EX-99.1 3 exhibit2.htm EX-99.1 EX-99.1

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)

                                 
    THIRD QUARTER
    GAAP 2010   One Time Charges 1   Normalized 2010 2   2009
 
                                
NET SALES
   $ 2,369.1           $ 2,369.1   $ 935.5
 
                                
COSTS AND EXPENSES 
                                
    Cost of sales
   1,514.8   (19.9 )   1,494.9   549.1
      Gross margin
   854.3   19.9   874.2   386.4
          % to Net sales
     36.1 %             36.9 %     41.3 %
 
                                
    Selling, general and administrative
   582.6   (8.0 )   574.6   251.4
          % to Net sales
     24.6 %             24.3 %     26.9 %
 
                        
       Operating margin
   271.7   27.9   299.6   135.0
          % to Net sales
     11.5 %             12.6 %     14.4 %
 
                                
    Other-net
   52.3   (8.1 )   44.2   33.6
    Restructuring charges and asset impairments
   24.8   (21.5 )   3.3   6.6
 
                                
      Income from operations
   194.6   57.5   252.1   94.8
 
                                
    Interest-net
   26.7   —   26.7   15.0
 
                                
 
                                
 
                                
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
   167.9   57.5   225.4   79.8
    Income taxes
   44.8   16.1   60.9   17.7
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS
   123.1   41.4   164.5   62.1
 
                                
    Less: net earnings (loss) attributable to non-controlling interests
   (0.1 )   —   (0.1 )   0.3
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS
   123.2   41.4   164.6   61.8
 
                                
    Loss from discontinued operations before income taxes
   —   —   —   (2.3 )
    Income tax benefit on discontinued operations
   —   —   —   (0.9 )
 
                                
NET LOSS FROM DISCONTINUED OPERATIONS
   —   —   —   (1.4 )
 
                                
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS
   $ 123.2   $ 41.4   $ 164.6   $ 60.4
 
                                
 
                                
BASIC (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                                
    Continuing operations
   $ 0.74   $ 0.25   $ 0.99   $ 0.77
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total basic earnings per share of common stock
   $ 0.74   $ 0.25   $ 0.99   $ 0.75
 
                                
 
                            
DILUTED (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                        
    Continuing operations
   $ 0.73   $ 0.24   $ 0.97   $ 0.77
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total diluted earnings per share of common stock
   $ 0.73   $ 0.24   $ 0.97   $ 0.75
 
                                
 
                            
DIVIDENDS PER SHARE
   $ 0.34                   $ 0.33
 
                                
 
                            
AVERAGE SHARES OUTSTANDING (in thousands)
                                
    Basic
   165,793   165,793   165,793   79,966
 
                                
 
                            
    Diluted
   168,889   168,889   168,889   80,565
 
                                
 
                                

1 One-time charges relate primarily to the Black & Decker merger, including inventory step-up, facility closure related charges, severance costs, and integration costs.

2 The normalized 2010 statement of operations, 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 one-time charges associated with the Black & Decker merger.

1

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)

                                 
    YEAR TO DATE
    GAAP 2010   One Time Charges 1   Normalized 2010 2   2009
 
                                
NET SALES
   $ 5,996.7           $ 5,996.7   $ 2,767.7
 
                                
COSTS AND EXPENSES 
                                
    Cost of sales
   3,917.5   (185.2 )   3,732.3   1,653.6
      Gross margin
   2,079.2   185.2   2,264.4   1,114.1
           % to Net sales
     34.7 %             37.8 %     40.3 %
 
                                
    Selling, general and administrative
   1,549.3   (72.7 )   1,476.6   759.4
           % to Net sales
     25.8 %             24.6 %     27.4 %
 
                        
      Operating margin
   529.9   257.9   787.8   354.7
           % to Net sales
     8.8 %             13.1 %     12.8 %
 
                                
    Other-net
   182.3   (51.7 )   130.6   51.3
    Restructuring charges and asset impairments
   208.0   (190.1 )   17.9   25.6
 
                                
      Income from operations
   139.6   499.7   639.3   277.8
 
                                
    Interest-net
   69.4   —   69.4   46.6
 
                                
 
                                
 
                                
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
   70.2   499.7   569.9   231.2
    Income taxes
   9.3   119.3   128.6   58.1
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS
   60.9   380.4   441.3   173.1
 
                                
    Less: net earnings attributable to non-controlling interests
   0.5   —   0.5   2.2
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS
   60.4   380.4   440.8   170.9
 
                                
    Loss from discontinued operations before income taxes
   —   —   —   (5.8 )
    Income tax benefit on discontinued operations
   —   —   —   (2.5 )
 
                                
NET LOSS FROM DISCONTINUED OPERATIONS
   —   —   —   (3.3 )
 
                                
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS
   $ 60.4   $ 380.4   $ 440.8   $ 167.6
 
                                
 
                                
BASIC (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                                
    Continuing operations
   $ 0.43   $ 2.69   $ 3.12   $ 2.15
    Discontinued operations
   —   —   —   (0.04 )
 
                                
      Total basic earnings per share of common stock
   $ 0.43   $ 2.69   $ 3.12   $ 2.11
 
                                
 
                            
DILUTED (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                        
    Continuing operations
   $ 0.42   $ 2.65   $ 3.07   $ 2.14
    Discontinued operations
   —   —   —   (0.04 )
 
                                
      Total diluted earnings per share of common stock
   $ 0.42   $ 2.65   $ 3.07   $ 2.10
 
                                
 
                            
DIVIDENDS PER SHARE
   $ 1.00                   $ 0.97
 
                                
 
                            
AVERAGE SHARES OUTSTANDING (in thousands)
                                
    Basic
   141,071   141,071   141,071   79,499
 
                                
 
                            
    Diluted
   143,766   143,766   143,766   79,951
 
                                
 
                                

1 One-time charges relate primarily to the Black & Decker merger, including inventory step-up, facility closure related charges, certain executive compensation and severance costs, transaction and integration costs.

2 The normalized 2010 statement of operations, 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 one-time charges associated with the Black & Decker merger.

2

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)

                 
             
    October 2, 2010   January 2, 2010
ASSETS
 
 
           Cash and cash equivalents
  $ 1,635.9     $ 400.7  
           Accounts and notes receivable
    1,699.4       532.0  
           Inventories
    1,396.8       366.2  
           Other current assets
    370.2       113.0  
 
                
                  Total current assets
    5,102.3       1,411.9  
 
                
           Property, plant and equipment, net
    1,141.8       575.9  
           Goodwill and other intangibles, net
    8,255.5       2,594.8  
           Other assets
    373.1       186.5  
 
                
                  Total assets
  $ 14,872.7     $ 4,769.1  
 
                
 
 
 
 
 
 
LIABILITIES AND SHAREOWNERS’ EQUITY
               
           Short-term borrowings
  $ 727.5     $ 298.4  
           Accounts payable
    1,014.4       410.1  
           Accrued expenses
    1,415.2       483.5  
 
                
                  Total current liabilities
    3,157.1       1,192.0  
 
                
           Long-term debt
    2,719.2       1,084.7  
           Other long-term liabilities
    2,058.8       480.9  
           Stanley Black & Decker, Inc. shareowners’ equity
    6,909.2       1,986.1  
           Non-controlling interests equity
    28.4       25.4  
 
                
                  Total liabilities and equity
  $ 14,872.7     $ 4,769.1  
 
                

3

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)

                                         
    THIRD QUARTER
            One-Time                
            Charges and                
    GAAP 2010   Payments 1           Normalized 2010 2   2009
OPERATING ACTIVITIES
                                    
 
                                    
    Net earnings
   $ 123.2   $ 41.4       $ 164.6   $ 60.4
    Depreciation and amortization
   86.4   —       86.4   51.9
    Changes in working capital
   (72.8 )   —       (72.8 )   32.4
    Other
   62.3   39.3       101.6   31.6
 
                                        
    Net cash provided by operating activities
   199.1   80.7       279.8   176.3
 
                                    
INVESTING AND FINANCING ACTIVITIES
                                    
 
                                    
    Capital and software expenditures
   (45.9 )   —       (45.9 )   (18.4 )
    Business acquisitions and asset disposals
   (460.6 )   —       (460.6 )   (14.3 )
    Proceeds from long-term borrowings
   396.3   —           396.3   —
    Cash dividends on common stock
   (56.3 )   —       (56.3 )   (26.3 )
    Other
   4.9   —       4.9   (66.2 )
 
                                        
    Net cash used in investing and financing activities
   (161.6 )   —       (161.6 )   (125.2 )
 
                                    
Increase in Cash and Cash Equivalents
   37.5   80.7       118.2   51.1
 
                                    
Cash and Cash Equivalents, Beginning of Period
   1,598.4   —           1,598.4   156.3
 
                                        
 
                                    
Cash and Cash Equivalents, End of Period
   $ 1,635.9   $ 80.7           $ 1,716.6   $ 207.4
 
                                        
 
                                        
 
                                        
Free Cash Flow Computation 3
                                        
 
                                        
Operating Cash Inflow
   $ 199.1                   $ 279.8   $ 176.3
Less: capital and software expenditures
   (45.9 )                   (45.9 )   (18.4 )
 
                                        
Free Cash Inflow (before dividends)
   $ 153.2                   $ 233.9   $ 157.9
 
                                        

1 One-time charges and payments relate primarily to the Black & Decker merger, including inventory step-up (non-cash), facility closure related charges, severance costs, and integration costs.

2¸ 3Free 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. Normalized cash flow and free cash flow, as reconciled above, are considered meaningful pro forma metrics to aid the understanding of the company’s cash flow performance aside from the material impact of Black & Decker merger-related payments and charges.

The change in working capital is comprised of accounts receivable, inventory and accounts payable.

4

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STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)

                                         
    YEAR TO DATE
            One-Time                
            Charges and                
    GAAP 2010   Payments 1           Normalized 2010 2   2009
OPERATING ACTIVITIES
                                    
 
                                    
    Net earnings
   $ 60.4   $ 380.4       $ 440.8   $ 167.6
    Depreciation and amortization
   238.8   —       238.8   148.8
    Changes in working capital
   (183.2 )   —       (183.2 )   16.8
    Other
   271.4   (180.5 )       90.9   (85.2 )
 
                                        
    Net cash provided by operating activities
   387.4   199.9       587.3   248.0
 
                                    
INVESTING AND FINANCING ACTIVITIES
                                    
 
                                    
    Capital and software expenditures
   (103.1 )   —       (103.1 )   (65.2 )
    Business acquisitions and asset disposals
   (478.7 )   —       (478.7 )   (20.0 )
    Proceeds from long-term borrowings
   396.3   —           396.3   —
    Cash acquired from Black & Decker
   949.4   —           949.4   —
    Cash dividends on common stock
   (145.2 )   —       (145.2 )   (76.9 )
    Other
   229.1   —       229.1   (90.1 )
 
                                        
    Net cash provided by (used in) investing and financing activities
   847.8   —           847.8   (252.2 )
 
                                    
Increase (decrease)in Cash and Cash Equivalents
   1,235.2   199.9       1,435.1   (4.2 )
 
                                    
Cash and Cash Equivalents, Beginning of Period
   400.7   —           400.7   211.6
 
                                        
 
                                    
Cash and Cash Equivalents, End of Period
   $ 1,635.9   $ 199.9           $ 1,835.8   $ 207.4
 
                                        
 
                                        
 
                                        
Free Cash Flow Computation 3
                                        
 
                                        
Operating Cash Inflow
   $ 387.4                   $ 587.3   $ 248.0
Less: capital and software expenditures
   (103.1 )                   (103.1 )   (65.2 )
 
                                        
Free Cash Inflow (before dividends)
   $ 284.3                   $ 484.2   $ 182.8
 
                                        

1 One-time charges and payments relate primarily to the Black & Decker merger, including inventory step-up (non-cash), facility closure related charges, certain executive compensation and severance costs, transaction and integration costs.

2¸ 3Free 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. Normalized cash flow and free cash flow, as reconciled above, are considered meaningful pro forma metrics to aid the understanding of the company’s cash flow performance aside from the material impact of Black & Decker merger-related payments and charges.

The change in working capital is comprised of accounts receivable, inventory and accounts payable.

5

-Page 13-

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)

                                     
    THIRD QUARTER
    GAAP 2010   One-Time Charges 1       Normalized 2010 2   2009
NET SALES
 
 
 
 
 
       Construction & DIY
  $ 1,289.3                 $ 1,289.3     $ 327.5  
       Security
    563.1                   563.1       402.7  
       Industrial
    516.7                   516.7       205.3  
 
                                    
         Total
  $ 2,369.1                 $ 2,369.1     $ 935.5  
 
                                    
 
                     
 
 
                     
 
SEGMENT PROFIT
                     
 
       Construction & DIY
  $ 164.0     $ 5.8         $ 169.8     $ 48.4  
       Security
    87.2       9.8           97.0       83.7  
       Industrial
    75.5       4.8           80.3       18.8  
 
                                    
         Segment Profit
    326.7       20.4           347.1       150.9  
       Corporate Overhead
    (55.0 )     7.5           (47.5 )     (15.9 )
 
                                    
         Total
  $ 271.7     $ 27.9         $ 299.6     $ 135.0  
 
                                    
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit as a Percentage of Net Sales
 
 
 
 
 
       Construction & DIY
    12.7 %                 13.2 %     14.8 %
       Security
    15.5 %                 17.2 %     20.8 %
       Industrial
    14.6 %                 15.5 %     9.2 %
 
                                    
         Segment Profit
    13.8 %                 14.7 %     16.1 %
       Corporate Overhead
    -2.3 %                 -2.0 %     -1.7 %
 
                                    
         Total
    11.5 %                 12.6 %     14.4 %
 
                                    

1 One-time charges relate primarily to the Black & Decker merger, including inventory step-up, facility closure related charges, severance costs, and integration costs.

2 The normalized 2010 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 one-time charges associated with the Black & Decker merger.

6

-Page 14-

STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)

                                     
    YEAR TO DATE
    GAAP 2010   One-Time Charges 1       Normalized 2010 2   2009
NET SALES
 
 
 
 
 
       Construction & DIY
  $ 3,173.0                 $ 3,173.0     $ 955.0  
       Security
    1,548.4                   1,548.4       1,167.0  
       Industrial
    1,275.3                   1,275.3       645.7  
 
                                    
         Total
  $ 5,996.7                 $ 5,996.7     $ 2,767.7  
 
                                    
 
                     
 
 
                     
 
SEGMENT PROFIT
                     
 
       Construction & DIY
  $ 333.6     $ 126.1         $ 459.7     $ 113.7  
       Security
    219.0       36.8           255.8       228.7  
       Industrial
    160.6       22.8           183.4       62.6  
 
                                    
         Segment Profit
    713.2       185.7           898.9       405.0  
       Corporate Overhead
    (183.3 )     72.2           (111.1 )     (50.3 )
 
                                    
         Total
  $ 529.9     $ 257.9         $ 787.8     $ 354.7  
 
                                    
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit as a Percentage of Net Sales
 
 
 
 
 
       Construction & DIY
    10.5 %                 14.5 %     11.9 %
       Security
    14.1 %                 16.5 %     19.6 %
       Industrial
    12.6 %                 14.4 %     9.7 %
 
                                    
         Segment Profit
    11.9 %                 15.0 %     14.6 %
       Corporate Overhead
    -3.1 %                 -1.9 %     -1.8 %
 
                                    
         Total
    8.8 %                 13.1 %     12.8 %
 
                                    

1 One-time charges relate primarily to the Black & Decker merger, including inventory step-up, facility closure related charges, certain executive compensation and severance costs, and integration costs.

2 The normalized 2010 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 one-time charges associated with the Black & Decker merger.

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