-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A0tTnbsZ47cZeKB6hoEbo0Kl+/4QP0+Din30UGTH+MWY0C4AEgxEcAARO6ENwHpb WE8JlJKQFUwuMLVIx/tUUA== 0000012355-99-000002.txt : 19990127 0000012355-99-000002.hdr.sgml : 19990127 ACCESSION NUMBER: 0000012355-99-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990126 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK & DECKER CORP CENTRAL INDEX KEY: 0000012355 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 520248090 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-03593 FILM NUMBER: 99512500 BUSINESS ADDRESS: STREET 1: 701 E JOPPA RD CITY: TOWSON STATE: MD ZIP: 21286 BUSINESS PHONE: 4107163900 MAIL ADDRESS: STREET 1: 701 EAST JOPPA ROAD STREET 2: MAIL STOP TW 290 CITY: TOWSON STATE: MD ZIP: 21286 FORMER COMPANY: FORMER CONFORMED NAME: BLACK & DECKER MANUFACTURING CO DATE OF NAME CHANGE: 19850206 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 25, 1999 -------------------- THE BLACK & DECKER CORPORATION (Exact name of registrant as specified in its charter) Maryland 1-1553 52-0248090 (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number) Towson, Maryland 21286 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 410-716-3900 Not Applicable (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS On January 25, 1999, the Corporation reported its earnings for the three and twelve months ended December 31, 1998. Attached to this Current Report on Form 8-K as Exhibit 99 is a copy of the Corporation's related press release dated January 25, 1999. FORWARD LOOKING STATEMENTS This Current Report on Form 8-K includes 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. 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: market acceptance of the new products introduced in 1998 and scheduled for introduction in 1999; the level of sales generated from these new products relative to expectations, based on the existing investments in productive capacity and commitments of the Corporation to fund advertising and product promotions in connection with the introduction of these new products; the ability of the Corporation and its suppliers to meet scheduled timetables of new product introductions; unforeseen competitive pressure or other difficulty in maintaining mutually beneficial relationships with key distributors or penetrating new channels of distribution; adverse changes in currency exchange rates or raw material commodity prices, both in absolute terms and relative to competitors' risk profiles; delays in or unanticipated inefficiencies resulting from manufacturing and administrative reorganization actions in progress or contemplated by the strategic repositioning described in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, and updated in Corporation's Quarterly Report on Form 10-Q for the quarter ended September 27, 1998; and the continuation of modest economic growth in the United States and Europe and gradual improvement in the economic environment in Asia and Latin America. In addition to the foregoing, the Corporation's ability to realize the anticipated benefits of the restructuring actions undertaken in 1998 is dependent upon current market conditions, as well as the timing and effectiveness of the relocation or consolidation of production and administrative processes. The ability to realize the benefits inherent in the balance of the restructuring actions is dependent on the selection and implementation of economically viable projects in addition to the restructuring actions taken to date. The ability to achieve certain sales and profitability targets and cash flow projections also is dependent upon the Corporation's ability to identify appropriate selected acquisitions that are complementary to the Corporation's existing businesses at acquisition prices that are consistent with these objectives. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit 99 Press Release of the Corporation dated January 25, 1999. 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 hereunto duly authorized. THE BLACK & DECKER CORPORATION By /s/STEPHEN F. REEVES --------------------------- Stephen F. Reeves Vice President and Controller EX-99 2 PRESS RELEASE DATED JANUARY 25, 1999 Barbara B. Lucas Senior Vice President - Public Affairs 410/716-2980 F. Robert Hunter, III Vice President - Investor Relations 410/716-3979 FOR IMMEDIATE RELEASE: Monday, January 25, 1999 SUBJECT: Black & Decker Reports Fourth Quarter and Full-Year Results for 1998; Earns $2.63 Per Diluted Share, Excluding Non-Recurring Items, For Full Year; Reduces Net Debt by Nearly $350 Million TOWSON, MD - The Black & Decker Corporation (NYSE:BDK) today announced that net earnings for the fourth quarter of 1998 were $91.6 million, or $1.03 per diluted share, compared to $97.0 million, or $1.00 per diluted share, for the same period of 1997. Excluding non-recurring items consisting of a $9.6 million after-tax charge ($.11 per diluted share) for restructuring under a two-year program announced in January 1998 and a $3.1 million after-tax gain ($.04 per diluted share) on the sale of a business, net earnings were $98.1 million, or $1.10 per diluted share, an increase of 10% over earnings per diluted share for the same period of 1997. Net earnings for the fourth quarter included after-tax restructuring-related expenses of $6.6 million ($.08 per diluted share). Excluding non-recurring items and restructuring-related expenses, earnings per diluted share for the quarter were $1.18. Sales declined in the fourth quarter of 1998 to $1.27 billion from $1.52 billion in the same period of 1997, largely as a result of business divestitures. Sales in core businesses - Power Tools and Accessories, Building Products (which includes security hardware and plumbing products), and Fastening and Assembly Systems - declined 1% compared to exceptionally strong performance in the same period last year. Excluding lower sales of cleaning and lighting products in North America, sales in core businesses increased 2%. Foreign currency translation had no effect on sales in the quarter. (more) Page Two For the full year 1998, the Corporation reported a net loss, related to a write-off of goodwill and restructuring charges, of $754.8 million or $8.22 per share. Because results for the full year were a loss, the calculation of reported net earnings per share on a diluted basis excludes stock options, which, if included, would be anti-dilutive and would decrease the per-share loss. For comparative purposes, however, the dilutive effect of these options has been included for the evaluation of the Corporation's performance that follows. Excluding non-recurring items consisting of the goodwill write-off, after-tax restructuring charges, and after-tax gains on the sales of businesses, net earnings for 1998 would have been $246.0 million, or $2.63 per share on this diluted basis, compared to $227.2 million, or $2.35 per diluted share, reported for 1997. This represents a 12% increase in earnings per share. The adjusted net earnings amount for 1998 includes after-tax restructuring-related expenses of $30.2 million, or $.32 per share. Excluding non-recurring items and restructuring-related expenses, earnings per diluted share for 1998 increased to $2.95. For the full year 1998, sales declined to $4.56 billion from $4.94 billion in 1997. The decline was entirely related to divested businesses. Sales increased 2% excluding divested businesses and the effects of foreign currency translation, and 4% if lower sales of cleaning and lighting products in North America also are excluded. Nolan D. Archibald, Chairman and Chief Executive Officer, commented, "This was a year of dynamic change at Black & Decker. In addition to achieving significant progress in the strategic repositioning of our company, we achieved record sales levels in each of our core businesses. Excluding non-recurring items, earnings per diluted share rose 12% for the year to $2.63, representing six consecutive years of improvement and yielding a five-year compound annual growth rate of 22%. Despite restructuring spending, improved working capital management and lower capital expenditures helped to boost free cash flow to $188 million. The increased free cash flow, along with excellent proceeds from our divestiture program, enabled us to reduce net debt by nearly $350 million, from $1.62 billion to $1.27 billion. We also maintained operating income margin in core businesses while absorbing nearly $45 million in restructuring-related expenses. (more) Page Three "Although most of the restructuring-related expenses were in Power Tools and Accessories, this business remained solidly profitable. Sales increased in this business, as strong growth in professional power tools and lawn and garden tools, combined with modest improvement in consumer power tools, more than compensated for flat results in accessories and a nearly $90 million decline in cleaning and lighting products. The cleaning and lighting product lines are being radically restructured as we integrate them into our power tools organization, and we expect to improve their results significantly this year. Geographically, sales and profitability improvement in Power Tools and Accessories was due largely to exceptional performance in North America. "Building Products achieved record sales in 1998, reporting increases in both security hardware and plumbing products operations. Higher operating income in plumbing products, associated with productivity and manufacturing improvements compared to a difficult 1997, more than offset a slight decline in security hardware associated with manufacturing inefficiencies. Fastening and Assembly Systems generated both record sales and record operating income despite strong pressure from the recession in Japan and the General Motors automotive strike in North America. "With respect to our strategic repositioning, we completed the first component of our plan during 1998 by divesting underperforming and non-strategic businesses. The sale of Household Products in North America and Latin America (excluding Brazil), Emhart Glass, and True Temper Sports generated aggregate net proceeds far in excess of our original projections. We also substantially completed the second component, well ahead of schedule, with the repurchase of approximately nine million shares of Black & Decker common stock during the year. "We have made substantial progress on the third component - the restructuring of our core businesses. We closed power tool manufacturing operations in Canada, Singapore, and Italy during 1998 and began the process of streamlining our European Power Tools and Accessories unit to create a more cost-effective, pan-European structure. Major ongoing activities to support this objective include the centralization of finance and support services and the installation of advanced supply-chain management systems. We also are in the early stages of consolidating distribution in continental Europe to improve customer service while improving inventory management and reducing transportation costs. (more) Page Four "In 1999, we will continue to pursue these and other restructuring projects throughout the company, including further rationalization of North American manufacturing and distribution operations for which we booked a restructuring charge in the fourth quarter of 1998. Based on our progress to date, total restructuring charges over the duration of the program are likely to be significantly less than the $250 million projected at the outset. We still expect, however, to achieve annual savings of approximately $100 million, as originally planned." This release includes 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. By their nature, all forward-looking statements involve risks and uncertainties. For a more detailed discussion of the risks and uncertainties that may affect Black & Decker's operating and financial results and its ability to achieve the financial objectives discussed in this press release, interested parties should review Black & Decker's reports filed with the Securities and Exchange Commission, including the Current Report on Form 8-K, to be filed January 26, 1999. Black & Decker is a leading global manufacturer and marketer of power tools, hardware, and building products used in and around the home and for commercial applications. * * * THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Dollars in Millions Except Per Share Amounts) Year Ended --------------------------------------- December 31, 1998 December 31, 1997 ------------------ ------------------ SALES $ 4,559.9 $ 4,940.5 Cost of goods sold 2,951.0 3,169.2 Selling, general, and administrative expenses 1,124.9 1,282.0 Write-off of goodwill 900.0 - Restructuring and exit costs 164.7 - Gain on sale of businesses 114.5 - ------------------ ------------------ OPERATING INCOME (LOSS) (466.2) 489.3 Interest expense (net of interest income) 114.4 124.6 Other expense 7.7 15.2 ------------------ ------------------ EARNINGS (LOSS) BEFORE INCOME TAXES (588.3) 349.5 Income taxes 166.5 122.3 ------------------ ------------------ NET EARNINGS (LOSS) $ (754.8) $ 227.2 ================== ================== NET EARNINGS (LOSS) PER COMMON SHARE - BASIC $ (8.22) $ 2.40 ================== ================== Shares Used in Computing Basic Earnings Per Share (in Millions) 91.8 94.6 ================== ================== NET EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION $ (8.22) $ 2.35 ================== ================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 91.8 96.5 ================== ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Dollars in Millions Except Per Share Amounts) Three Months Ended --------------------------------------- December 31, 1998 December 31, 1997 ------------------ ------------------ SALES $ 1,274.2 $ 1,518.4 Cost of goods sold 811.8 968.0 Selling, general, and administrative expenses 289.4 365.4 Restructuring and exit costs 10.5 - Gain on sale of businesses 51.1 - ------------------ ------------------ OPERATING INCOME 213.6 185.0 Interest expense (net of interest income) 27.1 30.7 Other expense 1.5 5.1 ------------------ ------------------ EARNINGS BEFORE INCOME TAXES 185.0 149.2 Income taxes 93.4 52.2 ------------------ ------------------ NET EARNINGS $ 91.6 $ 97.0 ================== ================== NET EARNINGS PER COMMON SHARE - BASIC $ 1.05 $ 1.02 ================== ================== Shares Used in Computing Basic Earnings Per Share (in Millions) 87.3 94.8 ================== ================== NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 1.03 $ 1.00 ================== ================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 88.9 96.9 ================== ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Millions of Dollars) December 31, 1998 December 31, 1997 ------------------ ------------------ ASSETS Cash and cash equivalents $ 87.9 $ 246.8 Trade receivables 792.4 931.4 Inventories 636.9 774.7 Other current assets 234.6 125.9 ------------------ ------------------ TOTAL CURRENT ASSETS 1,751.8 2,078.8 ------------------ ------------------ PROPERTY, PLANT, AND EQUIPMENT 727.6 915.1 GOODWILL 768.7 1,877.3 OTHER ASSETS 604.4 489.5 ------------------ ------------------ $ 3,852.5 $ 5,360.7 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ 152.5 $ 178.3 Current maturities of long-term debt 59.2 60.5 Trade accounts payable 348.8 372.0 Other accrued liabilities 814.2 761.8 ------------------ ------------------ TOTAL CURRENT LIABILITIES 1,374.7 1,372.6 ------------------ ------------------ LONG-TERM DEBT 1,148.9 1,623.7 DEFERRED INCOME TAXES 279.9 57.7 POSTRETIREMENT BENEFITS 263.5 304.2 OTHER LONG-TERM LIABILITIES 211.5 211.1 STOCKHOLDERS' EQUITY 574.0 1,791.4 ------------------ ------------------ $ 3,852.5 $ 5,360.7 ================== ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL EARNINGS INFORMATION (Unaudited) YEAR ENDED DECEMBER 31, 1998 (Dollars in Millions Except Per Share Amounts) Less: Less: Non- Restructuring- As Recurring Related As Reported Items Costs Adjusted -------- -------- ---------- -------- SALES $4,559.9 $4,559.9 Cost of goods sold 2,951.0 $ (32.8) 2,918.2 Selling, general, and administrative expenses 1,124.9 (11.6) 1,113.3 Write-off of goodwill 900.0 $ (900.0) - - Restructuring and exit costs 164.7 (164.7) - - Gain on sale of businesses 114.5 (114.5) - - -------- -------- ---------- -------- OPERATING INCOME (LOSS) (466.2) 950.2 44.4 528.4 Interest and other expenses 122.1 - - 122.1 -------- -------- ---------- -------- EARNINGS (LOSS) BEFORE INCOME TAXES (588.3) 950.2 44.4 406.3 Income taxes 166.5 (50.6)(A) 14.2 130.1 -------- -------- ---------- -------- NET EARNINGS (LOSS) $ (754.8) $1,000.8 $ 30.2 $ 276.2 ======== ======== ========== ======== Shares Used in Computing Diluted Earnings Per Share (in Millions) (B) 91.8 93.5 93.5 ======== ========== ======== NET EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION $ (8.22) $ 0.32 $ 2.95 ======== ========== ======== - ----------------------------------------------- (A) Adjustment represents net tax effect of gain on sale of businesses and restructuring and exit costs. (B) Option conversion is anti-dilutive due to the loss reported for the year. Excluding the goodwill write-off, restructuring charge, gain on sale of businesses, and restructuring-related costs, results for the year would have been positive. Accordingly, 1.7 million shares have been added to the diluted share count on an "as adjusted" basis. THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL EARNINGS INFORMATION (Unaudited) THREE MONTHS ENDED DECEMBER 31, 1998 (Dollars in Millions Except Per Share Amounts) Less: Less: Non- Restructuring- As Recurring Related As Reported Items Costs Adjusted -------- -------- ---------- -------- SALES $1,274.2 $1,274.2 Cost of goods sold 811.8 $ (6.3) 805.5 Selling, general, and administrative expenses 289.4 (3.4) 286.0 Restructuring and exit costs 10.5 $ (10.5) - - Gain on sale of businesses 51.1 (51.1) - - -------- -------- ---------- -------- OPERATING INCOME 213.6 (40.6) 9.7 182.7 Interest and other expenses 28.6 - - 28.6 -------- -------- ---------- -------- EARNINGS BEFORE INCOME TAXES 185.0 (40.6) 9.7 154.1 Income taxes 93.4 (47.1)(A) 3.1 49.4 -------- -------- ---------- -------- NET EARNINGS $ 91.6 $ 6.5 $ 6.6 $ 104.7 ======== ======== ========== ======== Shares Used in Computing Diluted Earnings Per Share (in Millions) 88.9 88.9 88.9 88.9 ======== ======== ========== ======== NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 1.03 $ 0.07 $ 0.08 $ 1.18 ======== ======== ========== ======== - ------------------------------------------------- (A) Adjustment represents net tax effect of gain on sale of businesses and restructuring and exit costs. Supplemental Information About Business Segments (Unaudited) (Millions of Dollars) Reportable Business Segments -------------------------------------------- Power Fastening Tools & Year Ended & Building Assembly December 31, 1998 Accessories Products Systems Total - ------------------------------------------------------------------------------ Sales to unaffiliated customers $2,946.4 $ 851.1 $ 463.0 $4,260.5 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) 293.4 125.2 76.6 495.2 Depreciation and amortization 88.2 27.1 13.4 128.7 Capital expenditures 79.1 36.5 16.2 131.8 Year Ended December 31, 1997 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $2,936.4 $ 804.8 $ 451.3 $4,192.5 Segment profit (loss) (for Consolidated, operating income) 290.7 121.3 69.7 481.7 Depreciation and amortization 87.5 24.7 11.9 124.1 Capital expenditures 113.2 47.3 15.4 175.9 Three Months Ended December 31, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 922.3 $ 230.6 $ 118.8 $1,271.7 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) 121.4 36.6 18.8 176.8 Depreciation and amortization 22.9 7.4 3.2 33.5 Capital expenditures 33.1 13.3 5.4 51.8 Three Months Ended December 31, 1997 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 954.0 $ 216.8 $ 114.9 $1,285.7 Segment profit (loss) (for Consolidated, operating income) 121.6 35.3 16.3 173.2 Depreciation and amortization 21.3 5.8 2.6 29.7 Capital expenditures 33.6 22.6 8.6 64.8 Supplemental Information About Business Segments (Unaudited) (Millions of Dollars) Corporate, Currency Adjustments, Year Ended All Translation & Consoli- December 31, 1998 Others Adjustments Eliminations dated - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 333.6 $ (34.2) $ -- $4,559.9 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) 16.5 (4.4) (23.3) 484.0 Depreciation and amortization -- (1.1) 27.6 155.2 Capital expenditures 13.3 (1.1) 2.0 146.0 Year Ended December 31, 1997 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 718.1 $ 29.9 $ -- $4,940.5 Segment profit (loss) (for Consolidated, operating income) 61.7 (2.3) (51.8) 489.3 Depreciation and amortization 24.4 (.3) 66.0 214.2 Capital expenditures 25.3 (.2) 2.1 203.1 Three Months Ended December 31, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ -- $ 2.5 $ -- $1,274.2 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) -- .1 (3.9) 173.0 Depreciation and amortization -- -- 7.2 40.7 Capital expenditures .2 -- 1.6 53.6 Three Months Ended December 31, 1997 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 233.0 $ (.3) $ -- $1,518.4 Segment profit (loss) (for Consolidated, operating income) 29.6 (1.2) (16.6) 185.0 Depreciation and amortization 5.3 (.2) 16.3 51.1 Capital expenditures 5.8 (.1) .4 70.9 The reconciliation of segment profit to the Corporation's earnings (loss) before income taxes for each year, in millions of dollars, is as follows: Year Ended December 31, 1998 1997 - ------------------------------------------------------------------------------ Segment profit for total reportable business segments $ 495.2 $ 481.7 Segment profit for all other businesses 16.5 61.7 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates (4.4) (2.3) Depreciation of Corporate property and amortization of goodwill (27.6) (66.0) Adjustment to businesses' postretirement benefit expenses booked in consolidation 24.4 23.8 Adjustment to eliminate net interest and non-operating expenses from results of certain operations in Brazil, Mexico, Venezuela, and Turkey 5.7 3.6 Other adjustments booked in consolidation directly related to reportable business segments (20.4) (17.6) Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (5.4) 4.4 - ------------------------------------------------------------------------------ Operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses 484.0 489.3 Restructuring and exit costs 164.7 -- Write-off of goodwill 900.0 -- Gain on sale of businesses 114.5 -- - ------------------------------------------------------------------------------ Operating income (loss) (466.2) 489.3 Interest expense, net of interest income 114.4 124.6 Other expense 7.7 15.2 - ------------------------------------------------------------------------------ Earnings (loss) before taxes $ (588.3) $ 349.5 ============================================================================== Three Months Ended December 31, 1998 1997 - ------------------------------------------------------------------------------ Segment profit for total reportable business segments $ 176.8 $ 173.2 Segment profit for all other businesses -- 29.6 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates .1 (1.2) Depreciation of Corporate property and amortization of goodwill (7.2) (16.3) Adjustment to businesses' postretirement benefit expenses booked in consolidation (.3) (.6) Adjustment to eliminate net interest and non-operating expenses from results of certain operations in Brazil, Mexico, Venezuela, and Turkey 1.5 2.2 Other adjustments booked in consolidation directly related to reportable business segments (1.7) (.1) Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (3.8) (1.8) - ------------------------------------------------------------------------------ Operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses 173.0 185.0 Restructuring and exit costs 10.5 -- Write-off of goodwill -- -- Gain on sale of businesses 51.1 -- - ------------------------------------------------------------------------------ Operating income (loss) 213.6 185.0 Interest expense, net of interest income 27.1 30.7 Other expense 1.5 5.1 - ------------------------------------------------------------------------------ Earnings (loss) before taxes $ 185.0 $ 149.2 ============================================================================== Basis of Presentation: The Corporation operates in three reportable business segments: Power Tools and Accessories, Building Products, and Fastening and Assembly Systems. The Power Tools and Accessories segment has worldwide responsibility for the manufacture and sale of consumer and professional power tools and accessories, cleaning and lighting products, and electric lawn and garden tools as well as for product service. In addition, the Power Tools and Accessories segment has responsibility for the sale of plumbing products to customers outside North America and for sales of the retained household products business. The Building Products segment has worldwide responsibility for the manufacture and sale of security hardware and for the manufacture of plumbing products as well as responsibility for the sale of plumbing products to customers in North America. The Fastening and Assembly Systems segment has worldwide responsibility for the manufacture and sale of fastening and assembly systems. The Corporation also operated several businesses that do not constitute reportable business segments. These businesses included the manufacture and sale of glass container-forming and inspection equipment, as well as recreational and household products. During 1998, the Corporation completed the sale or recapitalization of its glass container-forming and inspection equipment business, Emhart Glass; its recreational products business, True Temper Sports; and its household products business (excluding certain assets associated with the Corporation's cleaning and lighting products) in North America, Latin America (excluding Brazil), and Australia. Because True Temper Sports, Emhart Glass, and the household products business in North America, Latin America, and Australia are not treated as discontinued operations under generally accepted accounting principles, they remain a part of the Corporation's reported results from continuing operations, and the results of operations and financial positions of these businesses have been included in the consolidated financial statements through the dates of consummation of the respective transactions. Amounts relating to these businesses are included in the segment table above under the caption "All Others". The results of the household products business included under the caption "All Others" are based upon certain assumptions and allocations. The household products businesses sold during 1998 were jointly operated with the cleaning and lighting products businesses retained by the Corporation. Further, the Corporation's divested household products businesses in Australia and Latin America (excluding Brazil) were operated jointly with the Corporation's power tools and accessories businesses. Accordingly, the results of the household products businesses included in the segment table under the caption "All Others" were determined using certain assumptions and allocations that the Corporation believes are reasonable under the circumstances. The Corporation assesses the performance of its reportable business segments based upon a number of factors, including segment profit. In general, segments follow the same accounting policies as those described in Note 1 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, as updated through the Corporation's Quarterly Reports on Form 10-Q during the year ended December 31, 1998, except with respect to foreign currency translation and except as further indicated below. The financial statements of a segment's operating units located outside the United States, except those units operating in highly inflationary economies, are measured using the local currency as the functional currency. For these units located outside 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 newly established budgeted rates of exchange. The amounts included in the segment table above under the captions "Reportable Business Segments", "All Other", and "Corporate, Adjustments, & Eliminations" are reflected at the Corporation's current budgeted exchange rates. The amounts included in the segment table above under the caption "Currency Translation Adjustments" represent the difference between consolidated amounts determined using 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, goodwill amortization, adjustments to eliminate intercompany profit in inventory, and income tax expense. In addition, segment profit excludes restructuring and exit costs and, for 1998, the write-off of goodwill and gain on sale of businesses. For certain operations located in Brazil, Mexico, Venezuela, and Turkey, segment profit is reduced by net interest expense and non-operating expenses. In determining segment profit, expenses relating to pension and other postretirement benefits are based solely upon estimated service costs. Corporate expenses are allocated to each segment based upon budgeted amounts. No corporate expenses have been allocated to divested businesses. 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 sales 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 income or expense items of an unusual or nonrecurring 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 Corporation's various segments in a later period. -----END PRIVACY-ENHANCED MESSAGE-----