UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 29, 2008
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 1-1553
THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
Maryland
(State or other jurisdiction of
incorporation or organization)
701 East Joppa Road Towson, Maryland
(Address of principal executive offices)
|
52-0248090
(I.R.S. Employer Identification No.)
21286
(Zip Code)
|
(410) 716-3900
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report.)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X
YES
NO
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.
Large accelerated filer
X
Accelerated filer
Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
YES
X
NO
The number of shares of Common Stock outstanding as of July 25, 2008: 59,969,085
-2-
THE BLACK & DECKER
CORPORATION
INDEX FORM 10-Q
June 29, 2008
|
Page
|
PART I - FINANCIAL INFORMATION
|
|
Item 1. Financial Statements
|
Consolidated Statement of Earnings (Unaudited)
|
For the Three Months and Six Months Ended June 29, 2008 and July 1, 2007
|
3
|
Consolidated Balance Sheet (Unaudited)
|
June 29, 2008 and December 31, 2007
|
4
|
Consolidated Statement of Stockholders' Equity (Unaudited)
|
For the Six Months Ended June 29, 2008 and July 1, 2007
|
5
|
Consolidated Statement of Cash Flows (Unaudited)
|
For the Six Months Ended June 29, 2008 and July 1, 2007
|
6
|
Notes to Consolidated Financial Statements (Unaudited)
|
7
|
Item 2. Management's Discussion and Analysis of Financial Condition and
|
Results of Operations
|
20
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk
|
32
|
Item 4. Controls and Procedures
|
32
|
PART II - OTHER INFORMATION
|
Item 1. Legal Proceedings
|
33
|
Item 1A. Risk Factors
|
33
|
Item 2. Unregistered Sales of Equity Securities
|
and Use of Proceeds
|
33
|
Item 6. Exhibits
|
34
|
SIGNATURES
|
35
|
-3-
PART I FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
CONSOLIDATED STATEMENT
OF EARNINGS (Unaudited)
The Black & Decker
Corporation and Subsidiaries
(Dollars in Millions
Except Per Share Amounts)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 29,
2008
|
July 1,
2007
|
June 29,
2008
|
July 1,
2007
|
|
Sales
|
|
|
$
|
1,641.
|
7
|
$
|
1,699.
|
9
|
$
|
3,137.
|
5
|
$
|
3,277.
|
1
|
Cost of goods sold
|
|
|
|
1,104.
|
5
|
|
1,112.
|
0
|
|
2,082.
|
8
|
|
2,128.
|
6
|
Selling, general, and administrative expenses
|
|
|
|
399.
|
5
|
|
401.
|
3
|
|
794.
|
1
|
|
792.
|
3
|
Restructuring and exit costs
|
|
|
|
|
|
|
|
|
|
18.
|
3
|
|
|
|
|
Operating Income
|
|
|
|
137.
|
7
|
|
186.
|
6
|
|
242.
|
3
|
|
356.
|
2
|
Interest expense (net of interest income)
|
|
|
|
14.
|
8
|
|
20.
|
0
|
|
31.
|
3
|
|
41.
|
5
|
Other expense
|
|
|
|
.
|
4
|
|
.
|
2
|
|
.
|
4
|
|
1.
|
3
|
|
Earnings Before Income Taxes
|
|
|
|
122.
|
5
|
|
166.
|
4
|
|
210.
|
6
|
|
313.
|
4
|
Income taxes
|
|
|
|
25.
|
8
|
|
48.
|
4
|
|
46.
|
5
|
|
87.
|
3
|
|
Net Earnings
|
|
|
$
|
96.
|
7
|
$
|
118.
|
0
|
$
|
164.
|
1
|
$
|
226.
|
1
|
|
|
|
|
Net Earnings Per Common Share - Basic
|
|
|
$
|
1.6
|
1
|
$
|
1.8
|
0
|
$
|
2.7
|
2
|
$
|
3.4
|
6
|
|
Shares Used in Computing Basic Earnings
|
|
|
Per Share (in Millions)
|
|
|
|
60.
|
1
|
|
65.
|
6
|
|
60.
|
3
|
|
65.
|
4
|
|
Net Earnings Per Common Share - Assuming
|
|
|
Dilution
|
|
|
$
|
1.5
|
8
|
$
|
1.7
|
5
|
$
|
2.6
|
7
|
$
|
3.3
|
6
|
|
Shares Used in Computing Diluted Earnings
|
|
|
Per Share (in Millions)
|
|
|
|
61.
|
3
|
|
67.
|
5
|
|
61.
|
5
|
|
67.
|
3
|
|
|
|
|
Dividends Per Common Share
|
|
|
$
|
.4
|
2
|
$
|
.4
|
2
|
$
|
.8
|
4
|
$
|
.8
|
4
|
|
See Notes to Consolidated
Financial Statements (Unaudited).
-4-
CONSOLIDATED BALANCE
SHEET (Unaudited)
The Black & Decker
Corporation and Subsidiaries
(Dollars in Millions
Except Per Share Amount)
|
|
June 29, 2008
|
December 31, 2007
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
287
|
.6
|
$
|
254
|
.7
|
Trade receivables
|
|
|
|
1,247
|
.0
|
|
1,109
|
.4
|
Inventories
|
|
|
|
1,106
|
.6
|
|
1,145
|
.8
|
Other current assets
|
|
|
|
369
|
.2
|
|
329
|
.6
|
|
Total Current Assets
|
|
|
|
3,010
|
.4
|
|
2,839
|
.5
|
|
Property, Plant, and Equipment
|
|
|
|
584
|
.8
|
|
596
|
.2
|
Goodwill
|
|
|
|
1,221
|
.3
|
|
1,212
|
.9
|
Other Assets
|
|
|
|
735
|
.3
|
|
762
|
.3
|
|
|
|
|
$
|
5,551
|
.8
|
$
|
5,410
|
.9
|
|
Liabilities and Stockholders' Equity
|
|
|
Short-term borrowings
|
|
|
$
|
309
|
.5
|
$
|
329
|
.7
|
Current maturities of long-term debt
|
|
|
|
|
.2
|
|
|
.2
|
Trade accounts payable
|
|
|
|
537
|
.5
|
|
504
|
.6
|
Other current liabilities
|
|
|
|
1,002
|
.4
|
|
1,046
|
.3
|
|
Total Current Liabilities
|
|
|
|
1,849
|
.6
|
|
1,880
|
.8
|
|
Long-Term Debt
|
|
|
|
1,401
|
.4
|
|
1,179
|
.1
|
Postretirement Benefits
|
|
|
|
314
|
.4
|
|
311
|
.3
|
Other Long-Term Liabilities
|
|
|
|
540
|
.0
|
|
581
|
.0
|
Stockholders' Equity
|
|
|
Common stock, par value $.50 per share
|
|
|
|
30
|
.1
|
|
31
|
.5
|
Capital in excess of par value
|
|
|
|
|
|
|
27
|
.0
|
Retained earnings
|
|
|
|
1,463
|
.1
|
|
1,498
|
.5
|
Accumulated other comprehensive income (loss)
|
|
|
|
(46
|
.8)
|
|
(98
|
.3)
|
|
Total Stockholders' Equity
|
|
|
|
1,446
|
.4
|
|
1,458
|
.7
|
|
|
|
|
$
|
5,551
|
.8
|
$
|
5,410
|
.9
|
|
See Notes to Consolidated
Financial Statements (Unaudited).
-5-
CONSOLIDATED STATEMENT
OF STOCKHOLDERS EQUITY (Unaudited)
The Black & Decker
Corporation and Subsidiaries
(Dollars in Millions
Except Per Share Data)
|
|
|
Outstanding
Common
Shares
|
Par
Value
|
Capital in
Excess of
Par Value
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Stockholders'
Equity
|
|
Balance at December 31, 2006
|
|
|
|
66,734,843
|
|
$
|
33
|
.4
|
$
|
|
|
$
|
1,473
|
.0
|
$
|
(342
|
.8)
|
$
|
1,163
|
.6
|
Comprehensive income (loss):
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
226
|
.1
|
|
|
|
|
226
|
.1
|
Net loss on derivative
|
|
|
instruments (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
.6)
|
|
(11
|
.6)
|
Foreign currency translation
|
|
|
adjustments, less effect of
|
|
|
hedging activities (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
.3
|
|
34
|
.3
|
Amortization of actuarial losses
|
|
|
and prior service cost (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
.8
|
|
12
|
.8
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
226
|
.1
|
|
35
|
.5
|
|
261
|
.6
|
|
Cumulative effect of adopting
|
|
|
FASB Interpretation No. 48
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
.3)
|
|
|
|
|
(7
|
.3)
|
Cash dividends ($.84 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
(55
|
.7)
|
|
|
|
|
(55
|
.7)
|
Common stock issued under
|
|
|
stock-based plans (net of
|
|
|
forfeitures)
|
|
|
|
1,193,860
|
|
|
|
.6
|
|
71
|
.2
|
|
|
|
|
|
|
|
71
|
.8
|
Purchase and retirement of
|
|
|
common stock
|
|
|
|
(1,195,276
|
)
|
|
(
|
.6)
|
|
(15
|
.6)
|
|
(79
|
.7)
|
|
|
|
|
(95
|
.9)
|
|
Balance at July 1, 2007
|
|
|
|
66,733,427
|
|
$
|
33
|
.4
|
$
|
55
|
.6
|
$
|
1,556
|
.4
|
$
|
(307
|
.3)
|
$
|
1,338
|
.1
|
|
|
|
|
Outstanding
Common
Shares
|
Par
Value
|
Capital in
Excess of
Par Value
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Stockholders'
Equity
|
|
Balance at December 31, 2007
|
|
|
|
62,923,723
|
|
$
|
31
|
.5
|
$
|
27
|
.0
|
$
|
1,498
|
.5
|
$
|
(98
|
.3)
|
$
|
1,458
|
.7
|
Comprehensive income (loss):
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
.1
|
|
|
|
|
164
|
.1
|
Net gain on derivative
|
|
|
instruments (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
.8
|
|
12
|
.8
|
Foreign currency translation
|
|
|
adjustments, less effect of
|
|
|
hedging activities (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.6
|
|
31
|
.6
|
Amortization of actuarial losses
|
|
|
and prior service cost (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
.1
|
|
7
|
.1
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
.1
|
|
51
|
.5
|
|
215
|
.6
|
|
Cash dividends ($.84 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
.1)
|
|
|
|
|
(51
|
.1)
|
Common stock issued under
|
|
|
stock-based plans (net of
|
|
|
forfeitures)
|
|
|
|
185,066
|
|
|
|
.1
|
|
16
|
.5
|
|
|
|
|
|
|
|
16
|
.6
|
Purchase and retirement of
|
|
|
common stock
|
|
|
|
(2,984,405
|
)
|
|
(1
|
.5)
|
|
(43
|
.5)
|
|
(148
|
.4)
|
|
|
|
|
(193
|
.4)
|
|
Balance at June 29, 2008
|
|
|
|
60,124,384
|
|
$
|
30
|
.1
|
$
|
|
|
$
|
1,463
|
.1
|
$
|
(46
|
.8)
|
$
|
1,446
|
.4
|
|
See Notes to Consolidated
Financial Statements (Unaudited).
-6-
CONSOLIDATED STATEMENT
OF CASH FLOWS (Unaudited)
The Black & Decker
Corporation and Subsidiaries
(Dollars in Millions)
|
|
|
Six Months Ended
|
|
June 29, 2008
|
July 1, 2007
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
$
|
164
|
.1
|
$
|
226
|
.1
|
Adjustments to reconcile net earnings to cash flow from
|
|
|
operating activities:
|
|
|
Non-cash charges and credits:
|
|
|
Depreciation and amortization
|
|
|
|
71
|
.9
|
|
74
|
.3
|
Stock-based compensation
|
|
|
|
13
|
.2
|
|
14
|
.5
|
Amortization of actuarial losses and
|
|
|
|
|
|
|
|
|
prior service cost
|
|
|
|
7
|
.1
|
|
12
|
.8
|
Restructuring and exit costs
|
|
|
|
18
|
.3
|
|
|
|
Other
|
|
|
|
1
|
.3
|
|
1
|
.5
|
Changes in selected working capital items:
|
|
|
Trade receivables
|
|
|
|
(113
|
.1)
|
|
(64
|
.6)
|
Inventories
|
|
|
|
58
|
.7
|
|
(70
|
.1)
|
Trade accounts payable
|
|
|
|
26
|
.8
|
|
158
|
.1
|
Other current liabilities
|
|
|
|
(61
|
.3)
|
|
(31
|
.6)
|
Restructuring spending
|
|
|
|
(10
|
.2)
|
|
(
|
.2)
|
Other assets and liabilities
|
|
|
|
(78
|
.5)
|
|
22
|
.4
|
|
Cash Flow From Operating Activities
|
|
|
|
98
|
.3
|
|
343
|
.2
|
|
Investing Activities
|
|
|
Capital expenditures
|
|
|
|
(53
|
.8)
|
|
(46
|
.6)
|
Proceeds from disposal of assets
|
|
|
|
1
|
.6
|
|
3
|
.7
|
Cash inflow from hedging activities
|
|
|
|
40
|
.3
|
|
|
|
Cash outflow from hedging activities
|
|
|
|
(21
|
.0)
|
|
(21
|
.4)
|
|
Cash Flow From Investing Activities
|
|
|
|
(32
|
.9)
|
|
(64
|
.3)
|
|
Financing Activities
|
|
|
Net decrease in short-term borrowings
|
|
|
|
(20
|
.6)
|
|
(161
|
.0)
|
Proceeds from issuance of long-term debt (net of debt
|
issue costs of $.3)
|
|
|
|
224
|
.7
|
|
|
|
Payments on long-term debt
|
|
|
|
(
|
.1)
|
|
(
|
.1)
|
Purchase of common stock
|
|
|
|
(193
|
.4)
|
|
(95
|
.9)
|
Issuance of common stock
|
|
|
|
2
|
.3
|
|
57
|
.7
|
Cash dividends
|
|
|
|
(51
|
.1)
|
|
(55
|
.7)
|
|
Cash Flow From Financing Activities
|
|
|
|
(38
|
.2)
|
|
(255
|
.0)
|
Effect of exchange rate changes on cash
|
|
|
|
5
|
.7
|
|
4
|
.8
|
|
Increase In Cash And Cash Equivalents
|
|
|
|
32
|
.9
|
|
28
|
.7
|
Cash and cash equivalents at beginning of period
|
|
|
|
254
|
.7
|
|
233
|
.3
|
|
Cash And Cash Equivalents At End Of Period
|
|
|
$
|
287
|
.6
|
$
|
262
|
.0
|
|
See Notes to Consolidated Financial Statements (Unaudited).
-7-
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)
The Black & Decker
Corporation and Subsidiaries
NOTE 1: ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited
consolidated financial statements of The Black & Decker Corporation (collectively with
its subsidiaries, the Corporation) have been prepared in accordance with the instructions
to Form 10-Q and do not include all the information and notes required by accounting
principles generally accepted in the United States for complete financial statements. In
the opinion of management, the unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring accruals, considered necessary for a fair
presentation of the financial position and the results of operations.
Operating results for the three- and
six-month periods ended June 29, 2008, are not necessarily indicative of the results that
may be expected for a full fiscal year. For further information, refer to the consolidated
financial statements and notes included in the Corporations Annual Report on Form
10-K for the year ended December 31, 2007.
Comprehensive Income
Statement of Financial Accounting
Standards (SFAS) No. 130,
Reporting Comprehensive
Income
, requires that, as
part of a full set of financial statements, entities must present comprehensive income,
which is the sum of net income and other comprehensive income. Other comprehensive income
represents total non-stockholder changes in equity. For the six months ended June
29, 2008, and July 1, 2007, the Corporation has presented comprehensive
income in the accompanying Consolidated Statement of Stockholders Equity.
Comprehensive income for the three months ended June 29, 2008, and
July 1, 2007, was $133.3 million and $138.8 million, respectively.
Adoption of New
Accounting Standard
In September 2007, the Financial
Accounting Standards Board (FASB) issued SFAS No. 157,
Fair Value Measurements
.
SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. This statement clarifies how to measure
fair value as permitted under other accounting pronouncements, but does not require any
new fair value measurements. In February 2008, the FASB adopted a one-year deferral of
SFAS No. 157 for non-financial assets and liabilities, except for those that are
recognized or disclosed at fair value in the financial statements on at least an annual
basis.
The Corporation adopted SFAS No. 157
effective January 1, 2008, for measuring financial assets and financial liabilities. That
adoption did not have a material impact on the Corporations earnings or financial
position. The Corporation will be required to adopt the measurement and disclosure
requirements of SFAS No. 157 for non-financial assets and liabilities as of January 1,
2009. The Corporation is currently evaluating the impact of its adoption of SFAS No. 157
for non-financial assets and liabilities and has not determined the effect on its earnings
or financial position. The impact of the adoption of SFAS No. 157 is more fully disclosed
in Note 5.
-8-
Recent Accounting
Pronouncements
In March 2008, the FASB issued SFAS
No. 161,
Disclosures about Derivative Instruments and Hedging Activities
. SFAS No.
161 requires enhanced disclosures about an entitys derivative and hedging
activities, including (i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
, and (iii) how
derivative instruments and the related hedged items affect an entitys results of
operations, financial performance, and cash flows. This statement is effective for the
Corporation on January 1, 2009. Since SFAS No. 161 requires enhanced disclosures, without
a change to existing standards relative to measurement and recognition, the
Corporations adoption of SFAS No. 161 will not have any effect on its earnings or
financial position
.
NOTE 2: INVENTORIES
The classification of inventories at
the end of each period, in millions of dollars, was as follows:
|
|
June 29, 2008
|
December 31, 2007
|
|
FIFO cost
|
|
|
|
|
|
|
|
|
Raw materials and work-in-process
|
|
|
$
|
285
|
.5
|
$
|
275
|
.4
|
Finished products
|
|
|
|
840
|
.4
|
|
885
|
.2
|
|
|
|
|
|
1,125
|
.9
|
|
1,160
|
.6
|
Adjustment to arrive at LIFO inventory value
|
|
|
|
(19
|
.3)
|
|
(14
|
.8)
|
|
|
|
|
$
|
1,106
|
.6
|
$
|
1,145
|
.8
|
|
Inventories are stated at the lower
of cost or market. The cost of United States inventories is based primarily on the
last-in, first-out (LIFO) method; all other inventories are based on the first-in,
first-out (FIFO) method.
NOTE 3: SHORT-TERM
BORROWINGS, CURRENT MATURITIES OF LONG-TERM DEBT, AND LONG-TERM DEBT
The terms of the Corporations
$1.0 billion commercial paper program and its supporting $1.0 billion senior unsecured
revolving credit facility are more fully disclosed in Note 7 of Notes to Consolidated
Financial Statements included in Item 8 of the Corporations Annual Report on Form
10-K for the year ended December 31, 2007. The Corporations average
borrowings outstanding under its commercial paper program, its unsecured revolving credit
facility, and other short-term borrowing arrangements were $711.4 million and
$200.2 million for the six-month periods ended June 29, 2008 and July 1, 2007,
respectively. The amount available for borrowing under the Corporations unsecured
revolving credit facility was $704.5 million at June 29, 2008.
During 2008, the Corporation entered
into loan agreements in the aggregate amount of $225.0 million, with $125.0 million and
$100.0 million maturing in April 2011 and December 2012, respectively. The terms of the
loan agreements permit repayment prior to maturity. Borrowings under the loan agreements
are at variable rates. The average borrowing rate under the loan agreements is LIBOR plus
1.14%.
-9-
During 2008, the Corporation entered
into $75.0 million notional amount of fixed-to-variable interest rate swaps. At June 29,
2008, the Corporations portfolio of interest rate swap instruments consisted of
$400.0 million of fixed-to-variable interest rate swaps with a weighted-average fixed rate
receipt of 5.00%. The basis of the variable rate paid is LIBOR.
Indebtedness of subsidiaries of the
Corporation in the aggregate principal amounts of $164.3 million and $155.9 million
were included in the Consolidated Balance Sheet at June 29, 2008 and
December 31, 2007, respectively, in short-term borrowings, current maturities of
long-term debt, and long-term debt.
NOTE 4:
STOCKHOLDERS EQUITY
During the six months ended June 29,
2008, the Corporation repurchased 2,984,405 shares of its common stock at a total cost of
$193.4 million. To reflect that repurchase in its Consolidated Balance Sheet, the
Corporation: (i) first, reduced its common stock by $1.5 million, representing the
aggregate par value of the shares repurchased; (ii) next, reduced capital in excess of par
value by $43.5 million an amount which brought capital in excess of par value to
zero as of June 29, 2008; and (iii) last, charged the residual of $148.4 million to
retained earnings.
During the six months ended July 1,
2007, the Corporation repurchased 1,195,276 shares of its common stock at a total cost of
$95.9 million. To reflect that repurchase in its Consolidated Balance Sheet, the
Corporation: (i) first, reduced its common stock by $.6 million, representing the
aggregate par value of the shares repurchased; (ii) next, reduced capital in excess of par
value by $15.6 million an amount which brought capital in excess of par value to
zero as of July 1, 2007; and (iii) last, charged the residual of $79.7 million to retained
earnings.
NOTE 5: FAIR VALUE
MEASUREMENTS
As disclosed in Note 1, the
Corporation adopted SFAS No. 157 effective January 1, 2008, with respect to the fair value
measurement and disclosure of financial assets and liabilities. As disclosed in Note 1,
the effective date of SFAS No. 157 with respect to the fair value measurement and
disclosure of non-financial assets and liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis, is January 1,
2009. SFAS No. 157 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. SFAS No. 157 establishes a three-level fair
value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy
requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1-- Quoted prices in active markets for identical assets or liabilities.
Level 2-- Observable inputs other than quoted prices included in Level 1, such as quoted
prices for similar assets and
liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
Level 3-- Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of
the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and
similar techniques that use significant unobservable inputs.
-10-
Assets and liabilities measured at
fair value on a recurring basis are summarized below (in millions of dollars):
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs (Level 2)
|
June 29, 2008
(Total)
|
|
Assets:
|
|
|
Investments
|
|
|
|
|
|
$
|
47
|
.3
|
$
|
39
|
.0
|
$
|
86
|
.3
|
Derivatives
|
|
|
|
|
|
|
1
|
.3
|
|
65
|
.2
|
|
66
|
.5
|
Liabilities:
|
|
|
Derivatives
|
|
|
|
|
|
|
3
|
.4
|
|
54
|
.3
|
|
57
|
.7
|
|
Investments and derivative contracts
are valued using quoted market prices for identical or similar assets and
liabilities. Investments classified as Level 1 include those whose fair value is based on
identical assets in an active market. Investments classified as Level 2 include those
whose fair value is based upon identical assets in markets that are less active. The
fair value for derivative contracts are based upon current quoted market prices and are
classified as Level 1 or Level 2 based on the nature of the underlying market in which
these derivatives are traded.
NOTE 6: EARNINGS PER
SHARE
The computations of basic and diluted
earnings per share for each period are as follows:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
(Amounts in Millions Except Per Share Data)
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
$
|
96.
|
7
|
$
|
118.
|
0
|
$
|
164.
|
1
|
$
|
226.
|
1
|
|
Denominator:
|
|
|
Denominator for basic earnings per share -
|
|
|
weighted-average shares
|
|
|
|
60.
|
1
|
|
65.
|
6
|
|
60.
|
3
|
|
65.
|
4
|
Employee stock options and other
|
|
|
stock-based awards
|
|
|
|
1.
|
2
|
|
1.
|
9
|
|
1.
|
2
|
|
1.
|
9
|
|
Denominator for diluted earnings per share
|
|
|
- adjusted weighted-average shares and
|
|
|
assumed conversions
|
|
|
|
61.
|
3
|
|
67.
|
5
|
|
61.
|
5
|
|
67.
|
3
|
|
Basic earnings per share
|
|
|
$
|
1.6
|
1
|
$
|
1.8
|
0
|
$
|
2.7
|
2
|
$
|
3.4
|
6
|
|
Diluted earnings per share
|
|
|
$
|
1.5
|
8
|
$
|
1.7
|
5
|
$
|
2.6
|
7
|
$
|
3.3
|
6
|
|
As of June 29, 2008,
options to purchase approximately 2.4 million shares of common stock, with a
weighted-average exercise price of $84.20 per share, were outstanding, but were not
included in the computation of diluted earnings per share because the effect would be
anti-dilutive.
-11-
NOTE 7: BUSINESS SEGMENTS
The following table provides selected
financial data for the Corporations reportable business segments (in millions of
dollars):
|
|
Reportable Business Segments
|
|
|
|
Three Months Ended June 29, 2008
|
Power
Tools &
Accessories
|
Hardware
& Home
Improvement
|
Fastening
& Assembly
Systems
|
Total
|
Currency
Translation
Adjustments
|
Corporate,
Adjustments,
& Eliminations
|
Consolidated
|
|
Sales to unaffiliated customers
|
|
|
$
|
1,150
|
.1
|
$
|
241
|
.4
|
$
|
183
|
.4
|
$
|
1,574
|
.9
|
$
|
66
|
.8
|
$
|
|
|
$
|
1,641
|
.7
|
Segment profit (loss) (for Consoli-
|
|
|
dated, operating income)
|
|
|
|
91
|
.1
|
|
22
|
.5
|
|
29
|
.4
|
|
143
|
.0
|
|
11
|
.6
|
|
(16
|
.9)
|
|
137
|
.7
|
Depreciation and amortization
|
|
|
|
24
|
.9
|
|
5
|
.9
|
|
5
|
.6
|
|
36
|
.4
|
|
1
|
.2
|
|
|
.6
|
|
38
|
.2
|
Capital expenditures
|
|
|
|
16
|
.7
|
|
4
|
.7
|
|
5
|
.3
|
|
26
|
.7
|
|
|
.8
|
|
1
|
.3
|
|
28
|
.8
|
|
|
|
Three Months Ended July 1, 2007
|
|
|
|
Sales to unaffiliated customers
|
|
|
$
|
1,273
|
.8
|
$
|
254
|
.8
|
$
|
182
|
.8
|
$
|
1,711
|
.4
|
$
|
(11
|
.5)
|
$
|
|
|
$
|
1,699
|
.9
|
Segment profit (loss) (for Consoli-
|
|
|
dated, operating income)
|
|
|
|
158
|
.7
|
|
30
|
.7
|
|
28
|
.9
|
|
218
|
.3
|
|
(1
|
.5)
|
|
(30
|
.2)
|
|
186
|
.6
|
Depreciation and amortization
|
|
|
|
25
|
.2
|
|
6
|
.0
|
|
5
|
.5
|
|
36
|
.7
|
|
(
|
.3)
|
|
|
.7
|
|
37
|
.1
|
Capital expenditures
|
|
|
|
14
|
.9
|
|
5
|
.9
|
|
4
|
.9
|
|
25
|
.7
|
|
(
|
.2)
|
|
1
|
.0
|
|
26
|
.5
|
|
|
|
Six Months Ended June 29, 2008
|
|
|
|
Sales to unaffiliated customers
|
|
|
$
|
2,208
|
.2
|
$
|
453
|
.7
|
$
|
369
|
.9
|
$
|
3,031
|
.8
|
$
|
105
|
.7
|
$
|
|
|
$
|
3,137
|
.5
|
Segment profit (loss) (for Consoli-
|
|
|
dated, operating income before
|
|
|
restructuring and exit costs)
|
|
|
|
178
|
.3
|
|
38
|
.4
|
|
58
|
.3
|
|
275
|
.0
|
|
19
|
.7
|
|
(34
|
.1)
|
|
260
|
.6
|
Depreciation and amortization
|
|
|
|
47
|
.4
|
|
10
|
.8
|
|
11
|
.0
|
|
69
|
.2
|
|
2
|
.0
|
|
|
.7
|
|
71
|
.9
|
Capital expenditures
|
|
|
|
31
|
.8
|
|
10
|
.0
|
|
9
|
.3
|
|
51
|
.1
|
|
1
|
.3
|
|
1
|
.4
|
|
53
|
.8
|
|
|
|
Six Months Ended July 1, 2007
|
|
|
|
Sales to unaffiliated customers
|
|
|
$
|
2,451
|
.3
|
$
|
502
|
.9
|
$
|
361
|
.6
|
$
|
3,315
|
.8
|
$
|
(38
|
.7)
|
$
|
|
|
$
|
3,277
|
.1
|
Segment profit (loss) (for Consoli-
|
|
|
dated, operating income)
|
|
|
|
305
|
.0
|
|
58
|
.9
|
|
57
|
.5
|
|
421
|
.4
|
|
(5
|
.5)
|
|
(59
|
.7)
|
|
356
|
.2
|
Depreciation and amortization
|
|
|
|
50
|
.0
|
|
13
|
.2
|
|
10
|
.6
|
|
73
|
.8
|
|
(
|
.8)
|
|
1
|
.3
|
|
74
|
.3
|
Capital expenditures
|
|
|
|
27
|
.9
|
|
10
|
.7
|
|
7
|
.3
|
|
45
|
.9
|
|
(
|
.4)
|
|
1
|
.1
|
|
46
|
.6
|
The Corporation operates in three
reportable business segments: Power Tools and Accessories, Hardware and Home Improvement,
and Fastening and Assembly Systems. The Power Tools and Accessories segment has worldwide
responsibility for the manufacture and sale of consumer and industrial power tools and
accessories, lawn and garden products, and electric cleaning, automotive, lighting, and
household products, as well as for product service. In addition, the Power Tools and
Accessories segment has responsibility for the sale of security hardware to customers in
Mexico, Central America, the Caribbean, and South America; and for the sale of plumbing
products to customers outside the United States and Canada. The Hardware and Home
Improvement segment has worldwide responsibility for the manufacture and sale of security
hardware (except for the sale of security hardware in Mexico, Central America, the
Caribbean, and South America). The Hardware and Home Improvement segment also has
responsibility for the manufacture of plumbing products and for the sale of plumbing
products to customers in the United States and Canada. The Fastening and Assembly Systems
segment has worldwide responsibility for the manufacture and sale of fastening and
assembly systems.
The profitability measure employed by
the Corporation and its chief operating decision maker for making decisions about
allocating resources to segments and assessing segment performance is segment profit (for
the Corporation on a consolidated basis, operating income before restructuring
-12-
and exit
costs). In general, segments follow the same accounting policies as those described in
Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the
Corporations Annual Report on Form 10-K for the year ended
December 31, 2007, except with respect to foreign currency translation and
except as further indicated below. The financial statements of a segments operating
units located outside of the United States, except those units operating in highly
inflationary economies, are generally measured using the local currency as the functional
currency. For these units located outside of the United States, segment assets and
elements of segment profit are translated using budgeted rates of exchange. Budgeted rates
of exchange are established annually and, once established, all prior period segment data
is restated to reflect the current years budgeted rates of exchange. The amounts
included in the preceding table under the captions Reportable Business
Segments and Corporate, Adjustments, & Eliminations are reflected at
the Corporations budgeted rates of exchange for 2008. The amounts included in the
preceding table under the caption Currency Translation Adjustments represent
the difference between consolidated amounts determined using those budgeted rates of
exchange and those determined based upon the rates of exchange applicable under accounting
principles generally accepted in the United States.
Segment profit excludes interest
income and expense, non-operating income and expense, adjustments to eliminate
intercompany profit in inventory, and income tax expense. In addition segment profit
excludes restructuring and exit costs. In determining segment profit, expenses relating to
pension and other postretirement benefits are based solely upon estimated service costs.
Corporate expenses, as well as certain centrally managed expenses, including expenses
related to share-based compensation, are allocated to each reportable segment based upon
budgeted amounts. While sales and transfers between segments are accounted for at cost
plus a reasonable profit, the effects of intersegment sales are excluded from the
computation of segment profit. Intercompany profit in inventory is excluded from segment
assets and is recognized as a reduction of cost of goods sold by the selling segment when
the related inventory is sold to an unaffiliated customer. Because the Corporation
compensates the management of its various businesses on, among other factors, segment
profit, the Corporation may elect to record certain segment-related expense items of an
unusual or non-recurring nature in consolidation rather than reflect such items in segment
profit. In addition, certain segment-related items of income or expense may be recorded in
consolidation in one period and transferred to the various segments in a later period.
-13-
The reconciliation of segment profit
to the Corporations earnings before income taxes for each period, in millions of
dollars, is as follows:
|
|
Three Months Ended
|
Six Months Ended
|
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Segment profit for total reportable business segments
|
|
|
$
|
143
|
.0
|
$
|
218
|
.3
|
$
|
275
|
.0
|
$
|
421
|
.4
|
Items excluded from segment profit:
|
|
|
Adjustment of budgeted foreign exchange rates
|
|
|
to actual rates
|
|
|
|
11
|
.6
|
|
(1
|
.5)
|
|
19
|
.7
|
|
(5
|
.5)
|
Depreciation of Corporate property
|
|
|
|
(
|
.6)
|
|
(
|
.3)
|
|
(
|
.7)
|
|
(
|
.5)
|
Adjustment to businesses' postretirement benefit
|
|
|
expenses booked in consolidation
|
|
|
|
(1
|
.0)
|
|
(5
|
.0)
|
|
(1
|
.9)
|
|
(9
|
.8)
|
Other adjustments booked in consolidation directly
|
|
|
related to reportable business segments
|
|
|
|
(1
|
.1)
|
|
(4
|
.9)
|
|
(3
|
.3)
|
|
(3
|
.6)
|
Amounts allocated to businesses in arriving at segment profit
|
|
|
in excess of (less than) Corporate center operating expenses,
|
|
|
eliminations, and other amounts identified above
|
|
|
|
(14
|
.2)
|
|
(20
|
.0)
|
|
(28
|
.2)
|
|
(45
|
.8)
|
|
Operating income before restructuring and exit costs
|
|
|
|
137
|
.7
|
|
186
|
.6
|
|
260
|
.6
|
|
356
|
.2
|
Restructuring and exit costs
|
|
|
|
|
|
|
|
|
|
18
|
.3
|
|
|
|
|
Operating income
|
|
|
|
137
|
.7
|
|
186
|
.6
|
|
242
|
.3
|
|
356
|
.2
|
Interest expense, net of interest income
|
|
|
|
14
|
.8
|
|
20
|
.0
|
|
31
|
.3
|
|
41
|
.5
|
Other expense
|
|
|
|
|
.4
|
|
|
.2
|
|
|
.4
|
|
1
|
.3
|
|
Earnings before income taxes
|
|
|
$
|
122
|
.5
|
$
|
166
|
.4
|
$
|
210
|
.6
|
$
|
313
|
.4
|
|
NOTE 8: POSTRETIREMENT
BENEFITS
The Corporations pension and
other postretirement benefit plans are more fully disclosed in Notes 1 and 12 of Notes to
Consolidated Financial Statements included in Item 8 of the Corporations Annual
Report on Form 10-K for the year ended December 31, 2007. The following table presents the
components of the Corporations net periodic cost related to its defined benefit
pension plans for the three and six months ended June 29, 2008 and July 1, 2007 (in
millions of dollars):
|
|
Pension Benefits Plans
In the United States
|
|
Pension Benefits Plans
Outside of the United States
|
|
Three Months Ended
|
|
Three Months Ended
|
|
June 29,
2008
|
July 1,
2007
|
|
June 29,
2008
|
July 1,
2007
|
|
Service cost
|
|
|
$
|
5
|
.6
|
$
|
6
|
.5
|
|
|
|
$
|
3
|
.2
|
$
|
3
|
.6
|
Interest cost
|
|
|
|
16
|
.0
|
|
15
|
.6
|
|
|
|
|
10
|
.8
|
|
9
|
.8
|
Expected return on plan assets
|
|
|
|
(19
|
.4)
|
|
(18
|
.9)
|
|
|
|
|
(10
|
.6)
|
|
(9
|
.7)
|
Amortization of prior service cost
|
|
|
|
|
.5
|
|
|
.6
|
|
|
|
|
|
.3
|
|
|
.4
|
Amortization of net actuarial loss
|
|
|
|
3
|
.9
|
|
6
|
.6
|
|
|
|
|
1
|
.2
|
|
3
|
.2
|
|
Net periodic cost
|
|
|
$
|
6
|
.6
|
$
|
10
|
.4
|
|
|
|
$
|
4
|
.9
|
$
|
7
|
.3
|
|
-14-
|
|
Pension Benefits Plans
In the United States
|
|
Pension Benefits Plans
Outside of the United States
|
|
Six Months Ended
|
|
Six Months Ended
|
|
June 29,
2008
|
July 1,
2007
|
|
June 29,
2008
|
July 1,
2007
|
|
Service cost
|
|
|
$
|
11
|
.3
|
$
|
13
|
.0
|
|
|
|
$
|
6
|
.3
|
$
|
7
|
.2
|
Interest cost
|
|
|
|
31
|
.9
|
|
31
|
.2
|
|
|
|
|
21
|
.5
|
|
19
|
.4
|
Expected return on plan assets
|
|
|
|
(38
|
.9)
|
|
(37
|
.8)
|
|
|
|
|
(21
|
.2)
|
|
(19
|
.2)
|
Amortization of prior service cost
|
|
|
|
1
|
.0
|
|
1
|
.1
|
|
|
|
|
|
.7
|
|
|
.8
|
Amortization of net actuarial loss
|
|
|
|
7
|
.9
|
|
13
|
.2
|
|
|
|
|
2
|
.5
|
|
6
|
.3
|
|
Net periodic cost
|
|
|
$
|
13
|
.2
|
$
|
20
|
.7
|
|
|
|
$
|
9
|
.8
|
$
|
14
|
.5
|
|
The Corporations defined
postretirement benefits consist of several unfunded health care plans that provide certain
postretirement medical, dental, and life insurance benefits for certain United States
retirees and employees. The postretirement medical benefits are contributory and include
certain cost-sharing features, such as deductibles and co-payments. The net periodic
pension cost related to these defined postretirement benefit plans were $.6 million and
$1.2 million for the three and six months ended June 29, 2008, and $.4 million and $.8
million for the three and six months ended July 1, 2007, respectively.
As more fully disclosed in Note 1 of
Notes to Consolidated Financial Statements included in Item 8 of the Corporations
Annual Report on 10-K for the year ended December 31, 2007, in September 2006, the FASB
issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and
132(R)
. The funded status recognition and certain disclosure provisions of FAS 158
were effective as of December 31, 2006. The additional requirement of SFAS No. 158,
which requires that the funded status be measured as of an entitys year-end balance
sheet date rather than as of an earlier date as previously permitted, is effective for the
Corporation as of December 31, 2008. The Corporation, which previously used a measurement
date of September 30 for the majority of its defined benefit pension plans, will utilize a
December 31 measurement date effective December 31, 2008. The Corporation expects that the
adoption of the year-end measurement date requirement of SFAS No. 158 as of December 31,
2008, will result in a charge to retained earnings of $8.2 million, an increase in
deferred tax assets of $2.2 million, an increase in pension assets of $.2 million, an
increase in pension liabilities of $7.1 million, and an increase in accumulated other
comprehensive income of $3.5 million.
NOTE 9: STOCK-BASED
COMPENSATION
The number of shares/units granted
under the Corporations stock option and restricted stock plans during the six months
ended June 29, 2008, the weighted exercise price, and the related weighted-average
grant-date fair values were as follows:
|
|
|
Underlying
Shares
|
Exercise
Price
|
Grant-
Date Fair
Value
|
|
Options Granted
|
|
|
|
|
|
|
544,52
|
0
|
|
$67.1
|
8
|
|
$17.8
|
7
|
Restricted Stock Granted
|
|
|
|
|
|
|
176,70
|
0
|
|
|
|
|
$68.0
|
4
|
Restricted Stock Units Granted
|
|
|
|
|
|
|
167,04
|
0
|
|
|
|
|
$65.3
|
2
|
|
-15-
The options granted are exercisable
in equal annual installments over a period of four years. Under the restricted stock
plans, restrictions generally expire four years from the date of grant.
As more fully disclosed in Note 1 of
Notes to Consolidated Financial Statements included in Item 8 of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, the fair value
of stock options is determined using the Black-Scholes option valuation model, which
incorporates assumptions surrounding volatility, dividend yield, the risk-free interest
rate, expected life, and the exercise price as compared to the stock price on the grant
date. The following table summarizes the significant weighted-average assumption used to
determine the grant-date fair value of options granted during the six-month period ended
June 29, 2008:
|
Volatility
|
|
|
|
30.7
|
%
|
|
|
|
Dividend yield
|
|
|
|
2.50
|
%
|
Risk-free interest rate
|
|
|
|
3.30
|
%
|
Expected life in years
|
|
|
|
6
|
.0
|
|
NOTE 10: INTEREST
EXPENSE (NET OF INTEREST INCOME)
Interest expense (net of interest
income) for each period, in millions of dollars, was as follows:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Interest expense
|
|
|
$
|
24
|
.6
|
$
|
24
|
.0
|
$
|
49
|
.5
|
$
|
49
|
.5
|
Interest (income)
|
|
|
|
(9
|
.8)
|
|
(4
|
.0)
|
|
(18
|
.2)
|
|
(8
|
.0)
|
|
|
|
|
$
|
14
|
.8
|
$
|
20
|
.0
|
$
|
31
|
.3
|
$
|
41
|
.5
|
|
NOTE 11: INCOME TAXES
The Corporations effective tax
rate was 21.1% and 29.1% for the three-month periods ended June 29, 2008, and July 1,
2007, respectively, and 22.1% and 27.9% for the first six months of 2008 and 2007,
respectively. The Corporations effective tax rate for the three-month period ended
June 29, 2008, was less than the effective tax rate recognized in the corresponding period
of 2007 due principally to the favorable settlement of certain tax audits. The
Corporations effective tax rate for the six-month period ended June 29, 2008, was
less than the effective tax rate recognized in the corresponding period of 2007 due
principally to two factors in 2008: (i) the favorable settlement of certain tax audits,
and (ii) the $6.1 million tax benefit recognized on the $18.3 million pre-tax
restructuring charge.
The amount of unrecognized tax
benefits, including the amount of related interest, and the amount, if recognized, that
would not affect the annual effective tax rate at the end of each period, in millions of
dollars, was as follows:
|
|
June 29, 2008
|
December 31, 2007
|
|
Unrecognized tax benefits (including interest of
|
$75.6 in 2008 and $81.3 in 2007)
|
|
|
$
|
373
|
.9
|
$
|
398
|
.7
|
Amount, if recognized, that would not affect the
|
|
|
annual effective tax rate
|
|
|
|
53
|
.5
|
|
83
|
.5
|
|
-16-
At June 29, 2008, the Corporation
classified $102.0 million of its liabilities for unrecognized tax benefits within other
current liabilities.
As more fully disclosed in Note 11 of
Notes to Consolidated Financial Statements included in Item 8 of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, the Corporation is subject
to periodic examinations by taxing authorities in many countries and, currently, is
undergoing periodic examinations of its tax returns in the United States (both federal and
state), Canada, Germany and the United Kingdom. The final outcome of the future tax
consequences of these examinations and legal proceedings, as well as the outcome of competent
authority proceedings, changes in regulatory tax laws, or interpretation of those tax
laws, changes in income tax rates, or expiration of statutes of limitation, could impact
the Corporations financial statements. The Corporation is subject to the effects of
these matters occurring in various jurisdictions. Accordingly, the Corporation has tax
reserves recorded for which it is reasonably possible that the amount of the unrecognized
tax benefit will increase or decrease within the next twelve months. Any such increase or
decrease could have a material affect on the financial results for any particular fiscal
quarter or year. However, based on the uncertainties associated with litigation and the
status of examinations, including the protocols of finalizing audits by the relevant tax
authorities, which could include formal legal proceedings, it is not possible to estimate
the impact of any such change.
NOTE 12: RESTRUCTURING
ACTIONS
A summary of restructuring activity
during the six-month period ended June 29, 2008, is set forth below (in millions of
dollars):
|
|
Severance
Benefits
|
Write-Down to
Fair Value Less
Costs to Sell
of
Certain Long-
Lived Assets
|
Other
Charges
|
Total
|
|
Restructuring reserve at December 31, 2007
|
|
|
$
|
16
|
.7
|
$
|
|
|
$
|
|
.6
|
$
|
17
|
.3
|
Reserves established in 2008
|
|
|
|
14
|
.6
|
|
3
|
.7
|
|
|
|
|
18
|
.3
|
Utilization of reserves:
|
|
|
Cash
|
|
|
|
(9
|
.9)
|
|
|
|
|
(
|
.3)
|
|
(10
|
.2)
|
Non-cash
|
|
|
|
|
|
|
(3
|
.7)
|
|
|
|
|
(3
|
.7)
|
Foreign currency translation
|
|
|
|
(
|
.3)
|
|
|
|
|
|
|
|
(
|
.3)
|
|
Restructuring reserve at June 29, 2008
|
|
|
$
|
21
|
.1
|
$
|
|
|
$
|
|
.3
|
$
|
21
|
.4
|
|
The Corporations restructuring
actions that were initiated prior to 2008 are more fully disclosed in Note 18 of Notes to
Consolidated Financial Statements included in Item 8 of the Corporations Annual
Report on Form 10-K for the year ended December 31, 2007.
During the six months ended June 29,
2008, the Corporation recorded a restructuring charge of $18.3 million, reflecting actions
to reduce its selling, general, and administrative expenses and manufacturing cost base.
The principal components of the 2008 restructuring charge relate to the elimination of
selling, general, and administrative positions as well as direct and indirect
manufacturing positions. As a result, a severance benefits accrual of $14.6 million,
related to the
-17-
Power Tools and Accessories segment ($10.9 million), Fastening and Assembly
Systems segment ($3.0 million), and Hardware and Home Improvement segment ($.7 million),
was included in the restructuring charge. The severance benefits accrual relates to the
elimination of approximately 700 positions, including approximately 450
manufacturing-related positions. The restructuring charge also included a $3.7 million
write-down to fair value of certain long-lived assets for the Power Tools and Accessories
segment ($3.0 million) and Hardware and Home Improvement segment ($.7 million), which were
either held for sale or idled in preparation for disposal. As part of these restructuring
actions, the Power Tools and Accessories segment closed its manufacturing facility in
Decatur, Arkansas, and transferred production to another facility. As of June 29, 2008,
the carrying value of long-lived assets held for sale was not significant.
Of the remaining $21.4 million
restructuring accrual at June 29, 2008, $18.4 million relates to the Power Tools and
Accessories segment, $2.3 million relates to the Fastening and Assembly Systems segment,
and $.7 million relates to the Hardware and Home Improvement segment. The Corporation
anticipates that remaining actions under its restructuring accrual of $21.4 million as of
June 29, 2008, will be completed during 2008 and, to a lesser extent, during 2009.
NOTE 13: LITIGATION AND
CONTINGENT LIABILITIES
As more fully disclosed in Note 21 of
Notes to Consolidated Financial Statements included in Item 8 of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, 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 Corporations
products, allegations of patent and trademark infringement, and litigation and
administrative proceedings relating to employment matters, commercial disputes, and income
tax matters. In addition, the Corporation is party to litigation and administrative
proceedings with respect to claims involving the discharge of hazardous substances into
the environment.
The Environmental Protection Agency
(EPA) and the Santa Ana Regional Water Quality Control Board have each initiated
administrative proceedings against the Corporation and certain of the Corporations
current or former affiliates alleging that the Corporation and numerous other defendants
are responsible to investigate and remediate alleged groundwater contamination in and
adjacent to a 160-acre property located in Rialto, California. The cities of Colton and
Rialto, as well as Goodrich Corporation, also initiated lawsuits against the Corporation
and certain of the Corporations former or current affiliates in the Federal District
Court for California, Central District, alleging similar claims that the Corporation is
liable under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA), the Resource Conservation and Recovery Act, and state law for the discharge
or release of hazardous substances into the environment and the contamination caused by
those alleged releases. These cases were voluntarily dismissed without prejudice in June
2008. The City of Colton also has a companion case in California state court, which is
currently stayed for all purposes. Certain defendants in that case have cross-claims
against other defendants and have asserted claims against the State of California. The
administrative proceedings and the lawsuits generally allege that West Coast Loading
Corporation (WCLC), a defunct company that operated in Rialto between 1952 and 1957, and
an as yet undefined number of other defendants are responsible for the release of
perchlorate and solvents into the groundwater basin, and that the Corporation and certain
of the Corporations current or former affiliates are liable as a
successor of WCLC. The Corporation believes that neither the facts nor the law
support an allegation that the Corporation
-18-
is responsible for the contamination and is
vigorously contesting these claims.
The EPA has provided an affiliate of
the Corporation a Notice of Potential Liability related to environmental
contamination found at the Centredale Manor Restoration Project Superfund site, located in
North Providence, Rhode Island. The EPA has discovered dioxin, polychlorinated biphenyls,
and pesticide contamination at this site. The EPA alleged that an affiliate of the
Corporation is liable for site cleanup costs under CERCLA as a successor to the liability
of Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the
EPAs costs related to this site. The EPA, which considers the Corporation to be the
primary potentially responsible party (PRP) at the site, is expected to release a draft
Feasibility Study Report, which will identify and evaluate remedial alternatives for the
site, in 2009. The estimated remediation costs related to this site (including the
EPAs past costs as well as costs of additional investigation, remediation, and
related costs, less escrowed funds contributed by PRPs who have reached settlement
agreements with the EPA), which the Corporation considers to be probable and can be
reasonably estimable, range from approximately $48.7 million to approximately $100
million, with no amount within that range representing a more likely outcome. At June 29,
2008, the Corporation maintains a reserve for this environmental remediation matter of
$48.7 million, reflecting the probability that the Corporation will be identified as the
principal financially viable PRP upon issuance of the EPA draft Feasibility Study Report
in 2009. The Corporation has not yet determined the extent to which it will contest the
EPAs claims with respect to this site. Further, to the extent that the Corporation
agrees to perform or finance remedial activities at this site, it will seek participation
or contribution from additional PRPs and insurance carriers. As the specific nature of the
environmental remediation activities that may be mandated by the EPA at this site have not
yet been determined, the ultimate remedial costs associated with the site may vary from
the amount accrued by the Corporation at June 29, 2008.
As of June 29, 2008, the
Corporations aggregate probable exposure with respect to environmental liabilities,
for which accruals have been established in the consolidated financial statements, was
$104.3 million. These accruals are reflected in other current liabilities and other
long-term liabilities in the Consolidated Balance Sheet.
Total future costs for environmental
remediation activities will depend upon, among other things, the identification of any
additional sites, the determination of the extent of contamination at each site, the
timing and nature of required remedial actions, the technology available, the nature and
terms of cost sharing arrangements with other PRPs, the existing legal requirements and
nature and extent of future environmental laws, and the determination of the
Corporations liability at each site. The recognition of additional losses, if and
when they may occur, cannot be reasonably predicted.
In the opinion of management, amounts
accrued for exposures relating to product liability claims, environmental matters, income
tax matters, and other legal proceedings are adequate and, accordingly, the ultimate
resolution of these matters is not expected to have a material adverse effect on the
Corporations consolidated financial statements. As of June 29, 2008, the Corporation
had no known probable but inestimable exposures relating to product liability claims,
environmental matters, income tax matters, or other legal proceedings that are expected to
have a material adverse effect on the Corporation. There can be no assurance, however,
that unanticipated events will not require the Corporation to increase the amount it has
accrued for
-19-
any matter or accrue for a matter that has not been previously accrued because
it was not considered probable. While it is possible that the increase or establishment of
an accrual could have a material adverse effect on the financial results for any
particular fiscal quarter or year, in the opinion of management there exists no known
potential exposure that would have a material adverse effect on the financial condition or
on the financial results of the Corporation beyond any such fiscal quarter or year.
-20-
ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Corporation is a global
manufacturer and marketer of power tools and accessories, hardware and home improvement
products, and technology-based fastening systems. As more fully described in Note 7 of
Notes to Consolidated Financial Statements, the Corporation operates in three reportable
business segments Power Tools and Accessories, Hardware and Home Improvement, and
Fastening and Assembly Systems with these business segments comprising
approximately 73%, 15%, and 12%, respectively, of the Corporations sales for the
six-month period ended June 29, 2008.
The Corporation markets its products
and services in over 100 countries. During 2007, approximately 60%, 24%, and 16% of its
sales were made to customers in the United States, in Europe (including the United Kingdom
and Middle East), and in other geographic regions, respectively. The Power Tools and
Accessories and Hardware and Home Improvement segments are subject to general economic
conditions in the countries in which they operate as well as the strength of the retail
economies. The Fastening and Assembly Systems segment is also subject to general economic
conditions in the countries in which it operates as well as to automotive and industrial
demand.
An overview of certain aspects of the
Corporations performance during the three- and six-month periods ended June 29,
2008, follows:
o
|
|
Total consolidated sales for the three- and six-month periods ended June 29, 2008,
decreased by 3% and 4%, respectively, from the corresponding 2007 periods to $1.6 billion
and $3.1 billion, respectively. Those reductions were the result of a 7% and 8% decline in
unit volume for the three- and six-month periods ended June 29, 2008, respectively, and a
1% unfavorable impact from pricing actions that were partially offset by a 5% favorable
impact from foreign currency attributable to the effects of a weaker U.S. dollar. Those
unit volume declines were primarily driven by lower sales in the United States. The
Corporation expects that continued weakness in key sectors of the U.S. economy, including
lower residential housing starts, together with slowing conditions in Western Europe, will
contribute to a mid- to high-single-digit rate of sales decline, excluding the effects of
foreign currency translation, in 2008 as compared to 2007.
|
o
|
|
Operating income as a percentage of sales for the three- and six-month periods ended June
29, 2008, decreased by approximately 260 basis points and 320 basis points, respectively,
from the corresponding periods in 2007. Of the 260 basis point decline for the three-month
period ending June 29, 2008, approximately 190 basis points was attributable to a
reduction in gross margin and approximately 70 basis points was attributable to an
increase in selling, general, and administrative expenses. Of the 320 basis point decline
for the six-month period ending June 29, 2008, approximately 150 basis points was
attributable to a reduction in gross margin, approximately 110 basis points was
attributable to an increase in selling, general, and administrative expenses, and
approximately 60 basis points was attributable to a $18.3 million pre-tax restructuring
charge. Gross margin as a percentage of sales declined in the second quarter and first
half of 2008, as compared to the corresponding periods in 2007, as the negative effects of
rising commodity costs together with the change in Chinas value added tax and
|
-21-
|
|
appreciation of the Chinese renminbi which in the aggregate, increased cost of
goods sold by approximately $35 million and $90 million, respectively were only
partially offset by the favorable effects of productivity initiatives. Selling, general,
and administrative expenses as a percentage of sales increased in the three- and six-month
periods ended June 29, 2008, as compared to the corresponding 2007 periods, due
principally to the de-leveraging of expenses over a lower sales base in the United States
and Europe.
|
o
|
|
The Corporation expects that operating income as a percentage of sales will approximate
7.7% to 8.2% in 2008, including a .3% impact of the first quarter restructuring charge.
The Corporation expects that operating income will be unfavorably impacted by the effects
of rising commodity costs together with the change in Chinas value added tax
and appreciation of the Chinese renminbi which, in the aggregate, is expected to
approximate $145 million of incremental inflation, and an increase in selling, general,
and administrative expenses as a percentage of sales associated with the de-leveraging of
expenses over a lower sales base. However, the Corporation believes that those unfavorable
effects will be partially offset by the favorable impacts of productivity and
restructuring initiatives.
|
o
|
|
Interest expense (net of interest income) decreased by $5.2 million and $10.2 million for
the three- and six-month periods ended June 29, 2008, from the corresponding 2007 periods
principally as a result of lower interest rates, including the impact on the
Corporations foreign currency hedging activities.
|
o
|
|
The Corporations effective tax rate of 21.1% for the three-month period ended June
29, 2008, was less than the 29.1% effective tax rate recognized in the corresponding
period of 2007 due principally to the favorable settlement of certain tax audits. The
Corporations effective tax rate of 22.1% for the six-month period ended June 29,
2008, was less than the 27.9% effective tax rate recognized in the corresponding period of
2007 due principally to two factors in 2008: (i) the favorable settlement of certain tax
audits, and (ii) the $6.1 million tax benefit recognized on the $18.3 million pre-tax
restructuring charge.
|
o
|
|
Net earnings were $96.7 million, or $1.58 per share on a diluted basis, for the
three-month period ended June 29, 2008, as compared to net earnings of $118.0 million, or
$1.75 per share on a diluted basis, for the corresponding period in 2007. For the first
half of 2008, net earnings were $164.1 million, or $2.67 per share on a diluted basis, as
compared to $226.1 million, or $3.36 per share on a diluted basis, for the corresponding
period in 2007.
|
o
|
|
Under an ongoing share repurchase program, the Corporation repurchased approximately 3.0
million shares of its common stock during the first six months of 2008 at a cost of $193.4
million. As a result of the Corporations share repurchase program, shares used in
computing diluted earnings per share for both the three- and six-month periods ended June
29, 2008, declined by 9%, as compared to the corresponding 2007 periods.
|
The preceding information is an
overview of certain information for the three- and six-month periods ended June 29, 2008,
and should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations in its entirety.
In the discussion and analysis of
financial condition and results of operations that follows, the Corporation generally
attempts to list contributing factors in order of significance to the point being
addressed.
-22-
RESULTS OF OPERATIONS
Sales
The following chart sets forth an
analysis of the consolidated changes in sales for the three- and six-month periods ended
June 29, 2008 and July 1, 2007:
ANALYSIS OF CHANGES IN SALES
|
|
|
Three Months Ended
|
Six Months Ended
|
(Dollars in Millions)
|
June 29, 2008
|
|
July 1, 2007
|
|
June 29, 2008
|
|
July 1, 2007
|
|
|
Total sales
|
|
|
$ 1,641.7
|
|
|
$ 1,699.9
|
|
|
$ 3,137.5
|
|
|
$ 3,277.1
|
|
|
|
Unit volume - existing (a)
|
|
|
(7) %
|
|
|
(3) %
|
|
|
(8) %
|
|
|
(2) %
|
|
|
Unit volume - acquired (b)
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
1 %
|
|
|
Price
|
|
|
(1) %
|
|
|
1 %
|
|
|
(1) %
|
|
|
1 %
|
|
|
Currency
|
|
|
5 %
|
|
|
2 %
|
|
|
5 %
|
|
|
2 %
|
|
|
|
Change in total sales
|
|
|
(3) %
|
|
|
%
|
|
|
(4) %
|
|
|
2 %
|
|
|
|
|
|
|
(a)
(b)
|
Represents change in unit volume for businesses where year-to-year
comparability exists.
Represents change in unit volume for businesses that
were acquired and were not included in prior period results.
|
Total consolidated sales for the three- and six-month periods ended June 29, 2008, decreased by 3% and 4%, respectively, from the
corresponding 2007 periods. A 7% and 8% unit volume decline for the three- and six-month periods ended June 29, 2008, respectively,
was driven primarily by lower sales in the United States due to general economic conditions in the U.S., including lower housing
starts. Pricing actions had a 1% unfavorable impact on sales for both the three- and six-month periods ended June 29, 2008, as
compared to the corresponding 2007 periods. The effects of a weaker U.S. dollar as compared to most other currencies, particularly
the euro, Canadian dollar, Brazilian real, and Japanese yen, resulted in a 5% increase in the Corporation's consolidated sales during
the three- and six-month periods ended June 29, 2008, as compared to the corresponding periods in 2007.
Earnings
A summary of the Corporation's consolidated gross margin, selling, general, and administrative expenses, and operating income--all
expressed as a percentage of sales--follows:
|
|
|
Three Months Ended
|
Six Months Ended
|
(Percentage of sales)
|
June 29, 2008
|
|
July 1, 2007
|
|
June 29, 2008
|
|
July 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
32.7 %
|
|
|
34.6 %
|
|
|
33.6 %
|
|
|
35.1 %
|
|
|
Selling, general, and administrative
expenses
|
|
|
24.3 %
|
|
|
23.6 %
|
|
|
25.3 %
|
|
|
24.2 %
|
|
|
Restructuring and exit costs
|
|
|
%
|
|
|
%
|
|
|
.6 %
|
|
|
%
|
|
|
Operating income
|
|
|
8.4 %
|
|
|
11.0 %
|
|
|
7.7 %
|
|
|
10.9 %
|
|
|
|
|
|
|
-23-
The Corporation reported consolidated
operating income of $137.7 million, or 8.4% of sales, for the three months ended June 29,
2008, as compared to operating income of $186.6 million, or 11.0% of sales, for the
corresponding period in 2007. Operating income for the six months ended June 29, 2008, was
$242.3 million, or 7.7% of sales, as compared to operating income of $356.2 million, or
10.9% of sales, for the corresponding period in 2007.
Consolidated gross margin as a
percentage of sales declined by 190 basis points and 150 basis points from the 2007 levels
to 32.7% and 33.6% for the three- and six-month periods ended June 29, 2008, respectively.
That decrease in gross margin was primarily a result of rising commodity costs which,
coupled with the effects of the change in Chinas value added tax and appreciation of
the Chinese renminbi, added approximately $35 million and $90 million of incremental costs
for the three- and six-month periods ended June 29, 2008, respectively, as compared to the
2007 periods, and unfavorable fixed cost absorption during 2008 on lower production
volumes. However, that negative impact was partly offset by increased productivity.
Consolidated selling, general, and
administrative expenses as a percentage of sales increased by 70 basis points and 110
basis points over the 2007 levels to 24.3% and 25.3% for the three- and six-month periods
ended June 29, 2008, respectively. Selling, general, and administrative expenses for the
three- and six-month periods ended June 29, 2008, approximated the prior year amounts.
While the amount of selling, general, and administrative expenses were unfavorably
impacted by foreign currency translation, that effect was offset by the favorable effect
of cost control initiatives, restructuring actions, lower promotional expenses, and lower
expenses as the result of the lower level of sales.
In the first quarter of 2008, the
Corporation recognized a restructuring charge of $18.3 million related to actions in its
Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly
Systems segments. As more fully described in Note 12 of Notes to Consolidated Financial
Statements, the restructuring charge reflects actions to reduce the Corporations
selling, general, and administrative expenses and manufacturing cost base.
Consolidated net interest expense
(interest expense less interest income) for the three months ended June 29, 2008, and July
1, 2007, was $14.8 million and $20.0 million, respectively. Net interest expense
for the six months ended June 29, 2008, and July 1, 2007, was $31.3 million and $41.5
million, respectively. The decrease in net interest expense for both the three- and
six-month periods ended June 29, 2008, was principally the result of lower interest rates,
including the impact on the Corporations foreign currency hedging activities.
Other expense was $.4 million and $.2
million for the three months ended June 29, 2008, and July 1, 2007, respectively. Other
expense for the six months ended June 29, 2008, and July 1, 2007, was $.4 million and $1.3
million, respectively.
Consolidated income tax expense of
$25.8 million and $46.5 million was recognized on the Corporations earnings before
income taxes of $122.5 million and $210.6 million for the three- and six-month periods
ended June 29, 2008, respectively. The Corporations effective tax rate of 21.1% for
the three-month period ended June 29, 2008, was less than the 29.1% effective tax rate
recognized in the corresponding period of 2007 due principally to the favorable settlement
of certain tax audits. The Corporations effective tax rate of 22.1% for the
six-month period ended
-24-
June 29, 2008, was less than the 27.9% effective tax rate
recognized in the corresponding period of 2007 due principally to two factors in 2008: (i)
the favorable settlement of certain tax audits, and (ii) the $6.1 million tax benefit
recognized on the $18.3 million pre-tax restructuring charge.
The Corporation reported net earnings
of $96.7 million, or $1.58 per share on a diluted basis, for the three-month period ended
June 29, 2008, as compared to net earnings of $118.0 million, or $1.75 per share on a
diluted basis, for the three-month period ended July 1, 2007. The Corporation reported net
earnings of $164.1 million, or $2.67 per share on a diluted basis, for the six-month
period ended June 29, 2008, as compared to net earnings of $226.1 million, or $3.36
per share on a diluted basis, for the corresponding period in 2007. Net earnings for the
six-month period ended June 29, 2008, included the effects of an after-tax restructuring
charge of $12.2 million ($18.3 million before taxes). In addition to the matters
previously noted, diluted earnings per share for the three-and six-month periods ended
June 29, 2008, benefited from lower weighted average shares outstanding. Shares used in
computing diluted earnings per share for the three- and six-month periods ended June 29,
2008, declined by approximately 9%, as compared to the corresponding 2007 periods, as a
result of the Corporations share repurchase program.
BUSINESS SEGMENTS
As more fully described in Note 7 of
Notes to Consolidated Financial Statements, the Corporation operates in three reportable
business segments: Power Tools and Accessories, Hardware and Home Improvement, and
Fastening and Assembly Systems.
Power Tools and
Accessories
Segment sales and segment profit for the
Power Tools and Accessories segment, determined on the basis described in Note 7 of Notes
to Consolidated Financial Statements, were as follows (dollars in millions):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Sales to unaffiliated customers
|
|
|
$
|
1,150
|
.1
|
$
|
1,273
|
.8
|
$
|
2,208
|
.2
|
$
|
2,451
|
.3
|
Segment profit
|
|
|
|
91
|
.1
|
|
158
|
.7
|
|
178
|
.3
|
|
305
|
.0
|
|
Sales to unaffiliated customers in
the Power Tools and Accessories segment during the second quarter of 2008 decreased 10%
from the corresponding period in 2007.
During the second quarter of 2008,
sales in North America decreased at a double-digit rate from the prior years level
primarily as a result of continued weak demand in the United States. Sales for the
industrial power tools and accessories business in the United States decreased at a
double-digit rate as a result of lower demand in all key product categories and channels.
Sales for the consumer power tools and accessories business in the United States decreased
approximately 30% from the 2007 level. Over half of that decline was caused by lost
listings in the pressure-washer category and the effects of a transition from the
Firestorm® to the Porter-Cable® brand of power tools and accessories at a large
customer. Lower sales of both outdoor and automotive and electronic products also
contributed to the decline. In Canada, sales increased at a double-digit rate primarily as
a result of higher sales in the industrial power tools and accessories business.
-25-
Sales in Europe decreased at a
mid-single-digit rate during the second quarter of 2008 from the prior years level
as a result of lower sales in Western Europe, which were only partially offset by higher
sales in Eastern Europe and the Middle East. Sales decreased at a high-single-digit rate
in the industrial power tools and accessories business in Europe. Sales of the
Corporations consumer power tools and accessories business in Europe decreased at a
mid-single-digit rate driven by a decline in sales of consumer power tools and
accessories.
Sales in other geographic areas
increased at a double-digit rate during the second quarter of 2008 over the prior
years level. That increase primarily resulted from a double-digit rate of increase
in Latin America. Sales in the Asia/Pacific region approximated the prior year level.
Segment profit as a percentage of
sales for the Power Tools and Accessories segment declined from 12.5% for the second
quarter of 2007 to 7.9% for the second quarter of 2008. Gross margin as a percentage of
sales for the 2008 period decreased from the corresponding period in 2007 as commodity
inflation together with the change in Chinas value added tax and appreciation
of the Chinese renminbi, pricing actions, unfavorable cost absorption, and higher
provisions for warranty were only partially offset by the favorable effects of
productivity initiatives and foreign currency transaction gains. Selling, general, and
administrative expenses as a percentage of sales was higher for the 2008 period, as
compared to the corresponding period in 2007, due to de-leveraging of those expenses over
lower sales volumes.
Sales to unaffiliated customers in
the Power Tools and Accessories segment during the six months ended June 29, 2008,
decreased 10% from the corresponding period in 2007.
During the six months ended June 29,
2008, sales in North America decreased at a double-digit rate from the level experienced
in the corresponding period in 2007. Sales of the Corporations industrial power
tools and accessories business in the United States decreased at a double-digit rate, with
declines experienced across all key product categories and channels. Sales of the consumer
power tools and accessories business in the United States decreased approximately 28% from
the 2007 level. Over half of that decline was caused by lost listings in the
pressure-washer category and the effects of a transition from the Firestorm® to the
Porter-Cable® brand of power tools and accessories at a large customer. In addition,
lower sales of automotive and electronic products contributed to the decline. In Canada,
sales increased at a mid-single-digit rate as higher sales of the industrial power tools
and accessories business were partially offset by lower sales of the consumer power
tools and accessories business.
Sales in Europe decreased at a
mid-single-digit rate during the six months ended June 29, 2008, from the level
experienced in the corresponding 2007 period as a result of lower sales in Western Europe,
which were only partially offset by higher sales in Eastern European and the Middle East.
Sales of both the Corporations industrial and consumer power tools and accessories
businesses in Europe decreased at a mid-single-digit rate.
Sales in other geographic areas
increased at a double-digit rate during the six months ended June 29, 2008, over the level
experienced in the corresponding period in 2007. That increase resulted from a
double-digit rate of increase in Latin America and a high-single-digit rate of increase in
the Asia/Pacific region.
-26-
Segment profit as a percentage of
sales for the Power Tools and Accessories segment was 8.1% for the six-month period ended
June 29, 2008, as compared to 12.4% for the corresponding period in 2007. Gross margin as
a percentage of sales for the 2008 period decreased from the corresponding period in 2007
as commodity inflation together with the change in Chinas value added tax and
appreciation of the Chinese renminbi, pricing actions, unfavorable cost absorption, and
higher provisions for warranty were only partially offset by the favorable effects of
productivity initiatives and foreign currency transaction gains. Selling, general, and
administrative expenses as a percentage of sales was higher for the 2008 period, as
compared to the corresponding period in 2007, due to de-leveraging of those expenses over
lower sales volumes.
Hardware and Home
Improvement
Segment sales and segment profit for
the Hardware and Home Improvement segment, determined on the basis described in Note 7 of
Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Sales to unaffiliated customers
|
|
|
$
|
241
|
.4
|
$
|
254
|
.8
|
$
|
453
|
.7
|
$
|
502
|
.9
|
Segment profit
|
|
|
|
22
|
.5
|
|
30
|
.7
|
|
38
|
.4
|
|
58
|
.9
|
|
Sales to unaffiliated customers in
the Hardware and Home Improvement segment decreased 5% during the three-month period ended
June 29, 2008, from the corresponding period in 2007. Sales of security hardware products
decreased at a high-single-digit rate during the second quarter of 2008, from the
corresponding period in 2007, due to lower U.S. sales in the new construction channel
that were partially offset by higher sales in the U.S. retail channel, which were
partially attributable to a favorable timing of orders, and higher international sales.
Sales of plumbing products decreased at a low-single-digit rate during the three-month
period ended June 29, 2008, as compared to the corresponding period in 2007, primarily due
to lower U.S. sales in the new construction channel that were partially offset by higher
U.S. sales in the retail channel.
Segment profit as a percentage of
sales for the Hardware and Home Improvement segment decreased from 12.0% for the three
months ended July 1, 2007, to 9.3% for the three months ended June 29, 2008. That decrease
was primarily attributable to a lower gross margin as a percentage of sales during the
three-month period ended June 29, 2008, as compared to the corresponding period in 2007,
due to unfavorable effects of cost absorption and commodity inflation, which were partially
offset by productivity improvements. In addition, selling, general, and administrative
expenses as a percentage of sales increased during the second quarter of 2008 over the prior
years level principally due to the de-leveraging of those
expenses over lower sales.
Sales to unaffiliated customers in
the Hardware and Home Improvement segment decreased 10% during the six-month period ended
June 29, 2008, from the corresponding period in 2007. Sales of security hardware products
decreased at a double-digit rate during the first half of 2008, from the corresponding
period in 2007, due to lower U.S. sales in both the new construction and retail channels,
which were partially offset by higher international sales. Sales of plumbing products
decreased at a high-single-digit rate during the six-month period ended June 29, 2008, as
compared to the corresponding period in 2007, due to lower U.S. sales in both the new
-27-
construction and retail channels.
Segment profit as a percentage of
sales for the Hardware and Home Improvement segment decreased from 11.7% for the six
months ended July 1, 2007, to 8.5% for the six months ended June 29, 2008. That decrease
was primarily attributable to an increase in selling, general, and administrative expenses
as a percentage of sales, principally due to the de-leveraging of those expenses over
lower sales. Gross margin as a percentage of sales decreased during the six-month period
ended June 29, 2008, as compared to the corresponding period in 2007, due to the effects
of commodity inflation and unfavorable cost absorption, which were partially offset by
productivity improvements.
Fastening and Assembly
Systems
Segment sales and segment profit for
the Fastening and Assembly Systems segment, determined on the basis described in Note 7 of
Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 29, 2008
|
July 1, 2007
|
June 29, 2008
|
July 1, 2007
|
|
Sales to unaffiliated customers
|
|
|
$
|
183
|
.4
|
$
|
182
|
.8
|
$
|
369
|
.9
|
$
|
361
|
.6
|
Segment profit
|
|
|
|
29
|
.4
|
|
28
|
.9
|
|
58
|
.3
|
|
57
|
.5
|
|
Sales to unaffiliated customers in
the Fastening and Assembly Systems segment for the three-month period ended June 29, 2008,
approximated the prior years level and increased 2% during the six-month period
ended June 29, 2008, over the corresponding period in 2007. Sales of the North American
automotive business decreased at a double-digit rate during both the second quarter and
the first six months of 2008 from the corresponding periods in 2007, reflecting the
weakness in the U.S. automotive sector. Sales of the North American industrial business
increased at a low-single-digit rate during the second quarter and increased at a
mid-single-digit rate during the first six months of 2008 over the corresponding periods
in 2007. Sales in Europe during the second quarter and first six months of 2008 increased
at a mid-single-digit rate over the corresponding 2007 periods as a high-single-digit rate
of growth in the automotive business was tempered by sales in the industrial business that
approximated the 2007 level. Sales in Asia during the second quarter of 2008 increased at
a high-single-digit rate and increased at a double-digit rate during the first six months
of 2008, over the corresponding periods in 2007.
Segment profit as a percentage of
sales for the Fastening and Assembly Systems segment increased from 15.8% in the second
quarter of 2007 to 16.0% in the second quarter of 2008 as the favorable effects of lower
selling, general, and administrative expenses more than offset a decline in gross margin.
Segment profit as a percentage of sales for the Fastening and Assembly Systems segment
decreased from 15.9% in the first half of 2007 to 15.8% in the corresponding 2008 period
as the unfavorable effect of commodity inflation was partially offset by the favorable
effect of the leverage of selling, general, and administrative expenses over higher sales
volumes.
Other Segment-Related
Matters
As indicated in the first table of
Note 7 of Notes to Consolidated Financial Statements, segment profit (expense) associated
with Corporate, Adjustments, and Eliminations was $(16.9) million and $(34.1) million for
the three- and six-month periods ended June 29, 2008, respectively, as compared
-28-
to $(30.2)
million and $(59.7) million, respectively, for the corresponding periods in 2007. The
decrease in Corporate expenses during the three months ended June 29, 2008, was primarily
due to the effects of lower pension expense, lower expenses booked in consolidation
directly related to the reportable business segments, lower expense related to certain
self-insurance reserves, and lower expenses associated with intercompany eliminations. On
a year-to-date basis, the decrease in Corporate expenses was primarily due to the effects
of lower pension expense, a foreign currency loss by a Corporate subsidiary in 2007 which
did not recur in 2008, lower expense related to certain self-insurance reserves, lower
expenses associated with intercompany eliminations, and lower legal and environmental
expense.
Expense recognized by the
Corporation, on a consolidated basis, relating to its pension and other postretirement
benefit plans decreased by $6.0 million and $11.8 million for the three- and six-month
periods ended June 29, 2008, respectively, as compared to the 2007 levels. The Corporate
adjustment to businesses postretirement benefit expense booked in consolidation, as
identified in the final table included in Note 7 of Notes to Consolidated Financial
Statements was $1.0 million and $1.9 million for the three- and six-month
periods ended June 29, 2008, respectively, as compared to $5.0 million and $9.8 million,
respectively, for the corresponding periods in 2007. Those decreases in that Corporate
adjustment in 2008, as compared to the 2007 periods, resulted from the lower level of
pension and other postretirement benefit expense (excluding the service costs allocated to
the reportable business segments). As more fully described in Note 7 of Notes to
Consolidated Financial Statements, in determining segment profit, expenses relating to
pension and other postretirement benefits are based solely upon estimated service costs.
The Corporation anticipates that its pension and other postretirement benefit costs in
2008 will decrease by approximately $24 million from the 2007 level.
Expenses directly related to
reportable business segments booked in consolidation and, thus, excluded from segment
profit for the reportable business segments were $(1.1) million and $(3.3) million for the
three- and six-month periods ended June 29, 2008, respectively, as compared to $(4.9)
million and $(3.6) million, respectively, for the corresponding periods in 2007. The
segment-related income (expense) excluded from segment profit in both the three- and
six-month periods ended June 29, 2008, and July 1, 2007, primarily related to the Power
Tools and Accessories segment.
RESTRUCTURING ACTIVITY
The Corporation is committed to
continuous productivity improvements and continues to evaluate opportunities to reduce
fixed costs, simplify or improve processes, and eliminate excess capacity. The
Corporations restructuring activities are more fully discussed in both Item 7 under
the caption Restructuring and Integration Actions and Item 8 in Note 18 of
Notes to Consolidated Financial Statements of the Corporations Annual Report on Form
10-K for the year ended December 31, 2007, and in Note 12 of Notes to Consolidated
Financial Statements.
The Corporation realized
restructuring benefits of approximately $6 million and $7 million during the three- and
six-month periods ended June 29, 2008, net of restructuring-related expenses. Of those
restructuring savings, approximately two-thirds were realized through a reduction of
selling, general, and administrative expenses, with the remainder benefiting gross margin.
-29-
The Corporation expects that pre-tax
savings associated with the fourth quarter 2007 and first quarter 2008 restructuring
actions will benefit its 2008 results by approximately $20 million, net of
restructuring-related expenses. The Corporation expects that, of those incremental pre-tax
savings in 2008, approximately 75% will benefit selling, general, and administrative
expenses and the remaining 25% will benefit cost of goods sold.
Ultimate savings realized from
restructuring actions may be mitigated by such factors as economic weakness and
competitive pressures, as well as decisions to increase costs in areas, such as promotion
or research and development, above levels that were otherwise assumed.
INTEREST RATE SENSITIVITY
The following table provides
information as of June 29, 2008, about the Corporations short-term borrowings,
long-term debt, and interest rate hedge portfolio. This table should be read in
conjunction with the information contained in Managements Discussion and Analysis of
Financial Condition and Results of Operations under the heading Interest Rate
Sensitivity included in Item 7 of the Corporations Annual Report on Form 10-K
for the year ended December 31, 2007.
Principal Payments and
Interest Rate Detail by Contractual Maturity Dates
|
(U.S. Dollars in Millions)
|
6 Mos. Ending
Dec. 31, 2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
Thereafter
|
|
Total
|
|
Fair Value
(Assets)/
Liabilities
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
Variable rate (U.S. dollars and other currencies) (a)
|
|
|
$
|
309.5
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
309.5
|
|
$
|
309
|
.5
|
Average interest rate
|
|
|
|
3.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.01
|
%
|
Long-term debt
|
|
|
Variable rate (U.S. dollars)
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
125.0
|
|
$
|
100.0
|
|
$
|
|
|
$
|
225.0
|
|
$
|
225
|
.0
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
3.79
|
%
|
|
3.66
|
%
|
|
|
|
|
3.73
|
%
|
Fixed rate (U.S. dollars)
|
|
|
$
|
.1
|
|
$
|
.1
|
|
$
|
|
|
$
|
400.0
|
|
$
|
|
|
$
|
750.0
|
|
$
|
1,150.2
|
|
$
|
1,113
|
.3
|
Average interest rate
|
|
|
|
7.00
|
%
|
|
7.00
|
%
|
|
|
|
|
7.13
|
%
|
|
|
|
|
5.61
|
%
|
|
6.14
|
%
|
INTEREST RATE DERIVATIVES
|
|
|
Fixed to Variable Rate Interest
|
|
|
Rate Swaps (U.S. dollars)
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
150.0
|
|
$
|
|
|
$
|
250.0
|
|
$
|
400.0
|
|
$
|
(11
|
.4)
|
Average pay rate (b)
|
|
|
Average receive rate
|
|
|
|
|
|
|
|
|
|
|
|
|
5.34
|
%
|
|
|
|
|
4.80
|
%
|
|
5.00
|
%
|
|
(a)
|
Short-term borrowings of $309.5 million include $295.5 million and $14.0 million
that are denominated in U.S. dollars and other currencies, respectively.
|
(b)
|
The average pay rate for swaps in the notional principal amount of $175.0
million is based upon 3-month forward LIBOR (with swaps in the notional
principal amounts of $150.0 million maturing in 2011 and $25.0 million maturing
thereafter). The average pay rate for the remaining swaps is based upon 6-month
forward LIBOR.
|
FINANCIAL CONDITION
Operating activities provided cash of
$98.3 million for the six months ended June 29, 2008, as compared to $343.2 million of
cash provided in the corresponding period in 2007. The lower level of cash provided from
operating activities in the first six months of 2008, as compared to the 2007 period,
reflected: (i) higher usage of cash associated with other assets and liabilities, including the
impact of the Corporations foreign currency hedging activities and the timing of
certain prepayments; (ii) higher working capital requirements; and (iii) lower earnings. The higher working capital
requirements in the first six months of 2008, as compared to the corresponding 2007 period, were primarily due to lower cash
provided by accounts payable (associated with both
-30-
production levels and timing), higher
cash used by an increase in trade receivables (associated with both days sales outstanding
and timing of sales), and higher cash used by other current liabilities (due to the higher
level of customer and employee incentive payments made in the first quarter of 2008).
As part of its capital management,
the Corporation reviews certain working capital metrics. For example, the Corporation
evaluates its trade receivables and inventory levels through the computation of days sales
outstanding and inventory turnover ratio, respectively. The number of days sales
outstanding increased modestly at June 29, 2008, over the level at July 1, 2007. Average
inventory turns at June 29, 2008, remained consistent with inventory turns at July 1,
2007.
Investing activities for the six
months ended June 29, 2008, used cash of $32.9 million, as compared to
$64.3 million of cash used during the corresponding period in 2007. This decrease
primarily resulted from a $40.7 million net increase in cash flows from hedging
activities. Capital expenditures increased $7.2 million during the first six months of
2008, as compared to the 2007 period. The Corporation anticipates that its capital spending
in 2008 will approximate $115 million.
Financing activities for the six
months ended June 29, 2008, used cash of $38.2 million, as compared to $255.0 million
of cash used during the corresponding period in 2007. During the six months ended June 29,
2008, the Corporation entered into term loan agreements totaling $225.0 million which
resulted in proceeds from long-term debt of $224.7 million (net of issuance costs of $.3
million). During the first six months of 2008, the Corporation purchased 2,984,405 shares
of its common stock at an aggregate cost of $193.4 million. During the corresponding
period in 2007, the Corporation repurchased 1,195,276 shares of its common stock at an
aggregate cost of $95.9 million. As of June 29, 2008, the Corporation had remaining
authorization from its Board of Directors to repurchase an additional 3,929,108 shares of
its common stock. Cash provided on the issuance of common stock decreased $55.4 million
for the six months ended June 29, 2008, as compared to the corresponding 2007 period, due
to a lower level of stock option exercises. Cash used in financing activities in the first
six months of 2008 was also affected by the Corporations quarterly dividend
payments, which declined by $4.6 million, as compared to the corresponding 2007 period,
due to the lower number of shares outstanding in the first six months of 2008. The $20.6
million net decrease in short-term borrowings during the first six months of 2008, as
compared to the $161.0 million net decrease in short-term borrowings in the comparable
2007 period, was the result of the previously described cash flow activity.
As more fully described in Note 11 of
Notes to Consolidated Financial Statements, included in Item 8 of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, the Corporation and the
U.S. government reached a settlement agreement in December 2007 with respect to certain
litigation, principally related to the proposed disallowance by the Internal Revenue Service,
disputed by the Corporation, of a capital loss deduction taken in the Corporations tax return
and interest on the deficiency. That settlement agreement resolved the litigation relating to the audits of
the tax years 1998 through 2000 and also resolved the treatment of this tax position in
subsequent years. In the third quarter of 2008, the IRS closing agreement was finalized.
The Corporation made a cash payment of approximately $50 million during the third quarter
of 2008 relating to this settlement.
-31-
The variable-rate debt to total debt
ratio, after taking interest rate hedges into account, was 56% and 44% at June 29, 2008
and December 31, 2007, respectively. Average debt maturity was 5.6 years at June
29, 2008, as compared to 6.2 years at December 31, 2007. Average long-term debt
maturity was 6.8 years at June 29, 2008, as compared to 8.0 years at December 31, 2007.
The Corporation will continue to have
cash requirements to support seasonal working capital needs and capital expenditures, to
pay interest, and to service debt. In order to meet its cash requirements, the Corporation
intends to use its existing cash, cash equivalents, and internally generated funds, to
borrow under its existing unsecured revolving credit facilities or other short-term
borrowing facilities, and to consider additional term financing. The Corporation believes
that cash provided from these sources will be adequate to meet its cash requirements over
the next twelve months.
FORWARD-LOOKING
STATEMENTS
The Private Securities Litigation
Reform Act of 1995 (the Reform Act) provides a safe harbor for forward-looking statements
made by or on behalf of the Corporation. The Corporation and its representatives may, from
time to time, make written or verbal forward-looking statements, including statements
contained in the Corporations filings with the Securities and Exchange Commission
and in its reports to stockholders. Generally, the inclusion of the words
believe, expect, intend, estimate,
anticipate, will, and similar expressions identify statements that
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are
intended to come within the safe harbor protection provided by those sections. All
statements addressing operating performance, events, or developments that the Corporation
expects or anticipates will occur in the future, including statements relating to sales
growth, earnings or earnings per share growth, and market share, as well as statements
expressing optimism or pessimism about future operating results, are forward-looking
statements within the meaning of the Reform Act. The forward-looking statements are and
will be based upon managements then-current views and assumptions regarding
future events and operating performance, and are applicable only as of the dates of such
statements. The Corporation undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events, or
otherwise.
By their nature, all forward-looking
statements involve risks and uncertainties. Actual results may differ materially from
those contemplated by the forward-looking statements for a number of reasons, including
but not limited to those factors identified in Item 1A of Part I of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007.
-32-
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required under this Item
is contained in Note 3 of Notes to the Consolidated Financial Statements, in Item 2 of
Part I of this report under the caption Interest Rate Sensitivity, and under
the caption Hedging Activities, included in Item 7, and in Notes 1 and 9 of
Notes to Consolidated Financial Statements, included in Item 8 of the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, and is
incorporated by reference herein.
ITEM 4. CONTROLS AND
PROCEDURES
(a)
Under the supervision and with the participation of the Corporations
management, including the Corporations Chief Executive Officer and Chief
Financial Officer, the Corporation carried out an evaluation of the
effectiveness of the design and operation of the Corporations disclosure
controls and procedures as of June 29, 2008, pursuant to Exchange Act Rule
13a-15. Based upon that evaluation, the Corporations Chief Executive
Officer and Chief Financial Officer have concluded that the Corporations
disclosure controls and procedures are effective.
(b)
There have been no changes in the Corporations internal control over
financial reporting during the quarterly period ended June 29, 2008, that have
materially affected, or are reasonably likely to materially affect, the
Corporations internal control over financial reporting.
-33-
THE BLACK & DECKER
CORPORATION
PART II OTHER
INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As more fully described the Annual
Report on Form 10-K for the year ended December 31, 2007, and in Note 13, 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 Corporations
products, allegations of patent and trademark infringement, and litigation and
administrative proceedings relating to employment matters, tax matters and commercial
disputes. In addition, the Corporation is party to litigation and administrative
proceedings with respect to claims involving the discharge of hazardous substances into
the environment.
ITEM 1A. RISK FACTORS
In addition to the other information
set forth in this report, you should carefully consider the factors discussed under the
caption Risk Factors included in Part I, Item 1A. of our Annual Report on
Form 10-K for the year ended December 31, 2007, which could materially affect our
business, financial condition or results of operations. The risks described in our Annual
Report on Form 10-K are not exhaustive. Additional risks and uncertainties not presently
known to us or that we currently believe to be immaterial also may adversely impact our
business. Should any risk or uncertainties develop into actual events, these developments
could have material adverse effects on our business, financial condition, or results of
operations.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of
Equity Securities
|
Period (a)
|
Total Number of
Shares Purchased (b)
|
Average Price
Paid Per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
|
Maximum Number
of Shares that May
Yet be Purchased
Under the Plans (c)
|
|
March 31, 2008 through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27, 2008
|
|
|
|
|
|
|
$
|
|
|
|
|
|
4,894,90
|
8
|
April 28, 2008 through
|
|
|
May 25, 2008
|
|
|
|
17,95
|
9
|
|
$ 66.8
|
2
|
|
|
|
|
4,894,90
|
8
|
May 26, 2008 through
|
|
|
June 29, 2008
|
|
|
|
965,90
|
5
|
|
$ 60.6
|
2
|
|
965,80
|
0
|
|
3,929,10
|
8
|
|
Total
|
|
|
|
983,86
|
4
|
|
$ 60.7
|
3
|
|
965,80
|
0
|
|
3,929,10
|
8
|
|
(a)
(b)
(c)
|
|
The periods represent the Corporations monthly fiscal calendar.
Includes 18,064 of shares acquired from associates to satisfy withholding tax requirements upon the vesting of restricted stock.
The maximum number of shares that may yet be purchased under the plans represent the remaining shares that are available pursuant to the Corporation's publicly announced repurchase plans.
The maximum number of shares that may yet be purchased under the plans noted above included 4,000,000 shares authorized by the Board of Directors on October 17, 2007, and 2,000,000 shares
authorized by the Board of Directors on February 14, 2008. There is no expiration date or current intent to terminate the repurchase plans.
|
-34-
ITEM 6. EXHIBITS
|
Exhibit
No.
|
Description
|
|
|
31.1
|
Chief Executive Officer's Certification Pursuant to Rule 13a-14(a)/15d-14(a) and Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Chief Financial Officer's Certification Pursuant to Rule 13a-14(a)/15d-14(a) and Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Chief Executive Officer's Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
Chief Financial Officer's Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
All other items were not applicable.
-35-
THE BLACK & DECKER CORPORATION
S I G N A T U R E S
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
|
|
|
THE BLACK & DECKER CORPORATION
By
/s/ MICHAEL D. MANGAN
Michael D. Mangan
Senior Vice President and Chief Financial Officer
Principal Accounting Officer
By
/s/ CHRISTINA M. MCMULLEN
Christina M. McMullen
Vice President and Controller
|
Date: August 7, 2008
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