Decrease) Increase In Cash And Cash Equivalents (230.4) 15.7
Cash and cash equivalents at beginning of period 517.1 244.5
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Cash And Cash Equivalents At End Of Period $ 286.7 $260.2
================================================================================
See Notes to Consolidated Financial Statements (Unaudited).
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Black & Decker Corporation and Subsidiaries
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of The Black &
Decker Corporation (collectively with its subsidiaries, the Corporation) have
been prepared in accordance with the instructions to Form 10-Q and do not
include all the information and notes required by accounting principles
generally accepted in the United States 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.
Operating results for the three-month period ended March 30, 2003, 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, 2002.
Certain amounts presented for the three months ended March 31, 2002, have
been reclassified to conform to the 2003 presentation.
NOTE 2: INVENTORIES
The classification of inventories at the end of each period, in millions of
dollars, was as follows:
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March 30, 2003 December 31, 2002
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FIFO cost
Raw materials and work-in-process $190.1 $186.1
Finished products 613.2 553.9
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803.3 740.0
FIFO cost less than LIFO inventory value 10.6 8.9
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$813.9 $748.9
================================================================================
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;
all other inventories are based on the first-in, first-out (FIFO) method.
NOTE 3: SHORT-TERM BORROWINGS
In April 2002, the Corporation replaced an expiring $400 million 364-day
unsecured revolving credit facility with a $250 million 364-day unsecured
revolving credit facility (the Credit Facility). The Credit Facility provided
for annual renewals upon request by the Corporation and approval by the lending
banks. In April 2003, the Corporation elected not to request renewal of the
Credit Facility based upon its anticipated short-term financing needs. The terms
of the Corporation's $500 million commercial paper program and $1.0 billion
unsecured revolving credit facility are more fully disclosed in Note 5 of Notes
to Consolidated Financial Statements included in Item 8 of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 2002.
While no amounts were outstanding under either the commercial paper program
or the Corporation's unsecured revolving credit facilities at March 30, 2003, or
March 31, 2002,
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average borrowings outstanding under these arrangements during the quarter were
$403.1 million and $490.7 million, respectively.
NOTE 4: LONG-TERM DEBT
The Corporation's long-term debt and portfolio of interest rate swap instruments
are more fully disclosed in Notes 6 and 7 of Notes to Consolidated Financial
Statements included in Item 8 of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2002. On April 1, 2003, the Corporation repaid
$309.5 million of 7.50% notes. Also on April 1, 2003, $125 million notional
amount of fixed-to-variable interest rate swaps expired.
Indebtedness of subsidiaries of the Corporation in the aggregate principal
amounts of $307.4 million and $306.9 million were included in the Consolidated
Balance Sheet at March 30, 2003, and December 31, 2002, respectively, in
short-term borrowings, current maturities of long-term debt, and long-term debt.
NOTE 5: INTEREST EXPENSE (NET OF INTEREST INCOME)
Interest expense (net of interest income) for each period, in millions of
dollars, was as follows:
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Three Months Ended
March 30, 2003 March 31, 2002
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Interest expense $18.5 $21.7
Interest (income) (6.4) (5.9)
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$12.1 $15.8
================================================================================
NOTE 6: BUSINESS SEGMENTS
The following table provides selected financial data for the Corporation's
business segments (in millions of dollars):
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Reportable Business Segments
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Power Hardware Fastening Currency Corporate,
Tools & & Home & Assembly Translation Adjustments,
Three Months Ended March 30, 2003 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated
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Sales to unaffiliated customers $647.1 $172.6 $129.2 $948.9 $ 19.3 $ - $968.2
Segment profit (loss) (for
Consolidated, operating income) 57.7 15.0 18.4 91.1 2.2 (20.0) 73.3
Depreciation and amortization 19.8 8.1 3.7 31.6 .5 4.4 36.5
Capital expenditures 14.9 7.7 3.5 26.1 .1 .2 26.4
Three Months Ended March 31, 2002
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Sales to unaffiliated customers $652.0 $201.0 $125.9 $978.9 $(27.2) $ - $951.7
Segment profit (loss) (for
Consolidated, operating income) 39.1 15.6 16.5 71.2 (2.0) (7.0) 62.2
Depreciation and amortization 21.7 9.4 3.6 34.7 (.8) .3 34.2
Capital expenditures 15.2 3.4 3.6 22.2 (.3) .2 22.1
The Corporation operates in three reportable business segments: Power Tools
and Accessories, Hardware and Home Improvement, 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, electric 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 security hardware to
customers in Mexico, Central
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America, the Caribbean, and South America; for the sale of plumbing products to
customers outside the United States and Canada; and for sales of household
products. The Hardware and Home Improvement segment has worldwide responsibility
for the manufacture and sale of security hardware (except for the sale of
security hardware in Mexico, Central America, the Caribbean, and South America).
It also has responsibility for the manufacture of plumbing products and 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 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
Notes to Consolidated Financial Statements included in Item 8 of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2002,
except with respect to foreign currency translation and except as further
indicated below. The financial statements of a segment's operating units located
outside of the United States, except those units operating in highly
inflationary economies, are generally measured using the local currency as the
functional currency. For these units located outside of 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 current
year's budgeted rates of exchange. The amounts included in the preceding table
under the captions "Reportable Business Segments" and "Corporate, Adjustments, &
Eliminations" are reflected at the Corporation's budgeted rates of exchange for
2003. The amounts included in the preceding table under the caption "Currency
Translation Adjustments" represent the difference between consolidated amounts
determined using those 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, adjustments to eliminate intercompany profit in inventory, and
income tax expense. In addition, segment profit excludes restructuring and exit
costs. In determining segment profit, expenses relating to pension and other
postretirement benefits are based solely upon estimated service costs. Corporate
expenses, as well as certain centrally managed expenses, are allocated to each
reportable segment based upon budgeted amounts. 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 goods sold 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 non-recurring 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 various segments in a later period.
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The reconciliation of segment profit to the Corporation's earnings before
income taxes, in millions of dollars, is as follows:
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Three Months Ended
March 30, 2003 March 31, 2002
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Segment profit for total
reportable business segments $ 91.1 $ 71.2
Items excluded from segment profit:
Adjustment of budgeted foreign exchange
rates to actual rates 2.2 (2.0)
Depreciation of Corporate property (.3) (.3)
Adjustment to businesses' postretirement
benefit expenses booked in consolidation 3.6 10.3
Other adjustments booked in consolidation
directly related to reportable business
segments (10.0) (4.7)
Amounts allocated to businesses in arriving
at segment profit in excess of (less
than) Corporate center operating
expenses, eliminations, and other
amounts identified above (13.3) (12.3)
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Operating income 73.3 62.2
Interest expense, net of interest income 12.1 15.8
Other expense 1.8 1.2
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Earnings before income taxes $ 59.4 $ 45.2
================================================================================
NOTE 7: EARNINGS PER SHARE
The computations of basic and diluted earnings per share for each period are as
follows:
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Three Months Ended
(Amounts in Millions Except Per Share Data) March 30, 2003 March 31, 2002
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Numerator:
Net earnings $43.4 $33.0
================================================================================
Denominator:
Denominator for basic earnings per share --
weighted-average shares 78.3 80.1
Employee stock options and stock issuable
under employee benefit plans .2 .5
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Denominator for diluted earnings per share --
adjusted weighted-average shares
and assumed conversions 78.5 80.6
================================================================================
Basic earnings per share $ .55 $ .41
================================================================================
Diluted earnings per share $ .55 $ .41
================================================================================
As of March 30, 2003, options to purchase approximately 8.1 million shares
of common stock, with a weighted-average exercise price of $46.14, were
outstanding, but were not included in the computation of diluted earnings per
share because the effect would be anti-dilutive. These
-11-
options were anti-dilutive because the related exercise price was greater than
the average market price of the common shares during the quarter.
NOTE 8: STOCK-BASED COMPENSATION
As more fully disclosed in Note 14 of Notes to Consolidated Financial Statements
included in Item 8 of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2002, the Corporation has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock-based compensation. In
addition, the Corporation provides pro forma disclosure of stock-based
compensation expense, as measured under the fair value requirements of Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. These pro forma disclosures are provided as required under SFAS
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. A
reconciliation of the Corporation's net earnings to pro forma net earnings, and
the related pro forma earnings per share amounts, for the three-month periods
ended March 30, 2003, and March 31, 2002, is provided below.
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Three Months Ended
(Amounts in Millions Except Per Share Data) March 30, 2003 March 31, 2002
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Net earnings $43.4 $33.0
Adjustments to net earnings for:
Stock-based compensation expense
included in net earnings, net of tax .5 -
Pro forma stock-based compensation
(expense), net of tax (5.7) (4.3)
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Pro forma net earnings $38.2 $28.7
================================================================================
================================================================================
Pro forma net earnings per common share --
basic $ .49 $ .36
================================================================================
Pro forma net earnings per common share --
assuming dilution $ .49 $ .36
================================================================================
NOTE 9: RESTRUCTURING ACTIVITY
As more fully disclosed in Note 17 of Notes to Consolidated Financial Statements
included in Item 8 of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2002, the Corporation recorded a restructuring charge of
$50.7 million during 2002 and a $99.8 million charge during the fourth quarter
of 2001. A summary of restructuring activity during the three-month period ended
March 30, 2003, is as follows (in millions of dollars):
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Reserves at Utilization of Reserves Foreign Reserves at
December 31, ----------------------- Currency March 30,
2002 Cash Non-Cash Translation 2003
- -------------------------------------------------------------------------------------------------------------
Severance benefits $45.1 $ (4.8) $ - $.3 $40.6
Other charges 14.8 (10.9) - - 3.9
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Total $59.9 $(15.7) $ - $.3 $44.5
=============================================================================================================
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NOTE 10: LITIGATION AND CONTINGENT LIABILITIES
As more fully disclosed in Note 18 of Notes to Consolidated Financial Statements
included in Item 8 of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2002, 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, allegations of patent and
trademark infringement, and litigation and administrative proceedings relating
to employment matters and commercial disputes. In addition, the Corporation is
party to litigation and administrative proceedings with respect to claims
involving the discharge of hazardous substances into the environment.
The Corporation's estimate of the costs associated with product liability
claims, environmental exposures, and other legal proceedings is accrued if, in
management's judgment, the likelihood of a loss is probable and the amount of
the loss can be reasonably estimated. These accrued liabilities are not
discounted.
In the opinion of management, amounts accrued for exposures relating to
product liability claims, environmental matters, and other legal proceedings are
adequate and, accordingly, the ultimate resolution of these matters is not
expected to have a material adverse effect on the Corporation's consolidated
financial statements. As of March 30, 2003, the Corporation had no known
probable but inestimable exposures relating to product liability claims,
environmental matters, or other legal proceedings that are expected to have a
material adverse effect on the Corporation. There can be no assurance, however,
that unanticipated events will not require the Corporation to increase the
amount it has accrued for any matter or accrue for a matter that has not been
previously accrued because it was not considered probable.
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Corporation reported net earnings of $43.4 million, or $.55 per share on a
diluted basis, for the three-month period ended March 30, 2003, compared to net
earnings of $33.0 million, or $.41 per share on a diluted basis, for the
three-month period ended March 3l, 2002.
In the discussion and analysis of financial condition and results of
operations that follows, the Corporation generally attempts to list contributing
factors in order of significance to the point being addressed.
RESULTS OF OPERATIONS
SALES
The following chart sets forth an analysis of the consolidated changes in sales
for the three-month periods ended March 30, 2003 and March 31, 2002:
ANALYSIS OF CHANGES IN SALES
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Three Months Ended
(Dollars in Millions) March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------
Total sales $968.2 $951.7
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Unit volume (2)% 2%
Price (1)% (1)%
Currency 5% (2)%
- --------------------------------------------------------------------------------
Change in total sales 2% (1)%
================================================================================
Total consolidated sales for the three months ended March 30, 2003,
increased by 2% over the 2002 level. Decreases in unit volume resulted in a 2%
decline in sales during the three-month period ended March 30, 2003, from the
corresponding period in 2002. The unit volume decline was due, in part, to a
sharp decrease in sales of plumbing products as a result of the shelf space
losses at The Home Depot that occurred in the second half of 2002. Unit volume
declines in other businesses during the first quarter of 2003, particularly the
security hardware and professional power tools businesses in North America, were
partially offset by strong sales growth in the consumer power tools business in
North America. Pricing actions had a 1% negative effect on sales for the
three-month period ended March 30, 2003, as compared to the corresponding period
in 2002. The effects of a weaker dollar compared to other foreign currencies,
particularly the euro and pound sterling, caused a 5% increase in the
Corporation's consolidated sales during the three-month period ended March 30,
2003, as compared to the corresponding period in 2002.
-14-
EARNINGS
Operating income for the three months ended March 30, 2003, was $73.3 million,
or 7.6% of sales, compared to operating income of $62.2 million, or 6.5% of
sales, for the corresponding period in 2002.
Gross margin as a percentage of sales was 35.5% and 32.2% for the
three-month periods ended March 30, 2003, and March 31, 2002, respectively.
Gross margin as a percentage of sales for the three-month period ended March 30,
2003, increased in each of the Corporation's three business segments, as
compared to the corresponding period in 2002. Increases were principally the
result of higher productivity and restructuring initiatives, especially in the
North American and European power tools and accessories businesses. While the
Corporation anticipates that the positive effects of productivity initiatives
and restructuring actions will continue to favorably impact the year-over-year
comparisons of gross margins over the remainder of 2003, it expects that the
rate of improvement will moderate from the 3.3 percentage point improvement
experienced in the first quarter of 2003 given the increases in the comparable
gross margin as a percentage of sales in each of the successive quarterly
periods in 2002.
Selling, general, and administrative expenses as a percentage of sales were
27.9% for the quarter ended March 30, 2003, compared to 25.7% for the
three-month period ended March 31, 2002. Selling, general, and administrative
expenses increased by $25.5 million for the three months ended March 30, 2003,
as compared to the corresponding period in 2002. Approximately half of that
$25.5 million increase was due to effects of foreign currency translation, with
the remainder principally attributable to higher spending in the areas of
marketing and promotion as well as increased transportation and distribution
costs.
Net interest expense (interest expense less interest income) for the three
months ended March 30, 2003, was $12.1 million compared to net interest expense
of $15.8 million for the three months ended March 31, 2002. The decrease in net
interest expense for the three months ended March 30, 2003, as compared to the
corresponding period in 2002, was the result of both lower borrowing levels and
interest rates.
Other expense for the three months ended March 30, 2003, was $1.8 million
as compared to $1.2 million for the corresponding period in 2002.
The Corporation's effective tax rate was 27% for the three-month periods
ended March 30, 2003, and March 31, 2002.
The Corporation reported net earnings of $43.4 million, or $.55 per share
on a diluted basis, for the three-month period ended March 30, 2003, compared to
net earnings of $33.0 million, or $.41 per share on a diluted basis, for the
three-month period ended March 31, 2002. In addition to the impact of the
operational matters previously described, earnings per share for the 2003 period
also benefited from lower shares outstanding as a result of common shares
repurchased by the Corporation subsequent to March 31, 2002.
BUSINESS SEGMENTS
As more fully described in Note 6 of Notes to Consolidated Financial Statements,
the Corporation operates in three reportable business segments: Power Tools and
Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems.
-15-
Power Tools and Accessories
Segment sales and profit for the Power Tools and Accessories segment, determined
on the basis described in Note 6 of Notes to Consolidated Financial Statements,
were as follows (in millions of dollars):
- --------------------------------------------------------------------------------
Three Months Ended
March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $647.1 $652.0
Segment profit 57.7 39.1
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Power Tools and Accessories segment
during the first quarter of 2003 decreased 1% from the 2002 level.
Sales of power tools and accessories in North America during the first
quarter of 2003 approximated the prior year level as a high single-digit rate of
decline in sales of professional power tools and accessories offset a
double-digit rate of growth in sales of consumer power tools and accessories.
Sales of professional power tools and accessories decreased during the first
quarter of 2003 compared to the prior year level, reflecting the weak economic
environment, especially in the industrial sector, compounded by adverse weather
conditions. During the first quarter of 2003, sales of consumer power tools and
accessories increased significantly over the corresponding period in 2002 due to
several factors, including: (i) strong sales of new products in the first
quarter of 2003; (ii) a delay in orders of lawn and garden products for the
spring outdoor season from the first to the second quarter of 2002; and (iii)
expanded product placement with a significant customer.
Sales in Europe decreased at a low single-digit rate in the first quarter
of 2003 from the corresponding period in 2002, primarily due to declines in
sales of consumer power tools and outdoor products. Sales declines in Germany
and France accounted for much of the European sales decrease, due to weak
economic conditions and customers' efforts to control inventory levels.
Sales in other geographic areas increased at a mid-single-digit rate for
the first quarter of 2003 over the prior year level as sales of consumer power
tools and accessories increased at a mid-single-digit rate, while sales of
professional power tools and accessories increased at a low single-digit rate
compared to the previous year's first quarter.
Segment profit as a percentage of sales for the Power Tools and Accessories
segment was 8.9% for the three-month period ended March 30, 2003, as compared to
6.0% for the corresponding 2002 period. The increase in segment profit as a
percentage of sales during 2003 was driven by higher gross margins, principally
in North American and European power tools and accessories. The improved gross
margins primarily resulted from higher productivity and the results of
restructuring initiatives.
-16-
Hardware and Home Improvement
Segment sales and profit for the Hardware and Home Improvement segment,
determined on the basis described in Note 6 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
- --------------------------------------------------------------------------------
Three Months Ended
March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $172.6 $201.0
Segment profit 15.0 15.6
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Hardware and Home Improvement
segment decreased 14% for the three months ended March 30, 2003, from the
corresponding period in 2002. Sales of plumbing products declined at a
double-digit rate, reflecting a loss of shelf space at The Home Depot, which the
Corporation announced in the latter half of 2002. Sales of security hardware
decreased at a high single-digit rate in the first quarter of 2003 from the
corresponding period in 2002, due to shifts in the timing of promotional
programs from the first quarter in 2002 to the second quarter in 2003 and to the
results of a brand and product repositioning that favorably impacted sales in
the 2002 period.
Segment profit as a percentage of sales for the Hardware and Home
Improvement segment was 8.7% in the first three months of 2003 as compared to
7.8% in the corresponding period of 2002. Segment profit as a percentage of
sales benefited from improvements in gross margin as a percentage of sales
during the quarter ended March 30, 2003. The increase in gross margin as a
percentage of sales was primarily driven by productivity improvements and
restructuring benefits.
Although the loss of shelf space at The Home Depot in 2002 had a
significant effect on the Corporation's plumbing products business during the
first quarter of 2003, the plumbing products business has announced a
significant expansion of its product listings at Lowe's. This expansion,
scheduled to begin in the second quarter of 2003, is expected to increase the
average stock keeping units (SKU's) of the Corporation's plumbing products at
Lowe's stores by approximately 75% and to significantly mitigate the effect of
the loss of shelf space at The Home Depot.
Fastening and Assembly Systems
Segment sales and profit for the Fastening and Assembly Systems segment,
determined on the basis described in Note 6 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
- --------------------------------------------------------------------------------
Three Months Ended
March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------
Sales to unaffiliated customers $129.2 $125.9
Segment profit 18.4 16.5
- --------------------------------------------------------------------------------
Sales to unaffiliated customers in the Fastening and Assembly Systems
segment increased by 3% in the first quarter of 2003 over the 2002 level,
reflecting gains in both the automotive and industrial sectors, particularly in
Asia.
Segment profit as a percentage of sales for the Fastening and Assembly
Systems segment increased from 13.1% in the first quarter of 2002 to 14.2% in
2003. The increase in operating profit as a percentage of sales was due to
higher gross margins, reflecting favorable manufacturing productivity.
-17-
Other Segment-Related Matters
As more fully described in Note 6 of Notes to Consolidated Financial Statements,
in determining segment profit expenses relating to pension and other
postretirement benefits are based solely upon estimated service costs. Also, as
more fully described in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2002 in Item 7 under the caption "Financial Condition",
the Corporation anticipates that the expense recognized relating to its pension
and other postretirement benefits plans in 2003 will increase by approximately
$30 million from the 2002 levels. The adjustment to businesses' postretirement
benefit expense booked in consolidation as identified in the final table
included in Note 6 of Notes to Consolidated Financial Statements was $3.6
million and $10.3 million for the three-month periods ended March 30, 2003 and
March 31, 2002, respectively. This decrease reflects the impact excluded from
the Corporation's reportable business segments of that increase in pension and
other postretirement benefits expense.
Expenses directly related to reportable business segments booked in
consolidation and, thus, excluded from segment profit for the reportable
business segments were $10.0 million and $4.7 million for the three-month
periods ended March 30, 2003 and March 31, 2002, respectively. The increase in
these expenses for the three-month period ended March 30, 2003, as compared to
the corresponding 2002 period principally relates to $4.1 million of
restructuring-related expenses associated with the Power Tools and Accessories
segment.
RESTRUCTURING ACTIVITY
As more fully discussed in Note 9 of Notes to Consolidated Financial Statements
and in the Corporation's Annual Report on Form 10-K for the year ended December
31, 2002 in both Item 7 under the caption "Restructuring Actions", and Note 17
of Notes to Consolidated Financial Statements included in Item 8, during the
fourth quarter of 2001, the Corporation formulated a restructuring plan designed
to reduce its manufacturing footprint, variable production costs, and selling,
general, and administrative expenses. During 2001 and 2002, the Corporation has
recognized pre-tax restructuring charges under this plan totaling $150.5
million. The Corporation believes that additional pre-tax restructuring charges
of up to $20 million will be recognized over the remaining life of its
restructuring plan, which as currently envisioned, will be implemented in 2003
and 2004.
The Corporation expects that incremental pre-tax savings associated with
the restructuring plan will benefit 2003 and 2004 results, by $35 million and
$40 million, respectively, net of restructuring-related expenses. Ultimate
savings realized from restructuring actions may be mitigated by such factors as
continued economic weakness and competitive pressures, as well as decisions to
increase costs in areas such as promotion or research and development above
levels that were otherwise assumed.
The Corporation is committed to continuous productivity improvement and
continues to evaluate opportunities to reduce fixed costs, simplify or improve
processes, and eliminate excess capacity.
FINANCIAL CONDITION
Operating activities used cash of $120.4 million for the three months ended
March 30, 2003, compared to $62.5 million of cash provided in the corresponding
period in 2002. The decrease in cash provided by operating activities during the
quarter ended March 30, 2003, was primarily a result of higher inventories, as
well as the payments during the first quarter of higher accrued
-18-
liabilities that existed at year-end 2002 and higher cash taxes, all as compared
to the first quarter of 2002.
As part of its capital management, the Corporation reviews certain working
capital metrics. For example, the Corporation evaluates its accounts receivable
and inventory levels through the computation of days sales outstanding and
inventory turnover ratio, respectively. The number of days sales outstanding at
March 30, 2003, approximated the number of days sales outstanding at March 31,
2002. Average inventory turns at March 30, 2003, were flat in comparison to the
comparable period in 2002 despite the increased inventory levels as a result of
safety stock related to the Corporation's restructuring program and lower than
expected sales. The Corporation anticipates that the safety stock will begin to
decline in the second quarter and will be effectively eliminated by year end.
Investing activities for the three months ended March 30, 2003, used cash
of $26.2 million as compared to $19.8 million of cash used for the corresponding
period in 2002. The increase in cash usage was primarily due to higher capital
expenditures during the first quarter of 2003 as compared to the corresponding
period in 2002. The Corporation anticipates that its capital spending in 2003
will approximate $125 million.
The Corporation previously announced that it has signed an agreement to
sell its European Security Hardware business for $108 million. The European
Security Hardware business is included in the Corporation's Hardware and Home
Improvement segment. The sale is subject to regulatory approval and is not
expected to have a material effect on the Corporation's financial results for
2003.
Financing activities used cash of $86.4 million for the three-month period
ended March 30, 2003, as compared to cash used of $26.1 million during the first
three months of 2002. The increase in cash used is primarily the result of
higher cash expenditures for stock repurchases during the first quarter of 2003.
During the three months ended March 30, 2003, the Corporation repurchased
2,011,570 shares of its common stock at an aggregate cost of $77.5 million.
During the corresponding period in 2002, the Corporation did not repurchase any
shares of its common stock. At March 30, 2003, the Corporation had remaining
authorization from its Board of Directors to repurchase 2,911,595 shares of its
common stock.
As discussed further in Note 3 of Notes to Consolidated Financial
Statements, in April 2002, the Corporation replaced an expiring $400 million
364-day unsecured revolving credit facility with a $250 million 364-day
unsecured revolving credit facility (the Credit Facility). In April 2003, the
Corporation elected not to request renewal of the Credit Facility based upon its
anticipated short-term financing needs. Also, as discussed further in Note 4 of
Notes to Consolidated Financial Statements, on April 1, 2003, the Corporation
repaid $309.5 million of 7.50% notes.
The variable rate debt to total debt ratio, after taking interest rate
hedges into account, was 52% at March 30, 2003, and December 31, 2002. Average
debt maturity was 7.0 years at March 30, 2003, compared to 7.2 years at December
31, 2002.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a
safe harbor for forward-looking statements made by or on behalf of the
Corporation. The Corporation and its representatives may, from time to time,
make written or verbal forward-looking statements, including statements
contained in the Corporation's filings with the Securities and Exchange
Commission and in its reports to stockholders. Generally, the inclusion of the
words "believe,"
-19-
"expect," "intend," "estimate," "anticipate," "will," and similar expressions
identify 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. All statements addressing
operating performance, events, or developments that the Corporation expects or
anticipates will occur in the future, including statements relating to sales
growth, earnings or earnings per share growth, and market share, as well as
statements expressing optimism or pessimism about future operating results, are
forward-looking statements within the meaning of the Reform Act. The
forward-looking statements are and will be based upon management's then-current
views and assumptions regarding future events and operating performance, and are
applicable only as of the dates of such statements. The Corporation undertakes
no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
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 those factors identified in Item 1(g) of Part I of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 2002. An additional
risk factor that should be considered is the potential effects of the Severe
Acute Respiratory Syndrome ("SARS") on the Corporation. The Corporation
purchases materials and components from suppliers in China and conducts
manufacturing operations in China. While SARS has not currently affected, and is
not anticipated to affect, the Corporation's operations, if SARS becomes more
widespread, it could adversely affect the economy in China and as a result
adversely affect the Corporation's manufacturing and sourcing operations in
China.
-20-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required under this Item is contained in Note 4 of Notes to
Consolidated Financial Statements and under the caption "Hedging Activities",
included in Item 7, and in Notes 1 and 7 of Notes to Consolidated Financial
Statements included in Item 8 of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2002, and is incorporated by reference herein.
ITEM 4. CONTROLS AND PROCEDURES
(a) Within 90 days prior to the date of this report, the Corporation
carried out an evaluation--under the supervision and with the participation of
the Corporation's management, including the Corporation's Chief Executive
Officer and Chief Financial Officer--of the effectiveness of the design and
operation of the Corporation's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon that evaluation, the Corporation's Chief
Executive Officer and Chief Financial Officer have concluded that the
Corporation's disclosure controls and procedures are effective.
(b) There have been no significant changes in the Corporation's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation described in the preceding paragraph.
-21-
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 also is 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 exposure for product liability. The Corporation
is insured for product liability claims for amounts in excess of established
deductibles and accrues for the estimated liability as described above up to the
limits of the deductibles. All other claims and lawsuits are handled on a
case-by-case basis.
Pursuant to authority granted under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the United States
Environmental Protection Agency (EPA) has issued a National Priority List (NPL)
of sites at which action is to be taken to mitigate the risk of release of
hazardous substances into the environment. The Corporation is engaged in
continuing activities with regard to various sites on the NPL and other sites
covered under CERCLA. The Corporation also is engaged in site investigations and
remedial activities to address environmental contamination from past operations
at current and former manufacturing facilities in the United States and abroad.
To minimize the Corporation's potential liability with respect to these sites,
management has undertaken, when appropriate, active participation in steering
committees established at the sites and has agreed to remediation through
consent orders with the appropriate government agencies. Due to uncertainty over
the Corporation's involvement in some of the sites, uncertainty over the
remedial measures, and the fact that imposition of joint and several liability
with the right of contribution is possible under CERCLA and other laws and
regulations, the liability of the Corporation with respect to any site at which
remedial measures have not been completed cannot be established with certainty.
On the basis of periodic reviews conducted with respect to these sites, however,
the Corporation has established appropriate liability accruals.
The Corporation's estimate of costs associated with product liability
claims, environmental matters, and other legal proceedings is accrued if, in
management's judgment, the likelihood of a loss is probable and the amount of
the loss can be reasonably estimated. These accrued liabilities are not
discounted.
In the opinion of management, amounts accrued for exposures relating to
product liability claims, environmental matters, and other legal proceedings are
adequate and, accordingly, the ultimate resolution of these matters is not
expected to have a material adverse effect on the Corporation's consolidated
financial statements. As of March 30, 2003, the Corporation had no known
probable but inestimable exposures relating to product liability claims,
environmental matters, or other legal proceedings that are expected to have a
material adverse effect on the Corporation. There can be no assurance, however,
that unanticipated events will not require the Corporation to increase the
amount it has accrued for any matter or accrue for a matter that has not been
previously accrued because it was not considered probable.
-22-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2003 Annual Meeting of Stockholders was held on April 29, 2003, for the
election of directors, to ratify the selection of Ernst & Young LLP as the
Corporation's independent auditor for fiscal year 2003, to approve The Black &
Decker 2003 Stock Option Plan, and to act on certain stockholder proposals. A
total of 68,558,933 of the 78,594,593 votes entitled to be cast at the meeting
were present in person or by proxy. At the meeting, the stockholders:
(1) Elected the following directors:
Number of Shares Number of Shares
Directors Voted For Authority Withheld
---------------------------------------------------------------------------
Nolan D. Archibald 67,459,137 1,099,796
Norman R. Augustine 64,644,591 3,914,342
Barbara L. Bowles 64,628,480 3,930,453
M. Anthony Burns 64,646,484 3,912,449
Kim B. Clark 67,771,706 787,227
Manuel A. Fernandez 65,591,281 2,967,652
Benjamin H. Griswold, IV 65,593,848 2,965,085
Anthony Luiso 65,593,584 2,965,349
(2) Ratified the selection of Ernst & Young LLP as the Corporation's
independent auditor for fiscal year 2003 by an affirmative vote of
62,411,267; votes against ratification were 5,615,735; and abstentions
were 531,931.
(3) Approved The Black & Decker 2003 Stock Option Plan by an affirmative
vote of 44,583,765; votes against the proposal were 15,633,916;
abstentions were 580,228; and broker non-votes were 7,761,024.
(4) Rejected Stockholder Proposal 1 by a negative vote of 51,387,446;
affirmative votes for the stockholder proposal were 8,356,768;
abstentions were 1,053,695; and broker non-votes were 7,761,024.
(5) Approved Stockholder Proposal 2 by an affirmative vote of 30,862,250;
negative votes against the stockholder proposal were 28,038,844;
abstentions were 1,896,815; and broker non-votes were 7,761,024.
No other matters were submitted to a vote of the stockholders at the meeting.
-23-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
10 The Black & Decker 2003 Stock Option Plan, as amended,
included in the definitive Proxy Statement for the 2003
Annual Meeting of Stockholders of the Corporation dated
March 11, 2003, is incorporated by reference.
99.0 Chief Executive Officer's Certification Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.
99.1 Chief Financial Officer's Certification Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.
On January 3, 2003, the Corporation furnished a Current Report on Form 8-K with
the Commission. That Current Report on Form 8-K, furnished pursuant to Item 9 of
that Form, stated that, on January 3, 2003, the Corporation announced that it
affirmed comfort with consensus earnings estimates for the fourth quarter and
full year 2002.
On January 30, 2003, the Corporation furnished a Current Report on Form 8-K with
the Commission. That Current Report on Form 8-K, furnished pursuant to Item 9 of
that Form, stated that, on January 30, 2003, the Corporation had reported its
earnings for the three months and year ended December 31, 2002.
The Corporation did not file nor furnish any other reports on Form 8-K during
the three-month period ended March 30, 2003.
All other items were not applicable.
-24-
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 /s/ MICHAEL D. MANGAN
-----------------------------------------------------
Michael D. Mangan
Senior Vice President and Chief Financial Officer
Principal Accounting Officer
By /s/ CHRISTINA M. McMULLEN
-----------------------------------------------------
Christina M. McMullen
Vice President and Controller
Date: May 7, 2003
-25-
THE BLACK & DECKER CORPORATION
C E R T I F I C A T I O N S
I, Nolan D. Archibald, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Black & Decker
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ NOLAN D. ARCHIBALD
- ------------------------------------------------
Nolan D. Archibald
Chairman, President, and Chief Executive Officer
May 7, 2003
-26-
THE BLACK & DECKER CORPORATION
C E R T I F I C A T I O N S
I, Michael D. Mangan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Black & Decker
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ MICHAEL D. MANGAN
- -------------------------------------------------
Michael D. Mangan
Senior Vice President and Chief Financial Officer
May 7, 2003