Connecticut | 1-5224 | 06-0548860 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1000 Stanley Drive, New Britain, | ||||
Connecticut | 06053 | |||
(Address of principal executive offices) | (Zip Code) |
¨ | 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)) |
Stanley Black & Decker, Inc. | ||||||
April 21, 2017 | By: | /s/ Bruce H. Beatt | ||||
Name: | Bruce H. Beatt | |||||
Title: | Senior Vice President, General Counsel and Secretary |
Exhibit No. | Description | ||
99.1 | Press release dated April 21, 2017, issued by Stanley Black & Decker, Inc. | ||
99.2 | Financial statements and supporting schedules contained in Stanley Black & Decker, Inc.'s April 21, 2017 press release. |
• | 1Q’17 Revenues Totaled $2.8 Billion, Up 5% Versus Prior Year, Fueled By 5% Organic Growth |
• | 1Q’17 Operating Margin Rate Expanded 50 Basis Points To 13.6%; Excluding M&A Related Charges, Operating Margin Rate Expanded 110 Basis Points To A Record 1Q Rate Of 14.2% |
• | 1Q’17 Diluted GAAP EPS Was $2.59; Excluding M&A Related Charges And Gain On Divestitures, 1Q’17 Diluted EPS Was $1.29 Reflecting Strong Operational Performance Which More Than Offset Currency Headwinds, Higher Restructuring, A One-Time Environmental Charge, And Higher Shares |
• | Raising 2017 Full Year Diluted GAAP EPS Guidance Range To $7.95 To $8.15 (From $7.63 To $7.83); Raising Adjusted EPS Guidance Range To $7.08 To $7.28 (From $6.98 To $7.18) Due Primarily To An Improved Outlook For The Company’s Industrial Businesses; Reiterating Free Cash Flow Conversion Of Approximately 100% |
• | Net sales for the quarter were $2.8 billion, up 5% versus prior year, as positive volume (+5%) and acquisitions (+3%) more than offset currency (-1%) and divestitures (-2%). |
• | Gross margin rate for the quarter was 38.0%. Excluding charges, the gross margin rate was 38.2%, up 160 basis points from prior year as productivity and cost actions more than offset currency and commodity inflation. |
• | SG&A expenses were 24.4% of sales. Excluding charges, SG&A expenses were 24.0% of sales compared to 23.5% in 1Q’16, reflecting investments in SFS 2.0 growth initiatives moderated by continued tight cost management. |
• | Operating margin rate was 13.6%. Excluding charges, operating margin rate was 14.2% compared to 13.1% in 1Q’16, as operational actions to improve profitability more than offset unfavorable currency, growth investments and commodity inflation. |
• | Restructuring charges for the quarter were $15.8 million. Excluding restructuring charges relating to M&A, restructuring charges for the quarter were $15.3 million compared to $8.0 million in 1Q’16. In addition and as planned, the Company incurred $12.5 million relating to the settlement of a Canadian pension plan. |
• | Other, net totaled $106.2 million for the quarter. Excluding charges, Other, net totaled $66.1 million compared to $46.2 million in 1Q’16, reflecting the impact of a one-time $17 million environmental remediation charge in 1Q’17 relating to a legacy Black & Decker site. |
• | Pre-tax gain on divestitures, relating primarily to the sale of the majority of the Company’s Mechanical Security businesses, was $269.2 million. |
• | Tax rate was 16.8%. Excluding charges and gain on divestitures, tax rate was 25.0% versus the 25.8% 1Q’16 rate. |
• | Average diluted shares outstanding for the quarter were 151.5 million versus 147.6 million a year ago, reflecting the impact of share issuances in 4Q’16 associated with the Company’s 2013 Equity Units. |
• | Working capital turns for the quarter were 6.7, down 0.3 turns from prior year as a result of the recent Tools & Storage acquisitions (excluding such acquisitions turns increased 0.9 versus prior year). |
($ in M) | ||||||
Sales | Profit | Charges1 | Profit Ex- Charges1 | Profit Rate | Profit Rate Ex- Charges1 | |
Tools & Storage | $1,855 | $287.3 | $17.3 | $304.6 | 15.5% | 16.4% |
Security | $478 | $50.9 | $0.2 | $51.1 | 10.6% | 10.7% |
Industrial | $473 | $86.3 | N/A | $86.3 | 18.3% | 18.3% |
• | Tools & Storage net sales increased 9% versus 1Q’16 as volume (+6%) and acquisitions (+4%) more than offset unfavorable currency (-1%). Each region contributed to the 6% organic growth for the quarter with North America +8%, Europe +6%, and emerging markets +1%. New products, including sales from the DEWALT FlexVolt system, and consistently strong commercial execution fueled share gains in North America which continues to benefit from a healthy underlying U.S. tool market. Improving conditions in the industrial channels also contributed to growth in the region. Europe’s share gains continued with another quarter of above-market organic growth from new products and benefits from commercial actions, including an expanded retail footprint. Organic growth within the emerging markets, led by Latin America and Asia, was driven by the continued success of our mid-price-point product releases as well as pricing actions. Overall Tools & Storage segment profit rate, excluding charges, was 16.4%, above expectations and up from the 1Q’16 rate of 15.3%, as volume leverage, productivity and mix more than offset currency and commodity inflation. |
• | Security net sales decreased 5% versus 1Q’16 as price (+1%) and small, bolt-on electronic security acquisitions (+1%) were more than offset by the sale of the Mechanical Security business (-6%) and currency (-1%). North America delivered solid 2% organic growth, its highest growth quarter since 2Q’15, fueled primarily by higher automatic doors and healthcare volumes. Europe posted flat organic growth as strength within the Nordics and UK was offset by anticipated weakness in France. Overall Security segment profit rate, excluding charges, was 10.7%, down from the 11.9% prior year rate, reflecting the impact of the sale of the Mechanical Security business, growth investments and mix. The segment profit rate would have been approximately 11.4% inclusive of a full quarter’s results of the divested Mechanical Security business. |
• | Industrial net sales increased 3% versus 1Q’16 due to higher volumes (+5%) which more than offset price (-1%) and currency (-1%). Engineered Fastening organic revenues increased 4%, exceeding expectations for the quarter, as strong automotive system volumes more than offset weaker industrial and electronics volumes. Infrastructure organic revenues were up 2% as higher Hydraulic Tools volumes driven by successful commercial actions and improved market conditions, more than offset flat Oil & Gas volumes. Overall Industrial segment profit rate was 18.3%, up 180 basis points from the 1Q’16 rate, as volume leverage, productivity gains and cost control more than offset the impact of currency. |
• | Slightly higher overall Company organic growth for the year primarily attributable to an improved outlook for the Company’s industrial-related businesses (+~ $0.08) |
• | Incremental cost and productivity actions (+~ $0.10) |
• | Higher environmental charges attributable to the aforementioned first quarter 2017 charge, included in “Other, net” (-~ $0.08) |
• | In addition, the Company’s 2017 EPS GAAP outlook reflects the above items as well as the impact of the finalization of the gain on divestitures |
• | There is no change to the Company’s ~$50 million estimate of annual non-M&A related restructuring charges which included the impact of the planned 1Q’17 ~$12 million pension plan curtailment expense |
FIRST QUARTER | |||||||
2017 | 2016 | ||||||
NET SALES | $ | 2,805.6 | $ | 2,672.1 | |||
COSTS AND EXPENSES | |||||||
Cost of sales | 1,740.3 | 1,694.5 | |||||
Gross margin | 1,065.3 | 977.6 | |||||
% of Net Sales | 38.0 | % | 36.6 | % | |||
Selling, general and administrative | 684.7 | 627.8 | |||||
% of Net Sales | 24.4 | % | 23.5 | % | |||
Operating margin | 380.6 | 349.8 | |||||
% of Net sales | 13.6 | % | 13.1 | % | |||
Other - net | 106.2 | 46.2 | |||||
Gain on sales of businesses | (269.2 | ) | — | ||||
Pension settlement | 12.5 | — | |||||
Restructuring charges | 15.8 | 8.0 | |||||
Income from operations | 515.3 | 295.6 | |||||
Interest - net | 42.7 | 41.5 | |||||
EARNINGS BEFORE INCOME TAXES | 472.6 | 254.1 | |||||
Income taxes | 79.5 | 65.5 | |||||
NET EARNINGS | 393.1 | 188.6 | |||||
Less: net loss attributable to non-controlling interests | — | (0.8 | ) | ||||
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS | $ | 393.1 | $ | 189.4 | |||
EARNINGS PER SHARE OF COMMON STOCK | |||||||
Basic | $ | 2.63 | $ | 1.30 | |||
Diluted | $ | 2.59 | $ | 1.28 | |||
DIVIDENDS PER SHARE | $ | 0.58 | $ | 0.55 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands) | |||||||
Basic | 149,208 | 145,870 | |||||
Diluted | 151,526 | 147,619 |
April 1, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 378.0 | $ | 1,131.8 | ||||
Accounts and notes receivable, net | 1,728.0 | 1,302.8 | ||||||
Inventories, net | 1,976.7 | 1,478.0 | ||||||
Assets held for sale | — | 523.4 | ||||||
Other current assets | 285.6 | 352.5 | ||||||
Total current assets | 4,368.3 | 4,788.5 | ||||||
Property, plant and equipment, net | 1,538.3 | 1,451.2 | ||||||
Goodwill and other intangibles, net | 11,967.5 | 8,993.5 | ||||||
Other assets | 788.0 | 401.7 | ||||||
Total assets | $ | 18,662.1 | $ | 15,634.9 | ||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||||
Short-term borrowings | $ | 1,167.4 | $ | 12.1 | ||||
Accounts payable | 1,928.8 | 1,640.4 | ||||||
Accrued expenses | 1,118.2 | 1,101.5 | ||||||
Liabilities held for sale | — | 53.5 | ||||||
Total current liabilities | 4,214.4 | 2,807.5 | ||||||
Long-term debt | 3,815.6 | 3,815.3 | ||||||
Other long-term liabilities | 3,814.0 | 2,638.5 | ||||||
Stanley Black & Decker, Inc. shareowners’ equity | 6,811.5 | 6,367.0 | ||||||
Non-controlling interests’ equity | 6.6 | 6.6 | ||||||
Total liabilities and shareowners' equity | $ | 18,662.1 | $ | 15,634.9 |
FIRST QUARTER | ||||||||
2017 | 2016 | |||||||
OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 393.1 | $ | 188.6 | ||||
Depreciation and amortization | 101.5 | 100.1 | ||||||
Pre-tax gain on sales of businesses | (269.2 | ) | — | |||||
Changes in working capital1 | (410.2 | ) | (268.0 | ) | ||||
Other | 39.2 | (113.8 | ) | |||||
Net cash used in operating activities | (145.6 | ) | (93.1 | ) | ||||
INVESTING AND FINANCING ACTIVITIES | ||||||||
Capital and software expenditures | (64.7 | ) | (64.9 | ) | ||||
Proceeds from issuances of common stock | 17.3 | 8.5 | ||||||
Proceeds from sales of businesses, net of cash sold | 744.8 | — | ||||||
Business acquisitions, net of cash acquired | (2,435.4 | ) | (13.0 | ) | ||||
Net short-term borrowings | 1,156.7 | 481.2 | ||||||
Net investment hedge settlements | 20.7 | (2.4 | ) | |||||
Cash dividends on common stock | (86.7 | ) | (79.6 | ) | ||||
Purchases of common stock for treasury | (13.5 | ) | (361.4 | ) | ||||
Effect of exchange rate changes on cash | 38.1 | 17.1 | ||||||
Other | 14.5 | (5.6 | ) | |||||
Net cash used in investing and financing activities | (608.2 | ) | (20.1 | ) | ||||
Decrease in Cash and Cash Equivalents | (753.8 | ) | (113.2 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 1,131.8 | 465.4 | ||||||
Cash and Cash Equivalents, End of Period | $ | 378.0 | $ | 352.2 | ||||
Free Cash Flow Computation2 | ||||||||
Operating cash flow | $ | (145.6 | ) | $ | (93.1 | ) | ||
Less: capital and software expenditures | (64.7 | ) | (64.9 | ) | ||||
Free cash flow (before dividends) | $ | (210.3 | ) | $ | (158.0 | ) | ||
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 | |||||||
2017 | 2016 | ||||||
NET SALES | |||||||
Tools & Storage | $ | 1,854.5 | $ | 1,706.9 | |||
Security | 478.5 | 504.2 | |||||
Industrial | 472.6 | 461.0 | |||||
Total | $ | 2,805.6 | $ | 2,672.1 | |||
SEGMENT PROFIT | |||||||
Tools & Storage | $ | 287.3 | $ | 262.0 | |||
Security | 50.9 | 60.2 | |||||
Industrial | 86.3 | 76.0 | |||||
Segment Profit | 424.5 | 398.2 | |||||
Corporate Overhead | (43.9 | ) | (48.4 | ) | |||
Total | $ | 380.6 | $ | 349.8 | |||
Segment Profit as a Percentage of Net Sales | |||||||
Tools & Storage | 15.5 | % | 15.3 | % | |||
Security | 10.6 | % | 11.9 | % | |||
Industrial | 18.3 | % | 16.5 | % | |||
Segment Profit | 15.1 | % | 14.9 | % | |||
Corporate Overhead | (1.6 | )% | (1.8 | )% | |||
Total | 13.6 | % | 13.1 | % |
FIRST QUARTER 2017 | ||||||||||||||||
Reported | Acquisition- Related Charges & Other1 | Normalized2 | FIRST QUARTER 2016 | |||||||||||||
Gross margin | $ | 1,065.3 | $ | 6.8 | $ | 1,072.1 | $ | 977.6 | ||||||||
% of Net Sales | 38.0 | % | 38.2 | % | 36.6 | % | ||||||||||
Selling, general and administrative | 684.7 | (10.7 | ) | 674.0 | 627.8 | |||||||||||
% of Net Sales | 24.4 | % | 24.0 | % | 23.5 | % | ||||||||||
Operating margin | 380.6 | 17.5 | 398.1 | 349.8 | ||||||||||||
% of Net Sales | 13.6 | % | 14.2 | % | 13.1 | % | ||||||||||
Earnings before income taxes | 472.6 | (211.2 | ) | 261.4 | 254.1 | |||||||||||
Income taxes | 79.5 | (14.1 | ) | 65.4 | 65.5 | |||||||||||
Net earnings | 393.1 | (197.1 | ) | 196.0 | 189.4 | |||||||||||
Diluted earnings per share of common stock | $ | 2.59 | $ | (1.30 | ) | $ | 1.29 | $ | 1.28 |
FIRST QUARTER 2017 | |||||||||||||||||
Reported | Acquisition- Related Charges1 | Normalized2 | FIRST QUARTER 2016 | ||||||||||||||
SEGMENT PROFIT | |||||||||||||||||
Tools & Storage | $ | 287.3 | $ | 17.3 | $ | 304.6 | $ | 262.0 | |||||||||
Security | 50.9 | 0.2 | 51.1 | 60.2 | |||||||||||||
Industrial | 86.3 | — | 86.3 | 76.0 | |||||||||||||
Segment Profit | 424.5 | 17.5 | 442.0 | 398.2 | |||||||||||||
Corporate Overhead | (43.9 | ) | — | (43.9 | ) | (48.4 | ) | ||||||||||
Total | $ | 380.6 | $ | 17.5 | $ | 398.1 | $ | 349.8 | |||||||||
Segment Profit as a Percentage of Net Sales | |||||||||||||||||
Tools & Storage | 15.5 | % | 16.4 | % | 15.3 | % | |||||||||||
Security | 10.6 | % | 10.7 | % | 11.9 | % | |||||||||||
Industrial | 18.3 | % | 18.3 | % | 16.5 | % | |||||||||||
Segment Profit | 15.1 | % | 15.8 | % | 14.9 | % | |||||||||||
Corporate Overhead | (1.6 | )% | (1.6 | )% | (1.8 | )% | |||||||||||
Total | 13.6 | % | 14.2 | % | 13.1 | % | |||||||||||
1 | Acquisition-related charges relate primarily to integration and consulting costs. | ||||||||||||||||
2 | The normalized 2017 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 charges. |