Black & Decker Q1 financials

The Black & Decker Corporation, Towson, MD, announced net earnings for the first quarter of 2003 were $43.4 million a 34% increase over the first quarter of 2002. Sales for the first quarter of 2003 were $968 million, up 2% from $952 million for the same period last year. Sales decreased 3% excluding the effects of foreign currency translation.

Commenting on the results, Nolan D. Archibald, chairman and CEO, said, "Despite a very weak global economic environment during the quarter, we were able to grow sales in both our U.S. consumer power tools and accessories division and our fastening and assembly systems segment. In addition, operating margin improved significantly in each of our business segments, as our Six Sigma and restructuring programs continued to deliver positive results. This margin improvement enabled us to deliver earnings significantly higher than in the first quarter of 2002.

"We are also pleased with the progress of our restructuring program. During the quarter, our Mexican facility continued to add professional tool lines, and the transfer of tool assembly from the U.K. to our Czech plant is proceeding on plan. We continue to anticipate incremental savings of approximately $35 million in 2003 and $40 million in 2004, which, combined with $25 million in 2002, will yield $100 million of total annualized savings.

"Sales in the Power Tools and Accessories segment were essentially flat to the first quarter last year, with flat North American sales, a small decrease in Europe, and an increase in the rest of the world. Operating profit for the segment increased 47% from the first quarter last year, with strong improvement in both the U.S. and Europe. Six Sigma and restructuring program benefits were the primary reasons for the operating margin increase.

"In the U.S., sales of consumer products increased at a double-digit rate, with strong sales growth in lawn and garden products and power tools. This growth was driven by demand for new products, such as a new Grass Hog(R) automatic-feed trimmer/edger, and the continued success of the Bulls Eye(TM) auto-leveling laser line and stud finder. DEWALT(R) professional division sales decreased in the U.S., due to the weak economic environment, especially in the industrial sector, compounded by adverse weather conditions.

"In Europe, sales decreased modestly during the quarter, largely because of lower consumer tool sales in Germany and France. Professional tool sales were flat to last year, reflecting low construction activity. Gross margin and operating profit were up dramatically, with improvement driven by restructuring benefits and favorable currency.

"Sales in the Hardware and Home Improvement segment were down 14% for the quarter. Sales of Price Pfister(R) plumbing products decreased significantly as the result of previously announced shelf space losses. We are pleased to announce, however, that Price Pfister's product listings will increase approximately 75% at Lowe's stores. We expect that this reset, which will start in the second quarter, should begin to offset the previously announced volume losses. Sales in the Kwikset(R) security hardware business declined, largely due to promotional activity at home centers which drove sales in the first quarter of 2002. Operating profit for Hardware and Home Improvement decreased a modest 4% from the first quarter last year, as a significant improvement in operating margin mitigated the effect of lower sales volume.

"Sales in the Fastening and Assembly Systems segment were up 3% for the quarter, reflecting gains in both the automotive and industrial sectors, particularly in Asia. Operating profit in this segment increased 12% from the first quarter last year because of improvements in manufacturing productivity.

"Free cash flow, which is typically negative in the first quarter, was negative $147 million, reflecting higher inventory and the

payment of 2002 year-end accrued liabilities. The inventory increase from the first quarter of 2002 reflects currency translation, safety stock related to our restructuring program, and lower-than-expected sales. We anticipate that the safety stock will begin to diminish in the second quarter and will be effectively eliminated by year end. In addition, we repurchased 2.0 million shares of our stock during the quarter and repaid $310 million of maturing debt on April 1.

"Looking forward, assuming continued weak economic conditions, we anticipate flat or slightly lower sales for the second quarter, excluding currency translation. For the full year, we expect roughly flat sales before currency translation, aided by second-half gains at Price Pfister. At current foreign exchange rates, these projections would translate to low single-digit sales growth for the second quarter and full year. We expect restructuring and Six Sigma savings to drive an increase in operating margin, and interest expense should be favorable to 2002. As a result, we expect diluted earnings per share to be in the $0.90-to-$0.95 range for the second quarter and in the $3.60-to-$3.75 range for the full year, excluding any remaining charges under the previously announced restructuring program. We continue to anticipate converting at least 80% of full-year net earnings to free cash flow.

"Black & Decker's strong financial performance reflects excellent execution of manufacturing and commercial initiatives. We continue to invest in brands, product development, and end-user relationships, and to successfully execute our restructuring program. By combining market leadership with operating excellence, Black & Decker is well positioned to continue delivering outstanding value to shareholders."