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, | 06053 | |||
Connecticut | (Zip Code) | |||
(Address of principal executive offices) |
¨ | 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 24, 2019 | By: | /s/ Janet M. Link | ||||
Name: | Janet M. Link | |||||
Title: | Senior Vice President, General Counsel and Secretary |
• | 1Q’19 Revenues Totaled $3.3 Billion, Up 4% Versus Prior Year, Fueled By 5% Organic Growth And 3% Growth From Acquisitions |
• | 1Q’19 Diluted GAAP EPS Was $1.13; Excluding Charges, 1Q’19 Diluted EPS Was $1.42, Overcoming $160 Million Or Approximately $0.90 Of EPS In External Headwinds |
• | EPS Outperformance Driven By Strong Operational Performance And 16 Cents (~50% Of Outperformance) Of Tax Timing Within The Year |
• | Successfully Completed Acquisition Of IES Attachments |
• | Raising Full Year Diluted GAAP EPS Guidance Range to $7.50 - $7.70 (From $7.45 - $7.65), Raising Adjusted EPS Guidance Range To $8.50 - $8.70 (From $8.45 - $8.65) And Reiterating Free Cash Flow Conversion Estimate Of Approximately 85% - 90% |
• | Net sales for the quarter were $3.3 billion, up 4% versus prior year, as positive volume (+3%), acquisitions (+3%) and price (+2%) more than offset currency (-4%). |
• | Gross margin rate for the quarter was 33.2%, down approximately 300 basis points versus prior year as volume leverage, productivity and price were more than offset by carryover external headwinds from prior year, including commodity inflation, foreign exchange and tariffs. |
• | SG&A expenses were 23.4% of sales. Excluding charges, SG&A expenses were 22.7% of sales compared to 24.0% in 1Q’18, reflecting tight cost control, including the savings from the 4Q’18 cost reduction program. |
• | Restructuring costs for the quarter were $8.7 million. Excluding charges, restructuring costs for the quarter were $1.6 million compared to $21.8 million in 1Q’18. |
• | Other, net totaled $65.4 million for the quarter. Excluding charges, Other, net totaled $49.3 million compared to $52.1 million in 1Q’18. |
• | The tax rate was 12.7%. Excluding charges, the tax rate was 15.0% versus 23.0% in 1Q’18 primarily due to the settlement of a tax audit during the quarter. |
• | Average diluted shares outstanding for the quarter were 149.9 million versus 153.9 million a year ago, reflecting $500 million of share repurchases executed during 2018. |
• | Working capital turns for the quarter were 5.8, down 0.4 turns from prior year as a result of carrying higher levels of inventory associated with the Craftsman and other brand rollouts. |
($ in M) | ||||||
Sales | Profit | Charges1 | Profit Ex- Charges1 | Profit Rate | Profit Rate Ex- Charges1 | |
Tools & Storage | $2,292 | $265.8 | $12.6 | $278.4 | 11.6% | 12.1% |
Industrial | $555 | $71.0 | $6.0 | $77.0 | 12.8% | 13.9% |
Security | $486 | $39.5 | $10.8 | $50.3 | 8.1% | 10.3% |
• | Tools & Storage net sales increased 3% versus 1Q’18 as volume (+5%) and price (+2%) were partially offset by currency (-4%). All regions contributed to the 7% organic growth for the quarter with North America +11%, Europe +3% and emerging markets +1%. North America organic growth was driven by the rollout of the Craftsman brand, continued benefits from new product innovation and price realization. Europe delivered above-market growth supported by new product launches and continued successful commercial actions. Emerging markets growth was due to price, new products and e-commerce expansion, which was largely offset by continued market contractions in Argentina and Turkey. Additionally, the Company recently settled its lawsuit with Sears. Overall Tools & Storage segment profit rate, excluding charges, was 12.1%, down from the 1Q’18 rate of 14.3%, as the benefits from volume leverage, pricing and cost control were more than offset by the impact from currency, commodity inflation and tariffs. |
• | Industrial net sales increased 10% versus 1Q’18 as the Nelson and IES Attachments acquisitions (+16%) were partially offset by currency (-3%) and volume (-3%). Engineered Fastening organic revenues were down 4% as automotive light vehicle production declines and lower system shipments more than offset continued fastener penetration gains. Infrastructure organic revenues were up 5% primarily due to stronger North American pipeline project activity in Oil & Gas, partially offset by lower Hydraulic Tools volumes. Overall Industrial segment profit rate, excluding charges, was 13.9%, down from the 1Q’18 rate of 16.4%, as productivity gains and cost control were more than offset by the impact from lower Engineered Fastening automotive volume, commodity inflation, and the modestly dilutive impact from acquisitions. |
• | Security net sales declined 1% versus 1Q’18 as bolt-on commercial electronic security acquisitions (+2%) and price (+1%) were more than offset by currency (-4%). North America organic growth was up 2% as higher volumes within automatic doors and healthcare were partially offset by lower installations in commercial electronic security. Europe was down 1% organically as growth within France was offset by adverse market conditions in Sweden and UK. The overall Security segment profit rate, excluding charges, was 10.3%, which was up 70 basis points versus the prior year, as a focus on cost containment was partially offset by commercial investments to support the business transformation in commercial electronic security. |
• | Incremental organic growth and cost control realized in the first quarter more than offset an incremental $20 million headwind from foreign currency |
• | The IES Attachments acquisition and the Sargent & Greenleaf divestiture that was signed in the first quarter net to a relatively neutral impact to EPS |
First Quarter | |||||||
2019 | 2018 | ||||||
NET SALES | $ | 3,333.6 | $ | 3,209.3 | |||
COSTS AND EXPENSES | |||||||
Cost of sales | 2,228.0 | 2,043.6 | |||||
Gross margin | 1,105.6 | 1,165.7 | |||||
% of Net Sales | 33.2 | % | 36.3 | % | |||
Selling, general and administrative | 778.9 | 785.6 | |||||
% of Net Sales | 23.4 | % | 24.5 | % | |||
Operating margin | 326.7 | 380.1 | |||||
% of Net sales | 9.8 | % | 11.8 | % | |||
Other - net | 65.4 | 58.0 | |||||
Restructuring charges | 8.7 | 22.9 | |||||
Income from operations | 252.6 | 299.2 | |||||
Interest - net | 57.8 | 47.4 | |||||
EARNINGS BEFORE INCOME TAXES AND EQUITY INTEREST | 194.8 | 251.8 | |||||
Income taxes | 24.7 | 81.7 | |||||
NET EARNINGS BEFORE EQUITY INTEREST | 170.1 | 170.1 | |||||
Share of net earnings of equity method investment | 0.3 | — | |||||
NET EARNINGS | 170.4 | 170.1 | |||||
Less: net gain (loss) attributable to non-controlling interests | 0.5 | (0.5 | ) | ||||
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS | $ | 169.9 | $ | 170.6 | |||
EARNINGS PER SHARE OF COMMON STOCK | |||||||
Basic | $ | 1.15 | $ | 1.13 | |||
Diluted | $ | 1.13 | $ | 1.11 | |||
DIVIDENDS PER SHARE | $ | 0.66 | $ | 0.63 | |||
WEIGHTED-AVERAGE SHARES OUTSTANDING (in thousands) | |||||||
Basic | 147,863 | 150,612 | |||||
Diluted | 149,908 | 153,905 |
March 30, 2019 | December 29, 2018 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 281.8 | $ | 288.7 | ||||
Accounts and notes receivable, net | 1,882.1 | 1,607.8 | ||||||
Inventories, net | 2,791.6 | 2,373.5 | ||||||
Other current assets | 298.4 | 299.4 | ||||||
Total current assets | 5,253.9 | 4,569.4 | ||||||
Property, plant and equipment, net | 1,927.4 | 1,915.2 | ||||||
Goodwill and other intangibles, net | 13,028.3 | 12,441.1 | ||||||
Other assets | 1,250.7 | 482.3 | ||||||
Total assets | $ | 21,460.3 | $ | 19,408.0 | ||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||||
Short-term borrowings | $ | 1,780.7 | $ | 376.1 | ||||
Current maturities of long-term debt | 3.1 | 2.5 | ||||||
Accounts payable | 2,264.3 | 2,233.2 | ||||||
Accrued expenses | 1,718.1 | 1,389.8 | ||||||
Total current liabilities | 5,766.2 | 4,001.6 | ||||||
Long-term debt | 3,909.4 | 3,819.8 | ||||||
Other long-term liabilities | 3,848.0 | 3,746.7 | ||||||
Stanley Black & Decker, Inc. shareowners’ equity | 7,932.5 | 7,836.2 | ||||||
Non-controlling interests’ equity | 4.2 | 3.7 | ||||||
Total liabilities and shareowners' equity | $ | 21,460.3 | $ | 19,408.0 |
First Quarter | ||||||||
2019 | 2018 | |||||||
OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 170.4 | $ | 170.1 | ||||
Depreciation and amortization | 137.8 | 123.6 | ||||||
Share of net earnings of equity method investment | (0.3 | ) | — | |||||
Changes in working capital1 | (616.8 | ) | (544.3 | ) | ||||
Other | (122.4 | ) | (98.8 | ) | ||||
Net cash used in operating activities | (431.3 | ) | (349.4 | ) | ||||
INVESTING AND FINANCING ACTIVITIES | ||||||||
Capital and software expenditures | (89.6 | ) | (106.3 | ) | ||||
Business acquisitions, net of cash acquired | (676.2 | ) | (1.2 | ) | ||||
Purchases of investments | (245.4 | ) | (4.0 | ) | ||||
Net investment hedge settlements | 3.9 | (17.5 | ) | |||||
Payment on long-term debt | (400.0 | ) | — | |||||
Proceeds from debt issuance, net of fees | 496.9 | — | ||||||
Stock purchase contract fees | (10.1 | ) | (10.1 | ) | ||||
Net short-term borrowings | 1,419.9 | 382.0 | ||||||
Premium paid on equity option | — | (57.3 | ) | |||||
Cash dividends on common stock | (97.6 | ) | (94.9 | ) | ||||
Effect of exchange rate changes on cash | 4.8 | 27.9 | ||||||
Other | (0.9 | ) | (1.1 | ) | ||||
Net cash provided by investing and financing activities | 405.7 | 117.5 | ||||||
Decrease in cash, cash equivalents and restricted cash | (25.6 | ) | (231.9 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 311.4 | 655.1 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 285.8 | $ | 423.2 | ||||
Free Cash Flow Computation2 | ||||||||
Operating cash flow | $ | (431.3 | ) | $ | (349.4 | ) | ||
Less: capital and software expenditures | (89.6 | ) | (106.3 | ) | ||||
Free cash flow (before dividends) | $ | (520.9 | ) | $ | (455.7 | ) | ||
Reconciliation of Cash, Cash Equivalents and Restricted Cash | ||||||||
March 30, 2019 | December 29, 2018 | |||||||
Cash and cash equivalents | $ | 281.8 | $ | 288.7 | ||||
Restricted cash included in Other current assets | 4.0 | 22.7 | ||||||
Cash, cash equivalents and restricted cash | $ | 285.8 | $ | 311.4 | ||||
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 | |||||||
2019 | 2018 | ||||||
NET SALES | |||||||
Tools & Storage | $ | 2,292.3 | $ | 2,215.8 | |||
Industrial | 555.0 | 504.2 | |||||
Security | 486.3 | 489.3 | |||||
Total | $ | 3,333.6 | $ | 3,209.3 | |||
SEGMENT PROFIT | |||||||
Tools & Storage | $ | 265.8 | $ | 301.4 | |||
Industrial | 71.0 | 80.5 | |||||
Security | 39.5 | 45.5 | |||||
Segment Profit | 376.3 | 427.4 | |||||
Corporate Overhead | (49.6 | ) | (47.3 | ) | |||
Total | $ | 326.7 | $ | 380.1 | |||
Segment Profit as a Percentage of Net Sales | |||||||
Tools & Storage | 11.6 | % | 13.6 | % | |||
Industrial | 12.8 | % | 16.0 | % | |||
Security | 8.1 | % | 9.3 | % | |||
Segment Profit | 11.3 | % | 13.3 | % | |||
Corporate Overhead | (1.5 | )% | (1.5 | )% | |||
Total | 9.8 | % | 11.8 | % |
First Quarter 2019 | |||||||||||||
Reported | Acquisition- Related & Other Charges1 | 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 | |||||||
1 | Acquisition-related and other charges relates primarily to restructuring, deal and integration costs, Security business transformation and margin enhancement initiatives, and inventory step-up amortization. | ||||||||||||
First Quarter 2018 | |||||||||||||
Reported | Acquisition- Related Charges & Other2 | Normalized3 | |||||||||||
Gross margin | $ | 1,165.7 | $ | 1.7 | $ | 1,167.4 | |||||||
% of Net Sales | 36.3 | % | 36.4 | % | |||||||||
Selling, general and administrative | 785.6 | (16.4 | ) | 769.2 | |||||||||
% of Net Sales | 24.5 | % | 24.0 | % | |||||||||
Operating margin | 380.1 | 18.1 | 398.2 | ||||||||||
% of Net Sales | 11.8 | % | 12.4 | % | |||||||||
Earnings before income taxes | 251.8 | 25.1 | 276.9 | ||||||||||
Income taxes | 81.7 | (18.0 | ) | 63.7 | |||||||||
Net earnings attributable to common shareowners | 170.6 | 43.1 | 213.7 | ||||||||||
Diluted earnings per share of common stock | $ | 1.11 | $ | 0.28 | $ | 1.39 | |||||||
2 | Acquisition-related charges and other relates primarily to facility-related charges, integration and consulting costs, and a tax charge related to the enactment of new U.S. tax legislation. | ||||||||||||
3 | The normalized 2018 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 2019 | |||||||||||||
Reported | Acquisition- Related and Other Charges1 | 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 | % | |||||||||
1 | Acquisition-related and other charges relate primarily to inventory step-up amortization, integration costs, and Security business transformation and margin enhancement activities. | ||||||||||||
First Quarter 2018 | |||||||||||||
Reported | Acquisition- Related Charges2 | Normalized3 | |||||||||||
SEGMENT PROFIT | |||||||||||||
Tools & Storage | $ | 301.4 | $ | 14.7 | $ | 316.1 | |||||||
Industrial | 80.5 | 2.0 | 82.5 | ||||||||||
Security | 45.5 | 1.3 | 46.8 | ||||||||||
Segment Profit | 427.4 | 18.0 | 445.4 | ||||||||||
Corporate Overhead | (47.3 | ) | 0.1 | (47.2 | ) | ||||||||
Total | $ | 380.1 | $ | 18.1 | $ | 398.2 | |||||||
Segment Profit as a Percentage of Net Sales | |||||||||||||
Tools & Storage | 13.6 | % | 14.3 | % | |||||||||
Industrial | 16.0 | % | 16.4 | % | |||||||||
Security | 9.3 | % | 9.6 | % | |||||||||
Segment Profit | 13.3 | % | 13.9 | % | |||||||||
Corporate Overhead | (1.5 | )% | (1.5 | )% | |||||||||
Total | 11.8 | % | 12.4 | % | |||||||||
2 | Acquisition-related charges relate primarily to facility related charges, integration and consulting costs. | ||||||||||||
3 | The normalized 2018 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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