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)

                                 
    SECOND QUARTER
    GAAP 2010   One Time Charges 1   Normalized 2010 2   2009
 
                                
NET SALES
   $ 2,365.6           $ 2,365.6   $ 919.2
 
                                
COSTS AND EXPENSES 
                                
    Cost of sales
   1,596.6   (123.7 )   1,472.9   552.6
      Gross margin
   769.0   123.7   892.7   366.6
          % to Net sales
     32.5 %             37.7 %     39.9 %
 
                                
    Selling, general and administrative
   584.2   (15.7 )   568.5   255.3
          % to Net sales
     24.7 %             24.0 %     27.8 %
 
                        
       Operating margin
   184.8   139.4   324.2   111.3
          % to Net sales
     7.8 %             13.7 %     12.1 %
 
                                
    Other-net
   65.1   (11.6 )   53.5   (12.6 )
    Restructuring charges and asset impairments
   85.8   (78.4 )   7.4   9.9
 
                                
      Income from operations
   33.9   229.4   263.3   114.0
 
                                
    Interest-net
   24.6   —   24.6   15.3
 
                                
 
                                
 
                                
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
   9.3   229.4   238.7   98.7
 
                                
    Income taxes (benefit)
   (37.0 )   (69.1 )   32.1   26.7
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS
   46.3   160.3   206.6   72.0
 
                                
    Less: net earnings attributable to non-controlling interests
   0.5   —   0.5   1.2
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS
   45.8   160.3   206.1   70.8
 
                                
    Loss from discontinued operations before income taxes
   —   —   —   (2.4 )
    Income tax benefit on discontinued operations
   —   —   —   (1.1 )
 
                                
NET LOSS FROM DISCONTINUED OPERATIONS
   —   —   —   (1.3 )
 
                                
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS
   $ 45.8   $ 160.3   $ 206.1   $ 69.5
 
                                
 
                                
BASIC (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                                
    Continuing operations
   $ 0.28   $ 0.98   $ 1.26   $ 0.89
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total basic earnings per share of common stock
   $ 0.28   $ 0.98   $ 1.26   $ 0.88
 
                                
 
                            
DILUTED (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                        
    Continuing operations
   $ 0.28   $ 0.97   $ 1.24   $ 0.89
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total diluted earnings per share of common stock
   $ 0.28   $ 0.97   $ 1.24   $ 0.87
 
                                
 
                            
DIVIDENDS PER SHARE
   $ 0.33                   $ 0.32
 
                                
 
                            
AVERAGE SHARES OUTSTANDING (in thousands)
                                
    Basic
   162,847   162,847   162,847   79,327
 
                                
 
                            
    Diluted
   166,084   166,084   166,084   79,744
 
                                
 
                                

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.

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
   $ 3,627.6           $ 3,627.6   $ 1,832.2
 
                                
COSTS AND EXPENSES 
                                
    Cost of sales
   2,402.7   (165.3 )   2,237.4   1,104.5
      Gross margin
   1,224.9   165.3   1,390.2   727.7
           % to Net sales
     33.8 %             38.3 %     39.7 %
 
                                
    Selling, general and administrative
   966.7   (64.7 )   902.0   508.0
           % to Net sales
     26.6 %             24.9 %     27.7 %
 
                        
        Operating margin
   258.2   230.0   488.2   219.7
           % to Net sales
     7.1 %             13.5 %     12.0 %
 
                                
    Other-net
   130.0   (43.6 )   86.4   17.7
    Restructuring charges and asset impairments
   183.2   (168.6 )   14.6   19.0
 
                                
      (Loss) Income from operations
   (55.0 )   442.2   387.2   183.0
 
                                
    Interest-net
   42.7   —   42.7   31.6
 
                                
 
                                
 
                                
(LOSS) EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
   (97.7 )   442.2   344.5   151.4
 
                                
    Income taxes (benefit)
   (35.5 )   (103.2 )   67.7   40.4
 
                                
NET (LOSS) EARNINGS FROM CONTINUING OPERATIONS
   (62.2 )   339.0   276.8   111.0
 
                                
    Less: net earnings attributable to non-controlling interests
   0.6   —   0.6   1.9
 
                                
NET (LOSS) EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS
   (62.8 )   339.0   276.2   109.1
 
                                
    Loss from discontinued operations before income taxes
   —   —   —   (3.5 )
    Income tax benefit on discontinued operations
   —   —   —   (1.6 )
 
                                
NET LOSS FROM DISCONTINUED OPERATIONS
   —   —   —   (1.9 )
 
                                
NET (LOSS) EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS
   $ (62.8 )   $ 339.0   $ 276.2   $ 107.2
 
                                
 
                                
BASIC (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                                
    Continuing operations
   $ (0.49 )   $ 2.62   $ 2.13   $ 1.38
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total basic (loss) earnings per share of common stock
   $ (0.49 )   $ 2.62   $ 2.13   $ 1.35
 
                                
 
                            
DILUTED (LOSS) EARNINGS PER SHARE OF COMMON STOCK
                        
    Continuing operations
   $ (0.49 )   $ 2.57   $ 2.10   $ 1.37
    Discontinued operations
   —   —   —   (0.02 )
 
                                
      Total diluted (loss) earnings per share of common stock
   $ (0.49 )   $ 2.57   $ 2.10   $ 1.35
 
                                
 
                            
DIVIDENDS PER SHARE
   $ 0.66                   $ 0.64
 
                                
 
                            
AVERAGE SHARES OUTSTANDING (in thousands)
                                
    Basic
   129,163   129,163   129,163   79,220
 
                                
 
                            
    Diluted
   129,163   131,658   131,658   79,591
 
                                
 
                                

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)

                 
             
    July 3, 2010   January 2, 2010
ASSETS
 
 
           Cash and cash equivalents
  $ 1,598.4     $ 400.7  
           Accounts and notes receivable
    1,550.0       532.0  
           Inventories
    1,295.2       366.2  
           Other current assets
    428.8       113.0  
 
                
                  Total current assets
    4,872.4       1,411.9  
 
                
           Property, plant and equipment, net
    1,067.0       575.9  
           Goodwill and other intangibles, net
    7,711.2       2,594.8  
           Other assets
    345.0       186.5  
 
                
                  Total assets
  $ 13,995.6     $ 4,769.1  
 
                
 
 
 
 
 
 
LIABILITIES AND SHAREOWNERS’ EQUITY
               
           Short-term borrowings
  $ 771.3     $ 298.4  
           Accounts payable
    979.5       410.1  
           Accrued expenses
    1,323.9       483.5  
 
                
                  Total current liabilities
    3,074.7       1,192.0  
 
                
           Long-term debt
    2,318.7       1,084.7  
           Other long-term liabilities
    1,967.7       480.9  
           Stanley Black & Decker, Inc. shareowners’ equity
    6,609.2       1,986.1  
           Non-controlling interests equity
    25.3       25.4  
 
                
                  Total liabilities and equity
  $ 13,995.6     $ 4,769.1  
 
                

3

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

                                         
    SECOND QUARTER
            One-Time                
            Charges and                
    GAAP 2010   Payments 1           Normalized 2010 2   2009
OPERATING ACTIVITIES
                                    
 
                                    
    Net earnings
   $ 45.8   $ 160.3       $ 206.1   $ 69.5
    Depreciation and amortization
   92.7               92.7   48.9
    Changes in working capital
   (20.0 )               (20.0 )   29.7
    Other
   102.5   (133.1 )       (30.6 )   (80.0 )
 
                                        
    Net cash provided by operating activities
   221.0   27.2       248.2   68.1
 
                                    
INVESTING AND FINANCING ACTIVITIES
                                    
 
                                    
    Capital and software expenditures
   (35.1 )   —       (35.1 )   (25.1 )
    Business acquisitions and asset disposals
   (10.9 )   —       (10.9 )   0.3
    Cash dividends on common stock
   (54.6 )   —       (54.6 )   (25.3 )
    Other
   (27.4 )   —       (27.4 )   10.3
 
                                        
    Net cash (used in) investing and financing activities
   (128.0 )   —       (128.0 )   (39.8 )
 
                                    
Increase in Cash and Cash Equivalents
   93.0   27.2       120.2   28.3
 
                                    
Cash and Cash Equivalents, Beginning of Period
   1,505.4   —           1,505.4   128.0
 
                                        
 
                                    
Cash and Cash Equivalents, End of Period
   $ 1,598.4   $ 27.2           $ 1,625.6   $ 156.3
 
                                        
 
                                        
 
                                        
Free Cash Flow Computation 3
                                        
 
                                        
Operating Cash Inflow
   $ 221.0                   $ 248.2   $ 68.1
Less: capital and software expenditures
   (35.1 )                   (35.1 )   (25.1 )
 
                                        
Free Cash Inflow (before dividends)
   $ 185.9                   $ 213.1   $ 43.0
 
                                        

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.

4

-Page 14-

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 (loss) earnings
   $ (62.8 )   $ 339.0       $ 276.2   $ 107.2
    Depreciation and amortization
   152.4               152.4   96.9
    Changes in working capital
   (110.4 )               (110.4 )   (15.6 )
    Other
   209.1   (219.8 )       (10.7 )   (116.8 )
 
                                        
    Net cash provided by operating activities
   188.3   119.2       307.5   71.7
 
                                    
INVESTING AND FINANCING ACTIVITIES
                                    
 
                                    
    Capital and software expenditures
   (57.2 )   —       (57.2 )   (46.8 )
    Business acquisitions and asset disposals
   (18.1 )   —       (18.1 )   (5.7 )
    Cash acquired from Black & Decker
   949.4   —           949.4   —
    Cash dividends on common stock
   (88.9 )   —       (88.9 )   (50.6 )
    Other
   224.2   —       224.2   (23.9 )
 
                                        
    Net cash provided by (used in) investing and financing activities
   1,009.4   —           1,009.4   (127.0 )
 
                                    
Increase (decrease)in Cash and Cash Equivalents
   1,197.7   119.2       1,316.9   (55.3 )
 
                                    
Cash and Cash Equivalents, Beginning of Period
   400.7   —           400.7   211.6
 
                                        
 
                                    
Cash and Cash Equivalents, End of Period
   $ 1,598.4   $ 119.2           $ 1,717.6   $ 156.3
 
                                        
 
                                        
 
                                        
Free Cash Flow Computation 3
                                        
 
                                        
Operating Cash Inflow
   $ 188.3                   $ 307.5   $ 71.7
Less: capital and software expenditures
   (57.2 )                   (57.2 )   (46.8 )
 
                                        
Free Cash Inflow (before dividends)
   $ 131.1                   $ 250.3   $ 24.9
 
                                        

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 15-

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

                                     
    SECOND QUARTER
    GAAP 2010   One-Time Charges 1       Normalized 2010 2   2009
NET SALES
 
 
 
 
 
       Construction & DIY
  $ 1,322.3                 $ 1,322.3     $ 324.2  
       Security
    571.4                   571.4       390.6  
       Industrial
    471.9                   471.9       204.4  
 
                                    
         Total
  $ 2,365.6                 $ 2,365.6     $ 919.2  
 
                                    
 
                     
 
 
                     
 
SEGMENT PROFIT
                     
 
       Construction & DIY
  $ 118.1     $ 88.4         $ 206.5     $ 36.5  
       Security
    67.7       21.7           89.4       74.4  
       Industrial
    51.8       13.6           65.4       19.3  
 
                                    
         Segment Profit
    237.6       123.7           361.3       130.2  
       Corporate Overhead
    (52.8 )     15.7           (37.1 )     (18.9 )
 
                                    
         Total
  $ 184.8     $ 139.4         $ 324.2     $ 111.3  
 
                                    
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit as a Percentage of Net Sales
 
 
 
 
 
       Construction & DIY
    8.9 %                 15.6 %     11.3 %
       Security
    11.8 %                 15.6 %     19.0 %
       Industrial
    11.0 %                 13.9 %     9.4 %
 
                                    
         Segment Profit
    10.0 %                 15.3 %     14.2 %
       Corporate Overhead
    -2.2 %                 -1.6 %     -2.1 %
 
                                    
         Total
    7.8 %                 13.7 %     12.1 %
 
                                    

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.

6

-Page 16-

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
  $ 1,883.7                 $ 1,883.7     $ 627.5  
       Security
    985.3                   985.3       764.3  
       Industrial
    758.6                   758.6       440.4  
 
                                    
         Total
  $ 3,627.6                 $ 3,627.6     $ 1,832.2  
 
                                    
 
                     
 
 
                     
 
SEGMENT PROFIT
                     
 
       Construction & DIY
  $ 169.6     $ 120.3         $ 289.9     $ 65.3  
       Security
    131.8       27.0           158.8       145.0  
       Industrial
    85.1       18.0           103.1       43.8  
 
                                    
         Segment Profit
    386.5       165.3           551.8       254.1  
       Corporate Overhead
    (128.3 )     64.7           (63.6 )     (34.4 )
 
                                    
         Total
  $ 258.2     $ 230.0         $ 488.2     $ 219.7  
 
                                    
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit as a Percentage of Net Sales
 
 
 
 
 
       Construction & DIY
    9.0 %                 15.4 %     10.4 %
       Security
    13.4 %                 16.1 %     19.0 %
       Industrial
    11.2 %                 13.6 %     9.9 %
 
                                    
         Segment Profit
    10.7 %                 15.2 %     13.9 %
       Corporate Overhead
    -3.5 %                 -1.8 %     -1.9 %
 
                                    
         Total
    7.1 %                 13.5 %     12.0 %
 
                                    

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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