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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
December 31, 1994 1-1553
THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0248090
(State of Incorporation) (I.R.S. Employer Identification Number)
Towson, Maryland 21286
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-716-3900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.50 per share New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 twelve 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.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in part III of
this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 20, 1995 was $2,123,113,850.
The number of shares of Common Stock outstanding as of February 20,
1995 was 84,924,554.
The exhibit index as required by Item 601(a) of Regulation S-K is
included in Item 14 of Part IV of this report.
Documents Incorporated by Reference: Portions of the registrant's
definitive Proxy Statement for the 1995 Annual Meeting of Stockholders
are incorporated by reference in Part III of this Report.
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The Black & Decker Corporation (collectively with its
subsidiaries, the Corporation), incorporated in Maryland
in 1910, is a global marketer and manufacturer of
quality products used in and around the home and for
commercial applications. With products and services
marketed in over 100 countries, the Corporation enjoys
worldwide recognition of strong brand names and a
superior reputation for quality, design, innovation, and
value.
The Corporation is the world's leading producer of
power tools, power tool accessories and security
hardware, and the Corporation's product lines hold
leading market share positions in these industries. The
household products business is the North American leader
and is among the major global competitors in the small
household appliance industry. The Corporation is the
worldwide leader in the manufacturing of steel golf club
shafts and glass container-making equipment and is among
the major global suppliers of engineered fastening
systems. These assertions are based on total volume of
sales of products compared to the total market for those
products and are supported by market research studies
sponsored by the Corporation as well as independent
industry statistics available through various trade
organizations and periodicals, internally generated
market data, and other sources.
The Corporation also is a major supplier of
information systems and services to the United States
government and commercial customers.
On May 1, 1992, the Corporation sold 20,700,000
shares of common stock at $23.25 per share. Net
proceeds of $465.4 million were used to reduce debt.
In November 1992, the Corporation entered into a
five-year, unsecured revolving credit facility (the
Credit Facility) with a syndicate of banks, which
currently provides financing of up to $1.4 billion.
Initial borrowings under the Credit Facility were used
to repay amounts outstanding under the Corporation's
previous term loan and revolving credit facility, and to
repay certain other borrowings. For additional
information about the Credit Facility, see Note 8 of
Notes to Consolidated Financial Statements included in
Item 8 of Part II of this report.
During 1992, the Corporation commenced a
restructuring of certain of its operations and accrued
costs of $142.4 million. Of this amount, $98.9 million
related to the Corporation's decision to reorganize
Dynapert, the Corporation's printed circuit board
assembly equipment business, including the withdrawal
from the manufacturing of surface-mount machinery in
Europe. The restructuring plan also included a
reduction of manufacturing capacity of other businesses.
During 1993, the Corporation substantially completed its
restructuring plan related to Dynapert and, in October
1993, sold the Dynapert through-hole business at a gain
of $19.4 million. Also during 1993, the Corporation
sold the Corbin Russwin commercial hardware business at
a gain of $15.9 million. In 1993, the Corporation
realized cash proceeds of approximately $108 million
from the sale of Dynapert and Corbin Russwin, which were
used to reduce debt. Results of operations for 1993 also
included a charge of $29 million for the closure and
reorganization of certain manufacturing sites. These
plant actions, which have been substantially completed
during 1994, were part of the Corporation's continuing
effort to identify opportunities to improve its
manufacturing cost structure. For additional information
about the restructuring program, see the section
entitled Restructuring in Management's Discussion and
Analysis of Financial Conditions and Results of
Operations and Note 18 of Notes to Consolidated
Financial Statements, included in Items 7 and 8 of Part
II of this report.
During 1993, the Corporation filed a shelf
registration statement with the Securities and Exchange
Commission for the issuance of up to $1 billion of debt
securities and extended its debt maturities through the
issuance of $750 million of long-term notes under this
shelf registration. The net proceeds from the sale of
these notes were used to repay amounts outstanding under
the Credit Facility. In January 1994, the Corporation
issued an additional $250 million of long-term debt
securities under this shelf registration statement.
The Corporation renegotiated the pricing of
borrowings under the Credit Facility in October 1994.
As a result of the renegotiation, borrowings under the
Credit Facility will bear interest at the London
interbank borrowing rate (LIBOR) plus .4375% or at other
variable rates set forth therein. This pricing
represents a reduction of .0625% over the prior pricing.
In addition, the facility fee paid on the banks'
commitment under the Credit Facility, whether used or
unused, was reduced by .075% to .175%. For additional
information about the Credit Facility, see Note 8 of
Notes to Consolidated Financial Statements included in
Item 8 in Part II of this report.
The Credit Facility provides that the interest rate
margin over LIBOR declines as the Corporation's leverage
ratio improves. Effective January 1, 1995, the interest
rate margin over LIBOR declined by .1125% to .325% as a
result of improvements in the Corporation's leverage
ratio as of December 31, 1994. The interest rate margin
over LIBOR, which cannot exceed .4375%, is determined
quarterly based upon the leverage ratio at that time.
During 1994, the Corporation filed a shelf
registration statement with the Securities and Exchange
Commission to issue up to $500 million in debt
securities, which may consist of debentures, notes, or
other unsecured evidences of indebtedness. These debt
securities (the Medium Term Notes) may be offered in
separate series in amounts, at prices, and on terms to
be determined by market conditions at the time of sale.
The net proceeds from the sale of the Medium Term Notes
will be available for general corporate purposes, which
may include, but are not limited to, refinancing of
indebtedness, working capital, and capital expenditures.
During 1994, the Corporation issued $151.8 million
aggregate principal amount of the Medium Term Notes
under this shelf registration statement. During the
period from January 1, 1995, through February 9, 1995,
the Corporation issued an additional $85 million
aggregate principal amount of the Medium Term Notes.
For additional information about the shelf registration
statement, see Note 8 of Notes to Consolidated Financial
Statements included in Item 8 of Part II.
On March 2, 1995, the Corporation announced that it
has agreed to sell PRC Realty Systems, Inc., a real
estate listing technology business based in McLean,
Virginia, to News Holdings Corp. for approximately $60
million. PRC Realty Systems, Inc., was a component of
the Commercial Systems Group (CSG) of the Corporation's
Information Technology and Services segment (PRC). In
fiscal year 1994, PRC Realty Systems' revenues
represented less than 8% of PRC's total revenues.
(b) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The Corporation operates in three business segments:
Consumer and Home Improvement Products, including
consumer and professional power tools and accessories,
household products, security hardware, outdoor products
(composed of electric lawn and garden tools and
recreational products), plumbing products, and product
service; Commercial and Industrial Products, including
fastening systems and glass container-making equipment;
and Information Technology and Services (formerly, the
Information Systems and Services segment), including
government and commercial information systems
development, consulting, and other related contract
services. See Note 15 of Notes to Consolidated
Financial Statements included in Item 8 of Part II, and
Management's Discussion and Analysis of Financial
Condition and Results of Operations included in Item 7
of Part II of this report.
Revenues by product group within business segments
are presented in the following table.
1994 Revenues by Product Group within Business Segments
(Millions of Dollars)
Year Ended
December 31, 1994
Amount %
Consumer and Home Improvement Products
Power Tools and Product Service $1,632.1 31%
Household Products 745.2 14
Security Hardware 511.7 10
Accessories 356.3 7
Outdoor Products 310.9 6
Plumbing Products 217.6 4
Total Consumer and
Home Improvement Products $3,773.8 72%
Commercial and Industrial Products $ 591.4 11%
Information Technology and Services $ 883.1 17%
Total Consolidated Revenues $5,248.3 100%
There is no single class of product within the product
groups listed in the above table that represents more
than 10% of the Corporation's total consolidated
revenues. Approximately 84% of revenues in the
Information Technology and Services segment are
generated from contracts with various agencies of the
United States government. These revenues represent
approximately 14% of the Corporation's total
consolidated revenues. The loss of eligibility to
contract with the United States government would have a
material adverse effect on the Corporation. Reference
is made to the discussion under the caption "Information
Technology and Services Segment" for additional
information.
(c) NARRATIVE DESCRIPTION OF THE BUSINESS
The following is a brief description of each of the
business segments.
CONSUMER AND HOME IMPROVEMENT PRODUCTS SEGMENT
The Consumer and Home Improvement Products segment is
composed of consumer (home use) and professional power
tools and accessories, household products, security
hardware, outdoor products (composed of lawn and garden
power tools and recreational products), plumbing
products, and product service. Power tools include both
corded and cordless electric power tools, such as
drills, screwdrivers, saws, sanders, grinders, car
polishers and vacuums, Workmate workcenters, bench and
stationary tools, and a wide variety of related tools.
Accessories include accessories and attachments for
power tools, and a variety of consumer-use fastening
products, including gluing, stapling and riveting
products. Household products include a variety of both
corded and cordless small home appliances including
hand-held vacuums, irons, mixers, food processors and
choppers, can openers, blenders, coffeemakers, kettles,
toaster ovens, wafflebakers, knives, lighting products,
breadmakers, fans, and heaters. Security hardware
includes both residential and commercial door hardware,
including locksets, deadbolts, door closers, hinges and
exit devices, and master keying systems. Outdoor products
include a variety of both corded and cordless electric
lawn and garden care products, such as hedge and grass
trimmers, lawn edgers, mowers, blower vacuums,
shredders, chain saws, grass shears, and other similar
products. Outdoor recreational products include a
variety of steel and composite golf club shafts, as well
as chromoly steel, aluminum and composite tubing for
bicycle frames, and other specialty applications.
Plumbing products include a variety of conventional and
decorative faucets, shower valves, and bath accessories.
Power tools, household products, electric outdoor
products, and related accessories are marketed around
the world under the Black & Decker name as well as
other trademarks and trade names, including DeWalt,
Elu, Black & Decker Quantum, ProLine, Univolt,
Kodiak, Quattro, Workmate, Dustbuster, the
SnakeLight flexible flashlight, The Automatic Shut-Off
iron, the SurgeExpress iron, the Spacemaker Optima
line of under-the-cabinet kitchen appliances, and the
HandySeries of kitchen appliances. The security
hardware products are marketed under a variety of
trademarks and trade names including Kwikset, Lane,
Titan, NEMEF, DOM, and Corbin Co. The outdoor
recreational products are marketed under the trademarks
and trade names True Temper, Dynamic, Dynamic Gold,
Dynalite Gold, Gold Plus, TT Lite, EI-70, and
others. Plumbing products are marketed under the
trademarks and trade names Price Pfister, Genesis,
Verve, Windsor, Jet Setter, and others.
The Corporation's product service program supports
its power tools, electric outdoor products, and
household products businesses. Replacement parts and
product repair services are available through a network
of company-operated service centers, which are
identified and listed in product information material
generally included in product packaging. At
December 31, 1994, there were several hundred such
service centers, of which over one-half were located in
the United States. The remainder were located around
the world, primarily in Europe, Mexico, Australia,
Canada, and Latin America. These company-operated
service centers are supplemented by several hundred
authorized service centers operated by independent local
owners. The Corporation also operates a reconditioning
center in which power tools and small household
appliances are reconditioned and then re-sold through
numerous company-operated factory outlets and service
centers.
Most of the Corporation's consumer products sold in
the United States carry a two-year warranty, whereby the
consumer can return defective products during the two
years following the purchase in exchange for a
replacement product or repair at no cost to the
consumer. Consumer products sold outside the United
States generally have similar warranty arrangements.
Such arrangements vary, however, depending upon local
market conditions and laws and regulations.
The Corporation's product offerings in the Consumer
and Home Improvement Products segment are sold primarily
to retailers, wholesalers, distributors, and jobbers,
although some reconditioned power tools and household
products are sold through company-operated service
centers and factory outlets directly to end users.
Certain security hardware products are sold to
commercial, institutional, and industrial customers.
The principal materials used in the manufacturing
of products in the Consumer and Home Improvement
Products segment are plastics, aluminum, copper, steel,
bronze, zinc, brass, certain electronic components, and
batteries. These materials are used in various forms,
depending on the specific product. For example,
aluminum or steel may be used in wire, sheet, bar, and
strip stock form.
The materials used in the various manufacturing
processes are purchased on the open market, and the
majority are available through multiple sources and are
in adequate supply. The Corporation has experienced no
material work stoppages to date as a result of
shortages of materials. The Corporation has certain
long-term commitments for the purchase of various
component parts and raw materials and believes that it
is unlikely that any of these agreements would be
terminated prematurely. Alternate sources of supply at
competitive prices are available for most, if not all,
materials for which long-term commitments exist. The
Corporation believes that the termination of any of
these commitments would not have a material adverse
effect on operations. From time to time, the
Corporation enters into commodity hedges on certain raw
materials used in the manufacturing process to reduce
the risk of market price fluctuations. As of December
31, 1994, the amount of product under commodity hedges
was not material to the Corporation.
As a global marketer and manufacturer, the
Corporation purchases materials and supplies from
suppliers in many different countries around the world.
Certain of the finished products and component parts are
purchased from suppliers that have manufacturing
operations in mainland China. China has been granted
Most Favored Nation (MFN) status through July 3, 1995,
and currently there are no significant trade
restrictions or tariffs imposed on such products. The
Corporation has investigated alternate sources of supply
in case the MFN status is not extended. Alternative
sources of supply are available, or can be developed,
for many of these products. The Corporation believes
that, although there could be some disruption in the
supply of certain of these finished products and
component parts if China's MFN status is not extended or
if significant trade restrictions or tariffs are
imposed, the impact would not have a material adverse
effect on the operating results of the Corporation.
Principal manufacturing and assembly facilities in
the United States are located in Tarboro, Fayetteville,
and Asheboro, North Carolina; Easton and Hampstead,
Maryland; Anaheim and Pacoima, California; Denison,
Texas; Amory and Olive Branch, Mississippi; and Bristow,
Oklahoma. Subsequent to December 31, 1994, the
Corporation announced its intention to close its
manufacturing facility located in Tarboro, North
Carolina, by June 1996. This plant closure is part of
the Corporation's continuing effort to identify
opportunities to improve its manufacturing cost
structure.
Principal facilities outside the United States are
located in Buchlberg and Bruhl, Germany; Molteno and
Perugia, Italy; Spennymoor, Meadowfield, and Rotherham,
England; Delemont, Switzerland; Brockville, Canada;
Queretaro, Mexico; Santo Andre, Brazil; Jurong Town,
Singapore; Kuantan, Malaysia; Newcastle, Australia; and
Apeldoorn, Netherlands. For additional information with
respect to these and other properties owned or leased by
the Corporation, see Item 2, "Properties."
The Corporation holds various patents and licenses
on many of its products and processes in the Consumer
and Home Improvement Products segment. Although these
patents and licenses are important, the Corporation is
not materially dependent on such patents or licenses
with respect to its operations.
The Corporation holds various trademarks that are
employed in its businesses and operates under various
trade names, some of which are stated above. The
Corporation believes that these trademarks and trade
names are important to the marketing and distribution of
its products.
A significant portion of the Corporation's revenues
in the Consumer and Home Improvement Products segment is
derived from the do-it-yourself and home modernization
markets, which generally are not seasonal in nature.
However, sales of household products and certain
consumer power tools tend to be higher during the period
immediately preceding the Christmas gift-giving season,
while the sales of most electric lawn and garden tools
are at their peak during the winter and early spring
period. Most of the Corporation's other product lines
within this segment are not generally seasonal in nature
but may be influenced by trends in the residential and
commercial construction markets and other general
economic trends.
The Corporation is one of the world's leaders in
the manufacturing and marketing of portable power tools,
small household appliances, electric lawn and garden
tools, security hardware, plumbing products, and
accessories. Worldwide, the markets in which the
Corporation sells these products are highly competitive
on the basis of price, quality, and after-sale service.
A number of competing domestic and foreign companies are
strong, well-established manufacturers that compete on a
global basis. Some of these companies manufacture
products that are competitive with a number of the
Corporation's product lines. Other competitors restrict
their operations to fewer categories, and some offer
only a narrow range of competitive products.
Competition from certain of these manufacturers has been
intense in recent years and is expected to continue.
COMMERCIAL AND INDUSTRIAL PRODUCTS SEGMENT
The Corporation's fastening systems business
manufactures an extensive line of fasteners and tools
for commercial applications, including blind rivets,
riveting tools, threaded inserts, stud welding systems,
specialty metal and plastic fasteners for the automotive
industry, plastic automotive components, self-tapping
and self-drilling screws, and lock nuts in a wide
variety of metals and other materials, types, and
finishes. The fastening systems products are marketed
under the trademarks and trade names Emhart, POP,
Parker-Kalon, Parabolt, Warren, Gripco, HeliCoil,
Dodge, Tucker, and others.
The principal markets for these products include
the automotive, transportation, construction,
electronics, aerospace, machine tool, and appliance
industries. Substantial sales are made to automotive
manufacturers worldwide. Some of these products also
are sold through the Corporation's Consumer and Home
Improvement Products segment.
Products are marketed directly to customers and
also through distributors and representatives. These
products face competition from many manufacturers in
several countries. Product quality, performance,
reliability, price, delivery, and technical and
application engineering services are the primary
competitive factors. Except for sales to automotive
manufacturers, which historically schedule plant
shutdowns during July and August of each year, there is
little seasonal variation.
The Corporation owns a number of United States and
foreign patents, trademarks, and license rights relating
to the fastening systems business. While the
Corporation considers those patents, trademarks, and
license rights to be valuable, the Corporation is not
materially dependent upon such patents or license rights
with respect to its operations.
Principal manufacturing facilities for the
fastening systems business in the United States are
located in Danbury and Shelton, Connecticut; South
Whitley and Montpelier, Indiana; Campbellsville and
Hopkinsville, Kentucky; and Mt. Clemens, Michigan.
Principal facilities outside the United States are
located in Birmingham, England; Giessen, Germany; and
Toyohashi, Japan. For additional information with
respect to these and other properties owned or leased by
the Corporation, see Item 2, "Properties."
The raw materials used in the fastening systems
business consist primarily of ferrous and nonferrous
metals in the form of wire, bar stock, strip and sheet
metals, chemical compounds, plastics, and rubber. These
materials are readily available from a number of
suppliers.
The Corporation manufactures a variety of
automatic, high-speed machines for the glass container-
making industry, including machines for supplying molten
glass for the forming process and for manufacturing of a
full range of glass containers, electronic control
systems for controlling glass container machine
functions, and electronic inspection equipment for
monitoring quality levels. These machines are used in
producing bottles, jars, tumblers, and other glass
containers primarily for food, beverage, pharmaceutical,
and household products packaging. The Corporation also
provides replacement parts and a variety of engineering,
repairing, rebuilding, and other services to the glass
container-making industry throughout the world, and
these activities generate nearly two-thirds of the sales
in this business. These products and services are
marketed principally under the trademarks and trade
names Emhart and Powers.
The Corporation sells glass container-making
machinery and replacement parts primarily through its
own sales force directly to glass container
manufacturers throughout the world. The business is not
dependent on one or a few customers, the loss of which
would have a material adverse effect on operating
results of the business.
Some domestic manufacturers and a number of foreign
manufacturers compete with the Corporation in the
manufacture and sale of various types of glass
container-making equipment. However, the Corporation
believes that it is the leading supplier and offers the
most complete line of glass container-making and
inspection machinery, parts, and service. In recent
years, the glass container-making equipment business has
experienced the effects of increased competition with
packaging applications of plastic and other non-glass
containers. Important competitive factors are price,
technological and machine performance features, product
reliability, and technical and application engineering
services. There is little seasonal variation in this
business.
The Corporation owns a number of United States and
foreign patents, trademarks, and license rights relating
to the glass container-making business. While the
Corporation considers those patents, trademarks, and
license rights to be valuable, this business is not
materially dependent upon such patents or license rights
with respect to its operations.
The principal glass container-making equipment
manufacturing facility in the United States is located
in Windsor, Connecticut. Principal manufacturing
facilities outside the United States are located in
Orebro and Sundsvall, Sweden. For additional
information with respect to these and other properties
owned or leased by the Corporation, see Item 2,
"Properties."
The principal raw materials required for the glass
container-making equipment business are steel, iron,
copper and copper-based materials, aluminum and
refractory materials, and electronic components.
Manufactured parts are purchased from a number of
suppliers. All such materials and components are
generally available in adequate quantities.
During 1992, the Corporation commenced a
restructuring plan which included the reorganization of
Dynapert, the Corporation's printed circuit board
assembly equipment business. The business was divided
into the through-hole and surface-mount machinery
product lines. This restructuring plan included the
withdrawal from the manufacturing of surface-mount
machinery in Europe and was completed in 1993. Also
during 1993, the Corporation sold the remaining through-
hole business.
INFORMATION TECHNOLOGY AND SERVICES SEGMENT
The Information Technology and Services segment,
incorporated as PRC Inc. (PRC), is headquartered in
McLean, Virginia. PRC is a diversified information
technology company that designs, develops, integrates,
and supports computer-based systems which handle and
process information. PRC supplies business-oriented
information and other computer-based systems and
provides systems integration, systems engineering,
software development, and other professional services.
Its systems and services are designed to enable
government and commercial customers to improve workforce
productivity, increase the quality and value of their
products, and gain operational and competitive
advantages. PRC conducts its business through three
operating units, the Federal Systems Group (FSG), the
Environmental Management Group (EMG), and the Commercial
Systems Group (CSG).
FSG principally provides business-oriented systems
and services and systems and services related to
command, control, communications, intelligence,
aerospace, and space operations to the United States
government. EMG provides environmental engineering and
consulting services, including risk and environmental
impact assessments, environmental compliance
evaluations, and other specialized consulting services,
primarily to the United States government and to state
and local governments. CSG provides systems and
services to commercial customers and state and local
governments. CSG is the leading provider of on-line and
printed residential real estate multiple listing systems
and services and of computer-aided emergency dispatch
systems. (For information regarding the Corporation's
announcement, subsequent to December 31, 1994, that it
has agreed to sell CSG's realty systems business, see
Item 1(a), General Development of Business, included in
Part I of this report.)
Substantially all of PRC's government business is
conducted under the terms of contractual agreements
between PRC and various government agencies. Of the
total revenues from federal government business in 1994,
approximately 69% was derived from cost-plus contracts
and time and materials contracts, and the remainder from
fixed-price contracts. PRC's employees prepare contract
proposals and conduct contract negotiations directly
rather than through agents or other third parties.
Cost-plus-fixed-fee contracts generally provide for
the reimbursement of costs, to the extent that such
costs are allowable and allocable under government
guidelines and regulations, and the payment of a fixed
fee. Cost-plus-award-fee contracts generally provide
for the reimbursement of costs with a base fee and an
additional fee that is based upon a periodic evaluation
of the contractor's performance against specified
criteria. Under time and materials contracts, the
contractor agrees to provide certain categories of labor
that satisfy established education and experience
qualifications at a fixed hourly rate. To the extent
that a contractor's costs differ from the fixed hourly
rate, the contractor realizes the benefit or detriment
resulting from decreases or increases in the cost of
performing the work. Under firm fixed-price contracts,
the contractor agrees to perform certain work for a
fixed price and, accordingly, realizes the benefit or
detriment resulting from decreases or increases in the
cost of performing the work. Losses on fixed-price
government contracts, particularly on fixed-price
development contracts, are not unusual in the government
contracting business and represent an ongoing risk.
Fixed-price-incentive contracts are fixed-price
contracts that generally provide for the adjustment of
profits and the establishment of final contract prices
by a formula based on the relationship that a contract's
actual total cost bears to its targeted total cost.
Factors affecting incentive compensation under a fixed-
price incentive contract, in addition to cost, may
include reliability, delivery schedule, and performance.
Similar to firm fixed-price contracts, the contractor on
fixed-price incentive contracts bears the risk for all
costs in excess of the ceiling price.
PRC holds licenses, copyrights, trademarks, and
other proprietary technologies that are used in its
systems, services, and products. Although these
intellectual property rights in the aggregate are
critical to the performance by PRC of its contracts, PRC
believes that no single license, copyright, patent,
patent application, trademark, or other proprietary
technology is material to its business. This business
generally does not involve the acquisition of raw
materials or other commodities where scarcity is a
factor. Under the terms of substantially all contracts,
revenues earned (less normal retentions) may be billed
as work progresses or upon completion of stipulated
stages of the work. Although normal retentions may
require in excess of one year for collection, there are
no material receivables that are subject to extended
payment terms.
Because a majority of PRC's business is with the
United States government, loss of eligibility to
contract with the government would have a material
adverse effect on the Corporation. Such a condition
would result from debarment proceedings in the event
that PRC was determined by the government to be guilty
of serious wrongdoing in the acquisition or conduct of
its business.
Government contracts are, by their terms, subject
to termination by the government for its convenience or
due to default by the contractor. Upon termination of
cost-plus contracts, the contractor generally is
entitled to reimbursement of its allowable costs, and,
if the termination is for the convenience of the
government, a total fee proportionate to the percentage
of the work completed under the contract. Fixed-price
contracts provide for payment upon termination for items
delivered to and accepted by the government, and, if the
termination is for the convenience of the government,
payment of the contractor's costs incurred plus the
costs of settling and paying claims by terminated
subcontractors, other settlement expenses, and a
reasonable profit on the costs incurred, subject to a
proportionate adjustment of cost and profit if the
contract would have resulted in a loss to the
contractor. If a fixed-price contract termination is
for default, however, the government is not obligated to
accept any products or services and is not liable for
the contractor's costs with respect to unaccepted items,
and the contractor may be liable for excess costs
incurred by the government in procuring undelivered
items from another source. Loss or termination of one
or more large government contracts could have a material
adverse effect on PRC. During the three years ended
December 31, 1994, PRC has not experienced any such loss
or termination that had a material adverse effect upon
its operations.
Many of PRC's government contracts contain base
periods of one or more years, as well as one or more
option periods that may cover more than half of the
potential contract duration. The government generally
has the right not to exercise option periods, and its
failure to exercise option periods could curtail the
contract term of certain contracts held by PRC. Some of
PRC's government contracts are indefinite-quantity,
indefinite-delivery contracts. Under those contracts,
the government is only obligated to purchase the minimum
guaranteed amount set forth in the contract. Actual
quantities ordered by the government will depend on
government needs during the contract term and individual
orders placed under the contract.
Approximately 55% of PRC's 1994 revenues were from
contracts within the United States Department of
Defense. Defense expenditures by the government have
been decreasing and are expected to continue to decrease
as a result of budgetary constraints. These reductions
may affect the ability of PRC to obtain new defense
contracts and could cause defense agencies to exercise
their right to terminate existing contracts for
convenience or not to exercise options thereunder. The
United States Congress could also reduce or discontinue
appropriations for existing multi-year contracts.
The businesses in which PRC operates are highly
competitive. The number and size of competitors vary
among operating groups and within the individual
divisions of each group. Frequently, the number and
identity of competitors may vary even from program to
program, as PRC and its primary competitors attempt to
evaluate the likelihood of success on specific contract
procurements after consideration of the time commitment
and costs associated with submitting contract bids. The
Corporation believes that the principal competitive
factors in the markets served by PRC are technical
knowledge and capability, market understanding,
management expertise and support, reputation and
reliability, price, and financial condition. In
addition, the nature of PRC's business makes it
essential to attract and retain large numbers of highly
trained professional and technical employees, including
employees with security clearances. The competition for
these employees is intense.
Many of PRC's competitors are, or are controlled
by, companies that are significantly larger and have
greater financial resources than PRC and the
Corporation. Some of these competitors are a part of
the defense business of large, diversified companies
that have access to the financial resources of their
parent companies. In addition, as the level of
expenditures in the defense industry declines, it is
anticipated that a number of traditional weapons systems
and defense hardware suppliers that have not been
significant competitors of PRC in the past will increase
the level of competitive activity.
The principal facilities, which are leased, are
located in McLean and Reston, Virginia, and are
primarily used as headquarters and administrative
offices for PRC. PRC also leases additional office
space at numerous strategic locations around the country
and three facilities used to print various materials
primarily related to the real estate multiple listing
service. (For information regarding the Corporation's
announcement, subsequent to December 31, 1994, that it
has agreed to sell its realty systems business, see Item
1(a), General Development of Business, included in Part
I of this report.)
BACKLOG
The following is a summary of total backlog by
business segment as of the referenced dates.
(Millions of Dollars) Dec. 31, Dec. 31,
1994 1993
Consumer and Home Improvement
Products $ 103 $ 74
Commercial and Industrial
Products 111 84
Information Technology and Services 2,281 2,059
Total Backlog $2,495 $2,217
The amounts for the Information Technology and
Services segment include backlog of approximately $1.5
billion and $1.3 billion at December 31, 1994 and
December 31, 1993, respectively, relating to government
contracts that have been awarded and signed, but not
funded. None of the other backlog at December 31, 1994,
or at December 31, 1993, included unfunded amounts.
Unfunded backlog is dependent upon future appropriations
by the United States Congress and allocation of
appropriated funds by various government contracting
agencies. The amount of total backlog not expected to
be filled within one year was $1.5 billion at
December 31, 1994, all of which relates to the
Information Technology and Services segment.
OTHER INFORMATION
The Corporation's product development program in
the United States for the Consumer and Home Improvement
Products segment is coordinated from the Corporation's
headquarters in Towson, Maryland, for power tools; from
Shelton, Connecticut, for household products; from
Anaheim, California, for residential security hardware;
and from Pacoima, California, for plumbing products.
Outside the United States, product development
activities for power tools and household products are
coordinated from Slough, England, and are carried on at
facilities in Spennymoor, England; Brockville, Canada;
Civate, Italy; Idstein, Germany; and Newcastle,
Australia.
Product development activities for the Commercial
and Industrial Products segment are currently carried on
at various product or business group headquarters or at
principal manufacturing locations as previously noted.
Costs associated with development of new products
and changes to existing products are charged to
operations as incurred. See Note 1 of Notes to
Consolidated Financial Statements included in Item 8 of
Part II of this report for amounts of expenditures for
product development activities.
As of December 31, 1994, the Corporation employed
approximately 35,800 persons worldwide. Approximately
2,600 employees in the United States are covered by
collective bargaining agreements. During 1994, several
collective bargaining agreements in the United States
were negotiated without material disruption to
operations. A number of other agreements are scheduled
for negotiation during 1995. Also, the Corporation has
government-mandated collective bargaining arrangements
or union contracts with employees in other countries.
The Corporation's operations have not been affected
significantly by work stoppages and, in the opinion of
management, employee relations are good.
The Corporation's operations worldwide are subject
to certain foreign, federal, state, and local
environmental laws and regulations. In recent years,
many state and local governments have enacted laws and
regulations that govern the labeling and packaging of
products and limit the sale of products containing
certain materials deemed to be environmentally
sensitive. These laws and regulations not only limit
the acceptable methods for disposal of products and
components that contain certain substances, but also
require that products be designed in a manner to permit
easy recycling or proper disposal of environmentally
sensitive components such as nickel cadmium batteries.
The Corporation is in substantial compliance with these
laws and regulations. Although compliance involves
continuing costs, it has not materially increased
capital expenditures and has not had a material adverse
effect on the Corporation.
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 by the EPA or state authorities 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. As of December 31,
1994, the Corporation had been identified as a
potentially responsible party (PRP) in connection with
approximately 33 sites being investigated by federal or
state agencies 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,
when appropriate, management has undertaken, among other
things, 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 to be adopted at various sites and
facilities, and the fact that imposition of joint and
several liability with the right of contribution is
possible under CERCLA, 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, appropriate liability accruals
have been established by the Corporation. As of
December 31, 1994, the Corporation's aggregate probable
exposure with respect of environmental liabilities, for
which accruals have been established in the consolidated
financial statements, was $75 million. With respect to
environmental liabilities, unless otherwise noted below,
the Corporation does not believe that its liability with
respect to any individual site will exceed $10 million.
The EPA has included on the NPL a site designated
as the Old Springfield Landfill in Springfield, Vermont
(the "Springfield Site"). By letters dated January 6,
1984, and April 17, 1987, the EPA advised Fellows
Corporation ("Fellows"), a former subsidiary of Emhart,
of its investigation of the circumstances surrounding
the contamination of the Springfield Site and of
Fellows' status as a PRP under CERCLA with respect to
conditions at the Springfield Site.
Emhart, along with three other PRPs, contracted
with an environmental consultant for performance of its
remaining obligations under two preliminary consent
decrees regarding remediation at the Springfield Site.
At this time, remedial construction is complete, and the
town of Springfield has agreed to perform the operation,
maintenance, and monitoring of the treatment system.
Emhart's remaining obligations are estimated at less
than $1.0 million.
Pursuant to the terms of the Corporation's
agreement to sell the Bostik chemical adhesives business
to Orkem S.A., the Corporation agreed to indemnify Orkem
against costs incurred or claims made with respect to
environmental matters at Bostik facilities within four
years from the date of sale to the extent that the
aggregate costs and claims exceeds $5.0 million;
provided, however, that the Corporation's total
liability to Orkem for all environmental matters with
respect to Bostik facilities shall not exceed $10.0
million. By letter dated November 22, 1993, Orkem's
successor in interest notified the Corporation that
within the four-year period following the closing it had
incurred costs of approximately $5.4 million and
demanded payment of the amount in excess of $5.0
million. Orkem's successor in interest also demanded
indemnification for a number of environmental conditions
identified in its letter, the cost of which it estimated
would exceed the $10.0 million limitation of the
Corporation's indemnification obligation. The
Corporation has insufficient information concerning the
claims of Orkem's successor to assess the validity of
the claims and so notified Orkem's successor by letter
dated December 8, 1993. Representatives of the
Corporation and Orkem's successor are in the process of
reviewing the claims.
Emhart received a notice of responsibility from the
Massachusetts Department of Environmental Protection for
the 90-acre site of the former United Shoe Machinery
business at Beverly, Massachusetts. The site has been
classified a non-priority site, with a waiver of
approvals allowed. An investigation of contamination
has been completed, and a remediation plan has been
proposed (estimated at $1.0 million) under the
Massachusetts Contingency Plan.
In or about 1985, as a consequence of
investigations stemming from an underground storage tank
leak from a nearby gas station, the Corporation
discovered certain groundwater contamination at its
facility located in Hampstead, Maryland. Upon discovery
of the groundwater contamination, the Corporation, in
cooperation with the Department of the Environment of
the State of Maryland, embarked on a program to
remediate groundwater contamination, including
installation of an air stripping system designed to
remove contaminants from groundwater. The Corporation,
in cooperation with the Department of the Environment of
the State of Maryland, conducted extensive
investigations as to potential sources of the
groundwater contamination. Following submission of the
results of its investigations to the Department of the
Environment of the State of Maryland, the Corporation
proposed to expand its groundwater remediation system
and also proposed to excavate and remediate soils in the
vicinity of the plant that appear to be a source area
for certain contamination. The Corporation has received
all permits necessary to operate its expanded
groundwater treatment facility at the Hampstead
facility, and the system is fully operational.
In October 1994, suit was filed in the United
States District Court for the District of Maryland
against the Corporation by the owners of a farm that is
adjacent to the Hampstead facility (Leister et al. v.
The Black & Decker Corporation (Civil Action No. JFM 94-
2809)). Plaintiffs claim that groundwater
contamination, allegedly emanating from the facility,
has migrated in groundwater and has adversely affected
plaintiffs' property. Plaintiffs have alleged various
claims for relief, including causes of action under the
Federal Resource Conservation and Recovery Act, CERCLA,
and the Clean Water Act, as well as various state tort
claims, including claims for negligence, nuisance,
intentional misrepresentation, and negligent
misrepresentation. Plaintiffs seek various forms of
relief, including compensatory damages of $20 million
and punitive damages of $100 million. The Corporation
believes that plaintiffs' claims are without merit and
intends to defend vigorously against the allegations
made in this matter. Management is of the opinion that
the ultimate resolution of this matter will not have a
material adverse effect on the Corporation.
In October 1992, the Corporation's Price Pfister
subsidiary received a 60-day notice of intent to file
suit under California's Proposition 65 from the Natural
Resources Defense Council (NRDC) and the Environmental
Law Foundation (ELF), alleging improper warnings and
discharge of lead into drinking water in California. On
December 15, 1992, Price Pfister and numerous other
plumbing manufacturers were sued by the State of
California in the Superior Court for the City and County
of San Francisco. On the same day, a separate suit was
filed by the NRDC and the ELF. The suits filed by the
State of California and the NRDC and the ELF include
substantially the same allegations, namely that lead
leaches from brass faucets into tap water in violation
of California's lead discharge prohibitions of
Proposition 65, that the manufacture and sale of brass
faucets exposes individuals to lead without a proper
"clear and reasonable warning," and that such violations
of Proposition 65 also constitute unfair business
practices under California law. The NRDC and the ELF
suit also alleges breach of warranty and breach of
contract claims against Price Pfister and the other
plumbing manufacturers. The State of California and the
NRDC and the ELF generally seek the following relief:
(a) elimination of lead from brass faucets; (b) improved
public disclosure programs regarding lead in brass
faucets; (c) commencement of a public information
campaign regarding alleged health risks arising from
lead exposure; (d) restitution to purchasers of faucets;
(e) statutory penalties and punitive damages in unstated
amounts; and (f) attorneys' fees and other costs. Price
Pfister has joined in a common defense group with other
manufacturers in response to these suits.
Subsequent to the filing of their complaints,
plaintiffs filed a motion for a preliminary injunction
seeking to require Price Pfister and certain other
defendants to provide specific warning language in a
particular manner with faucets at the time of sale.
Plaintiff's motion for a preliminary injunction was
denied, and the trial court accepted defendants'
proposed warning system. Defendants have filed
demurrers to the State of California's claim that brass
faucets result in a "prohibited discharge" of lead into
drinking water under California law and to the standing
of the NRDC and the ELF to bring their claims.
In May 1994, Judge Bea of the California Superior
Court for the City and County of San Francisco issued an
order rejecting the Attorney General's claims that lead
which leaches from faucets constitutes a prohibited
discharge of lead into water or onto or into land where
lead will pass or is at least likely to pass into a
source of drinking water. Judge Bea's order granted the
Attorney General 20 days to amend his complaint to state
a cause of action under Proposition 65. In the
companion case involving similar claims by the NRDC and
the ELF, Judge Cahill of the California Superior Court
for the City and County of San Francisco denied
defendants' challenges to the standing of the NRDC and
the ELF to bring these claims and refused to stay the
proceedings pending resolution of the claims by the
Attorney General. Subsequent to Judge Bea's order
rejecting the Attorney General's claims and granting the
Attorney General 20 days to amend his complaint to state
a cause of action under Proposition 65, the Attorney
General filed an appeal of Judge Bea's order. The
Attorney General's appeal is still pending.
As disclosed in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1992, on or
about July 29, 1992, the Corporation initiated a lawsuit
in the United States District Court for the Western
District of New York against General Electric Company as
a consequence of General Electric's notice to the
Corporation that it intended to discontinue certain
groundwater remediation activities at a former
manufacturing facility located in Brockport, New York.
General Electric subsequently answered the Corporation's
complaint and counterclaimed alleging that it no longer
had responsibility to address environmental conditions
at the Brockport facility. The Corporation and General
Electric have settled this matter, and both companies
are working together to address the environmental
conditions at the Brockport facility.
In 1988, J.C. Rhodes, a former subsidiary of Emhart
Industries, Inc., was notified by both the EPA and the
State of Massachusetts that it was considered a PRP with
regard to the Sullivan's Ledge site in New Bedford,
Massachusetts. Emhart and 11 other companies formed a
PRP group to respond to the EPA's and Massachusetts'
demands, and, in September 1990, executed a Consent
Order to perform the remedial action recommended by the
EPA in its Record of Decision. The remedial action is
now underway.
A second area of the Sullivan's Ledge site, known
as Middle Marsh, was investigated by the EPA, and a
Record of Decision was issued in September 1991. In
September 1992, Emhart, 11 other companies, and the City
of New Bedford, Massachusetts, executed a Consent Order
to perform the remediation required in the Middle Marsh
section of the site. At this time, Emhart's estimated
liability for remediation cost at the Sullivan's Ledge
site is estimated at $3.0 million.
Emhart has submitted claims to several of its
insurance carriers regarding costs incurred with respect
to the Springfield Site and a number of other sites in
which Emhart has incurred or is likely to incur
liability for the clean-up of hazardous wastes. These
claims were rejected by each of the insurers, and Emhart
subsequently filed suit against the insurers seeking a
declaration that the policies covered these liabilities
and potential liabilities and an award of these costs.
The claims have been settled with a number of Emhart's
insurance carriers, and settlement of the remaining
carriers' claims is currently under discussion.
The Corporation has been investigating certain
environmental matters at the NEMEF security hardware
facility in the Netherlands. The NEMEF facility has
been a manufacturing operation since 1921. During
building construction in 1990, soil and groundwater
contamination was discovered on the property.
Investigations to understand the full extent of the
contamination were undertaken at that time, and those
investigations are continuing. The Corporation has been
working with consultants and local authorities to
develop a comprehensive remediation plan in conjunction
with neighboring property owners. It is anticipated
that a remediation plan will be presented to the local
authorities in the Netherlands within the next 12
months.
In the opinion of management, the costs of
compliance with respect to matters set forth above and
other remedial costs have been adequately accrued, and
the ultimate resolution of these matters will not have a
material adverse effect on the Corporation. The ongoing
costs of compliance with existing environmental laws and
regulations have not had, nor are they expected to have,
a material adverse effect upon the Corporation's capital
expenditures or financial position.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND
DOMESTIC OPERATIONS
Reference is made to Note 15 of Notes to Consolidated
Financial Statements, entitled Business Segment and
Geographic Areas, included in Item 8 of Part II and to
the section entitled Business Segments in Management's
Discussion and Analysis of Financial Condition and
Results of Operations included in Item 7 of Part II of
this report.
(e) EXECUTIVE OFFICERS AND OTHER SENIOR OFFICERS
OF THE CORPORATION
The current Executive Officers and Other Senior Officers
of the Corporation, their ages, current offices or
positions, and their business experience during the past
five years is set forth below.
Nolan D. Archibald - 51
Chairman, President, and Chief Executive Officer,
January 1990 - present;
President and Chief Executive Officer,
May 1989 - January 1990;
Chairman, President, and Chief Executive Officer,
December 1986 - May 1989.
Raymond A. DeVita - 58
Executive Vice President and President -
Commercial and Industrial Group,
May 1989 - present;
Executive Vice President and President -
Industrial Sector, Emhart Corporation,
October 1988 - May 1989.
Dennis G. Heiner - 51
Executive Vice President and President -
Security Hardware Group,
January 1992 - present;
Executive Vice President and President -
Household Products Group,
May 1989 - January 1992;
Senior Vice President and President -
Household Products Group,
April 1986 - May 1989.
Gary T. DiCamillo - 44
Group Vice President and President -
Power Tools and Accessories,
September 1993 - present;
Group Vice President and President - North American
Power Tools,
March 1993 - September 1993;
Vice President and President - U.S. Power Tools,
May 1988 - March 1993.
Don R. Graber - 51
Group Vice President and President - Household
Products, July 1994 - present;
Group Vice President and President - International,
March 1993 - July 1994;
Vice President and President - International,
February 1992 - March 1993;
President - Black & Decker Canada,
September 1988 - February 1992.
Roger H. Thomas - 52
Group Vice President and President - Eastern
Hemisphere, April 1994 - present;
Group Vice President and President - Europe,
May 1989 - April 1994;
Group Vice President - Europe,
May 1987 - May 1989.
James J. Leto - 51
President and Chief Executive Officer, PRC Inc.,
January 1993 - present;
Executive Vice President and Acting General Manager,
PRC Inc.,
September 1992 - January 1993;
Senior Vice President and General Manager,
Engineering Technologies Group, PRC Inc.,
March 1992 - September 1992;
Senior Vice President, Business Development, PRC Inc.,
January 1992 - March 1992;
Vice President and General Manager,
Federal Computer Systems Division,
American Telephone and Telegraph Company,
January 1989 - January 1992.
Charles E. Fenton - 46
Vice President and General Counsel,
May 1989 - present;
Partner, Miles & Stockbridge, Attorneys at Law,
April 1980 - May 1989.
Joseph Galli - 36
Vice President and President -
North American Power Tools,
October 1993 - present;
President - U.S. Power Tools,
February 1993 - October 1993.
Vice President Sales and Marketing - U.S. Power Tools,
May 1991 - February 1993;
Vice President Marketing - U.S. Power Tools,
August 1990 - May 1991;
Vice President Sales and Marketing -
U.S. Accessories,
February 1989 - August 1990.
Kathleen W. Hyle - 36
Vice President and Treasurer,
May 1994 - present;
Assistant Treasurer, Domestic,
December 1992 - May 1994;
Director, Domestic Finance,
February 1990 - December 1992;
Domestic Finance Manager,
November 1986 - February 1990.
Barbara B. Lucas - 49
Vice President - Public Affairs and
Corporate Secretary,
July 1985 - present.
Thomas M. Schoewe - 42
Vice President and Chief Financial Officer,
October 1993 - present;
Vice President - Finance,
January 1990 - October 1993;
Vice President - Business Planning and Analysis,
January 1986 - January 1990.
Leonard A. Strom - 49
Vice President - Human Resources,
May 1986 - present.
Anton van Schijndel - 51
Vice President and President - Europe,
April 1994 - present;
Vice President, Marketing and Sales -
Black & Decker Europe,
March 1993 - April 1994;
Executive Vice President, Domestic
Appliances and Personal Care, International,
Philips Electronics,
November 1990 - March 1993;
Executive Vice President Lighting Division,
Philips Electronics,
May 1986 - November 1990.
ITEM 2. PROPERTIES
The Corporation and its subsidiaries operate 47
manufacturing facilities around the world, including 23
located outside the United States in 14 foreign
countries. The major properties associated with each
business segment are listed in Narrative Description of
the Business in Item 1(c) of Part I of this report.
The Corporation owns most of its facilities, with
the exception of the following major leased facilities.
In the United States: Mt. Clemens, Michigan;
McLean and Reston, Virginia; Shelton, Connecticut; and
Towson, Maryland.
Outside the United States: Rotherham, England;
Buchlberg, Germany; and Kuantan, Malaysia.
In 1992, as part of the Corporation's continuous
review of manufacturing capacity and utilization, the
Corporation commenced a restructuring plan which
included the withdrawal from the printed circuit board
assembly equipment business in the Commercial and
Industrial segment and a reduction of manufacturing
capacity, primarily in the Consumer and Home Improvement
Products segment in Europe. This plan included the
closure and/or sale of certain manufacturing facilities.
Also during 1993, the Corporation recorded a charge of
$29 million for the closure and reorganization of
certain additional manufacturing sites. These plant
actions, which have been substantially completed during
1994, were part of the Corporation's continuing effort
to identify opportunities to improve its manufacturing
cost structure. For additional information about the
restructuring program, see the section entitled
Restructuring in Management's Discussion and Analysis of
Financial Conditions and Results of Operations and
Note 18 of Notes to Consolidated Financial Statements,
included in Item 7 and 8 of Part II of this report.
Additional property both owned and leased by the
Corporation in Towson, Maryland, is used for
administrative offices. Subsidiaries of the Corporation
lease certain locations primarily for smaller
manufacturing and/or assembly operations, service
operations, sales and administrative offices, and for
warehousing and distribution centers. The Corporation
also owns a manufacturing plant which is located on
leased land in Jurong Town, Singapore,
The Corporation's average utilization rate for its
manufacturing facilities for 1994 was in the range of
75% to 85%. The Corporation continues to evaluate its
worldwide manufacturing cost structure to identify
opportunities to improve capacity utilization and will
take appropriate action as deemed necessary.
Management believes that its owned and leased
facilities are suitable and adequate to meet the
Corporation's anticipated needs.
ITEM 3. 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. As previously noted under Item 1 of
Part I, the Corporation also is party to litigation and
administrative proceedings with respect to claims
involving the discharge of hazardous substances into the
environment. Certain of these matters assert damages
and liability for remedial investigations and clean-up
costs with respect to sites at which the Corporation has
been identified as a PRP under federal and state
environmental laws and regulations. Other matters
involve sites that the Corporation owns and operates or
previously sold.
On or about March 31, 1989, a purported class
action complaint, titled Cooperman et al. v. The Black &
Decker Corporation et al., No. 89 Civ 2177 (the
Cooperman Complaint), was filed in the United States
District Court for the Southern District of New York
alleging that the Corporation's settlement agreement
with Topper Acquisition Corp. and Topper L.P., bidders
for Emhart Corporation, and the payments by the
Corporation thereunder violated the federal securities
laws, particularly sections 10(b) and 14(d) of the
Securities Exchange Act of 1934, as amended, and the
rules and regulations, including rules 10b-13 and 14d-
10, thereunder. Plaintiffs initially sought injunctive
relief prohibiting the Corporation from consummating its
tender offer for Emhart and now seek rescissory damages
as well as costs, disbursements, and reasonable
attorneys' and other fees. The Corporation's request
for leave to move for summary judgment was denied by the
District Court, and the District Court issued an order
directing that discovery be completed by June 1, 1991,
and providing that the Corporation might again apply for
leave to move for summary judgment on or before June 15,
1991. The parties subsequently have entered into a
number of stipulations and orders amending the date for
the completion of discovery and the date before which
the Corporation may again apply for leave to move for
summary judgment. The Corporation believes the claims
made in the Cooperman Complaint are without merit and
intends to defend vigorously against the allegations
made in this matter. In the opinion of management, the
ultimate resolution of the Cooperman Complaint will not
have a material adverse effect on the Corporation.
In March 1990, PRC was served by the Inspector
General of the United States Department of Defense with
a subpoena for documents from the period 1986 to 1990 in
connection with a criminal investigation of bid and
proposal cost charging practices of certain divisions of
PRC. Since that date, PRC has been served with two
additional Inspector General subpoenas for marketing and
proposal-related documents. During 1992, PRC and some
former employees also received grand jury subpoenas
issued by the United States District Court for the
Eastern District of Virginia. During 1993, PRC received
an additional subpoena from the grand jury directing PRC
to provide information concerning the procurement and
government property management functions of certain
divisions of PRC. The investigations are continuing,
and PRC is cooperating with the Inspector General and
the United States Attorney's office in these matters.
The Corporation cannot predict the eventual outcome of
these investigations, but, based on currently available
information, management believes that the investigations
will not have a material adverse effect on the
Corporation.
In August 1994, PRC Environmental Management, Inc.
("EMI") was informed by the Office of the Inspector
General of the EPA that the Office of the Inspector
General was commencing an investigation into EMI's
subcontractor payment practices. The investigation
involved the timing of EMI's processing of subcontractor
payments and the submission by EMI of invoices to the
EPA. PRC and EMI cooperated with the Office of the
Inspector General and the United States Attorney's
office in this matter and, pursuant to an agreement with
Office of the Inspector General and the United States
Attorney's office, PRC and EMI conducted an internal
investigation of the facts and circumstances surrounding
the investigation. In March 1995, PRC and EMI reached a
final settlement with respect to this investigation.
Pursuant to the settlement agreement, EMI agreed to make
a payment of $300,000 and PRC and EMI agreed to
implement a comprehensive compliance program to address
the substantive matters that were the subject of the
investigation. The Office of the Inspector General of
the EPA has agreed not to pursue any further civil
action in this matter and the United States Attorney's
Office has issued a letter declining to pursue any
criminal action in connection with this matter.
On June 1, 1994, Masco Corporation of Indiana
("Masco") filed suit against the Corporation's Price
Pfister subsidiary in the United States District Court
for the Eastern District of Virginia (Civ. No. 94-728A).
Masco alleged that Price Pfister's manufacture, use and
sale of its Genesis Model 42 Series of lavatory faucets
infringes and induces infringement of Masco's U.S.
Design Patent No. 323,877, is unfair competition under
federal and Virginia law and infringes the trade dress
rights associated with lavatory faucets of Delta Faucet
Company, a division of Masco. Masco sought an
injunction, delivery up for destruction of offending
items in Price Pfister's possession, profits, damages
(trebled), costs and attorneys' fees.
Price Pfister has filed a counterclaim for
infringement by Masco of Price Pfister's rights in U.S.
Design Patent Nos. 329,911, 328,335, and 327,732, for
unfair competition and patent misuse under common
statutory law, for abuse of process, and for trademark
infringement under Price Pfister's U.S. Trademark
Registration No. 1,808,996 and trademark registrations
of several states. Masco counterclaimed for
cancellation of U.S. Trademark Registration No.
1,808,996 and also has instituted a separate
Cancellation Proceeding for the U.S. Patent and
Trademark Office.
Following the filing by Masco and Price Pfister of
a number of motions, trial on the claims and
counterclaims in this matter was held in November 1994.
The trial resulted in a verdict in favor of Masco on
Masco's design patent infringement claim with damages
being awarded against Price Pfister in the amount of
$1,374,596.35 plus interest and Price Pfister being
enjoined from continued infringement of Masco's rights.
All other claims and counterclaims were dismissed.
Price Pfister has filed an appeal of this decision and
the appeal is pending. In the opinion of management,
amounts accrued for awards or assessments in conjunction
with the Masco litigation are adequate and, accordingly,
ultimate resolution of this matter will not have a
material adverse effect on the Corporation.
In the opinion of management, amounts accrued for
awards or assessments in connection with the matters
specified above and in Item 1 of Part I with respect to
environmental matters and other litigation and
administrative proceedings to which the Corporation is a
party are adequate and, accordingly, ultimate resolution
of these matters will not have a material adverse effect
on the Corporation.
As of December 31, 1994, the Corporation has no
known probable but inestimable exposures for awards and
assessments in connection with the matters specified
above and in Item 1 of Part I with respect to
environmental matters and other litigation and
administrative proceedings that could have a material
effect on the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY STOCK AND RELATED
SECURITY HOLDER MATTERS
(a) MARKET INFORMATION
The Corporation's Common Stock is listed on the New York
Stock Exchange and the Pacific Stock Exchange and also
is traded on the London, Frankfurt, and Swiss exchanges.
The following table sets forth, for the periods
indicated, the high and low sales prices of the Common
Stock as reported in the consolidated reporting system
for the New York Stock Exchange Composite Transactions:
Quarter 1994 1993
January to March $22-3/8 to $19-1/4 $19-5/8 to $16-5/8
April to June $21 to $17 $21-3/4 to $17-3/8
July to September $23-1/8 to $17 $22-1/4 to $19-7/8
October to December $25-3/4 to $21-1/8 $21 to $18-5/8
(b) HOLDERS OF THE CORPORATION'S CAPITAL STOCK
As of February 20, 1995, there were 19,709 holders of
record of the Corporation's Common Stock. As of
February 20, 1995, there was one holder of record of the
Corporation's Series B Cumulative Convertible Preferred
Stock.
(c) DIVIDENDS
The Corporation has paid consecutive quarterly dividends
on its Common Stock since 1937. Future dividends
necessarily will depend upon the Corporation's earnings,
financial condition, and other factors, and the payment
of dividends on the outstanding shares of Series B
Stock. The Credit Facility does not restrict the
Corporation's ability to pay regular dividends in the
ordinary course of business on the Common Stock or the
Series B Stock. In the event that dividends on the
Series B Stock are in arrears, thereafter and until all
accrued but unpaid dividends on the shares of Series B
Stock shall have been paid in full the Corporation may
not declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration, any shares of Common Stock.
Quarterly dividends per common share for the most
recent two years are as follows:
Quarter 1994 1993
January to March $.10 $.10
April to June .10 .10
July to September .10 .10
October to December .10 .10
$.40 $.40
During each of the quarters in 1994 and 1993, the
Corporation declared a dividend of approximately $2.9
million on its shares of Series B Preferred Stock.
During the most recent two years, no other dividends were
declared or paid in respect of shares of preferred stock
by the Corporation.
Common Stock: 150,000,000 authorized, $.50 par
value; 84,688,803 shares and
83,845,194 shares outstanding
as of December 31, 1994 and
1993, respectively.
Preferred Stock: 5,000,000 authorized, without par
value; 150,000 shares of Series B
Cumulative Convertible Preferred
Stock outstanding as of
December 31, 1994 and 1993.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is certain Selected Financial Data for each of
the years in the five-year period ended December 31, 1994.
The selected consolidated financial data for the fiscal
year ended December 31, 1994, has been derived from the
Corporation's audited consolidated financial statements for the
year ended December 31, 1994, which are included in Item 8 of
Part II of this report. The selected financial data for the
fiscal years ended December 31, 1993, 1992, 1991, and 1990, has
been derived from audited consolidated financial statements
previously filed with the Securities and Exchange Commission
(the Commission). The following information should be read in
conjunction with those consolidated financial statements and
related notes.
FIVE-YEAR SUMMARY
(Millions of Dollars Except Per Share Data)
1994 1993(a) 1992(b) 1991 1990
Total revenues $5,248.3 $4,882.2 $4,779.6 $4,637.0 $4,832.3
Net earnings (loss) before
extraordinary item and
cumulative effects of
changes in accounting
principles 127.4 95.2 (73.3) 53.0 51.1
Net earnings (loss) 127.4 66.0 (333.6) 53.0 51.1
Per common share data:
Net earnings (loss)
before extraordinary
item and cumulative
effects of changes in
accounting principles 1.37 1.00 (1.11) .81 .84
Net earnings (loss) 1.37 .65 (4.52) .81 .84
Total assets 5,433.7 5,310.6 5,391.9 5,532.7 5,889.5
Long-term debt 1,723.2 2,069.2 2,108.5 2,625.8 2,755.6
Cash dividends
per common share .40 .40 .40 .40 .40
(a) Effective January 1, 1993, the Corporation changed its method of accounting for
postemployment benefits. In addition, operating results for 1993 include a
restructuring credit of $6.3 million before tax ($.2 million after tax).
(b) Effective January 1, 1992, the Corporation changed its methods of accounting for
income taxes and postretirement benefits other than pensions. In 1992, the
Corporation recognized a $22.7 million extraordinary loss from extinguishment of
debt. In addition, operating results for 1992 included a restructuring charge of
$142.4 million before tax ($134.7 million after tax.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Corporation reported net earnings of $127.4 million or $1.37
per share for the year ended December 31, 1994, compared to net
earnings of $66.0 million or $.65 per share in 1993. Excluding
the net earnings effects of an accounting change and
restructuring credit recognized in 1993, net earnings for the
Corporation would have been $95.0 million or $1.00 per share for
1993. The improvement in earnings in 1994 over 1993 was primarily
the result of improved operating results stemming from higher
sales volumes, cost reduction initiatives, and leverage
improvements attendant to higher sales volumes.
During 1994, the Corporation generated free cash flow (cash
available for debt reduction prior to the effects of cash
received from divested businesses, equity offerings, and sales of
receivables) of $116.1 million compared to negative free cash
flow of $(110.4) million during 1993. The improvement in free
cash flow in 1994 over 1993 was primarily the product of improved
operating results coupled with more stringent working capital
management.
RESULTS OF OPERATIONS
REVENUES
The following chart sets forth an analysis of the consolidated
changes in revenues for the years ended December 31, 1994,
December 31, 1993, and December 31, 1992.
ANALYSIS OF CHANGES IN REVENUES
For the Year Ended December 31
(Dollars in Millions) 1994 1993 1992
Total revenues $5,248 $4,882 $4,780
Unit volume - Existing (1) 9 % 5 % 1 %
- Disposed (2) (3)% - -
Price 1 % 1 % 1 %
Currency - (4)% 1 %
Change in total revenues 7 % 2 % 3 %
In the above chart and throughout the remainder of this discussion,
the following definitions apply:
(1) Existing - Reflects the change in unit volume for businesses
where period-to-period comparability exists.
(2) Disposed - Reflects the change in total revenues for businesses
that were included in prior year results but subsequently have
been sold.
Total revenues for the year ended December 31, 1994, were $5.2
billion, which represented a 7% increase over 1993 revenues of
$4.9 billion. During 1994, existing unit volume grew by 9%
compared to 5% growth in 1993. This improvement resulted
primarily from revenue growth in the Consumer and Home
Improvement Products (Consumer) segment.
Total revenues for the year ended December 31, 1993, were
$4.9 billion, which represented a 2% increase over 1992 revenues
of $4.8 billion. During 1993, existing unit volume grew by 5%
compared to 1% growth in 1992, due primarily to continued revenue
growth in the Consumer segment mainly in the United States, which
was partially offset by unit volume declines in the Commercial
and Industrial Products (Commercial) segment. A stronger United
States dollar compared to most major foreign currencies had an
adverse effect on revenues in 1993 relative to 1992.
EARNINGS
Total operating income as a percentage of total revenues was 7.5%
for 1994 compared to 6.9% and 4.2% for 1993 and 1992,
respectively. Excluding restructuring credits and charges in 1993
and 1992, operating income as a percentage of total revenues was
6.7% and 7.1% in 1993 and 1992, respectively.
Gross margin as a percentage of total revenues in 1994 was
34.3% compared to 33.8% for 1993 and 34.6% for 1992. Gross
margin as a percentage of total revenues on product sales, i.e.,
excluding the Information Technology and Services segment (PRC),
was 36.6% for 1994 compared to 35.5% for 1993 and 36.3% for 1992.
The improvement in margin during 1994 over the 1993 level was the
result of margin improvements in the Consumer segment, which
resulted primarily from increased manufacturing productivity, the
implementation of cost reduction initiatives, and the leveraging
of fixed and semi-fixed costs over a higher sales base. The
decline in gross margin as a percentage of total revenues on
product sales to 35.5% for 1993 from 36.3% for 1992 was primarily
due to volume declines and significant competitive pressure in
several commercial businesses and in the consumer businesses in
Europe, Mexico, and Brazil.
PRC's gross margin as a percentage of revenues for 1994 was
23.2% compared to 24.4% for 1993 and 25.0% for 1992. This lower
percentage for 1994 compared to 1993 was primarily the result of
the Super-Minicomputer Procurement (SMP) contract, a long-term
contract which, during its early stages, has a dilutive effect on
gross margin. The decline in PRC's gross margin as a percentage
of revenues in 1993 compared to 1992 was primarily the result of
lower margins in the Federal Systems business due to a shift of
revenues from higher margin service-oriented contracts to lower
margin systems integration contracts.
Marketing and administrative expenses as a percentage of
total revenues were 26.8% for 1994 compared to 27.1% for 1993 and
27.4% for 1992. The improvement in 1994 compared to 1993 was
primarily the result of cost reduction initiatives and the effect
of leveraging fixed and semi-fixed costs over a higher sales
base. The 1993 improvement compared to 1992 was the result of
leveraging the increased spending for promotional and marketing
programs associated with the launching of new products into
higher revenues sufficient to offset this increased spending and
the result of cost containment initiatives implemented in the
commercial businesses and PRC.
Net interest expense (interest expense less interest income)
of $188.1 million for 1994 was above the 1993 level of $171.7
million, primarily as a result of higher interest rates on
variable rate debt, partially offset by reduced borrowing levels
during the year. Net interest expense in 1993 was below the 1992
level of $216.8 million, primarily as a result of lower borrowing
costs due to the refinancing of existing term and revolving loans
in November 1992 and lower interest rates.
Other expense for 1994, 1993, and 1992 primarily included
costs associated with the sale of receivables program.
The Corporation's reported tax rate was 33% in 1994 compared
to a rate of 39% in 1993 (37% excluding the effects of
restructuring credits in 1993) and a negative rate on a pretax
loss in 1992, i.e., the Corporation reported tax expense in 1992
despite its pretax loss. The lower tax rate for 1994 compared to
1993 and 1992 was primarily due to a change in mix of the
Corporation's operating income outside the United States from
subsidiaries in higher rate tax jurisdictions to those in lower
rate tax jurisdictions or to those that profit from the
utilization of net operating loss carryforwards.
BUSINESS SEGMENTS
The Corporation operates in three business segments: Consumer and
Home Improvement Products, including consumer and professional
power tools and accessories, household products, security
hardware, outdoor products (composed of electric lawn and garden
tools and recreational products), plumbing products, and product
service; Commercial and Industrial Products, including fastening
systems and glass container-making equipment; and Information
Technology and Services, including government and commercial
information systems development, consulting, and other related
contract services.
REVENUES AND OPERATING INCOME BY BUSINESS SEGMENT
For the Year Ended December 31
(Dollars in Millions) 1994 1993 1992
CONSUMER AND HOME IMPROVEMENT PRODUCTS
Total revenues $3,774 $3,529 $3,379
Operating income 294 216 218
Operating income excluding
restructuring costs or credits
and goodwill amortization 351 281 308
COMMERCIAL AND INDUSTRIAL PRODUCTS
Total revenues 591 592 667
Operating income (loss) 53 76 (45)
Operating income excluding
restructuring costs or credits and
goodwill amortization 69 73 80
INFORMATION TECHNOLOGY AND SERVICES
Total revenues 883 761 734
Operating income 37 29 19
Operating income excluding goodwill
amortization 40 32 22
CORPORATE AND ELIMINATIONS
Operating income 10 14 7
Total revenues $5,248 $4,882 $4,780
Total operating income $ 394 $ 335 $ 199
Total operating income excluding
restructuring costs or credits and
goodwill amortization $ 470 $ 400 $ 417
CONSUMER AND HOME IMPROVEMENT PRODUCTS
The following chart sets forth an analysis of the change in
revenues for the year ended December 31, 1994, compared to the
year ended December 31, 1993, by geographic area within the
Consumer segment.
United Total
States Europe Other Consumer
Unit volume
- Existing 8 % 5 % 18 % 8 %
- Disposed (4)% - (1)% (2)%
Price 1 % 1 % 1 % 1 %
Currency - 1 % (2)% -
Total Consumer 5 % 7 % 16 % 7 %
Total revenues in the Consumer segment for 1994 were 7% higher
than in 1993. Existing unit volume, which excludes unit volume
associated with businesses that have been sold, increased by 8%
for 1994 over the 1993 level. Unit volume in the United States
for 1994 rose by 8% over the 1993 level. The domestic unit volume
increase resulted from double-digit rates of growth in the power
tools and accessories, security hardware, and plumbing products
businesses. This growth primarily stemmed from the continued
strong demand for the DeWalt professional power tools and
accessories line, which was expanded by the introduction of more
than 20 tools and numerous accessories in 1994, expanded
distribution of the Titan lockset line, and the introduction of
the Genesis series of single-control faucets. Despite strong
demand experienced late in 1994 when the SnakeLight flexible
flashlight and the Spacemaker Optima line of under-the-cabinet
kitchen appliances were introduced in the United States, unit
volume in the household products business was down slightly in
1994 over the prior year.
The Corporation's consumer power tools business in Europe
achieved moderate unit volume growth in 1994 over the 1993 level.
Unit volume increases were experienced in 1994 in all major
European power tool markets, with the exception of the United
Kingdom and Germany, where unit volumes were essentially flat to
the prior year. Unit volume in the European security hardware
business was also essentially flat to the prior year. Strong unit
volume increases in 1994 over the prior year were experienced in
the Far East and in a number of consumer businesses in Latin
America, including those in Brazil and Mexico.
Operating income as a percentage of total revenues for the
Consumer segment was 7.8% for 1994 compared to 6.1% for 1993.
Excluding the effects of goodwill amortization and, for 1993,
restructuring charges of $13.1 million, operating income as a
percentage of total revenues for the Consumer segment would have
been 9.3% for 1994 compared to 8.0% for 1993. The improvement in
operating income levels in 1994 over 1993 in the worldwide power
tools and accessories business as well as in the domestic
security hardware and plumbing products businesses was primarily
the result of increased manufacturing productivity, the
implementation of cost reduction initiatives, and the effect of
leveraging fixed and semi-fixed costs over a higher sales base.
Partially offsetting this improvement was a decline in the
operating income level in 1994 over 1993 for the household
products business. This decline was primarily the result of
increased promotion spending and administrative expenses in 1994,
which were not offset by revenue increases. In addition,
operating income levels improved during 1994 for the golf club
shafts business (True Temper Sports) over the low levels
experienced in 1993 due to shifting consumer preferences to
graphite golf club shafts from steel golf club shafts.
Total revenues in the Consumer segment for 1993 were 4%
higher than in 1992. Existing unit volume, primarily in the
United States, accounted for 7% of this increase, with price
increases and adverse foreign exchange effects of 2% and (5)%,
respectively, accounting for the remainder. The increase in
existing unit volume resulted primarily from double-digit rates
of growth in the domestic power tools, household products, and
security hardware businesses. This improvement was driven by the
successful introduction of new products and product line
extensions in all three of these businesses, including an
expanded DeWalt professional power tools and accessories line,
the new Black & Decker Quantum line of high performance consumer
power tools, Titan locksets, a new line of household irons, and
several new food preparation products. The plumbing products
business also reported a unit volume increase resulting from new
lines of decorative faucets and handle sets as well as expanded
distribution into home improvement centers and professional
markets. Offsetting these strong results in domestic Consumer
businesses were revenue declines in True Temper Sports during
1993 due to market contraction resulting from general weakness in
economies worldwide, poor weather conditions in the United
States, and an accelerated trend in consumer preferences toward
graphite golf club shafts, where the Corporation had a relatively
small market share, from premium steel shafts, where the
Corporation had a substantial market share. While the United
Kingdom and other major European markets experienced a weakening
economic environment in 1993, the decline in unit volume in 1993
over 1992 levels in the European Consumer businesses was modest,
due largely to a wide array of new or enhanced products suited to
the serious "do-it-yourself" consumer. As a result of the
strengthening of the United States dollar against major European
currencies in 1993, the foreign exchange effect reduced revenues
in the Consumer businesses in Europe by 11% on a dollar basis.
Unit volume growth in the Consumer businesses in other geographic
areas was bolstered by strong performance in much of Latin
America, partially offset by economic difficulties in Mexico,
where revenues for 1993 were well below the 1992 level.
Operating income as a percentage of total revenues for the
Consumer segment was 6.1% for 1993 compared to 6.5% for 1992.
Operating results for 1993 included a $29.0 million charge for
certain planned plant closures and reorganizations to eliminate
overcapacity, partially offset by a $15.9 million gain on the
sale of Corbin Russwin. Operating income for 1992 for the
Consumer segment included restructuring charges of $35.5 million,
primarily related to a plan to consolidate and reduce excess
manufacturing capacity in Europe. Excluding these costs and
goodwill amortization, operating income as a percentage of total
revenues would have been 8.0% for 1993 compared to 9.1% for 1992.
The domestic power tools and plumbing products businesses
achieved improved operating income margins in 1993 compared to
1992, primarily because of increased unit volumes. These
improvements were not sufficient, however, to offset operating
income margin declines in True Temper Sports, the European power
tools business, and in operations in Mexico and Brazil. The
decrease in True Temper Sports was due to a sharp unit volume
decline, while the decreases in Europe and Mexico were mainly due
to continuing weak economic environments. The Corporation's
businesses in Brazil experienced operating losses that were
primarily due to severe pricing pressure in the local household
iron market and charges associated with a change in the structure
of customer financing arrangements that reduced the Corporation's
future exposure to foreign exchange translation losses.
COMMERCIAL AND INDUSTRIAL PRODUCTS
The following chart sets forth an analysis of the change in
revenues for the year ended December 31, 1994, compared to the
year ended December 31, 1993, by geographic area within the
Commercial segment.
United Total
States Europe Other Commercial
Unit volume
- Existing 7 % 6 % (2)% 4 %
- Disposed (8)% (1)% (12)% (7)%
Price 1 % - (1)% 1 %
Currency - 2 % 4 % 2 %
Total Commercial - 7 % (11)% -
Total revenues in the Commercial segment for 1994 were
essentially flat to those of the prior year. An increase of 4% in
existing unit volume, coupled with the positive effects of
pricing and foreign exchange, were offset by the effects of the
sale of the remaining Dynapert business late in 1993. A double-
digit rate of increase in unit volume in the fastenings systems
(Fastening) business was partially offset by a volume decline in
the glass-container making equipment (Glass) business. The
improvement in the Fastening business during 1994 occurred in the
United States and Europe and was primarily attributable to the
strengthening of the automotive industry. While sales in the
Glass business were weak throughout all geographic areas during
1994, order backlog at December 31, 1994, was higher than at
December 31, 1993, and order trends during 1994 showed
improvement over 1993 levels.
Operating income as a percentage of total revenues for the
Commercial segment for 1994 was 8.9% compared to 12.9% for 1993.
Excluding the effects of goodwill amortization and, for 1993,
restructuring credits of $19.4 million relating to the gain on
the sale of Dynapert's through-hole business, operating income as
a percentage of total revenues for the Commercial segment would
have been 11.6% for 1994 compared to 12.4% for 1993. The
improvement in operating income experienced by the Fastening
business in 1994, as a result of increased sales and cost
reduction initiatives, was offset by an operating income decline
in the Glass business, due to revenue shortfalls.
Total revenues in the Commercial segment for 1993 were 11%
below the 1992 level. A unit volume decline of 10% was partially
due to the withdrawal from the manufacturing of printed circuit
board assembly equipment in Europe late in 1992 and the sale of
most of the remaining Dynapert business in the fourth quarter of
1993. Unit volumes in both the Glass and Fastening businesses
were down compared to 1992 levels, primarily because of weakness
in the European and Japanese markets. In the Glass business, the
continuing recessionary environment caused a decline in
manufacturers' orders for new capital goods and for servicing
existing machinery. Persistent weakness in the European and
Japanese automotive industries resulted in sales declines in the
Fastening business. The Fastening business in the United States
was able to achieve unit volume growth on the strength of an
improving automotive industry, which partially offset revenue
declines elsewhere.
Operating income as a percentage of total revenues for the
Commercial segment for 1993 was 12.9% compared to (6.7)% for
1992. Operating income for 1993 included a gain on the sale of
Dynapert's through-hole business of $19.4 million. Operating
income for 1992 included a restructuring charge of $106.9
million, primarily to reorganize Dynapert, including the
withdrawal from the manufacturing of surface-mount machinery in
Europe. Excluding the effects of restructuring and goodwill
amortization, operating income as a percentage of revenues would
have been 12.4% for 1993 compared to 12.1% for 1992. Significant
earnings declines in both the Glass and Fastening businesses were
the result of the lower unit volumes discussed above. These
declines were offset by the profitable operation of the remaining
Dynapert through-hole business during 1993 up to the date of
sale, compared to an operating loss for 1992, and by significant
reductions in operating costs in all businesses during the year.
INFORMATION TECHNOLOGY AND SERVICES
The Information Technology and Services segment (formerly, the
Information Systems and Services segment) includes the results of
PRC. PRC conducts its business through three operating groups:
the Federal Systems Group (FSG), the Commercial Systems Group
(CSG), and the Environmental Management Group (EMG). These groups
provide systems and services to the United States government,
commercial customers, and state and local governments.
Approximately 84% of PRC's 1994 revenues (or 14% of the
Corporation's consolidated revenues) were generated from
contracts with various agencies of the United States government.
The loss of all or substantially all of the revenues from the
United States government could have a substantial adverse effect
on the Corporation.
PRC's total revenues for 1994 were 16% higher than in 1993.
Increased revenues in FSG related to the Super-Minicomputer
Procurement (SMP) contract with the United States government
accounted for approximately 80% of PRC's growth in total revenues
in 1994 over the 1993 level. The SMP contract, which was awarded
in 1992, was in its start-up phase during the first part of 1993;
therefore, 1994 represented the first full year of revenues
earned under this contract. CSG revenues for 1994 declined over
prior year levels due to continued declines in demand for its
Realty Systems Division's (RSI) multiple listing services
publication. EMG's revenues for 1994 increased over 1993 levels,
primarily as a result of higher demand under an existing contract
with the United States Navy and the award of an additional
contract during 1994.
Operating income as a percentage of total revenues for PRC
was 4.2% in 1994 compared to 3.8% in 1993. Excluding goodwill
amortization, operating income as a percentage of revenues would
have been 4.6% for 1994 compared to 4.2% for 1993. This
improvement was attributable to cost reduction initiatives in
1994 with respect to indirect operating costs and general and
administrative expenses, partially offset by an increase in
direct costs within FSG due to a shift in business mix from
service-oriented contracts, which have a lower content of direct
material costs, to systems integration contracts, which have a
higher content of direct material costs.
PRC's total revenues for 1993 were 4% higher than in 1992.
Increased revenues in FSG, primarily from the SMP contract, more
than offset revenue declines in CSG. Within FSG, revenues from
SMP more than offset lower revenues caused by a general slowing
down of the government procurement process and the loss of
certain recompete contracts. While SMP was in its start-up phase
during the first six months of 1993, revenues were insignificant;
however, revenues increased substantially in the fourth quarter
of 1993. CSG's 1993 revenues declined, primarily as a result of
reductions in the Engineering Systems Division when a major
customer significantly reduced its demand for consulting
services. Excluding the effects of the favorable settlement of a
contract dispute, revenues of CSG's RSI declined during 1993,
primarily as a result of lower publishing revenues due to reduced
demands and related pricing pressures within the industry. This
decline was partially offset by increased on-line realty systems
and services revenues. CSG's Public Sector Division (PSI), which
is engaged primarily in computer-aided emergency dispatch
systems, generated increased revenues during 1993, successfully
starting up several new contracts awarded in 1992. EMG's revenues
for 1993 were flat compared to 1992, primarily due to the
Environmental Protection Agency's slowdown in awarding new
contracts.
Operating income as a percentage of total revenues for PRC
was 3.8% in 1993 compared to 2.5% in 1992. Excluding goodwill
amortization, operating income as a percentage of revenues would
have been 4.2% for 1993 compared to 3.0% for 1992. This
improvement was primarily the result of the favorable settlement
of a contract dispute and significant cost cutting initiatives.
The improvement, however, was partially offset by lower operating
income as a percentage of revenues in FSG due to first year
start-up costs related to SMP and a shift of revenues from higher
margin service-oriented contracts to lower margin systems
integration contracts.
RESTRUCTURING
As more fully described in Note 18 of Notes to Consolidated
Financial Statements, at the end of 1992, the Corporation
commenced a restructuring of certain of its operations and
accrued costs of $142.4 million, of which $98.9 million related
to the decision to reorganize Dynapert, the printed circuit board
assembly business, including withdrawal from the manufacture of
surface-mount machinery. The remainder of the 1992 restructuring
plan included a restructuring of manufacturing capacity in other
businesses, predominantly in Europe, at a cost of $43.5 million.
During 1993, the Corporation substantially completed its
restructuring plan with respect to Dynapert by withdrawing from
the manufacture of surface-mount machinery. In addition, during
1993, the Corporation sold the Dynapert through-hole machinery
business at a gain of $19.4 million and the Corbin Russwin
commercial hardware business at a gain of $15.9 million. These
gains were reflected as credits to restructuring in 1993.
Restructuring costs for 1993 included a charge of $29.0 million
for the closure and reorganization of certain manufacturing
sites.
The quantification of the major elements of each
restructuring plan, as initially established, is set forth below:
(Dollars in Millions) 1993 1992
Write-off of goodwill associated
with the Dynapert business $ 58.9
Estimated losses during the
Corporation's withdrawal from
its Dynapert business 23.5
Employee severance and
related costs $10.6 33.5
Write-down of property, plant and
equipment and related costs 13.2 9.5
Lease termination costs - 7.1
Other 5.2 9.9
Total restructuring $29.0 $142.4
Actions related to the 1992 and 1993 restructuring plans were
substantially completed during 1994. Total cash spending for
restructuring during 1995 is expected to be approximately $20
million. The Corporation anticipates that the reductions in
manufacturing capacity through plant closings and reorganizations
will result in annual cost reductions, comprised primarily of
reduced labor costs and depreciation, of approximately $40
million beginning in 1995. Cost reductions realized during 1994
as a result of these programs were estimated at approximately $20
million. These actions are part of the Corporation's continuing
effort to identify opportunities to improve its manufacturing
cost structure.
FINANCIAL CONDITION
Cash flows from operating activities before the sale of
receivables generated cash of $383.9 million for the year ended
December 31, 1994, compared to cash generation of $129.6 million
for the year ended December 31, 1993. This increase in cash
generation during 1994 was primarily the result of increased
profitability coupled with the Corporation's heightened emphasis
on reducing inventory levels and other working capital
requirements, as well as the inclusion of a number of unusual and
unfavorable non-recurring items in 1993.
In addition to measuring its cash flow generation and usage
based upon the operating, investing and financing classifications
included in the Consolidated Statement of Cash Flows, the
Corporation began in 1994 to emphasize free cash flow, a measure
commonly employed by bond rating agencies and banks. The
Corporation defines free cash flow as cash available for debt
reduction (including short-term borrowings), prior to the effects
of cash received from divested businesses, equity offerings, and
sales of receivables. Free cash flow, a more inclusive measure of
the Corporation's cash flow generation than cash flows from
operating activities included in the Consolidated Statement of
Cash Flows, considers items such as cash used for capital
expenditures and dividends, as well as net cash inflows or
outflows from hedging activities. During the year ended
December 31, 1994, the Corporation generated free cash flow of
$116.1 million compared to negative free cash flow of $(110.4)
million during 1993. The improvement in free cash flow in 1994
over 1993 was attributable to the Corporation's increased
profitability and more stringent working capital controls.
The total amount of receivables sold under the Corporation's
sale of receivables program at December 31, 1994, was $244
million compared to $218 million at December 31, 1993. The sale
of receivables program provided for a seasonal expansion of the
amount of receivables that may be sold, from $200 million to $275
million during the period from October 1, 1994, through
January 31, 1995. The Corporation's liquidity facility, which
supports the sale of receivables program, expires in June 1995.
The Corporation expects to be able to extend this facility beyond
December 1995.
Investing activities for 1994 used cash of $220.5 million
compared to $83.8 million of cash used in 1993. Capital
expenditures of $198.5 million during 1994 approached the 1993
level of $209.9 million. During 1994, approximately 84% of the
capital expenditures were in the Consumer segment, primarily in
support of new product initiatives and productivity enhancements.
The Corporation expects capital spending in 1995 to continue at
approximately the 1994 level. Proceeds from disposal of assets
and businesses for 1993 included the proceeds from the sale of
Dynapert and Corbin Russwin, amounting to approximately $108
million, which were used to reduce debt.
The ongoing costs of compliance with existing environmental
laws and regulations have not had, nor are they expected to have,
a material adverse effect on the Corporation's capital
expenditures or financial position.
The Corporation has a number of manufacturing sites
throughout the world and sells its products in over 100
countries. As a result, the Corporation is exposed to movements
in the exchange rates of various currencies against the United
States dollar. The major foreign currencies in which the
Corporation has foreign currency risk are the pound sterling,
deutsche mark, Dutch guilder, Canadian dollar, Swedish krona,
Japanese yen, French franc, Italian lira, Australian dollar,
Mexican peso, and Brazilian real.
Assets and liabilities of the Corporation's subsidiaries
located outside the United States are translated at rates of
exchange at the balance sheet date, as more fully explained in
Note 1 of Notes to Consolidated Financial Statements. The
resulting translation adjustments are included in equity
adjustment from translation, a separate component of
stockholders' equity. During 1994, translation adjustments,
recorded in the equity adjustment from translation component of
stockholders' equity, increased stockholders' equity by $98.7
million compared to a $76.6 million reduction in 1993. As more
fully explained in Note 9 of Notes to Consolidated Financial
Statements, the Corporation hedges a portion, generally limited
to tangible net worth, of its net investment in foreign
subsidiaries. Prior to 1994, the Corporation operated under a
full hedge policy, hedging the net assets, including goodwill, of
its foreign subsidiaries. The change in 1994 from the full hedge
policy employed in prior years was based upon the Corporation's
determination that the benefits of a full hedge policy no longer
exceeded its costs. In order to hedge its exposure to foreign
currency fluctuations on its net investments in subsidiaries
located outside the United States, the Corporation enters into
various currency forward contracts and options. These hedging
activities generate cash inflows and outflows that offset the
translation adjustment. During 1994, these activities netted to a
cash outflow of $35.5 million, compared to a cash inflow of $11.5
million in 1993, due to the weakening of the United States dollar
against most other major currencies during 1994. The
corresponding gains and losses on these hedging activities were
recorded in the equity adjustment from translation component of
stockholders' equity. Also included in the equity adjustment from
translation component were the Corporation's costs of maintaining
its hedge portfolio of foreign exchange contracts. These hedge
costs decreased stockholders' equity by $33.0 million and $52.2
million in 1994 and 1993, respectively.
As more fully described in Note 9 of Notes to Consolidated
Financial Statements, the Corporation, through its foreign
currency hedging activities, seeks to minimize the risk that its
eventual United States dollar cash flows resulting from the sales
of products in markets outside the United States will be affected
by changes in exchange rates. Foreign currency commitment and
transaction exposures generally are an integral part of the
responsibility of the Corporation's individual operating units.
Management's responses to foreign exchange movements vary. For
example, pricing actions, changes in cost structures, and changes
in hedging strategies may all be effective responses to a change
in exchange rates.
In late 1994, the Mexican peso was severely devalued.
Because the Corporation's Mexican peso exposure was hedged, this
devaluation did not have a significant effect on the
Corporation's earnings in 1994. However, it is likely that the
currency situation in Mexico will have an adverse effect on the
Corporation's Mexican operations in 1995, which management will
attempt to mitigate through pricing actions and changes in cost
structures. Due to the relative immateriality of its Mexican
operations to the consolidated financial statements, management
does not believe that the recent economic upheaval in Mexico will
have a significant adverse effect upon the Corporation in 1995.
In 1993, the Corporation's operations in Brazil were
negatively affected by a change in the structure of customer
financing arrangements that was enacted by local management to
reduce the Corporation's future exposure to translation losses.
While the Corporation has been proactive in managing its
currency risks, it will continue to report, from time to time,
fluctuations in both earnings and equity due to foreign exchange
movements. This occurs for two reasons. First, it is not possible
to establish a cost-effective hedging program that eliminates all
risk. Second, under generally accepted accounting principles, the
hedging of anticipated future earnings, which are not firm, is
not accorded hedge accounting treatment and, consequently, could
increase earnings volatility. The Corporation, therefore, does
not hedge the translation of future foreign earnings.
Based on taxable earnings (losses) history over the past
several years and the volatility of comprehensive taxable
earnings (losses) in the United States due to foreign exchange
contracts, a full valuation allowance was considered necessary on
net tax assets in the United States. In addition, a full
valuation allowance on net tax assets in certain foreign taxing
jurisdictions was considered necessary based on the history of
taxable earnings (losses), the tax carryforward periods, and
projected earnings. An analysis of taxes on earnings is included
in Note 11 of Notes to Consolidated Financial Statements.
Financing activities for 1994 used cash of $210.9 million
compared to cash used of $29.5 million for 1993. As noted
earlier, cash generated from the sale of Corbin Russwin and
Dynapert, totalling approximately $108 million, was used to
reduce debt during 1993. During 1994, the Corporation issued $250
million of 7.0% notes due in 2006, and repaid its 8.375% notes in
the amount of $100 million and its 5.75% 100 million deutsche
mark bearer bonds. Also during 1994, the Corporation filed a
shelf registration statement to issue up to $500 million of debt
securities that may be offered in separate series in amounts, at
prices, and on terms to be determined by market conditions
at the time of sale. At December 31, 1994, the Corporation had
issued $151.8 million of debt securities under the shelf
registration statement.
As more fully explained in Note 9 of Notes to Consolidated
Financial Statements, the Corporation seeks to issue debt
opportunistically, whether at fixed or variable rates, at the
lowest possible costs. Based upon its assessment of the future
interest rate environment and its desired variable rate debt to
total debt ratio, the Corporation may later convert such debt
from fixed to variable or from variable to fixed interest rates,
or from United States dollar-based rates to rates based upon
another currency, through the use of interest rate swap
agreements. In addition, the Corporation may enter into interest
rate cap agreements in order to limit the effects of increasing
interest rates on a portion of its variable rate debt.
In order to meet its goal of fixing or limiting interest
costs, the Corporation maintains a portfolio of interest rate
hedge instruments. These interest rate hedges could change the
mix of fixed and variable rate debt as actual interest rates move
outside the ranges covered by these instruments. The
Corporation's variable rate debt to total debt ratio, after
taking interest rate hedges into account, was 34% at December 31,
1994, compared to 46% at December 31, 1993, and 30% at
December 31, 1992. At December 31, 1994, average debt maturity
was 4.9 years compared to 4.8 years at December 31, 1993, and 4.1
years at December 31, 1992.
The Corporation's unsecured revolving credit facility (the
Credit Facility) includes certain covenants that require the
Corporation to meet specified minimum cash flow coverage and
maximum leverage (debt to equity) ratios during the term of the
loan, as more fully explained in Note 8 of Notes to Consolidated
Financial Statements. The Corporation's leverage ratio during the
life of the Credit Facility may not exceed 2.2 at the end of any
fiscal quarter. The cash flow coverage ratio calculated as of the
end of each fiscal quarter must be greater than 2.5 for any 12-
month period. At December 31, 1994, the leverage ratio was 1.66,
and the cash flow coverage ratio was 3.19. As of December 31,
1994, the Corporation was in compliance with all covenants and
provisions of the Credit Facility.
The Corporation expects to continue to meet the covenants
imposed by the Credit Facility over the next 12 months. Meeting
the cash flow coverage ratio, however, is dependent upon future
earnings, interest rates, and debt levels, each of which can have
a significant impact on the ratio.
The Corporation will continue to have cash requirements to
support working and fixed capital needs, to pay interest and to
service debt. In order to meet these cash requirements, the
Corporation intends to use internally generated funds and to
borrow under the Credit Facility or under short-term borrowing
facilities. Management believes that cash generated from these
sources will be adequate to meet the Corporation's cash
requirements over the next 12 months.
As more fully described in Note 8 of Notes to Consolidated
Financial Statements, borrowings under the Credit Facility were
at the London interbank borrowing rate (LIBOR) plus .4375% as of
December 31, 1994. The interest rate margin over LIBOR declines
as the Corporation's leverage ratio improves. Effective January
1, 1995, the interest rate margin over LIBOR declined by .1125%
to .325% as a result of improvements in the Corporation's
leverage ratio as of December 31, 1994. The interest rate margin
over LIBOR, which cannot exceed .4375%, is determined quarterly
based upon the leverage ratio at that time.
During the period from January 1, 1995, through February 9,
1995, the Corporation issued an additional $85 million of debt
under the shelf registration statement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the
Corporation and its subsidiaries are included herein as indicated
below:
Consolidated Financial Statements
Consolidated Statement of Earnings
- years ended December 31, 1994, 1993, and 1992
Consolidated Balance Sheet
- December 31, 1994 and 1993
Consolidated Statement of Cash Flows
- years ended December 31, 1994, 1993, and 1992
Notes to Consolidated Financial Statements
Report of Independent Auditors
CONSOLIDATED STATEMENT OF EARNINGS
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amounts)
Year Ended December 31
1994 1993 1992
REVENUES
Product sales $4,365.2 $4,121.5 $4,045.7
Information technology and services 883.1 760.7 733.9
TOTAL REVENUES 5,248.3 4,882.2 4,779.6
Cost of revenues
Products 2,769.7 2,657.4 2,577.2
Information technology and services 677.9 575.1 550.3
Marketing and administrative expenses 1,407.0 1,320.7 1,310.5
Restructuring costs (credits) - (6.3) 142.4
OPERATING INCOME 393.7 335.3 199.2
Interest expense (net of interest income of $7.0
for 1994, $8.3 for 1993, and $10.8 for 1992) 188.1 171.7 216.8
Other expense 15.5 7.7 11.4
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEM,
AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 190.1 155.9 (29.0)
Income taxes 62.7 60.7 44.3
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 127.4 95.2 (73.3)
Extraordinary loss from early extinguishment of debt - - (22.7)
Cumulative effect to January 1, 1993, of change in
accounting principle for postemployment benefits - (29.2) -
Cumulative effect to January 1, 1992, of change in
accounting principle for postretirement benefits - - (249.8)
Cumulative effect to January 1, 1992, of change
in accounting principle for income taxes - - 12.2
NET EARNINGS (LOSS) $ 127.4 $ 66.0 $ (333.6)
NET EARNINGS (LOSS) APPLICABLE TO COMMON SHARES $ 115.8 $ 54.4 $ (345.2)
NET EARNINGS (LOSS) PER COMMON SHARE:
Net earnings (loss) before extraordinary item and
cumulative effects of changes in accounting principles $ 1.37 $ 1.00 $ (1.11)
Extraordinary loss from early extinguishment of debt - - (.30)
Cumulative effect adjustment for postemployment benefits - (.35) -
Cumulative effect adjustment for postretirement benefits - - (3.27)
Cumulative effect adjustment for income taxes - - .16
NET EARNINGS (LOSS) PER COMMON SHARE $ 1.37 $ .65 $ (4.52)
AVERAGE COMMON SHARES OUTSTANDING (in Millions) 84.3 83.6 76.3
See Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
December 31
1994 1993
<
ASSETS
Cash and cash equivalents $ 65.9 $ 82.0
Trade receivables, less allowances of $41.5 ($38.5 for 1993) 910.9 832.1
Inventories 723.0 728.9
Other current assets 133.4 121.1
TOTAL CURRENT ASSETS 1,833.2 1,764.1
PROPERTY, PLANT AND EQUIPMENT 858.1 796.2
GOODWILL 2,293.0 2,333.6
OTHER ASSETS 449.4 416.7
$5,433.7 $5,310.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 549.0 $ 332.3
Current maturities of long-term debt 121.1 163.1
Trade accounts payable 405.2 307.3
Other accrued liabilities 804.5 705.8
TOTAL CURRENT LIABILITIES 1,879.8 1,508.5
LONG-TERM DEBT 1,723.2 2,069.2
DEFERRED INCOME TAXES 45.4 47.9
POSTRETIREMENT BENEFITS 328.2 319.3
OTHER LONG-TERM LIABILITIES 287.7 316.8
STOCKHOLDERS' EQUITY
Convertible preferred stock (outstanding: December 31, 1994
and 1993_150,000 shares) 150.0 150.0
Common stock (outstanding: December 31, 1994_84,688,803 shares,
December 31, 1993_83,845,194 shares) 42.3 41.9
Capital in excess of par value 1,049.1 1,034.8
Retained earnings (deficit) 24.6 (57.5)
Equity adjustment from translation (96.6) (120.3)
TOTAL STOCKHOLDERS' EQUITY 1,169.4 1,048.9
$5,433.7 $5,310.6
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
Year Ended December 31
1994 1993 1992
OPERATING ACTIVITIES
Net earnings (loss) $ 127.4 $ 66.0 $ (333.6)
Adjustments to reconcile net earnings (loss)
to cash flow from operating activities:
Non-cash charges and credits:
Depreciation and amortization 213.6 200.5 204.1
Restructuring costs (credits) - (6.3) 142.4
Extraordinary loss - - 22.7
Cumulative effect of changes in accounting principles - 29.2 237.6
Other 1.9 (.4) 14.1
Changes in selected working capital items:
Trade receivables (85.9) (65.3) (90.5)
Inventories 27.6 (33.9) (20.1)
Trade accounts payable 90.5 47.4 26.9
Restructuring (47.3) (24.8) (25.8)
Other assets and liabilities 56.1 (82.8) (58.4)
CASH FLOW FROM OPERATING ACTIVITIES
BEFORE SALE OF RECEIVABLES 383.9 129.6 119.4
Sale of receivables 26.0 6.5 5.2
CASH FLOW FROM OPERATING ACTIVITIES 409.9 136.1 124.6
INVESTING ACTIVITIES
Proceeds from disposal of assets and businesses 13.5 114.6 9.8
Capital expenditures (198.5) (209.9) (184.0)
Cash inflow from hedging activities 1,070.4 1,096.6 1,653.0
Cash outflow from hedging activities (1,105.9) (1,085.1) (1,724.6)
CASH FLOW FROM INVESTING ACTIVITIES (220.5) (83.8) (245.8)
CASH FLOW BEFORE FINANCING ACTIVITIES 189.4 52.3 (121.2)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 217.4 (14.1) 169.9
Proceeds from long-term debt
(including revolving credit facility) 1,226.7 2,008.3 2,055.3
Payments on long-term debt
(including revolving credit facility) (1,622.8) (1,989.4) (2,539.4)
Issuance of equity interest in a subsidiary 4.3 4.4 _
Issuance of common stock 8.8 6.4 477.5
Cash dividends (45.3) (45.1) (43.5)
CASH FLOW FROM FINANCING ACTIVITIES (210.9) (29.5) 119.8
Effect of exchange rate changes on cash 5.4 (7.1) (7.8)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16.1) 15.7 (9.2)
Cash and cash equivalents at beginning of year 82.0 66.3 75.5
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 65.9 $ 82.0 $ 66.3
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black & Decker Corporation and Subsidiaries
NOTE 1: SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of the Corporation and its
subsidiaries. Intercompany transactions have been eliminated.
Revenue Recognition: Revenue from information technology and
services (PRC) consists of revenue generated primarily for
contracted services. Revenue on contracts is recognized on the
basis of an estimated percentage of completion of services
rendered and, accordingly, amounts for unbilled services are
included in accounts receivable. Product sales include sales of
manufactured and externally sourced products and related service
and repair of such products.
Foreign Currency Translation: The financial statements of the
Corporation's subsidiaries outside the United States, except for
those subsidiaries located in highly inflationary economies, are
generally measured using the local currency as the functional
currency. Assets, including goodwill, and liabilities of these
subsidiaries are translated at the rates of exchange as of the
balance sheet date. The resultant translation adjustments are
included in equity adjustment from translation, a separate
component of stockholders' equity. Income and expense items are
translated at average monthly rates of exchange. Gains and losses
from foreign currency transactions are included in net earnings.
For subsidiaries operating in highly inflationary economies,
gains and losses from balance sheet translation adjustments are
included in net earnings.
Cash and Cash Equivalents: Cash and cash equivalents includes
cash on hand, demand deposits, and short-term investments with
original maturities of three months or less.
Inventories: 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.
Property and Depreciation: Property, plant and equipment is
stated at cost. Depreciation is computed generally on the
straight-line method for financial reporting purposes and on
accelerated and straight-line methods for tax reporting purposes.
Goodwill and Other Intangibles: Goodwill and other intangibles
are amortized on the straight-line method over periods ranging up
to 40 years. On a periodic basis, the Corporation estimates the
future undiscounted cash flows of the businesses to which
goodwill relates in order to ensure that the carrying value of
such goodwill has not been impaired.
Product Development Costs: Costs associated with the development
of new products and changes to existing products are charged to
operations as incurred. Product development costs associated with
PRC that are specific to negotiated contracts are generally
chargeable to and recoverable under the terms of the contracts
and are not included as product development costs. Product
development costs were $91.7 million in 1994, $93.0 million in
1993, and $95.6 million in 1992.
Postretirement Benefits: The Corporation and its subsidiaries
have pension plans covering substantially all of their employees.
The Corporation's employees are primarily covered by non-
contributory defined benefit plans. The plans are funded in
conformity with the funding requirements of applicable government
regulations. Generally, benefits are based on age, years of
service, and the level of compensation during the final years of
employment. Prior service costs for defined benefit plans are
generally amortized over the estimated remaining service periods
of employees.
Certain employees of the Corporation are covered by defined
contribution plans. The Corporation's contributions to the plans
are based on a percentage of employee compensation or employee
contributions. The plans are funded on a current basis.
In addition to pension benefits, the Corporation provides
certain postretirement medical, dental, and life insurance
benefits, principally to certain United States employees.
Retirees in other countries are generally covered by government-
sponsored programs.
The Corporation uses the corridor approach in the valuation
of defined benefit plans and other postretirement benefits. The
corridor approach defers all actuarial gains and losses resulting
from variances between actual results and economic estimates or
actuarial assumptions. These unrecognized gains and losses are
amortized when the net gains and losses exceed 10% of the
accumulated postretirement benefit obligation at the beginning of
the year. The amount in excess of the corridor is amortized over
the average remaining service period to retirement date of active
plan participants or, for retired participants, the average
remaining life expectancy.
Derivative Financial Instruments: Derivative financial
instruments are used by the Corporation principally in the
management of its interest rate and foreign currency exposures.
Amounts to be paid or received under interest rate swap
agreements are accrued as interest rates change and are
recognized over the life of the swap agreements as an adjustment
to interest expense. The related amounts payable to, or
receivable from, the counterparties are included in other accrued
liabilities. The fair value of the swap agreements is not
recognized in the consolidated financial statements since they
are accounted for as hedges.
The costs of interest rate cap agreements are included in
interest expense ratably over the lives of the agreements.
Payments to be received as a result of the cap agreements are
accrued as a reduction of interest expense. The unamortized costs
of the cap agreements are included in other assets.
In the case of an early termination of an interest rate swap
or cap, gains or losses resulting from the early termination are
deferred and amortized as an adjustment to the yield of the
related debt instrument over the remaining period originally
covered by the terminated swap or cap.
Gains and losses on hedges of net investments are not
included in the income statement, but are reflected in the
balance sheet in the equity adjustment from translation component
of stockholders' equity, with the related amounts due to or from
the counterparties included in other liabilities or other assets.
Gains and losses on the Corporation's foreign currency
transaction hedges are recognized in income and offset the
foreign exchange gains and losses on the underlying transactions.
Gains and losses of foreign currency firm commitment hedges are
deferred and included in the basis of the transactions underlying
the commitments.
Net Earnings (Loss) Per Common Share: Net earnings (loss) per
common share are computed by dividing net earnings (loss), after
deducting preferred stock dividends, by the weighted average
number of common shares outstanding during each year. Fully
diluted earnings per share are not materially different from
earnings per common share.
Reclassifications: Certain prior years' amounts in the
consolidated financial statements have been reclassified to
conform to the presentation used for 1994.
NOTE 2: TRADE RECEIVABLES
Trade receivables at December 31, 1994, included unbilled costs
and retainages under long-term contracts of PRC in the amount of
$162.9 million, of which $15.8 million is not expected to be
collected within one year. Unbilled amounts can be invoiced upon
reaching certain milestones and upon completion of contract
audits.
Concentration of Credit: The Corporation sells products and
services to customers in diversified industries and geographic
regions and, therefore, has no significant concentrations of
credit. The Corporation continuously evaluates the
creditworthiness of its customers and generally does not require
collateral.
Sale of Receivables Program: In 1994, the Corporation negotiated
a seasonal expansion of the capacity of its sale of receivables
program from $200.0 million to $275.0 million during the period
from October 1, 1994, through January 31, 1995. Receivables sold
under this program are not subject to any significant recourse
provisions. At December 31, 1994, the Corporation had sold $244.0
million of receivables under this program compared to $218.0
million at December 31, 1993. The discount on the sale of
receivables is included in other expense.
NOTE 3: INVENTORIES
The classification of inventories at the end of each year, in
millions of dollars, was as follows:
1994 1993
FIFO cost
Raw materials and work-in-process $ 220.4 $ 206.2
Finished products 543.8 567.4
764.2 773.6
Excess of FIFO cost over
LIFO inventory value (41.2) (44.7)
$ 723.0 $ 728.9
The cost of United States inventories stated under the LIFO
method was approximately 48% and 52% of the value of total
inventories at December 31, 1994 and 1993, respectively.
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at the end of each year, in
millions of dollars, consisted of the following:
1994 1993
Property, plant and equipment at cost:
Land and improvements $ 68.3 $ 67.8
Buildings 348.0 346.4
Machinery and equipment 1,357.8 1,203.4
1,774.1 1,617.6
Less accumulated depreciation 916.0 821.4
$ 858.1 $ 796.2
Depreciation expense charged to operations was $134.6 million in
1994, $126.3 million in 1993, and $125.8 million in 1992.
NOTE 5: GOODWILL
Goodwill at the end of each year, in millions of dollars, was as
follows:
1994 1993
Goodwill $2,735.5 $2,699.9
Less accumulated amortization 442.5 366.3
$2,293.0 $2,333.6
NOTE 6: OTHER ACCRUED LIABILITIES
Other accrued liabilities at the end of each year, in millions of
dollars, included the following:
1994 1993
Salaries and wages $ 108.0 $ 81.2
Employee benefits 60.8 76.7
Restructuring 21.2 65.3
All other 614.5 482.6
$ 804.5 $ 705.8
All other at December 31, 1994 and 1993, primarily consisted of
accruals for trade discounts and allowances, insurance, warranty
costs, advertising, interest, and income and other taxes.
NOTE 7: SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1994 and 1993, included
unsecured money market loans in the amounts of $293.3 million and
$195.0 million, respectively, at contracted interest rates based
on a margin over the London interbank borrowing rate (LIBOR).
These loans are payable on demand with a one-to-five day notice
period. Short-term borrowings at December 31, 1994, also included
$75.0 million of competitive bid rate loans under the
Corporation's unsecured revolving credit facility, as more fully
described in Note 8. Short-term borrowings in the amounts of
$180.7 million and $102.1 million at December 31, 1994 and 1993,
respectively, primarily consisted of borrowings of subsidiaries
outside the United States under the terms of uncommitted lines of
credit or other short-term borrowing arrangements. Short-term
borrowings also included commercial paper of $35.2 million at
December 31, 1993. The weighted average interest rate on short-
term borrowings outstanding at December 31, 1994 and 1993, was
7.0% and 4.3%, respectively.
Under terms of uncommitted lines of credit at December 31,
1994, certain of the Corporation's subsidiaries outside the
United States may borrow up to an additional $314.2 million on
such terms as may be mutually agreed upon. These arrangements do
not have termination dates and are reviewed periodically. No
material compensating balances are required or maintained.
NOTE 8: LONG-TERM DEBT
The composition of long-term debt at the end of each year, in
millions of dollars, was as follows:
1993 1994
Revolving credit facility
expiring 1997 $ 426.2 $1,086.7
7.50% notes due 2003 500.0 500.0
6.625% notes due 2000 250.0 250.0
7.0% notes due 2006 250.0 -
Medium Term Notes due from
1996 through 2002 151.8 -
9.25% sinking fund debentures
maturing 2016 150.0 150.0
6.75% deutsche mark bearer bonds
maturing 1995 111.4 102.7
5.75% deutsche mark bearer bonds
maturing 1994 - 58.7
8.375% notes due 1997 - 100.0
Other loans due through 2009 37.6 19.7
Less current maturities of
long-term debt (121.1) (163.1)
Less debt discounts (32.7) (35.5)
$1,723.2 $2,069.2
During 1994, the Corporation filed a shelf registration statement
to issue up to $500 million in debt securities, which may consist
of debentures, notes, or other unsecured evidences of
indebtedness. These debt securities (the Medium Term Notes) may
be offered in separate series in amounts, at prices, and on terms
to be determined by market conditions at the time of sale. The
net proceeds from the sale of the Medium Term Notes will be
available for general corporate purposes, which may include, but
are not limited to, refinancing of indebtedness, working capital,
and capital expenditures. As of December 31, 1994, the
Corporation had issued $151.8 million aggregate principal amount
of the Medium Term Notes under this shelf registration statement.
Of that amount, a total of $109.8 million bear interest at fixed
rates ranging from 6.93% to 8.88%, while the remainder bear
interest at variable rates.
As a result of the issuance of public debt, the Corporation
reduced the amount of credit available under its unsecured
revolving credit facility (the Credit Facility) from $2.15
billion as of December 31, 1993, to $1.7 billion as of December
31, 1994. In January 1995, the Corporation reduced the amount of
credit available under the Credit Facility to $1.4 billion. The
amount available for borrowing under the Credit Facility at
December 31, 1994, was $1,198.8 million ($898.8 million after the
January 1995 reduction in the amount available for borrowing).
The Corporation renegotiated the pricing of borrowings under
the Credit Facility in October 1994. Borrowing options under the
Credit Facility are at LIBOR plus .4375% (LIBOR plus .50%, prior
to October 1994), or at other variable rates set forth therein.
The interest rate margin over LIBOR declines as the Corporation's
leverage ratio improves. The Corporation also is able to borrow
by means of competitive bid rate loans under the Credit Facility.
Competitive bid rate loans are made through an auction process at
then-current market rates and are classified as short-term
borrowings in the consolidated balance sheet. In addition to
interest payable on the principal amount of indebtedness
outstanding from time to time under the Credit Facility, the
Corporation is required to pay an annual facility fee to each
bank equal to .175% (.25%, prior to October 1994) of the amount
of the bank's commitment, whether used or unused.
The Credit Facility includes various customary covenants,
including covenants limiting the ability of the Corporation and
its subsidiaries to pledge assets or incur liens on assets and
financial covenants requiring the Corporation to maintain a
specified leverage ratio and to achieve certain levels of cash
flow to fixed expense coverage. As of December 31, 1994, the
Corporation was in compliance with all terms and conditions of
the Credit Facility. The Corporation expects to continue to meet
the covenants imposed by the Credit Facility over the next 12
months. Meeting the cash flow coverage ratio is dependent upon
the level of future earnings and interest rates, each of which
can have a significant impact on the ratio.
The 9.25% sinking fund debentures are obligations of Emhart
Corporation (Emhart), a wholly owned subsidiary, and are callable
at prices decreasing from 103.2% of face amount as of
December 31, 1994, to 100% in 2006. Commencing in August 1997,
annual sinking fund payments of $8.0 million are required.
The 6.75% deutsche mark bearer bonds are obligations of
Emhart and are guaranteed by the Corporation. The bonds, which
are callable at the option of Emhart at a price of 100.5% of face
amount beginning in October 1994, mature in October 1995 and have
been classified as current maturities. The 9.25% sinking fund
debentures and 6.75% deutsche mark bearer bonds include certain
restrictions on liens on assets and impose limitations on sale-
leaseback transactions.
Indebtedness of subsidiaries of the Corporation, including
the obligations of Emhart noted above, in the aggregate principal
amounts of $773.8 million and $852.4 million were included in the
consolidated balance sheet at December 31, 1994 and 1993,
respectively, under the captions short-term borrowings, current
maturities of long-term debt, and long-term debt.
In 1992, the Corporation recognized a $22.7 million
extraordinary loss, which represented the unamortized debt issue
costs related to debt repaid in connection with the Corporation's
refinancing of its previous term loan and revolving credit
facility and the early extinguishment of debt following the sale
by the Corporation of 20.7 million shares of common stock earlier
in 1992.
Principal payments on long-term debt obligations due over
the next five years are as follows: $121.1 million in 1995, $19.8
million in 1996, $461.9 million in 1997, $65.8 million in 1998,
and $63.3 million in 1999. Interest payments were $185.0 million
for 1994, $165.0 million for 1993, and $240.0 million for 1992.
NOTE 9: DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation is exposed to market risks arising from changes
in interest rates. With products and services marketed in over
100 countries and with manufacturing sites in 15 countries, the
Corporation also is exposed to risks arising from changes in
foreign exchange rates. As an end user of derivative financial
instruments, the Corporation utilizes derivatives to manage these
risks by creating offsetting market positions. The Corporation's
use of derivatives with respect to interest rate and foreign
currency exposures is discussed below.
Credit Exposure: The Corporation is exposed to credit-related
losses in the event of nonperformance by counterparties to
certain derivative financial instruments. The Corporation
monitors the creditworthiness of the counterparties and presently
does not expect default by any of the counterparties. The
Corporation does not obtain collateral in connection with its
derivative financial instruments.
The credit exposure that results from interest rate and
foreign exchange contracts is represented by the fair value of
contracts with a positive fair value as of the reporting date, as
indicated below. Some derivatives are not subject to credit
exposures. The fair value of all financial instruments is
summarized in Note 10.
Interest Rate Risk Management: The Corporation manages its
interest rate risk, primarily through the use of interest rate
swap and cap agreements, in order to achieve a cost effective mix
of fixed to variable rate indebtedness. The Corporation seeks to
issue debt opportunistically, whether fixed or variable, at the
lowest possible cost and then, based upon its assessment of the
future interest rate environment, may, through the use of
interest rate derivatives, convert such debt from fixed to
variable or from variable to fixed interest rates. Similarly, the
Corporation may, at times, seek to limit the impacts of rising
interest rates on its variable rate debt through the use of
interest rate caps.
The amounts exchanged by the counterparties to interest rate
swap and cap agreements normally are based upon notional amounts
and other terms, generally related to interest rates, of the
derivatives. While the notional amounts of interest rate swaps
and caps form part of the basis for the amounts exchanged by the
counterparties, the notional amounts are not themselves exchanged
and, therefore, do not represent a measure of the Corporation's
exposure as an end user of derivative financial instruments.
The notional amounts of the Corporation's interest rate
derivatives at the end of each year, in millions of dollars, were
as follows:
1994 1993
Interest rate swaps:
Fixed to variable rates $850.0 $700.0
Variable to fixed rates 750.0 700.0
Rate basis swaps 200.0 200.0
U.S. rates to foreign rates 175.0 100.0
Interest rate caps purchased $100.0 $250.0
The Corporation's portfolio of interest rate swap instruments as
of December 31, 1994, included $850 million notional amounts of
fixed to variable rate swaps with a weighted average fixed rate
receipt of 6.19%. The basis of the variable rates paid is LIBOR.
The majority of the fixed to variable rate swaps contain
provisions that permit, during a portion of the terms of swaps,
the setting of the variable rates at either the beginning or the
end of the reset periods, at the option of the counterparties.
The reset periods generally occur every three to six months. Of
these swaps to variable rates, $100 million mature in 1998, with
the remainder maturing in the years 2000 through 2004. A total of
$300 million of these swaps, maturing in 2003, contains
provisions that permit the counterparties to terminate the swap,
without penalty, beginning in 1998.
As of December 31, 1994, the portfolio also included $750
million notional amounts of variable to fixed rate swaps with a
weighted average fixed rate payment of 5.56%. The basis of the
variable rate received is LIBOR. A total of $150 million of the
variable to fixed rate swaps included caps limiting interest rate
movements to .25% between reset dates, which generally occur
every three months. The maturities of these swaps, by notional
amounts, are as follows: $200 million in 1995, $150 million in
1996, $200 million in 1997, and $200 million in 1998.
As of December 31, 1994, the portfolio also contained $200
million notional amounts of rate basis swaps, which swap to the
higher of a specified fixed rate or LIBOR minus a specified
spread, with a weighted average fixed rate payment of 5.93% or a
weighted average variable rate payment of LIBOR minus 1.30%. The
basis of the variable rates received is LIBOR. Rates under these
rate basis swaps are generally reset every six months. The
maturities of these swaps, by notional amounts, are as follows:
$50 million in 1995, $100 million in 1996, and $50 million in
1997. At December 31, 1994, payments under these swaps were based
on the weighted average fixed rate payment provisions of the swap
agreements.
The remainder of the interest rate swap portfolio as of
December 31, 1994, consisted of $175 million notional amounts of
interest rate swaps that swap from United States dollars into
foreign currencies. Of that amount, $150 million swapped from
fixed rate United States dollars (with a weighted average fixed
rate of 6.75%) into fixed rate Japanese yen (with a weighted
average fixed rate of 4.68%). Of the $150 million notional
amounts, $100 million mature in 1996 and the balance in 1997. A
total of $25 million notional amounts of interest rate swaps,
maturing in 1997, swapped from variable rate United States
dollars (with the variable rate based on LIBOR) into fixed rate
Swiss francs (with a weighted average fixed rate of 5.17%).
As of December 31, 1994, the Corporation also had $100
million notional amounts of interest rate caps, which have the
effect of limiting the Corporation's exposure to high interest
rates. The maturities, by notional amounts, and cap rates of
these agreements are as follows: $50 million in 1995, with a cap
rate of 6%; and $50 million in 1997, with a cap rate of 7%.
The Corporation's credit exposure on its interest rate
derivatives as of December 31, 1994 and 1993, was $22.2 million
and $15.3 million, respectively. Deferred gains and losses on the
early termination of interest rate swaps as of December 31, 1994
and 1993, were not significant.
Foreign Currency Management: The Corporation enters into various
foreign exchange contracts in managing its foreign exchange
risks. The contractual amounts of foreign currency derivative
financial instruments (principally, forward exchange contracts
and options) are generally exchanged by the counterparties.
In order to limit the volatility of reported equity, the
Corporation hedges a portion of its net investment in
subsidiaries located outside the United States, where
practicable, except for those subsidiaries located in highly
inflationary economies, through the use of foreign currency
forward contracts, foreign currency swaps, and purchased foreign
currency options with little or no intrinsic value at the
inception of the options. Prior to 1994, the Corporation
generally operated under a full hedge policy, hedging the net
assets, including goodwill, of its subsidiaries outside the
United States. During 1994, the Corporation determined that the
benefits of the full hedge policy no longer exceeded its costs
and, accordingly, elected to hedge only a portion, generally
limited to tangible net worth, of its net investment in
subsidiaries outside the United States.
Through its foreign currency hedging activities, the
Corporation seeks to minimize the risk that the eventual cash
flows resulting from the sales of products outside the United
States will be affected by changes in exchange rates. Foreign
currency commitment and transaction exposures generally are the
responsibility of the Corporation's individual operating units to
manage as an integral part of their business. Management responds
to foreign exchange movements through many alternative means,
such as pricing actions, changes in cost structure, and changes
in hedging strategies.
The Corporation hedges its foreign currency transaction and
firm purchase commitment exposures, including firm intercompany
foreign currency purchases, based on management's judgment,
generally through the use of forward exchange contracts and
purchased options with little or no intrinsic value at the
inception of the options. Some of the contracts involve the
exchange of two foreign currencies, according to the local needs
of the subsidiaries. The Corporation utilizes some natural hedges
to mitigate its transaction and commitment exposures.
Intercompany foreign currency purchase commitments are considered
to be firm when performance under the commitments is probable
because of sufficiently large disincentives to the Corporation
for nonperformance. Deferred gains and losses on intercompany
purchases hedged are recognized in cost of sales when the related
inventory is sold or when a hedged purchase is no longer expected
to occur.
The following table summarizes the contractual amounts of
the Corporation's forward exchange contracts and options as of
December 31, 1994 and 1993, in millions of United States dollars,
including details by major currency as of December 31, 1994.
Foreign currency amounts are translated at current rates as of
the reporting date. The "Buy" amounts represent the United States
dollar equivalent of commitments to purchase currencies, and the
"Sell" amounts represent the United States dollar equivalent of
commitments to sell currencies.
Forward Exchange Contracts Purchased Options
As of December 31, 1994 Buy Sell Buy Sell
United States dollar $1,045.3 $ (877.5) $236.4 $ (12.1)
Pound sterling 260.5 (221.0) - (76.6)
Deutsche mark 297.9 (165.7) - (79.0)
Dutch guilder 69.9 (45.0) - (31.3)
Swedish krona 52.1 (86.2) 15.3 -
Japanese yen 16.6 (182.3) 6.0 -
French franc 20.1 (83.4) - -
Canadian dollar 246.1 (182.3) - (34.5)
Italian lira 39.4 (42.8) - -
Swiss franc 35.3 (61.9) 9.0 (3.2)
Other 37.3 (189.0) - (25.6)
Total $2,120.5 $(2,137.1) $266.7 $(262.3)
As of December 31, 1993
Total $1,881.7 $(1,867.9) $414.9 $(408.2)
The Corporation's credit exposure on its foreign currency
derivatives as of December 31, 1994 and 1993, was $43.2 million
and $26.6 million, respectively.
Gross deferred realized gains and losses on commitment
hedges were not significant at December 31, 1994 and 1993.
Substantially all of the amounts deferred at December 31, 1994,
are expected to be recognized in earnings during 1995, when the
gains or losses on the underlying transactions will also be
recognized.
NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at
which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or
liquidation. Significant differences can arise between the fair
value and carrying amount of financial instruments that are
recognized at historical cost amounts.
The following methods and assumptions were used by the
Corporation in estimating fair value disclosures for financial
instruments:
Cash and cash equivalents, trade receivables, certain other
current assets, short-term borrowings, and current maturity of
long-term debt: The amounts reported in the consolidated balance
sheet approximate fair value.
Long-term debt: Publicly traded debt is valued based on quoted
market values. The amount reported in the consolidated balance
sheet for the remaining long-term debt approximates fair value
since such debt was either variable rate debt or fixed rate debt
that had been recently issued as of the reporting date.
Interest rate hedges: The fair value of interest rate hedges,
including interest rate swaps and caps, reflects the estimated
amounts that the Corporation would receive or pay to terminate
the contracts at the reporting date, thereby taking into account
unrealized gains and losses of open contracts as of the reporting
date.
Foreign exchange contracts: Foreign exchange forward and option
contracts are estimated using prices established by financial
institutions for comparable instruments.
The following table sets forth the carrying amounts and fair
values of the Corporation's financial instruments, except for
those financial instruments noted above for which the carrying
values approximate fair values, at the end of each year, in
millions of dollars:
1994 1993
Carrying Fair Carrying Fair
Assets (Liabilities) Amount Value Amount Value
Non-derivatives:
Long-term debt $(1,723.2) $(1,637.3) $(2,069.2) $(2,088.3)
Derivatives relating to:
Debt
Assets .6 22.2 5.1 15.3
Liabilities (1.4) (101.8) (.9) (36.2)
Foreign currency
Assets 38.0 43.2 35.0 26.6
Liabilities (43.9) (62.6) (8.5) (10.8)
The carrying amounts of debt-related derivatives are included in
the consolidated balance sheet under the caption accrued
liabilities. The carrying amounts of foreign currency-related
derivatives related to net investment and commitment hedges are
included in the consolidated balance sheet under the captions
other current assets and other current liabilities. The carrying
amounts of foreign currency-related derivatives related to
transaction hedges are reflected in the same balance sheet
caption as the hedged transaction.
NOTE 11: INCOME TAXES
Earnings (loss) before income taxes, extraordinary item, and
cumulative effects of changes in accounting principles, for each
year, in millions of dollars, were as follows:
1994 1993 1992
United States $ 24.9 $ 52.3 $(131.4)
Other countries 165.2 103.6 102.4
$ 190.1 $ 155.9 $ (29.0)
Significant components of income taxes (benefits) for each year,
in millions of dollars, were as follows:
1994 1993 1992
Current:
United States $ 5.2 $ 7.6 $ 4.3
Other countries 43.7 32.3 36.4
Withholding on
remittances from
other countries 1.4 1.0 (1.0)
50.3 40.9 39.7
Deferred:
United States 15.5 21.7 -
Other countries (3.1) (1.9) 4.6
12.4 19.8 4.6
$ 62.7 $ 60.7 $ 44.3
During 1994 and 1993, the Corporation utilized United States tax
loss carryforwards and capital loss carryforwards obtained in a
prior business combination. The effect of utilizing these
carryforwards was to recognize deferred income tax expense and to
reduce goodwill by $15.5 million in 1994 and by $21.7 million in
1993.
In 1993 and 1992, no income tax benefits were recorded on
the cumulative effect adjustments for postemployment and
postretirement benefits or the extraordinary loss from early
extinguishment of debt. The tax assets related to these
adjustments, which are predominantly in the United States, have
been offset by a corresponding increase in the deferred tax asset
valuation allowance. Income tax expense recorded directly as an
adjustment to equity as a result of hedging activities in 1994,
1993, and 1992 was not significant.
Income tax payments were $44.6 million for 1994, $92.2
million for 1993, and $32.8 million for 1992. Taxes paid during
1993 included $49 million of previously accrued tax payments
relating to settlement of prior year tax audit issues.
Deferred tax liabilities (assets), in millions of dollars,
were composed of the following:
1994 1993
Deferred tax liabilities:
Fixed assets $ 53.4 $ 54.5
Postretirement benefits 31.2 24.9
Other 19.8 25.6
Gross deferred tax liabilities 104.4 105.0
Deferred tax assets:
Bad debt allowance (5.3) (5.7)
Inventories (17.3) (36.3)
Postretirement benefits (20.1) (24.3)
Fixed assets (5.7) (5.8)
Other accruals (136.7) (126.2)
Tax loss carryforwards (144.3) (186.7)
Tax credit and capital loss
carryforwards (55.1) (52.4)
Gross deferred tax assets (384.5) (437.4)
Deferred tax assets' valuation
allowance 317.9 363.7
Net deferred tax liability $ 37.8 $ 31.3
Deferred income taxes are included in the consolidated balance
sheet under the captions other current assets, other accrued
liabilities, and deferred income taxes.
Net deferred tax assets (prior to the valuation allowance)
of $49 million as of December 31, 1994, resulted from a prior
business combination and, accordingly, will result in a reduction
of goodwill if realized for financial reporting purposes.
During the year ended December 31, 1994, the deferred tax
asset valuation allowance decreased by $45.8 million. This net
decrease is mainly due to utilization of tax loss carryforwards
and capital loss carryforwards.
Tax basis carryforwards at December 31, 1994, consisted of
net operating losses (NOLs) expiring from 1995 to 2010, capital
loss carryforwards expiring from 1995 to 1996, and other tax
credits expiring from 1998 to 2006.
At December 31, 1994, unremitted earnings of subsidiaries
outside the United States were approximately $1,347 million on
which no United States taxes have been provided. The
Corporation's intention is to reinvest these earnings permanently
or to repatriate the earnings only when tax effective to do so.
It is not practicable to estimate the amount of additional tax
that might be payable upon repatriation of foreign earnings;
however, the Corporation believes that United States foreign tax
credits would largely eliminate any United States tax and offset
any foreign withholding tax.
A reconciliation of income taxes at the federal statutory
rate to the Corporation's income taxes for each year, in millions
of dollars, is as follows:
1994 1993 1992
Income taxes at federal
statutory rate $ 66.5 $ 54.6 $ (9.9)
Lower effective taxes
on earnings of
other countries (18.7) (15.0) (14.7)
Effect of net operating loss
carryforwards (14.3) (11.9) 12.1
Withholding on remittances
from other countries 1.4 1.0 2.7
Amortization and write-off
of goodwill 25.6 24.8 53.9
Other-net 2.2 7.2 .2
Income taxes $ 62.7 $ 60.7 $ 44.3
NOTE 12: POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
Net pension cost (credit) for all domestic defined benefit plans
included the following components for each year, in millions of
dollars:
1994 1993 1992
Service cost $ 14.0 $ 11.8 $ 10.0
Interest cost on projected
benefit obligation 45.6 44.0 45.1
Actual return on assets (20.8) (98.6) (58.3)
Net amortization and deferral (38.2) 33.4 (13.6)
Net pension cost (credit) $ .6 $ (9.4) $(16.8)
The funded status of the domestic defined benefit plans for each
year, in millions of dollars, was as follows:
1994 1993
Actuarial present value of
benefit obligations:
Vested benefit $ 492.9 $ 562.0
Accumulated benefit $ 505.4 $ 575.0
Projected benefit $ 553.1 $ 646.4
Plan assets at fair value 686.6 707.9
Plan assets in excess of
projected benefit obligation 133.5 61.5
Unrecognized net loss 79.6 163.5
Unrecognized prior service cost 6.3 7.4
Unrecognized net asset at date
of adoption net of amortization (5.3) (8.6)
Net pension asset recognized in
the consolidated balance sheet $ 214.1 $ 223.8
Discount rates 9.0% 7.0%
Salary scales 5.0-6.0% 5.0-6.0%
Expected return on plan assets 10.5% 10.5%
Net pension credit for defined benefit plans outside the United
States for each year, in millions of dollars, included the
following components:
1994 1993 1992
Service cost $ 8.5 $ 7.7 $ 7.6
Interest cost on projected
benefit obligation 19.0 19.1 20.9
Actual return on assets 11.3 (65.9) (43.0)
Net amortization and deferral (40.8) 38.4 10.5
Net pension credit $ (2.0) $ (.7) $ (4.0)
The funded status of the defined benefit pension plans outside
the United States for each year, in millions of dollars, was as
follows:
1994 1993
Plans Where Assets Exceeded
Accumulated Benefits
Actuarial present value of
benefit obligations:
Vested benefit $ 161.8 $ 150.9
Accumulated benefit $ 162.7 $ 152.0
Projected benefit $ 184.9 $ 177.9
Plan assets at fair value 275.2 277.7
Plan assets in excess of
projected benefit obligation 90.3 99.8
Unrecognized net loss (gain) 8.1 (16.3)
Unrecognized prior service cost 14.1 13.1
Unrecognized net asset at date
of adoption net of amortization (15.9) (16.8)
Net pension asset recognized in
the consolidated balance sheet $ 96.6 $ 79.8
Discount rates 5.0-9.0% 4.5-8.0%
Salary scales 3.5-5.0% 3.0-4.5%
Expected return on plan assets 5.5-12.0% 5.5-12.0%
1994 1993
Plans Where Accumulated Benefits
Exceeded Assets
Actuarial present value of
benefit obligations:
Vested benefit $ 51.0 $ 45.0
Accumulated benefit $ 55.3 $ 52.6
Projected benefit $ 63.9 $ 62.2
Plan assets at fair value - -
Projected benefit obligation in
excess of plan assets (63.9) (62.2)
Unrecognized net (gain) loss (7.2) .7
Unrecognized prior service cost 2.4 2.3
Unrecognized net liability at date of
adoption net of amortization 1.8 3.0
Net pension liability recognized in
the consolidated balance sheet $ (66.9) $ (56.2)
Discount rates 7.0-10.0% 6.5-8.5%
Salary scales 4.0-7.0% 4.0-6.0%
Assets of domestic plans and plans outside the United States
consist principally of investments in equity securities, debt
securities, and cash equivalents.
The expected returns on plan assets during 1992 for defined
benefit plans were 11.0% for plans in the United States and 5.5%
to 12.0% for funded plans outside the United States.
Expense for defined contribution plans amounted to $20.5
million, $18.4 million, and $18.2 million in 1994, 1993, and
1992, respectively.
The Corporation has several unfunded health care plans that
provide certain postretirement medical, dental, and life
insurance benefits for most United States employees. The
postretirement medical and dental plans are contributory and
include certain cost-sharing features, such as deductibles and
co-payments.
The Corporation adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," as of
January 1, 1992. As a result of the adoption, a $249.8 million
cumulative effect adjustment was recorded as a reduction of net
earnings during 1992.
Net periodic postretirement benefit expense, in millions of
dollars, included the following components:
1994 1993 1992
Service expense $ 1.8 $ 1.7 $ 2.7
Interest expense 12.9 14.8 19.8
Net amortization (8.0) (7.7) (1.7)
Net periodic postretirement
benefit expense $ 6.7 $ 8.8 $ 20.8
The reconciliation of the accumulated postretirement benefit
obligation to the liability recognized in the consolidated
balance sheet, in millions of dollars, was as follows:
1994 1993
Accumulated postretirement
benefit obligation
Retirees $133.1 $150.4
Fully eligible active participants 10.7 25.6
Other active participants 22.2 29.6
Total 166.0 205.6
Unrecognized prior service cost 63.5 69.5
Unrecognized net gain (loss) 15.8 (25.5)
Net postretirement benefit liability
recognized in the consolidated
balance sheet $245.3 $249.6
The health care cost trend rate used to determine the
postretirement benefit obligation was 10.75% for 1994, 8.75% for
1995, decreases gradually to an ultimate rate of 4.75% in 2001
and remains at that level thereafter. The trend rate is a
significant factor in determining the amounts reported. The
effect of a 1% annual increase in these assumed health care cost
trend rates would increase the accumulated postretirement benefit
obligation by approximately $7.1 million. The effect of a 1%
increase on the aggregate of the service and interest cost
components of net periodic postretirement benefit cost is
immaterial. An assumed discount rate of 9.0% was used to measure
the accumulated postretirement benefit obligation for 1994
compared to 7.0% used in 1993.
As of January 1, 1993, the Corporation adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which
addresses the accounting for certain benefits provided to former
employees prior to retirement. For the Corporation, these
benefits primarily relate to disability and workers' compensation
benefits. Prior to January 1, 1993, the Corporation recognized
the cost of providing these benefits principally on the cash
basis. Commencing in 1993, the Corporation began to accrue these
benefits when payment of such benefits is probable and when
sufficient information exists to make reasonable estimates of the
amounts to be paid. As a result of the adoption of SFAS No. 112,
a $29.2 million cumulative effect adjustment was recorded as a
reduction of net income during 1993.
NOTE 13: STOCKHOLDERS' EQUITY
(Dollars in Millions Except Per Share Amounts)
Equity
Outstanding Outstanding Capital in Retained Adjustment
Preferred Common $.50 Excess of Earnings From
Shares Amount Shares Par Value Par Value (Deficit) Translation
Balance at December 31, 1991 150,000 $150.0 61,860,619 $30.9 $ 561.9 $ 298.1 $(13.8)
Net loss - - - - - (333.6) -
Cash dividends
- Common ($.40 per share) - - - - - (31.3) -
- Preferred - - - - - (11.6) -
Sale of common stock - - 20,700,000 10.4 455.0 - -
Common stock issued under
employee benefit plans - - 867,487 .4 11.7 - -
Valuation changes, less net
effect of hedging activities - - - - - - (54.1)
Balance at December 31, 1992 150,000 150.0 83,428,106 41.7 1,028.6 (78.4) (67.9)
Net earnings - - - - - 66.0 -
Cash dividends
- Common ($.40 per share) - - - - - (33.5) -
- Preferred - - - - - (11.6) -
Common stock issued under
employee benefit plans - - 417,088 .2 6.2 - -
Valuation changes, less net
effect of hedging activities - - - - - - (52.4)
Balance at December 31, 1993 150,000 150.0 83,845,194 41.9 1,034.8 (57.5) (120.3)
Net earnings - - - - - 127.4 -
Cash dividends
- Common ($.40 per share) - - - - - (33.7) -
- Preferred - - - - - (11.6) -
Common stock issued under
employee benefit plans - - 843,609 .4 14.3 - -
Valuation changes, less net
effect of hedging activities - - - - - - 23.7
Balance at December 31, 1994 150,000 $150.0 84,688,803 $42.3 $1,049.1 $ 24.6 $(96.6)
The Corporation has one class of $.50 par value common stock with
150,000,000 authorized shares. The Corporation has authorized
5,000,000 shares of preferred stock without par value, of which
1,500,000 shares have been designated as Series A Junior
Participating Preferred Stock (Series A) and 150,000 shares have
been designated as Series B Cumulative Convertible Preferred
Stock (Series B).
In May 1992, the Corporation sold 20,700,000 shares of
common stock at $23.25 per share. Net proceeds of $465.4 million
were used to reduce debt.
Holders of Series B stock are entitled to dividends, payable
quarterly, at an annual rate of $77.50 per share. In accordance
with the terms of the Articles Supplementary that set forth the
terms and conditions of the Series B stock, each share of Series
B stock now is convertible into 42 1/3 shares of common stock and
is entitled to 42 1/3 votes on matters submitted generally to the
stockholders of the Corporation. The conversion rate and the
number of votes per share are subject to adjustment under certain
circumstances pursuant to anti-dilution provisions. The
Corporation has reserved 6,350,000 shares of common stock for
issuance upon conversion of the shares of Series B stock. The
shares of Series B stock are not redeemable at the option of the
Corporation until September 2001. For a 90-day period thereafter,
the Corporation is entitled to redeem all, but not less than all,
of the shares of Series B stock at a redemption price equal to
the current market price of the shares of common stock into which
the Series B stock is then convertible. The shares of Series B
stock are not subject to redemption at the option of the holders
of the shares under any circumstances. The Corporation also has
the option, after September 1996, to require the conversion of
the shares of Series B stock into shares of common stock if the
current market price of the shares of common stock is at least
equal to $39.45 per share (subject to adjustment) for a period of
20 trading days out of 30 consecutive trading days.
In connection with the sale of the Series B stock, the
Corporation and the purchaser of Series B stock entered into a
standstill agreement that includes, among other things,
provisions limiting the purchaser's ownership and voting of
shares of the Corporation's capital stock, provisions limiting
actions by the purchaser with respect to the Corporation, and
provisions generally restricting the purchaser's equity interest
to 15%. The standstill agreement expires in September 2001.
The Corporation has a Stockholder Rights Plan pursuant to which,
under certain conditions, each stockholder has share purchase
rights for each outstanding share of common stock and Series B
stock of the Corporation. The Corporation has reserved 1,500,000
shares of Series A stock for possible issuance upon exercise of
the rights.
NOTE 14: STOCK OPTION AND PURCHASE PLANS
Under various stock option plans, options to purchase common
stock may be granted until 2002. Options generally are granted at
fair market value at the date of grant, are exercisable in
installments beginning one year from the date of grant, and
expire 10 years after the date of grant. The plans permit the
issuance of either incentive stock options or non-qualified stock
options, which, for certain of the plans, may be accompanied by
stock or cash appreciation rights or limited stock appreciation
rights issued simultaneously with the grant of the stock options.
Additionally, certain plans allow for the granting of stock
appreciation rights on a stand-alone basis.
As of December 31, 1994, 75,375 incentive stock options,
5,719,967 non-qualified stock options without cash appreciation
rights, and 235,000 non-qualified stock options with cash
appreciation rights were outstanding under domestic plans. There
were 421,940 stock options outstanding under the Corporation's
United Kingdom plan.
Under all plans, there were 963,505 shares of common stock
reserved for future grants as of December 31, 1994. Transactions
are summarized as follows:
Stock Options
Outstanding Price Range
December 31, 1993 6,436,111 $ 9.88-25.25
Granted 761,050 17.63-23.38
Exercised 343,702 9.88-21.63
Canceled or expired 401,177 9.88-25.25
December 31, 1994 6,452,282 9.88-25.25
Shares exercisable at
December 31, 1994 4,335,838 9.88-25.25
Shares exercised
during the year ended
December 31, 1993 330,024 9.88-20.88
Shares exercised
during the year ended
December 31, 1992 535,426 9.88-25.25
Under the 1991 Employees Stock Purchase Plan (and its predecessor
plan), employees may subscribe to purchase shares of the
Corporation's common stock at the lower of 90% of market value on
the date offered or on the date purchased.
Transactions under these plans are summarized as follows:
Common Shares
Subscribed Prices
December 31, 1993 216,629 $16.50
Subscriptions 157,815 19.13
Purchases 208,529 16.25
Cancellations 13,035 16.25-19.13
December 31, 1994 152,880 19.13
Shares purchased
during the year ended
December 31, 1993 87,064 16.75
Shares purchased
during the year ended
December 31, 1992 332,061 11.50
NOTE 15: BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
BUSINESS SEGMENTS
(Millions of Dollars)
Consumer & Home Commercial & Information
Improvement Industrial Technology Corporate &
1994 Products Products & Services Eliminations Consolidated
Sales to unaffiliated customers $3,773.8 $ 591.4 $ 883.1 $ - $5,248.3
Operating income 293.7 52.6 37.2 10.2 393.7
Operating income excluding goodwill amortization 350.6 68.7 40.4 10.2 469.9
Identifiable assets 4,686.2 1,390.0 523.5 (1,166.0) 5,433.7
Capital expenditures 166.5 12.4 17.0 2.6 198.5
Depreciation 101.5 13.9 15.2 4.0 134.6
1993
Sales to unaffiliated customers $3,529.6 $ 591.9 $ 760.7 $ - $4,882.2
Operating income 215.8 76.5 28.9 14.1 335.3
Operating income excluding restructuring
costs and credits and goodwill amortization 280.8 73.2 32.0 14.1 400.1
Identifiable assets 4,693.9 1,375.5 494.2 (1,253.0) 5,310.6
Capital expenditures 171.7 13.9 19.6 4.7 209.9
Depreciation 94.2 13.4 15.0 3.7 126.3
1992
Sales to unaffiliated customers $3,379.0 $ 666.7 $ 733.9 $ - $4,779.6
Operating income 218.4 (44.7) 18.6 6.9 199.2
Operating income excluding restructuring
costs and credits and goodwill amortization 307.5 80.4 21.7 6.9 416.5
Identifiable assets 4,753.7 1,390.6 426.1 (1,178.5) 5,391.9
Capital expenditures 152.3 9.3 16.3 6.1 184.0
Depreciation 93.8 15.7 12.7 3.6 125.8
GEOGRAPHIC AREAS
(Millions of Dollars)
United Corporate &
1994 States Europe Other Eliminations Consolidated
Sales to unaffiliated customers $3,292.4 $1,279.3 $ 676.6 $ - $5,248.3
Sales and transfers between geographic areas 234.9 147.6 213.7 (596.2) -
Total sales $3,527.3 $1,426.9 $ 890.3 $ (596.2) $5,248.3
Operating income $ 254.2 $ 114.6 $ 14.7 $ 10.2 $ 393.7
Identifiable assets $3,723.5 $2,305.9 $ 670.8 $(1,266.5) $5,433.7
1993
Sales to unaffiliated customers $3,069.3 $1,200.3 $ 612.6 $ - $4,882.2
Sales and transfers between geographic areas 236.5 143.3 208.9 (588.7) -
Total sales $3,305.8 $1,343.6 $ 821.5 $ (588.7) $4,882.2
Operating income $ 213.9 $ 101.5 $ 5.8 $ 14.1 $ 335.3
Identifiable assets $3,661.2 $2,255.0 $ 622.7 $(1,228.3) $5,310.6
1992
Sales to unaffiliated customers $2,805.6 $1,392.0 $ 582.0 $ - $4,779.6
Sales and transfers between geographic areas 225.4 132.5 169.0 (526.9) -
Total sales $3,031.0 $1,524.5 $ 751.0 $ (526.9) $4,779.6
Operating income $ 162.2 $ 26.8 $ 3.3 $ 6.9 $ 199.2
Identifiable assets $3,578.0 $2,355.7 $ 637.0 $(1,178.8) $5,391.9
The Corporation operates in three business segments: Consumer
and Home Improvement Products, including consumer and
professional power tools and accessories, household products,
security hardware, outdoor products (composed of electric lawn
and garden and recreational products), plumbing products, and
product service; Commercial and Industrial Products, including
fastening systems and glass container-making equipment; and
Information Technology and Services, including government and
commercial systems development, consulting, and other related
services.
Approximately 14% of 1994, 13% of 1993, and 12% of 1992
total revenues were from contracts with the United States
government and government agencies. Substantially all of these
revenues are included in the Information Technology and Services
segment.
For 1993, the Consumer and Home Improvement Products segment
included charges of $29.0 million for plant closures and
reorganizations offset by a gain of $15.9 million for the sale of
Corbin Russwin. The Commercial and Industrial segment included a
gain of $19.4 million for the sale of Dynapert.
For 1992, restructuring costs in the amount of $35.5 million
were charged to the Consumer and Home Improvement Products
segment and $106.9 million to the Commercial and Industrial
segment.
In the geographic area table, United States includes all
domestic operations and an intercompany manufacturing facility
outside the United States, which manufactures products
predominantly for sale in the United States. Other includes
subsidiaries located in Canada, Latin America, Australia, and the
Far East.
For 1993, restructuring credits in the amount of $6.3
million were included in the United States geographic segment.
For 1992, restructuring costs of $31.5 million, $93.9
million, and $17.0 million were charged to the United States,
Europe, and Other geographic segments, respectively.
Transfers between geographic areas are accounted for at cost
plus a reasonable profit. Transfers between business segments are
not significant. Identifiable assets are those assets identified
with the operations in each area or segment, including goodwill.
Corporate assets included in corporate and eliminations were
$242.3 million at December 31, 1994, $217.5 million at
December 31, 1993, and $282.0 million at December 31, 1992, and
consist principally of cash and cash equivalents, other current
assets, property, and other sundry assets. The remainder of
corporate and eliminations includes certain pension credits and
amounts to eliminate intercompany items, including income and
expense, accounts receivable and payable, and intercompany profit
in inventory.
NOTE 16: OTHER EXPENSE
Other expense for 1994, 1993, and 1992 primarily included the
costs associated with the sale of receivables program.
NOTE 17: LEASES
The Corporation leases certain service centers, offices,
warehouses, and equipment. Generally, the leases carry renewal
provisions and require the Corporation to pay maintenance costs.
Rental payments may be adjusted for increases in taxes and
insurance above specified amounts. Rental expense charged to
earnings for 1994, 1993, and 1992 amounted to $91.8 million,
$86.5 million, and $106.0 million, respectively. Capital leases
are immaterial in amount and are generally treated as operating
leases. Future minimum payments, in millions of dollars, under
non-cancelable operating leases with initial or remaining terms
of more than one year as of December 31, 1994, were as follows:
1995 $ 53.9
1996 38.9
1997 24.2
1998 16.2
1999 10.4
Thereafter 42.4
Total $186.0
NOTE 18: RESTRUCTURING
During 1992, the Corporation commenced a restructuring of certain
of its operations and accrued costs of $142.4 million. Of this
amount, $98.9 million related to the Corporation's decision to
reorganize Dynapert, the Corporation's printed circuit board
assembly equipment business, including the withdrawal from the
manufacturing of surface-mount machinery in Europe. Costs
associated with the Dynapert restructuring included the write-off
of goodwill, write-down of property, plant and equipment,
termination of leases, employee severance, and anticipated losses
during the withdrawal period. The remainder of the restructuring
plan, which was substantially completed in 1994, included a
reduction of manufacturing capacity of other businesses at a cost
of $43.5 million. These costs related predominantly to operations
in Europe and included the write-down of property, plant and
equipment to net realizable value, relocation and transfer costs,
and employee severance and related costs.
During 1993, the Corporation substantially completed its
restructuring plan related to Dynapert by withdrawing from the
manufacture of surface-mount machinery. In addition, during the
fourth quarter of 1993, the Corporation sold the Dynapert
through-hole business at a gain of $19.4 million, which has been
reflected as a credit to restructuring costs. The combined 1993
revenues and operating income of the two businesses, including
the surface-mount machinery business that was liquidated,
amounted to $112.5 million and $9.0 million, respectively,
compared to revenues and operating loss of $138.1 million and
$(3.3) million, respectively, in 1992. In 1993, the Corporation
realized cash proceeds of approximately $108 million from the
sale of Dynapert and Corbin Russwin, which were used to reduce
debt.
Restructuring costs for 1993 also included a charge of $29.0
million for the closure and reorganization of certain
manufacturing sites. These costs primarily included the write-
down of property, plant and equipment to net realizable value and
employee severance and related costs. Of the total amount,
approximately $10 million represented cash spending. These plant
actions, which have been substantially completed during 1994,
were part of the Corporation's continuing effort to identify
opportunities to improve its manufacturing cost structure.
NOTE 19: LITIGATION AND CONTINGENT LIABILITIES
The Corporation is involved in various lawsuits in the ordinary
course of business. These lawsuits primarily involve claims for
damages arising out of the use of the Corporation's products and
allegations of patent and trademark infringement. The Corporation
is also involved in litigation and administrative proceedings
involving employment matters and commercial disputes. Some of
these lawsuits include claims for punitive as well as
compensatory damages. The Corporation, using current product
sales data and historical trends, actuarially calculates the
estimate of its current exposure for product liability. The
Corporation is insured for product liability claims for amounts
in excess of established deductibles and accrues for the
estimated liability as described above up to the limits of the
deductibles. All other claims and lawsuits are handled on a case-
by-case basis.
The Corporation also is involved in lawsuits and
administrative proceedings with respect to claims involving the
discharge of hazardous substances into the environment. Certain
of these claims assert damages and liability for remedial
investigations and cleanup costs with respect to sites at which
the Corporation has been identified as a potentially responsible
party under federal and state environmental laws and regulations
(off-site). Other matters involve sites that the Corporation
currently owns and operates or has previously sold (on-site). For
off-site claims, the Corporation makes an assessment of the cost
involved based on environmental studies, prior experience at
similar sites, and the experience of other named parties. The
Corporation also considers the ability of other parties to share
costs, the percentage of the Corporation's exposure relative to
all other parties, and the effects of inflation on these
estimated costs. For on-site matters associated with properties
currently owned, an assessment is made as to whether an
investigation and remediation would be required under applicable
federal and state law. For on-site matters associated with
properties previously sold, the Corporation considers the terms
of sale as well as applicable federal and state laws to determine
if the Corporation has any remaining liability. If the
Corporation is determined to have potential liability for
properties currently owned or previously sold, an estimate is
made of the total cost of investigation and remediation and other
potential costs associated with the site.
The Corporation's estimate of the costs associated with
legal, product liability, and environmental exposures is accrued
if, in management's judgment, the likelihood of a loss is
probable. These accrued liabilities are not discounted.
Insurance recoveries for environmental and certain general
liability claims are not recognized until realized. In the
opinion of management, amounts accrued for awards or assessments
in connection with these matters are adequate and, accordingly,
ultimate resolution of these matters will not have a material
effect on the Corporation.
As of December 31, 1994, the Corporation had no known
probable but inestimable exposures that could have a material
effect on the Corporation.
NOTE 20: QUARTERLY RESULTS (UNAUDITED)
(Millions of Dollars Except Per Share Data)
Year Ended December 31, 1994 First Quarter Second Quarter Third Quarter Fourth Quarter
Total revenues $1,084.6 $1,221.2 $1,323.4 $1,619.1
Gross margin 370.7 421.3 447.2 561.5
Net earnings 14.6 23.0 29.3 60.5
Net earnings per common share .14 .24 .31 .68
Year Ended December 31, 1993
Total revenues $1,099.9 $1,155.9 $1,189.6 $1,436.8
Gross margin 379.9 397.6 385.0 487.2
Net earnings before cumulative effect
of change in accounting principle 13.9 19.5 19.5 42.3
Net earnings (loss) (15.3) 19.5 19.5 42.3
Per common share information:
Net earnings before cumulative effect
of change in accounting principle .13 .20 .20 .47
Net earnings (loss) (.22) .20 .20 .47
The results for the first quarter of 1993 included a charge for
the cumulative effect of adopting SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," effective as of
January 1, 1993, in the amount of $29.2 million or $.35 per
common share. The fourth quarter of 1993 included the gain on
sale of Dynapert and Corbin Russwin, substantially offset by the
charge for plant closures and reorganizations.
The three-month period ended July 4, 1993, included a tax
benefit of $1.4 million reflective of the cumulative year-to-date
adjustment of the effective tax rate that resulted from a change
in the mix between foreign and domestic earnings, primarily due
to increased operating income and lower interest expense in the
United States.
Earnings per common share calculations for each of the
quarters were based on the weighted average number of shares
outstanding for each period, and the sum of the quarters may not
necessarily be equal to the full year earnings per common share
amount.
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
The Black & Decker Corporation:
We have audited the accompanying consolidated balance sheets of
The Black & Decker Corporation as of December 31, 1994 and 1993,
and the related consolidated statements of earnings and cash
flows for each of the three years in the period ended
December 31, 1994. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the
Corporation's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of The Black & Decker Corporation
at December 31, 1994 and 1993, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
As discussed in Note 12 to the Financial Statements,
effective January 1, 1993, the Corporation changed its method of
accounting for postemployment benefits. As discussed in Notes 11
and 12 to the Financial Statements, effective January 1, 1992,
the Corporation changed its methods of accounting for income
taxes and postretirement benefits other than pensions.
Ernst & Young LLP
Baltimore, Maryland
February 9, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information required under this Item with respect to Directors
is contained in the Corporation's Proxy Statement for the
Annual Meeting of Stockholders to be held April 25, 1995, under
the captions Election of Directors and Board of Directors -
Section 16 and is incorporated herein by reference.
Information required under this Item with respect to
Executive Officers of the Corporation is included in Item 1 of
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this Item is contained in the
Corporation's Proxy Statement for the Annual Meeting of
Stockholders to be held April 25, 1995, under the captions
Board of Directors - Compensation of Directors and Executive
Compensation and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required under this Item is contained in the
Corporation's Proxy Statement for the Annual Meeting of
Stockholders to be held April 25, 1995, under the captions
Voting Securities and Security Ownership of Management and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in the
Corporation's Proxy Statement for the Annual Meeting of
Stockholders to be held April 25, 1995, under the caption
Executive Compensation and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) LIST OF FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES AND EXHIBITS
(1) List of Financial Statements
The following consolidated financial statements of the
Corporation and its subsidiaries are included in Item 8
of Part II:
Consolidated Statement of Earnings - years ended
December 31, 1994, 1993, and 1992.
Consolidated Balance Sheet - December 31, 1994 and
1993.
Consolidated Statement of Cash Flows - years ended
December 31, 1994, 1993, and 1992.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(2) List of Financial Statement Schedules
The following financial statement schedule of the
Corporation and its subsidiaries is included herein.
Schedule II - Valuation and Qualifying Accounts and
Reserves.
All other schedules for which provision is made in the
applicable accounting regulations of the Commission are
not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(3) List of Exhibits
The following exhibits are either included in this
report or incorporated herein by reference as indicated
below:
Exhibit No. Exhibit
3(a)(1) Charter of the Corporation, as amended, included
in the Corporation's Quarterly Report on Form 10-Q
for the quarter ended December 25, 1988, is
incorporated herein by reference.
3(a)(2) Articles Supplementary of the Corporation, as
filed with the State Department of Assessments and
Taxation of the State of Maryland on September 5,
1991, included in the Corporation's Current Report
on Form 8-K dated September 25, 1991, is
incorporated herein by reference.
3(b) By-Laws of the Corporation, as amended.
4(a) Indenture dated as of March 24, 1993, by and
between The Black & Decker Corporation and
Security Trust Company, National Association,
included in the Corporation's Current Report on
Form 8-K filed with the Commission on March 26,
1993, is incorporated herein by reference.
4(b) Form of 7-1/2% Notes due April 1, 2003, included
in the Corporation's Current Report on Form 8-K
filed with the Commission on March 26, 1993, is
incorporated herein by reference.
4(c) Form of 6-5/8% Notes due November 15, 2000,
included in the Corporation's Current Report on
Form 8-K filed with the Commission on November 22,
1993, is incorporated herein by reference.
4(d) Form of 7% Notes due February 1, 2006 included in
the Corporation's Current Report on Form 8-K filed
with the Commission on January 20, 1994, is
incorporated by reference.
4(e)(1) Credit Agreement dated as of November 18, 1992,
among The Black & Decker Corporation, Black &
Decker Holdings Inc., Black & Decker GmbH, DOM
Sicherheitstechnik GmbH & Co. KG, Black & Decker
(France) S.A.R.L., the banks listed on the
signature pages thereto, Chemical Bank, Credit
Suisse and The Bank of Nova Scotia, as Managing
Agents, and Credit Suisse, as Administrative
Agent, included in the Corporation's Annual Report
on Form 10-K for the year ended December 31, 1992,
is incorporated herein by reference.
4(e)(2) Amendment No. 1 dated as of October 21, 1994, to
Credit Agreement dated as of November 18, 1992, by
and among The Black & Decker Corporation, Black &
Decker Holdings Inc., Black & Decker GmbH, DOM
Sicherheitstechnik GmbH & Co. KG, Black & Decker
(France) S.A.R.L., the banks listed therein,
Chemical Bank, Credit Suisse and The Bank of Nova
Scotia, as Managing Agents, and Credit Suisse, as
Administrative Agent, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter ended
October 2, 1994, is incorporated by reference.
4(f) Indenture dated as of September 9, 1994, by and
between The Black & Decker Corporation and Marine
Midland Bank, as Trustee, included in the
Corporation's Current Report on Form 8-K filed
with the Commission on September 9, 1994, is
incorporated by reference.
4(g) Indenture dated as of August 15, 1986, in respect
of the 9-1/4% Sinking Fund Debentures due 2016 of
Emhart Corporation. The Corporation agrees to
furnish a copy of same upon request.
4(h) DM175,000,000, 6-3/4% Bearer Bonds due 1995 of
Emhart Corporation. The Corporation agrees to
furnish a copy of same upon request.
The Corporation agrees to furnish a copy of any other documents
with respect to long-term debt instruments of the Corporation and
its subsidiaries upon request.
4(i)(1) Rights Agreement, dated as of April 17, 1986, by
and between the Corporation and Morgan Guaranty
Trust Company of New York, included in the
Corporation's Current Report on Form 8-K dated
April 29, 1986, is incorporated herein by
reference.
4(i)(2) Amendment Agreement to the Rights Agreement dated
as of March 31, 1988, between the Corporation and
Morgan Guaranty Trust Company of New York as
Rights Agent, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended March 27, 1988, is incorporated herein by
reference.
4(i)(3) Second Amendment Agreement to the Rights Agreement
dated as of September 6, 1991, by and between the
Corporation and First Chicago Trust Company of New
York as successor Rights Agent, included in the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1991, is incorporated
herein by reference.
10(a) The Black & Decker Corporation Deferred
Compensation Plan For Non-Employee Directors, as
amended, is included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended October 2, 1994, is incorporated herein by
reference.
10(b) The Black & Decker 1982 Stock Option Plan, as
amended, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended
September 29, 1991, is incorporated herein by
reference.
10(c) The Black & Decker 1986 Stock Option Plan, as
amended, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended
September 29, 1991, is incorporated herein by
reference.
10(d) The Black & Decker 1986 U.K. Approved Option
Scheme, as amended, included in the Corporation's
Registration Statement on Form S-8 (Reg. No. 33-
47651), filed with the Commission on May 5, 1992,
is incorporated herein by reference.
10(e) The Black & Decker 1989 Stock Option Plan, as
amended, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended
September 29, 1991, is incorporated herein by
reference.
10(f) The Black & Decker 1992 Stock Option Plan,
included in the Corporation's Registration
Statement on Form S-8 (Reg. No. 33-47652), filed
with the Commission on May 5, 1992, is
incorporated herein by reference.
10(g) The Black & Decker Performance Equity Plan,
included in the Corporation's Quarterly Report on
Form 10-Q for the quarter ended March 29, 1992, is
incorporated herein by reference.
10(h) Annual Incentive Plan, included in the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992, is incorporated
herein by reference.
10(i)(1) Employment Agreement, dated September 9, 1985, by
and between the Corporation and Nolan D.
Archibald, included in the Corporation's Annual
Report on Form 10-K for the year ended
September 29, 1985, is incorporated herein by
reference.
10(i)(2) Amendment to Employment Agreement, dated July 16,
1987, by and between the Corporation and Nolan D.
Archibald, included in the Corporation's Annual
Report on Form 10-K for the year ended
September 27, 1987, is incorporated herein by
reference.
10(i)(3) Second Amendment to Employment Agreement, dated
September 15, 1988, by and between the Corporation
and Nolan D. Archibald, included in the
Corporation's Annual Report on Form 10-K for the
year ended September 25, 1988, is incorporated
herein by reference.
10(i)(4) Third Amendment to Employment Agreement, dated
January 29, 1990, by and between the Corporation
and Nolan D. Archibald, included in the
Corporation's Quarterly Report on Form 10-Q for
the quarter ended April 1, 1990, is incorporated
herein by reference.
10(j) Letter Agreement, dated October 8, 1985, by and
between the Corporation and Dennis G. Heiner,
included in the Corporation's Annual Report on
Form 10-K for the year ended September 27, 1987,
is incorporated herein by reference.
10(k) Letter Agreement, dated April 14, 1986, by and
between the Corporation and Gary T. DiCamillo,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
10(1) Letter Agreement, dated May 31, 1989, by and
between the Corporation and Raymond A. DeVita,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991, is
incorporated herein by reference.
10(m) Letter Agreement, dated July 29, 1987, by and
between the Corporation and Roger H. Thomas
included in the Corporation's Annual Report on
Form 10-K for the year ended September 27, 1987,
is incorporated herein by reference.
10(n) Letter Agreement, dated February 1, 1975, by and
between the Corporation and Alonzo G. Decker, Jr.,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1990, is
incorporated herein by reference.
10(o) The Black & Decker Supplemental Pension Plan, as
amended, included in the Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by
reference.
10(p) The Black & Decker Executive Deferred Compensation
Plan, as amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended October 3, 1993, is incorporated herein by
reference.
10(q) The Black & Decker Supplemental Executive
Retirement Plan, as amended, included in the
Corporation's Quarterly Report on Form 10-Q for
the quarter ended October 3, 1993, is incorporated
herein by reference.
10(r) The Black & Decker Executive Life Insurance
Program, as amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended April 4, 1993, is incorporated herein by
reference.
10(s) Description of the Corporation's "Policy Relating
to Salary Continuance Upon Termination" included
in the Corporation's Annual Report on Form 10-K
for the year ended September 29, 1985, is
incorporated herein by reference.
10(t) Description of the Corporation's policy and
procedure for relocation of existing employees
(individual transfers), included in the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1991, is incorporated
herein by reference.
10(u) Description of the Corporation's policy and
procedures for relocation of new employees,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991, is
incorporated herein by reference.
10(v) Form of Amendment and Restatement of Severance
Benefits Agreement by and between the Corporation
and approximately 18 of its key employees,
included in the Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1990, is incorporated herein by reference.
10(w) Amendment and Restatement of Severance Benefits
Agreement, dated October 18, 1990, by and between
the Corporation and Nolan D. Archibald, included
in the Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990, is
incorporated herein by reference.
10(x) Amendment and Restatement of Severance Benefits
Agreement, dated October 18, 1990, by and between
the Corporation and Dennis G. Heiner, included in
the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1990, is incorporated
herein by reference.
10(y) Amendment and Restatement of Severance Benefits
Agreement, dated October 18, 1990, by and between
the Corporation and Roger H. Thomas, included in
the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1990, is incorporated
herein by reference.
10(z) Amendment and Restatement of Severance Benefits
Agreement, dated October 18, 1990, by and between
the Corporation and Gary T. DiCamillo, included in
the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1992, is incorporated
herein by reference.
10(aa) Amendment and Restatement of Severance Benefits
Agreement, dated October 18, 1990, by and between
the Corporation and Raymond A. DeVita, included in
the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1991, is incorporated
herein by reference.
10(bb)(1) Agreement and Plan of Merger dated as of March 19,
1989, included in the Corporations' Schedule 14D-1
in respect of Emhart Corporation filed on
March 22, 1989, is incorporated herein by
reference.
10(bb)(2) Amendment Agreement dated as of April 26, 1989,
included in the Corporation's Amendment No. 5 to
Schedule 14D-1 in respect of Emhart Corporation
filed on April 28, 1989, is incorporated herein by
reference.
10(cc) Letter Agreement dated as of August 13, 1991, by
and between the Corporation and Newell Co.,
included in the Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, is
incorporated herein by reference.
10(dd) Standstill Agreement dated as of September 24,
1991, between the Corporation and Newell Co.,
included in the Corporation's Current Report on
Form 8-K dated September 25, 1991, is incorporated
herein by reference.
10(ee) Distribution Agreement dated September 9, 1994, by
and between The Black & Decker Corporation, Lehman
Brothers Inc., Citicorp Securities, Inc., Goldman,
Sachs & Co., Morgan Stanley & Co. Incorporated,
NationsBanc Capital Markets, Inc. and Salomon
Brothers Inc., included in the Corporation's
Current Report on Form 8-K filed with the
Commission on September 9, 1994, is incorporated
by reference.
10(ff) The Black & Decker Corporation 1995 Stock Option
Plan for Non-Employee Directors, included in the
Corporation's Proxy Statement dated March 9, 1995,
for use in connection with the 1995 Annual Meeting
of Stockholders, is incorporated by reference.
11 Computation of Earnings Per Share.
12 Computation of Ratios.
21 List of Subsidiaries.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
99 Computation of Leverage and Cash Flow Coverage
Ratios.
All other items are not applicable or none.
(b) REPORTS ON FORM 8-K
The Corporation filed Current Reports on Form 8-K with
the Commission on January 20, 1994, and September 12,
1994, respectively. These Current Reports on Form 8-K
were filed pursuant to Item 5 of Form 8-K and reported
the sale by the Corporation of $250,000,000 aggregate
principal amount of the Corporation's 7% Notes due
February 1, 2006, and the commencement of a Medium-Term
Note Program by the Corporation under its $500,000,000
shelf registration statement, respectively.
All other items are not applicable or none.
(c) EXHIBITS
The exhibits required by Item 601 of Regulation S-K are
filed herewith.
(d) FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedule required by Regulation
S-X is filed herewith.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Millions of Dollars)
Additions
Balance at Charged to Other Balance at
Beginning Costs and Changes End of
Description of Period Expenses Deductions Add (Deduct) Period
Year Ended December 31, 1994
Reserve for doubtful accounts
and cash discounts $38.5 $42.3 $40.8 (A) $ 1.5 (B) $41.5
Year Ended December 31, 1993
Reserve for doubtful accounts
and cash discounts $49.9 $30.0 $39.7 (A) $(1.7) (B) $38.5
Year Ended December 31, 1992
Reserve for doubtful accounts
and cash discounts $52.3 $28.5 $30.8 (A) $ (.1) (B) $49.9
(A) Accounts written off during the year and cash discounts taken by customers.
(B) Primarily includes currency translation adjustments.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 20, 1995 By NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 20, 1995, by the following
persons on behalf of the registrant and in the capacities indicated.
Signature Title Date
Principal Executive Officer
NOLAN D. ARCHIBALD
Nolan D. Archibald Chairman, President, March 20, 1995
and Chief Executive Officer
Principal Financial Officer
THOMAS M. SCHOEWE
Thomas M. Schoewe Vice President and March 20, 1995
Chief Financial Officer
Principal Accounting Officer
STEPHEN F. REEVES
Stephen F. Reeves Corporate Controller March 20, 1995
This report has been signed by the following directors, constituting a
majority of the Board of Directors, by Nolan D. Archibald, Attorney-
in-Fact.
Nolan D. Archibald J. Dean Muncaster
Barbara L. Bowles Lawrence R. Pugh
Malcolm Candlish Mark H. Willes
Alonzo G. Decker, Jr. M. Cabell Woodward, Jr.
Anthony Luiso
NOLAN D. ARCHIBALD Date: March 20, 1995
Nolan D. Archibald
Attorney-in-Fact