-----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, TZ/bEcszL9NzWgrTTGdxxBls4zO6n49dLQN1NUMqQlZEUKXQZ/Ujsz1sYmP4iGt5 WQ4IPdbd/pLyvgw8lbDwMA== 0000012355-99-000033.txt : 19991020 0000012355-99-000033.hdr.sgml : 19991020 ACCESSION NUMBER: 0000012355-99-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991003 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991019 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: 99730340 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 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) October 3, 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) 701 East Joppa Road, 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 October 19, 1999, the Corporation reported its earnings for the three and nine months ended October 3, 1999. Attached to this Current Report on Form 8-K as Exhibit 99 is a copy of the Corporation's related press release dated October 19, 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 1999 and scheduled for introduction in the balance of 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, 1998, as updated in the Corporation's Quarterly Report on Form 10-Q for the quarter ended July 4, 1999; the degree of working capital investment required to meet customer service levels; gradual improvement in the economic environment in Asia and Latin America; and economic growth in North America which more than offsets economic softness in Europe. In addition to the foregoing, the Corporation's ability to realize the anticipated benefits of the restructuring actions undertaken in 1998 and 1999 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 October 19, 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 10/19/99 Contact: 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: Tuesday, October 19, 1999 SUBJECT: Black & Decker's Third-Quarter Sales by Retained Businesses Rise 9% Excluding Foreign Exchange; Earnings Per Share Increase 21% on Comparable Basis to Record Level TOWSON, MD - The Black & Decker Corporation (NYSE:BDK) announced today that sales by retained businesses in the third quarter of 1999 reached a record level of $1.131 billion, an increase of 7% over comparable sales in the same period of 1998. Excluding the effects of foreign currency translation, third-quarter sales increased 9%. Including the effects of business divestitures and foreign currency translation, reported sales of $1.111 billion for the quarter were slightly higher than last year's level of $1.108 billion. For the first nine months of 1999, sales by retained businesses increased 7% over the same period of 1998, or 9% excluding the effects of foreign currency translation. Reported nine-month sales declined 3% due to divestitures and foreign currency translation. Net earnings for the third quarter of 1999 rose to $75.3 million or a record level of 85 cents per diluted share. In the same quarter of 1998, net earnings were $65.1 million or 70 cents per diluted share, excluding non-recurring items consisting of a $9.2 million (10 cents per share) gain on sale of businesses and a $7.7 million (8 cents per share) after-tax restructuring charge. The 21% increase in earnings per share resulted from operating improvements and lower average outstanding shares of the Corporation's stock due to a stock repurchase program. (more) Page Two For the first nine months of 1999, net earnings were $185.2 million or $2.09 per diluted share. In the same period last year, the Corporation reported a net loss of $846.4 million or $9.06 per share. Excluding non-recurring items consisting of a $900 million write-off of goodwill, a $107.7 million after-tax restructuring charge, and a $13.4 million after-tax gain on sale of businesses and including the dilutive effect of options for the first nine months of 1998, net earnings would have been $147.9 million or $1.55 per diluted share for the period. Therefore, comparable earnings per share for the first nine months of 1999 improved 35%. The increase was due to operating improvements, lower restructuring-related costs, lower borrowing costs, and lower average outstanding shares. Commenting on the results, Nolan D. Archibald, Chairman and Chief Executive Officer, said, "This was Black & Decker's strongest third quarter ever, as evidenced by record levels of sales and earnings per share. With increases of 8% in sales and 32% in profits, the Power Tools and Accessories segment surpassed even the excellent performance that it achieved in the second quarter. These results were driven by our North American business, where sales of both DEWALT(R) professional tools and Black & Decker(R) consumer tools continued to grow at double-digit rates. Popular new products, including the jobsite charger/radio by DEWALT, and FireStorm(TM) high-performance cordless drills, Mouse(TM) sander/polishers, and DustBuster(R) cordless vacuums by Black & Decker, together with strong partnerships with key retailers have contributed to our success. As we enter the largest selling season of the year with a wide array of new products, we are encouraged by early indications from end users and major retailers, including The Home Depot, Lowe's, and Wal*Mart. "Outstanding performance in North America more than compensated for flat Power Tools and Accessories sales in Europe, where solid growth in some countries was offset by continued weakness in Germany. In the rest of the world, sales were up slightly. Six Sigma projects and manufacturing productivity gains around the world had a significant impact on this segment's financial and operating results. (more) Page Three "Sales in the Hardware and Home Improvement segment increased 5% and profits were up 6% over last year's third-quarter levels. Profits improved dramatically at Price Pfister plumbing products on a 5% increase in sales. Sales also rose 5% at Kwikset security hardware. We expect increased profitability in Hardware and Home Improvement as we continue to execute our manufacturing productivity and restructuring plans and consider additional steps to improve our cost structure and customer service levels. "The Fastening and Assembly Systems segment maintained a long-standing positive trend with increases of 11% in sales and 12% in profits for the quarter. Innovative new products, global networking, intense customer focus, and continuous improvement in productivity are driving excellent performance in this high-margin business. "We are particularly pleased that the Corporation's return on sales climbed to 12.4% in the quarter, nearly one percentage-point higher than the comparable level last year. This performance puts us on track to reach our return-on-sales goal of 12% for the full year and positions us to achieve 15% ROS over the longer term. "Year-to-date free cash flow was a use of $75 million. This increase from a use of $12 million last year was related directly to a planned increase in inventory to support customer service requirements and strong sales growth that we continue to experience, particularly in our North American Power Tools business, as we prepare for the holiday season. With prospects for increased productivity and good sales growth, we anticipate healthy cash flow during the fourth quarter and believe that our company is capable of generating approximately $200 million of free cash flow for the full year. (more) Page Four "Our outlook for the remainder of the year remains optimistic. We are encouraged by a positive response in the North American marketplace to our new products. We have aggressive merchandising programs in place in major home centers and mass merchants to ensure maximum exposure and appeal to end users, and we will be supporting our sales efforts with national television advertising. Our Power Tools business in North America remains very strong, and we expect continued improvement in Europe and other foreign markets. Restructuring activities, together with Six Sigma initiatives which are being fully deployed throughout our company, are strengthening our manufacturing processes and improving product quality while reducing costs. We also are investing in long-term growth by adding engineering and end-user marketing resources to enhance our ability to develop and promote successful new products." 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, filed October 19, 1999. Black & Decker is a leading global manufacturer and marketer of power tools, hardware, and home improvement products used in and around the home and for commercial applications. * * * THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) (Dollars in Millions Except Per Share Amounts) Three Months Ended -------------------------------------- October 3, 1999 September 27, 1998 ----------------- ------------------ SALES $ 1,110.6 $ 1,107.7 Cost of goods sold 694.0 709.0 Selling, general, and administrative expenses 278.9 270.1 Restructuring and exit costs - 14.2 Gain on sale of businesses - 26.9 ----------------- ------------------ OPERATING INCOME 137.7 141.3 Interest expense (net of interest income) 26.2 29.1 Other expense 0.8 3.8 ----------------- ------------------ EARNINGS BEFORE INCOME TAXES 110.7 108.4 Income taxes 35.4 41.8 ----------------- ------------------ NET EARNINGS $ 75.3 $ 66.6 ================= ================== NET EARNINGS PER COMMON SHARE - BASIC $ 0.87 $ 0.73 ================= ================== Shares Used in Computing Basic Earnings Per Share (in Millions) 87.0 90.9 ================= ================== NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 0.85 $ 0.72 ================= ================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 88.3 92.6 ================= ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) (Dollars in Millions Except Per Share Amounts) Nine Months Ended -------------------------------------- October 3, 1999 September 27, 1998 ----------------- ------------------ SALES $ 3,173.3 $ 3,285.7 Cost of goods sold 1,993.4 2,139.2 Selling, general, and administrative expenses 836.7 835.5 Write-off of goodwill - 900.0 Restructuring and exit costs - 154.2 Gain on sale of businesses - 63.4 ----------------- ------------------ OPERATING INCOME (LOSS) 343.2 (679.8) Interest expense (net of interest income) 70.9 87.3 Other expense - 6.2 ----------------- ------------------ EARNINGS (LOSS) BEFORE INCOME TAXES 272.3 (773.3) Income taxes 87.1 73.1 ----------------- ------------------ NET EARNINGS (LOSS) $ 185.2 $ (846.4) ================= ================== NET EARNINGS (LOSS) PER COMMON SHARE - BASIC $ 2.13 $ (9.06) ================= ================== Shares Used in Computing Basic Earnings Per Share (in Millions) 87.1 93.4 ================= ================== NET EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION $ 2.09 $ (9.06) ================= ================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 88.4 93.4 ================= ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited) (Millions of Dollars) October 3, 1999 September 27, 1998 --------------- ------------------- ASSETS Cash and cash equivalents $ 142.5 $ 143.3 Trade receivables 851.7 804.3 Inventories 864.3 739.9 Current assets of business held for sale - 21.1 Other current assets 200.5 179.8 --------------- ------------------- TOTAL CURRENT ASSETS 2,059.0 1,888.4 --------------- ------------------- PROPERTY, PLANT, AND EQUIPMENT 718.2 717.4 GOODWILL 746.0 762.0 NON-CURRENT ASSETS OF BUSINESS HELD FOR SALE - 101.1 OTHER ASSETS 630.3 489.2 --------------- ------------------- $ 4,153.5 $ 3,958.1 =============== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ 428.0 $ 61.0 Current maturities of long-term debt 58.8 60.4 Trade accounts payable 431.0 361.2 Current liabilities of business held for sale - 8.3 Other accrued liabilities 731.7 773.9 --------------- ------------------- TOTAL CURRENT LIABILITIES 1,649.5 1,264.8 --------------- ------------------- LONG-TERM DEBT 1,058.4 1,671.3 DEFERRED INCOME TAXES 276.8 55.0 POSTRETIREMENT BENEFITS 262.0 265.5 OTHER LONG-TERM LIABILITIES 230.5 183.8 STOCKHOLDERS' EQUITY 676.3 517.7 --------------- ------------------- $ 4,153.5 $ 3,958.1 =============== =================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL BALANCE SHEET INFORMATION (Unaudited) INVENTORY DETAIL (Millions of Dollars) October 3, 1999 September 27, 1998 --------------- ------------------ Power Tools & Accessories (a) $ 702.7 $ 584.9 Hardware & Home Improvement 151.1 155.1 Fastening & Assembly Systems 52.9 51.0 Corporate & Eliminations (42.4) (51.1) --------------- ------------------ Total $ 864.3 $ 739.9 =============== ================== (a) Consists of the following: North America $ 363.2 $ 248.6 Europe 245.2 222.0 Other 94.3 114.3 --------------- ------------------ Total Power Tools & Accessories $ 702.7 $ 584.9 =============== ================== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS (Unaudited) (Millions of Dollars) Reportable Business Segments -------------------------------------------- Power Hardware Fastening Tools & Home & Three Months Ended & Improve- Assembly October 3, 1999 Accessories ment Systems Total - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 785.3 $226.3 $119.7 $1,131.3 Segment profit (loss) (for Consolidated, operating income) 97.0 33.9 19.9 150.8 Depreciation and amortization 18.8 8.1 3.9 30.8 Capital expenditures 28.0 8.9 7.7 44.6 Three Months Ended September 27, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 729.8 $216.2 $108.3 $1,054.3 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, and gain on sale of businesses) 73.6 32.0 17.7 123.3 Depreciation and amortization 20.8 7.1 3.4 31.3 Capital expenditures 15.5 9.6 4.7 29.8 Nine Months Ended October 3, 1999 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $2,189.6 $656.2 $ 374.1 $3,219.9 Segment profit (loss) (for Consolidated, operating income) 223.3 88.7 63.5 375.5 Depreciation and amortization 61.1 25.5 11.6 98.2 Capital expenditures 71.4 25.7 16.3 113.4 Nine Months Ended September 27, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $2,024.1 $620.5 $ 344.2 $2,988.8 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) 172.0 88.6 57.8 318.4 Depreciation and amortization 65.3 19.7 10.2 95.2 Capital expenditures 46.0 23.2 10.8 80.0 THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS (Unaudited) (Millions of Dollars) Corporate, Adjust- Currency ments, Three Months Ended All Translation & Elimi- Consoli- October 3, 1999 Others Adjustments nations dated - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ -- $ (20.7) $ -- $1,110.6 Segment profit (loss) (for Consolidated, operating income) -- (2.3) (10.8) 137.7 Depreciation and amortization -- (.6) 6.9 37.1 Capital expenditures -- (1.1) -- 43.5 Three Months Ended September 27, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ 67.6 $ (14.2) $ -- $1,107.7 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, and gain on sale of businesses) 4.3 (1.1) 2.1 128.6 Depreciation and amortization -- (.4) 7.0 37.9 Capital expenditures 3.2 (.5) .1 32.6 Nine Months Ended October 3, 1999 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $ -- $ (46.6) $ -- $3,173.3 Segment profit (loss) (for Consolidated, operating income) -- (5.0) (27.3) 343.2 Depreciation and amortization -- (1.4) 20.9 117.7 Capital expenditures -- (2.2) .2 111.4 Nine Months Ended September 27, 1998 - ------------------------------------------------------------------------------ Sales to unaffiliated customers $333.6 $ (36.7) $ -- $3,285.7 Segment profit (loss) (for Consolidated, operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses) 16.5 (4.5) (19.4) 311.0 Depreciation and amortization -- (1.1) 20.4 114.5 Capital expenditures 13.1 (1.1) .4 92.4 The reconciliation of segment profit to the Corporation's earnings (loss) before income taxes for each period, in millions of dollars, is as follows: Three Months Ended - ------------------------------------------------------------------------------ October 3, September 27, 1999 1998 - ------------------------------------------------------------------------------ Segment profit for total reportable business segments $150.8 $123.3 Segment profit for all other businesses -- 4.3 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates (2.3) (1.1) Depreciation of Corporate property and amortization of goodwill (6.9) (7.0) Adjustment to businesses' postretirement benefit expenses booked in consolidation 5.2 8.2 Adjustment to eliminate net interest and non-operating expenses from results of certain operations in Brazil, Mexico, Venezuela, and Turkey .1 1.6 Other adjustments booked in consolidation directly related to reportable business segments (6.4) .3 Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (2.8) (1.0) - ------------------------------------------------------------------------------ Operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses 137.7 128.6 Restructuring and exit costs -- 14.2 Write-off of goodwill -- -- Gain on sale of businesses -- 26.9 - ------------------------------------------------------------------------------ Operating income (loss) 137.7 141.3 Interest expense, net of interest income 26.2 29.1 Other expense .8 3.8 - ------------------------------------------------------------------------------ Earnings (loss) before taxes $110.7 $108.4 ============================================================================== Nine Months Ended - ------------------------------------------------------------------------------ October 3, September 27, 1999 1998 - ------------------------------------------------------------------------------ Segment profit for total reportable business segments $375.5 $318.4 Segment profit for all other businesses -- 16.5 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates (5.0) (4.5) Depreciation of Corporate property and amortization of goodwill (20.9) (20.4) Adjustment to businesses' postretirement benefit expenses booked in consolidation 21.8 24.7 Adjustment to eliminate net interest and non-operating expenses from results of certain operations in Brazil, Mexico, Venezuela, and Turkey 1.2 4.2 Other adjustments booked in consolidation directly related to reportable business segments (10.0) (18.7) Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (19.4) (9.2) - ------------------------------------------------------------------------------ Operating income before restructuring and exit costs, write-off of goodwill, and gain on sale of businesses 343.2 311.0 Restructuring and exit costs -- 154.2 Write-off of goodwill -- 900.0 Gain on sale of businesses -- 63.4 - ------------------------------------------------------------------------------ Operating income (loss) 343.2 (679.8) Interest expense, net of interest income 70.9 87.3 Other expense -- 6.2 - ------------------------------------------------------------------------------ Earnings (loss) before taxes $272.3 $(773.3) ============================================================================== Basis of Presentation: The Corporation operates in three reportable business segments: Power Tools and Accessories, Hardware and Home Improvement (formerly "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 the United States and Canada and for sales of the retained household products business. The Hardware and Home Improvement 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 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 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. In 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 (excluding Brazil), 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, 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 Others," 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 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-----