(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title Of Each Class | Trading Symbol | Name Of Each Exchange On Which Registered | |||
- $2.50 Par Value per Share | |||||
Stanley Black & Decker, Inc. | ||||||
April 30, 2020 | By: | /s/ Janet M. Link | ||||
Name: | Janet M. Link | |||||
Title: | Senior Vice President, General Counsel and Secretary |
Exhibit No. | Description |
99.1 | |
99.2 | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
• | 1Q’20 Revenues Totaled $3.1 Billion, Down 6% Versus Prior Year, With A 7% Organic Decline Primarily Related To Impacts From COVID-19 |
• | 1Q’20 Diluted GAAP EPS Was $0.88; Excluding Charges, 1Q’20 Diluted EPS Was $1.20, Reflecting $60 Million In External Headwinds And Coronavirus Related Volume Declines Partially Offset By Margin Resiliency Actions |
• | Recently Announced Cost Reduction Program Expected To Deliver $1 Billion In Annualized Savings With $500 Million In 2020 |
• | Continues Suspension Of Guidance But Currently Expects Second Quarter To Be The Trough For 2020 Revenue Decline |
• | Net sales for the quarter were $3.1 billion, down 6% versus prior year, as acquisitions (+2%) and price (+1%) were more than offset by volume (-8%) and currency (-1%). |
• | Gross margin rate for the quarter was 32.7%. Excluding charges, the rate was 33.0%, down 40 basis points from prior year as price, margin resiliency and other cost controls in late March were more than offset by lower volumes, higher manufacturing costs related to the virus as well as currency and tariff headwinds. Higher manufacturing costs resulted from significant increases in PPE and freight costs. |
• | SG&A expenses were 23.9% of sales. Excluding charges, SG&A expenses were 23.0% of sales compared to 22.7% in 1Q’19, reflecting tight cost management and headcount reductions from 2019 actions partially offsetting the impact from lower volumes. |
• | The tax rate was 8.8%. Excluding charges, the tax rate was 12.5% versus 15.0% in 1Q’19. |
• | Working capital turns for the quarter were 6.0, up 0.2 turns from prior year. |
($ in M) | ||||||
Sales | Profit | Charges1 | Profit Ex- Charges1 | Profit Rate | Profit Rate Ex- Charges1 | |
Tools & Storage | $2,071 | $234.8 | $3.1 | $237.9 | 11.3% | 11.5% |
Industrial | $591 | $67.8 | $10.4 | $78.2 | 11.5% | 13.2% |
Security | $468 | $20.9 | $13.9 | $34.8 | 4.5% | 7.4% |
• | Tools & Storage net sales declined 10% versus 1Q’19 from the impacts of lower volume (-9%) and currency (-2%) partially offset by price (+1%). Revenue across all regions declined due to the impact from the global pandemic with North America -8%, Europe -7% and emerging markets -13%. The North America organic decline was driven by the expected difficult comparison to the prior year’s Craftsman rollout and the unexpected pandemic-related impacts that emerged during the quarter. Europe and emerging markets were impacted by customer closures and government restrictions beginning in late February which continued through the end of the quarter. Overall Tools & Storage segment profit rate, excluding charges, |
• | Industrial net sales increased 6% versus 1Q’19 as the IES Attachments and CAM acquisitions (+15%) were partially offset by volume (-8%) and currency (-1%). Engineered Fastening organic revenues were down 9% as share gains were more than offset by lower global automotive light vehicle and general industrial production. Infrastructure organic revenues were down 6% as modest growth in Oil & Gas was more than offset by lower North American Attachment Tools volumes. Overall Industrial segment profit rate, excluding charges, was 13.2%, down from the 1Q’19 rate of 13.9%, as the negative virus-related volume impacts and currency were partially offset by cost control and margin resiliency initiatives. |
• | Security net sales declined 4% versus 1Q’19 due to divestitures (-2%) and currency (-2%). North America organic growth was up 2% as higher volume in automatic doors and healthcare were partially offset by lower installation and service revenue in commercial electronic security. Europe was down 1% organically as a decline due to customer restrictions in France and the UK was partially offset by growth in Sweden. Although the commercial electronic security organic growth in both regions were impacted by customer and government restrictions, the installation orders and backlog (+20% versus prior year) remain in a healthy position. The overall Security segment profit rate, excluding charges, was 7.4%, which was down from the 1Q’19 rate of 10.3%, as price and cost control were more than offset by lower volume in electronic security, investments to support growth and the impact from the Sargent & Greenleaf divestiture. |
• | Adjust the Company’s supply chain and manufacturing labor base to match the current demand environment |
• | Substantially reduce indirect spending (currently ~$1.7B annualized) |
• | Reduce staffing, compensation & benefits in a manner that ensures the Company is prepared for a demand recovery at the appropriate time |
• | Capture the significant raw material deflation opportunity |
• | Maintains strong investment grade credit ratings |
• | Possesses approximately $1B of cash on-hand as of quarter end |
• | Manages a robust and highly rated commercial paper program ($3B program with $1.7B outstanding as of quarter end). |
• | Carries $3 billion of revolving credit facilities backed by a well-capitalized, diversified bank group |
• | Has the ability to generate additional cash proceeds of $750 million in the second quarter upon the successful remarketing of its Series C Convertible Preferred Stock, pursuant to its 2017 Equity Units Transaction |
First Quarter | |||||||
2020 | 2019 | ||||||
NET SALES | $ | 3,129.4 | $ | 3,333.6 | |||
COSTS AND EXPENSES | |||||||
Cost of sales | 2,106.3 | 2,228.0 | |||||
Gross margin | 1,023.1 | 1,105.6 | |||||
% of Net Sales | 32.7 | % | 33.2 | % | |||
Selling, general and administrative | 748.5 | 778.9 | |||||
% of Net Sales | 23.9 | % | 23.4 | % | |||
Operating margin | 274.6 | 326.7 | |||||
% of Net sales | 8.8 | % | 9.8 | % | |||
Other - net | 74.9 | 65.4 | |||||
Restructuring charges | 3.9 | 8.7 | |||||
Income from operations | 195.8 | 252.6 | |||||
Interest - net | 49.6 | 57.8 | |||||
EARNINGS BEFORE INCOME TAXES AND EQUITY INTEREST | 146.2 | 194.8 | |||||
Income taxes | 12.9 | 24.7 | |||||
NET EARNINGS BEFORE EQUITY INTEREST | 133.3 | 170.1 | |||||
Share of net (losses) earnings of equity method investment | (0.2 | ) | 0.3 | ||||
NET EARNINGS | 133.1 | 170.4 | |||||
Less: net (losses) earnings attributable to non-controlling interests | (0.1 | ) | 0.5 | ||||
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS | $ | 133.2 | $ | 169.9 | |||
EARNINGS PER SHARE OF COMMON STOCK | |||||||
Basic | $ | 0.89 | $ | 1.15 | |||
Diluted | $ | 0.88 | $ | 1.13 | |||
DIVIDENDS PER SHARE | $ | 0.69 | $ | 0.66 | |||
WEIGHTED-AVERAGE SHARES OUTSTANDING (in thousands) | |||||||
Basic | 150,330 | 147,863 | |||||
Diluted | 151,903 | 149,908 |
March 28, 2020 | December 28, 2019 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 987.1 | $ | 297.7 | ||||
Accounts and notes receivable, net | 1,681.5 | 1,454.6 | ||||||
Inventories, net | 2,532.4 | 2,255.0 | ||||||
Other current assets | 491.9 | 449.3 | ||||||
Total current assets | 5,692.9 | 4,456.6 | ||||||
Property, plant and equipment, net | 2,036.7 | 1,959.5 | ||||||
Goodwill and other intangibles, net | 13,877.4 | 12,859.5 | ||||||
Other assets | 1,298.0 | 1,321.0 | ||||||
Total assets | $ | 22,905.0 | $ | 20,596.6 | ||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||||
Short-term borrowings | $ | 1,674.0 | $ | 337.3 | ||||
Current maturities of long-term debt | 3.1 | 3.1 | ||||||
Accounts payable | 2,029.2 | 2,087.8 | ||||||
Accrued expenses | 1,664.0 | 1,977.5 | ||||||
Total current liabilities | 5,370.3 | 4,405.7 | ||||||
Long-term debt | 4,662.6 | 3,176.4 | ||||||
Other long-term liabilities | 3,912.9 | 3,872.3 | ||||||
Stanley Black & Decker, Inc. shareowners’ equity | 8,953.4 | 9,136.3 | ||||||
Non-controlling interests’ equity | 5.8 | 5.9 | ||||||
Total liabilities and shareowners' equity | $ | 22,905.0 | $ | 20,596.6 |
First Quarter | ||||||||
2020 | 2019 | |||||||
OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 133.1 | $ | 170.4 | ||||
Depreciation and amortization | 141.1 | 137.8 | ||||||
Share of net losses (earnings) of equity method investment | 0.2 | (0.3 | ) | |||||
Changes in working capital1 | (512.7 | ) | (616.8 | ) | ||||
Other | (166.9 | ) | (122.4 | ) | ||||
Net cash used in operating activities | (405.2 | ) | (431.3 | ) | ||||
INVESTING AND FINANCING ACTIVITIES | ||||||||
Capital and software expenditures | (82.9 | ) | (89.6 | ) | ||||
Business acquisitions, net of cash acquired | (1,302.4 | ) | (676.2 | ) | ||||
Purchases of investments | (6.5 | ) | (245.4 | ) | ||||
Payments on long-term debt | — | (400.0 | ) | |||||
Proceeds from debt issuances, net of fees | 1,486.4 | 496.9 | ||||||
Stock purchase contract fees | (20.1 | ) | (10.1 | ) | ||||
Net short-term borrowings | 1,351.9 | 1,419.9 | ||||||
Proceeds from issuances of common stock | 44.6 | 10.2 | ||||||
Craftsman deferred purchase price | (250.0 | ) | — | |||||
Cash dividends on common stock | (105.6 | ) | (97.6 | ) | ||||
Effect of exchange rate changes on cash | (22.6 | ) | 4.8 | |||||
Other | (3.9 | ) | (7.2 | ) | ||||
Net cash provided by investing and financing activities | 1,088.9 | 405.7 | ||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 683.7 | (25.6 | ) | |||||
Cash, cash equivalents and restricted cash, beginning of period | 314.6 | 311.4 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 998.3 | $ | 285.8 | ||||
Free Cash Flow Computation2 | ||||||||
Operating cash flow | $ | (405.2 | ) | $ | (431.3 | ) | ||
Less: capital and software expenditures | (82.9 | ) | (89.6 | ) | ||||
Free cash flow (before dividends) | $ | (488.1 | ) | $ | (520.9 | ) | ||
Reconciliation of Cash, Cash Equivalents and Restricted Cash | ||||||||
March 28, 2020 | December 28, 2019 | |||||||
Cash and cash equivalents | $ | 987.1 | $ | 297.7 | ||||
Restricted cash included in Other current assets | 11.2 | 16.9 | ||||||
Cash, cash equivalents and restricted cash | $ | 998.3 | $ | 314.6 | ||||
1 | Working capital is comprised of accounts receivable, inventory, accounts payable and deferred revenue. | |||||||
2 | Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items. |
First Quarter | |||||||
2020 | 2019 | ||||||
NET SALES | |||||||
Tools & Storage | $ | 2,070.8 | $ | 2,292.3 | |||
Industrial | 590.7 | 555.0 | |||||
Security | 467.9 | 486.3 | |||||
Total | $ | 3,129.4 | $ | 3,333.6 | |||
SEGMENT PROFIT | |||||||
Tools & Storage | $ | 234.8 | $ | 265.8 | |||
Industrial | 67.8 | 71.0 | |||||
Security | 20.9 | 39.5 | |||||
Segment Profit | 323.5 | 376.3 | |||||
Corporate Overhead | (48.9 | ) | (49.6 | ) | |||
Total | $ | 274.6 | $ | 326.7 | |||
Segment Profit as a Percentage of Net Sales | |||||||
Tools & Storage | 11.3 | % | 11.6 | % | |||
Industrial | 11.5 | % | 12.8 | % | |||
Security | 4.5 | % | 8.1 | % | |||
Segment Profit | 10.3 | % | 11.3 | % | |||
Corporate Overhead | (1.6 | )% | (1.5 | )% | |||
Total | 8.8 | % | 9.8 | % |
First Quarter 2020 | |||||||||||||
Reported | Acquisition- Related Charges & Other1 | Normalized3 | |||||||||||
Gross margin | $ | 1,023.1 | $ | 9.1 | $ | 1,032.2 | |||||||
% of Net Sales | 32.7 | % | 33.0 | % | |||||||||
Selling, general and administrative | 748.5 | (29.8 | ) | 718.7 | |||||||||
% of Net Sales | 23.9 | % | 23.0 | % | |||||||||
Operating margin | 274.6 | 38.9 | 313.5 | ||||||||||
% of Net Sales | 8.8 | % | 10.0 | % | |||||||||
Earnings before income taxes and equity interest | 146.2 | 61.7 | 207.9 | ||||||||||
Income taxes | 12.9 | 13.1 | 26.0 | ||||||||||
Share of net (losses) earnings of equity method investment | (0.2 | ) | 1.0 | 0.8 | |||||||||
Net earnings attributable to common shareowners | 133.2 | 49.6 | 182.8 | ||||||||||
Diluted earnings per share of common stock | $ | 0.88 | $ | 0.32 | $ | 1.20 | |||||||
1 | Acquisition-related charges and other relates primarily to inventory step-up, deal costs, Security business transformation and margin resiliency initiatives. | ||||||||||||
First Quarter 2019 | |||||||||||||
Reported | Acquisition- Related Charges & Other2 | Normalized3 | |||||||||||
Gross margin | $ | 1,105.6 | $ | 6.4 | $ | 1,112.0 | |||||||
% of Net Sales | 33.2 | % | 33.4 | % | |||||||||
Selling, general and administrative | 778.9 | (23.0 | ) | 755.9 | |||||||||
% of Net Sales | 23.4 | % | 22.7 | % | |||||||||
Operating margin | 326.7 | 29.4 | 356.1 | ||||||||||
% of Net Sales | 9.8 | % | 10.7 | % | |||||||||
Earnings before income taxes and equity interest | 194.8 | 52.6 | 247.4 | ||||||||||
Income taxes | 24.7 | 12.4 | 37.1 | ||||||||||
Share of net earnings of equity method investment | 0.3 | 3.4 | 3.7 | ||||||||||
Net earnings attributable to common shareowners | 169.9 | 43.6 | 213.5 | ||||||||||
Diluted earnings per share of common stock | $ | 1.13 | $ | 0.29 | $ | 1.42 | |||||||
2 | Acquisition-related charges and other relates primarily to restructuring, deal and integration costs, Security business transformation and margin resiliency initiatives, and inventory step-up charges. | ||||||||||||
3 | The normalized 2020 and 2019 information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company’s margin and earnings results aside from the material impact of the acquisition-related and other charges. |
First Quarter 2020 | |||||||||||||
Reported | Acquisition- Related and Other Charges1 | Normalized3 | |||||||||||
SEGMENT PROFIT | |||||||||||||
Tools & Storage | $ | 234.8 | $ | 3.1 | $ | 237.9 | |||||||
Industrial | 67.8 | 10.4 | 78.2 | ||||||||||
Security | 20.9 | 13.9 | 34.8 | ||||||||||
Segment Profit | 323.5 | 27.4 | 350.9 | ||||||||||
Corporate Overhead | (48.9 | ) | 11.5 | (37.4 | ) | ||||||||
Total | $ | 274.6 | $ | 38.9 | $ | 313.5 | |||||||
Segment Profit as a Percentage of Net Sales | |||||||||||||
Tools & Storage | 11.3 | % | 11.5 | % | |||||||||
Industrial | 11.5 | % | 13.2 | % | |||||||||
Security | 4.5 | % | 7.4 | % | |||||||||
Segment Profit | 10.3 | % | 11.2 | % | |||||||||
Corporate Overhead | (1.6 | )% | (1.2 | )% | |||||||||
Total | 8.8 | % | 10.0 | % | |||||||||
1 | Acquisition-related and other charges relate primarily to inventory step-up, Security business transformation and margin resiliency initiatives. | ||||||||||||
First Quarter 2019 | |||||||||||||
Reported | Acquisition- Related and Other Charges2 | Normalized3 | |||||||||||
SEGMENT PROFIT | |||||||||||||
Tools & Storage | $ | 265.8 | $ | 12.6 | $ | 278.4 | |||||||
Industrial | 71.0 | 6.0 | 77.0 | ||||||||||
Security | 39.5 | 10.8 | 50.3 | ||||||||||
Segment Profit | 376.3 | 29.4 | 405.7 | ||||||||||
Corporate Overhead | (49.6 | ) | — | (49.6 | ) | ||||||||
Total | $ | 326.7 | $ | 29.4 | $ | 356.1 | |||||||
Segment Profit as a Percentage of Net Sales | |||||||||||||
Tools & Storage | 11.6 | % | 12.1 | % | |||||||||
Industrial | 12.8 | % | 13.9 | % | |||||||||
Security | 8.1 | % | 10.3 | % | |||||||||
Segment Profit | 11.3 | % | 12.2 | % | |||||||||
Corporate Overhead | (1.5 | )% | (1.5 | )% | |||||||||
Total | 9.8 | % | 10.7 | % | |||||||||
2 | Acquisition-related and other charges relate primarily inventory step-up, integration costs, and Security business transformation and margin resiliency initiatives. | ||||||||||||
3 | The normalized 2020 and 2019 business segment information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company's segment profit results aside from the material impact of the acquisition-related and other charges. |
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