-----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, JjxAeXIcTU2iTKM1XxK5oDE+j67imkc9waILJrTEhe+72tMujdsoQplslK/7nhrj OSlxJdBPV+P7d5NEZdkOzw== 0000012355-04-000112.txt : 20040719 0000012355-04-000112.hdr.sgml : 20040719 20040719082246 ACCESSION NUMBER: 0000012355-04-000112 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040716 ITEM INFORMATION: ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040719 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: 1934 Act SEC FILE NUMBER: 333-03593 FILM NUMBER: 04919121 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 form8k07192004a.txt 8-K FILED 7/19/04 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) July 19, 2004 -------------------------------- 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) -2- ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On July 19, 2004, the Corporation announced that it has signed an agreement to purchase the Tools Group from Pentair, Inc. for approximately $775 million in cash. The transaction, which is subject to regulatory clearances and customary closing conditions, is expected to close later in 2004. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit 99 Press Release of the Corporation dated July 19, 2004. Exhibit 99 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in a filing. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On July 19, 2004, the Corporation reported its earnings for the three and six months ended June 27, 2004. Attached to this Current Report on Form 8-K as Exhibit 99 is a copy of the Corporation's related press release dated July 19, 2004. FORWARD-LOOKING STATEMENTS This Current Report on Form 8-K contains "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 that are intended to come within the safe harbor protection provided by those statutes. By their nature, all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect the Corporation's actual results are identified in Item 1(g) of Part I of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003. NON-GAAP FINANCIAL MEASURES The press release attached as Exhibit 99 contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Corporation believes that these non-GAAP financial measures provide information that is useful to the users of its financial information regarding the Corporation's financial condition and results of operations. Additionally, the Corporation uses these non-GAAP measures to evaluate its past performance, reportable business segments, and prospects for future performance. The Corporation believes it is appropriate to present this non-GAAP financial information for the following reasons: o The Corporation provides certain measures of operating results, net earnings, and earnings per share adjusted to exclude certain costs, expenses, and gains and losses, as well as to exclude effects of changes in foreign currency exchange rates and of acquired businesses on sales. The Corporation believes that this information is helpful in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportional positive or negative impact on the Corporation's results of operations in any -3- particular period. The Corporation also utilizes certain of these measures to compensate certain management personnel of the Corporation. o In addition to measuring its cash flow generation and usage based upon operating, investing, and financing activities classifications established under accounting principles generally accepted in the United States, the Corporation also measures its free cash flow. Free cash flow is a measure commonly employed by credit providers. The Corporation defines free cash flow as cash flow from operating activities, less capital expenditures, plus proceeds from the disposal of assets (excluding proceeds from business sales). While the Corporation believes that these non-GAAP financial measures are useful in evaluating the Corporation, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Further, these non-GAAP financial measures may differ from similar measures presented by other companies. -4- 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/ CHRISTINA M. MCMULLEN --------------------------------- Christina M. McMullen Vice President and Controller Date: July 19, 2004 EX-99 2 form8k07192004b.txt EARNINGS RELEASE FILED 7/19/04 Contact: Barbara B. Lucas Senior Vice President Public Affairs 410-716-2980 Mark M. Rothleitner Vice President Investor Relations and Treasurer 410-716-3979 FOR IMMEDIATE RELEASE: Monday, July 19, 2004 Subject: Black & Decker Reports a Record $1.50 Earnings Per Share From Continuing Operations for Second Quarter 2004; Signs Agreement to Acquire Pentair's Tools Group for $775 million; Declares Regular Quarterly Cash Dividend Towson, MD - The Black & Decker Corporation (NYSE: BDK) today announced that net earnings from continuing operations for the second quarter of 2004 were a record $121.8 million or $1.50 per diluted share, a 56% increase versus the second quarter of 2003. Sales from continuing operations were a record $1.3 billion, an increase of 19%, or 11% excluding the effects of foreign currency translation and acquisitions. Free cash flow was $198 million, an improvement of $98 million over the second quarter of 2003. The Corporation also announced that it has signed an agreement to purchase the Tools Group from Pentair, Inc. (NYSE: PNR) for approximately $775 million in cash. The Tools Group, with 2003 sales of $1.08 billion and operating profit of $82 million, includes the Porter-Cable, Delta, DeVilbiss Air Power, Oldham Saw, and FLEX businesses. The transaction, which is subject to regulatory clearances and customary closing conditions, is expected to close later in 2004. (more) Page Two Nolan D. Archibald, Chairman and Chief Executive Officer, commented, "We are very pleased to announce both record results and an ideal bolt-on acquisition with excellent strategic and financial benefits. The businesses we will acquire from Pentair focus on the large and profitable professional power tool market in North America and are an excellent fit with our DEWALT division. This acquisition will add well-respected brands to our portfolio and expand our offerings in product lines where we have relatively low market share, including woodworking equipment, compressors, pressure washers, and nailers. In addition, it will give us a stronger presence throughout our distribution network, particularly in the industrial/construction channel. "Black & Decker has an outstanding track record of creating value across its business portfolio. We have built leading market positions by applying our core strengths of product innovation, brand management, strong customer relationships, and end-user focus. In addition, by combining businesses, rationalizing manufacturing, and eliminating duplicate costs, we have significantly reduced costs and streamlined our operations. We will leverage these proven strengths to add value to the acquired businesses. By nearly doubling the sales volume of our North American professional business, we will also have better scale to improve the profitability of the combined group. We expect to realize $65 million of annual cost savings by the end of 2007, and anticipate that the acquisition will be highly accretive to earnings per share. We expect accretion of approximately $0.50 per share in 2005, followed by an incremental $0.25 in both 2006 and 2007, for a total of $1.00 per share. This acquisition has a very positive net present value and should be accretive to our return on capital employed by 2007. "In addition to announcing this acquisition, our company had a record second quarter. We have now grown earnings per share by more than 19% for nine consecutive quarters. All three of our business segments grew sales at double-digit rates before acquisitions and currency translation. Operating margin increased more than 300 basis points, reflecting the benefit of sales volume leverage and continued restructuring savings. (more) Page Three "Sales and operating profit in the Power Tools and Accessories segment increased 11% and 43%, respectively. In the U.S., sales of DEWALT(R) professional products increased at a double-digit rate for the third consecutive quarter, with gains in all major distribution channels and product categories. Sales of Black & Decker consumer products also increased at a double-digit rate, led by lasers, cordless drills, and lawn and garden products. Sales increased at a double-digit rate in Asia and at a mid-single-digit rate in Europe and Latin America. "Sales in the Hardware and Home Improvement segment increased 10% excluding the acquisition of Baldwin Hardware Corporation and Weiser Lock Corporation, with Kwikset sales growing at a mid-single-digit rate and Price Pfister sales growing more than 20%. Productivity, restructuring savings, and higher sales volume resulted in dramatic increases in operating margin and operating profit over the second quarter of 2003. "Sales in the Fastening and Assembly Systems segment increased 15%, or 11% excluding the acquisition of MasterFix. Sales increased in all key divisions and product lines and were particularly strong in the North American industrial division and in Asia. Operating profit in this segment increased 13%, as operating margin held nearly flat despite commodity price increases. "Looking forward, we remain optimistic about our new products, market positions, and the North American economy. Despite facing much tougher comparisons, we are forecasting a low-to-mid-single-digit rate of sales growth excluding currency translation and acquisitions for the third quarter, and a mid-single-digit rate for the full year. For both the third quarter and the full year, we anticipate a double-digit sales growth rate including currency and acquisitions. Operating margins should continue to improve, but not as dramatically as in the first half of the year. Therefore, we anticipate diluted earnings per share from continuing operations in the ranges of $1.25-to-$1.30 for the third quarter and $5.05-to-$5.15 for the full year. We continue to expect that we will convert at least 90% of full-year net earnings to free cash flow. (more) Page Four "By combining top market positions with operating excellence, Black & Decker has grown its earnings and cash flow dramatically over the last three years and continued that trend in the second quarter. The acquisition announced today is a unique opportunity to take further advantage of our core strengths, and represents the beginning of a new growth phase for our company. By executing our strategy and wisely investing our cash flow, we intend to continue generating outstanding returns for our shareholders." The Corporation also announced that its Board of Directors declared a quarterly cash dividend of $0.21 per share of the Corporation's outstanding common stock payable September 24, 2004, to stockholders of record at the close of business on September 10, 2004. The Corporation will now hold the conference call, originally scheduled for Thursday, July 22, 2004, today at 10:30 a.m., E.T., to discuss second-quarter results, the outlook for the remainder of 2004, and the pending acquisition. Investors can listen to the conference call by visiting http://www.bdk.com and clicking on the icon labeled "Live Webcast." Listeners should log-in at least ten minutes prior to the beginning of the event to assure timely access. A replay of the call will be available at http://www.bdk.com. 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 the "Forward-Looking Statements" sections in Black & Decker's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003. This release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included with this release is a reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP. Black & Decker is a leading global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology-based fastening systems. # # # THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Dollars in Millions Except Per Share Amounts) Three Months Ended --------------------------------- June 27, 2004 June 29, 2003 -------------- -------------- SALES $ 1,297.6 $ 1,090.1 Cost of goods sold 810.0 699.4 Selling, general, and administrative expenses 316.0 280.4 Restructuring and exit costs - .4 ------------- -------------- OPERATING INCOME 171.6 109.9 Interest expense (net of interest income) 4.5 7.7 Other expense .2 .6 -------------- -------------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 166.9 101.6 Income taxes 45.1 26.9 -------------- -------------- NET EARNINGS FROM CONTINUING OPERATIONS 121.8 74.7 Earnings (loss) from discontinued operations (net of income taxes) (.2) 1.0 -------------- -------------- NET EARNINGS $ 121.6 $ 75.7 ============== ============== BASIC EARNINGS PER COMMON SHARE Continuing operations $ 1.53 $ .96 Discontinued operations - .02 -------------- -------------- NET EARNINGS PER COMMON SHARE - BASIC $ 1.53 $ .98 ============== ============== Shares Used in Computing Basic Earnings Per Share (in Millions) 79.4 77.6 ============== ============== DILUTED EARNINGS PER COMMON SHARE Continuing operations $ 1.50 $ .96 Discontinued operations - .01 -------------- -------------- NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 1.50 $ .97 ============== ============== Shares Used in Computing Diluted Earnings Per Share (in Millions) 80.9 77.9 ============== ============== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Dollars in Millions Except Per Share Amounts) Six Months Ended --------------------------------- June 27, 2004 June 29, 2003 -------------- -------------- SALES $ 2,390.5 $ 2,029.3 Cost of goods sold 1,500.1 1,303.3 Selling, general, and administrative expenses 611.1 543.4 Restructuring and exit costs - .6 -------------- -------------- OPERATING INCOME 279.3 182.0 Interest expense (net of interest income) 9.7 19.8 Other expense 1.0 2.3 -------------- -------------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 268.6 159.9 Income taxes 72.5 42.1 -------------- -------------- NET EARNINGS FROM CONTINUING OPERATIONS 196.1 117.8 DISCONTINUED OPERATIONS (NET OF INCOME TAXES): Earnings of discontinued operations .4 1.3 Gain on sale of discontinued operations(net of impairment charge of $24.4) 11.7 - -------------- -------------- NET EARNINGS FROM DISCONTINUED OPERATIONS 12.1 1.3 -------------- -------------- NET EARNINGS $ 208.2 $ 119.1 ============== ============== BASIC EARNINGS PER COMMON SHARE Continuing operations $ 2.49 $ 1.51 Discontinued operations .15 .02 -------------- -------------- NET EARNINGS PER COMMON SHARE - BASIC $ 2.64 $ 1.53 ============== ============== Shares Used in Computing Basic Earnings Per Share (in Millions) 78.9 78.0 ============== ============== DILUTED EARNINGS PER COMMON SHARE Continuing operations $ 2.44 $ 1.51 Discontinued operations .15 .01 -------------- -------------- NET EARNINGS PER COMMON SHARE - ASSUMING DILUTION $ 2.59 $ 1.52 ============== ============== Shares Used in Computing Diluted Earnings Per Share (in Millions) 80.2 78.2 ============== ============== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Millions of Dollars) June 27, December 31, 2004 2003 -------------- -------------- ASSETS Cash and cash equivalents $ 526.1 $ 308.2 Trade receivables 929.7 808.6 Inventories 836.2 709.9 Current assets of discontinued operations 64.6 160.2 Other current assets 204.0 216.1 -------------- -------------- TOTAL CURRENT ASSETS 2,560.6 2,203.0 -------------- -------------- PROPERTY, PLANT, AND EQUIPMENT 615.4 660.2 GOODWILL 777.5 771.7 OTHER ASSETS 563.6 587.6 -------------- -------------- $ 4,517.1 $ 4,222.5 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ .1 $ .1 Current maturities of long-term debt .4 .4 Trade accounts payable 506.2 379.8 Current liabilities of discontinued operations 28.3 38.0 Other accrued liabilities 834.3 893.8 -------------- -------------- TOTAL CURRENT LIABILITIES 1,369.3 1,312.1 -------------- -------------- LONG-TERM DEBT 900.1 915.6 DEFERRED INCOME TAXES 177.3 179.8 POSTRETIREMENT BENEFITS 458.6 451.9 OTHER LONG-TERM LIABILITIES 516.9 516.6 STOCKHOLDERS' EQUITY 1,094.9 846.5 -------------- -------------- $ 4,517.1 $ 4,222.5 ============== ============== THE BLACK & DECKER CORPORATION AND SUBSIDIARIES SUPPLEMENTAL INFORMATION ABOUT BUSINESS SEGMENTS (Millions of Dollars)
Reportable Business Segments ---------------------------------------------- Power Hardware Fastening Currency Corporate, Tools & & Home & Assembly Translation Adjustments, Three Months Ended June 27, 2004 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $ 876.3 $235.9 $152.0 $1,264.2 $ 33.4 $ - $1,297.6 Segment profit (loss) (for Consoli- dated, operating income) 124.9 41.6 21.9 188.4 3.3 (20.1) 171.6 Depreciation and amortization 19.4 7.6 4.1 31.1 .8 2.2 34.1 Capital expenditures 16.8 5.4 2.2 24.4 .5 .4 25.3 Three Months Ended June 29, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $ 786.2 $166.0 $132.0 $1,084.2 $ 5.9 $ - $1,090.1 Segment profit (loss) (for Consoli- dated, operating income before restructuring and exit costs) 87.3 16.9 19.3 123.5 1.0 (14.2) 110.3 Depreciation and amortization 20.2 6.7 4.0 30.9 .1 3.8 34.8 Capital expenditures 15.7 5.1 3.1 23.9 .1 .3 24.3 Six Months Ended June 27, 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $1,565.9 $ 456.3 $ 290.4 $2,312.6 $ 77.9 $ - $2,390.5 Segment profit (loss) (for Consoli- dated, operating income) 199.0 73.3 40.3 312.6 6.8 (40.1) 279.3 Depreciation and amortization 38.7 15.2 8.3 62.2 2.0 5.0 69.2 Capital expenditures 31.1 8.3 4.5 43.9 1.2 .6 45.7 Six Months Ended June 29, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $1,452.6 $ 312.2 $ 265.2 $2,030.0 $ (.7) $ - $2,029.3 Segment profit (loss) (for Consoli- dated, operating income before restructuring and exit costs) 146.8 29.9 38.6 215.3 .8 (33.5) 182.6 Depreciation and amortization 40.3 13.5 7.8 61.6 .1 8.2 69.9 Capital expenditures 30.9 12.4 6.6 49.9 (.1) .5 50.3
The reconciliation of segment profit to the Corporation's earnings from continuing operations before income taxes for each period, in millions of dollars, is as follows: Three Months Ended Six Months Ended - -------------------------------------------------------------------------------- June 27, June 29, June 27, June 29, 2004 2003 2004 2003 - -------------------------------------------------------------------------------- Segment profit for total reportable business segments $188.4 $123.5 $312.6 $215.3 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates 3.3 1.0 6.8 .8 Depreciation of Corporate property (.3) (.2) (.7) (.5) Adjustment to businesses' post- retirement benefit expenses booked in consolidation .2 3.9 .3 7.7 Other adjustments booked in consolidation directly related to reportable business segments (3.4) (1.2) (5.5) (10.0) Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (16.6) (16.7) (34.2) (30.7) - -------------------------------------------------------------------------------- Operating income before restructuring and exit costs 171.6 110.3 279.3 182.6 Restructuring and exit costs - .4 - .6 - -------------------------------------------------------------------------------- Operating income 171.6 109.9 279.3 182.0 Interest expense, net of interest income 4.5 7.7 9.7 19.8 Other expense .2 .6 1.0 2.3 - -------------------------------------------------------------------------------- Earnings from continuing operations before income taxes $166.9 $101.6 $268.6 $159.9 ================================================================================ BASIS OF PRESENTATION: The Corporation operates in three reportable business segments: Power Tools and Accessories, Hardware and Home Improvement, 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, electric 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 security hardware to customers in Mexico, Central America, the Caribbean, and South America; for the sale of plumbing products to customers outside the United States and Canada; and for sales of household products. The Hardware and Home Improvement segment has worldwide responsibility for the manufacture and sale of security hardware (except for the sale of security hardware in Mexico, Central America, the Caribbean, and South America). On September 30, 2003, the Corporation acquired Baldwin Hardware Corporation and Weiser Lock Corporation. These acquired businesses are included in the Hardware and Home Improvement segment. The Hardware and Home Improvement segment also has responsibility for the manufacture of plumbing products and 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. In January 2004, the Corporation sold two components of its European security hardware business. The divested businesses and the remaining portion that is expected to be sold in 2004 are treated as discontinued operations in the Corporation's consolidated financial statements. Sales, segment profit, depreciation and amortization, and capital expenditures set forth in the preceding tables exclude the results of the discontinued operations. 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 Notes to Consolidated Financial Statements included in Item 8 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003, except with respect to foreign currency translation and except as further indicated below. The financial statements of a segment's operating units located outside of the United States, except those units operating in highly inflationary economies, are generally measured using the local currency as the functional currency. For these units located outside of 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 current year's budgeted rates of exchange. The amounts included in the preceding tables under the captions "Reportable Business Segments" and "Corporate, Adjustments, & Eliminations" are reflected at the Corporation's budgeted rates of exchange for 2004. The amounts included in the preceding tables under the caption "Currency Translation Adjustments" represent the difference between consolidated amounts determined using those 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, adjustments to eliminate intercompany profit in inventory, and income tax expense. In addition, segment profit excludes restructuring and exit costs. In determining segment profit, expenses relating to pension and other postretirement benefits are based solely upon estimated service costs. Corporate expenses, as well as certain centrally managed expenses, are allocated to each reportable segment based upon budgeted amounts. 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 goods sold 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 non-recurring 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 various segments in a later period. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE: To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Corporation provides additional measures of operating results, net earnings, and earnings per share adjusted to exclude certain costs, expenses, and gains and losses, as well as to exclude effects of changes in foreign currency exchange rates and of acquired businesses on sales. The Corporation believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for its future performance. This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follows. Sales, excluding the effects of foreign currency translation and acquired - -------------------------------------------------------------------------------- businesses: - ---------- As more fully described in this press release under the caption "Supplemental Information About Business Segments--Basis of Presentation", elements of segment profit, including sales, for units located outside of the United States are generally measured using the local currency as the functional currency. For these units, sales 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 current year's budgeted rates of exchange. Amounts included on the line entitled "Sales to unaffiliated customers" under the heading "Reportable Business Segments" in the first table under the caption "Supplemental Information About Business Segments" are reflected at the Corporation's budgeted rates of exchange for 2004. The reference in this press release to an 11% increase in sales, excluding the effects of foreign currency translation and acquired businesses, for the second quarter of 2004, compared to the corresponding period in 2003, is determined as follows (dollars in millions): Three Months Ended June 27, June 29, 2004 2003 -------------- -------------- Sales $ 1,297.6 $ 1,090.1 Currency translation adjustment (33.4) (5.9) ------------- -------------- Sales as translated at budgeted rates of exchange 1,264.2 1,084.2 Sales of acquired businesses as translated at budgeted rates of exchange (58.1) - -------------- -------------- Sales excluding foreign currency and acquired businesses $ 1,206.1 $ 1,084.2 ============== ============== Free cash flow for the three months ended June 27, 2004 and June 29, 2003: - ------------------------------------------------------------------------- The calculation of free cash flow, which is defined by the Corporation as cash flow from operating activities, less capital expenditures, plus proceeds from the disposal of assets (excluding proceeds from business sales), for the quarters ended June 27, 2004 and June 29, 2003, follows (dollars in millions): Three Months Ended June 27, June 29, 2004 2003 -------------- -------------- Cash flow from operating activities $ 209.0 $ 121.0 Capital expenditures (including capital expenditures of discontinued operations) (25.7) (25.2) Proceeds from disposals of assets 14.7 4.7 -------------- -------------- Free cash flow $ 198.0 $ 100.5 ============== ============== Hardware and Home Improvement segment sales, excluding the effects of the - -------------------------------------------------------------------------------- acquired businesses: - ------------------- This press release indicates that the Hardware and Home Improvement segment reported a 10% sales increase for the three months ended June 27, 2004, as compared to the corresponding period in the prior year, excluding the acquisition of Baldwin and Weiser. The determination of the aforementioned growth in sales, excluding the acquisition of Baldwin and Weiser, is determined by deducting $52.8 million of sales of the acquired businesses that were recognized during the three-month period ended June 27, 2004. Fastening and Assembly Systems segment sales, excluding the effects of the - -------------------------------------------------------------------------------- acquired business: - ----------------- This press release indicates that the Fastening and Assembly Systems segment reported an 11% sales increase for the three months ended June 27, 2004, as compared to the corresponding period in the prior year, excluding the acquisition of MasterFix. The determination of the aforementioned growth in sales, excluding the acquisition of MasterFix, is determined by deducting $5.3 million of sales of the acquired business that were recognized during the three-month period ended June 27, 2004. -----END PRIVACY-ENHANCED MESSAGE-----