Power tool maker The Black & Decker Corporation has announced that net earnings for the third quarter of 2003 were U.S. $74.4 million or $0.95 per diluted share, versus net earnings of $54.9 million, or $0.68 per diluted share in the third quarter of 2002. Excluding restructuring charges in both years, recurring diluted earnings per share were a record $1.15 for the quarter, an increase of 21 percent over $0.95 in the third quarter of 2002. Restructuring charges, for the final phase of the program announced in early 2002, were $21.0 million before taxes, $15.3 million after taxes, or $0.20 per diluted share in the third quarter of 2003. In the third quarter of 2002, restructuring charges were $38.4 million before taxes, $22.3 million after taxes, or $0.27 per diluted share.
Sales for the third quarter of 2003 were $1.14 billion, a 5-percent increase over $1.09 billion for the same period last year. Sales increased 2 percent, excluding the effects of foreign currency translation.
Commenting on the results, Nolan D. Archibald, chairman and CEO, said, "For the sixth straight quarter, our earnings per share grew by more than 19 percent. Our performance this quarter reflected both sales growth and operating margin improvement. As economic conditions improved, sales exceeded our expectations, particularly in our North American power tools and accessories business. Our Hardware and Home Improvement segment continued its recovery, posting a double-digit sales increase and excellent operating margin."
Mr. Archibald also noted that the company’s restructuring program, which was announced in early 2002, is in its final phase and continues to generate significant cost savings. Actions covered by this charge include the previously announced closure of a compressor plant in Pennsylvania, U.S. and headcount reductions in the company’s power tools operations in the U.S. and Europe.
"Because of the outstanding execution of this program, we now expect incremental savings of $40 million in 2003, $45 million in 2004 and $10 million in 2005," Mr. Archibald said. "Combined with $25 million realized in 2002, this totals $120 million of annualized savings, a 20-percent increase from our original target of $100 million. "
Mr. Archibald reported the following earnings highlights:
Sales in the Power Tools and Accessories segment increased 1 percent for the quarter, due to growth in the U.S. and Asia. Sales of consumer products in the U.S. increased at a mid-single-digit rate, with strong sales of power tools and lawn and garden products. Sales of professional products increased at a low single-digit rate, led by the industrial construction independent channel.
Sales in Europe decreased at a low single-digit rate, with a decline in sales of consumer tools partly offset by growth in professional tool sales. The weak economic environment, particularly in Germany and France, continued to challenge the consumer division. As a result of cost reduction efforts and favorable currency, however, European operating profit increased significantly despite the sales decline.
Operating profit for the segment decreased 10 percent compared to a very strong third quarter last year, with declines in the Americas partly offset by gains in Europe and other regions. While its restructuring and Six Sigma programs continued to generate savings, the company said it significantly reduced production levels, which in turn reduced gross margins.
Sales in the Hardware and Home Improvement segment increased 11 percent for the quarter. Because of a significant increase in product listings at Lowe's, sales of Price Pfister® plumbing products increased at a double-digit rate. Sales in the Kwikset® security hardware business increased at a high single- digit rate, reflecting successful combination kit promotions. Operating margins improved for both Kwikset and Price Pfister, driven by productivity and restructuring savings. As a result, operating profit more than doubled for the segment again this quarter.
Sales in the Fastening and Assembly Systems segment were down 3 percent for the quarter, due largely to weakness in the North American industrial and automotive markets. Strong sales in Europe and Asia helped to mitigate the North American decline.
"Looking forward, we are optimistic that, with the help of a recovering U.S. economy, we can deliver sales growth in the fourth quarter," concluded Mr. Archibald. "We are forecasting low single-digit sales growth excluding currency translation and revenues of the acquired businesses, or mid-to-high-single-digit growth including those factors. Combined with modestly higher operating margin, lower interest expense and a lower share count, we expect diluted earnings per share in the $1.20-to-$1.30 range for the fourth quarter. This range excludes any restructuring charges associated with the integration of our security hardware businesses. This guidance represents an increase from our previous forecast and an improvement of 14 to 24 percent from recurring diluted earnings of $1.05 per share in 2002."
For the full year, the company is forecasting diluted earnings per share to fall between $3.87 $3.97, excluding restructuring charges.
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