Stanley Black & Decker Reports 3Q 2010 Results

Stanley Black & Decker Reports 3Q 2010 Results


NEW BRITAIN, Conn., Oct 20, 2010 (BUSINESS WIRE) -- Stanley Black &
Decker (NYSE: SWK) today announced third quarter 2010 financial results.

  • 3Q'10 Pro Forma Revenues Increased 11% To $2.4 Billion; Pro Forma Organic Revenues Up 8%
  • Excluding One-Time Charges Related Primarily To The Black & Decker Merger, 3Q Diluted EPS Was $0.97
  • Diluted GAAP EPS, Including One-Time Charges, Was $0.73
  • Full Year EPS Guidance Range Increased To $3.81 - $3.91 (Excluding One-Time Charges); $3.60 - $3.70 Excluding $0.21 2Q'10 Tax-Related Benefit
  • 3Q'10 Free Cash Flow, Excluding One-Time Payments, Was $234 Million; Annual Free Cash Flow Guidance Increased To Above $700 Million
  • Merger Cost Synergy Estimate for 2010 Increased To $125 Million As Integration Progresses Ahead Of Plan

 

Net sales for the period were $2.4 billion, up 153% versus prior year due to
the inclusion of Black & Decker's results (+139%), unit volume (+7%), other
acquisitions (+9%) and currency (-2%). On a pro forma basis, legacy Black &
Decker also achieved strong unit volume growth of 10%.

The gross margin rate, excluding one-time charges, was 36.9%, relatively flat
to the pro forma 3Q'09 rate. The impact of modest commodity inflation,
foreign exchange and unfavorable mix was partially offset by productivity
projects and synergy realization.

Working capital turns for the quarter were 4.6. 3Q'10 free cash flow was $234
million, excluding $81 million of merger-related one-time payments.

SG&A expenses, excluding one-time charges, were 24.3% of sales, down from
a 3Q'09 combined company pro forma level of 25.3% as a result of volume leverage
and cost synergy realization.

Stanley Black & Decker's President and CEO, John F. Lundgren commented,
"We are very pleased with the organic revenue growth achieved across many of our
businesses in the third quarter, which was driven by the launch of a number of
successful new products and the impact of our commitment to outstanding customer
service. The integration of Stanley Black & Decker is proceeding ahead of
plan and based on our execution and experience to date, we now expect to realize
$125 million in cost synergies in 2010, $35 million more than originally
forecast. In addition, as we continue to analyze the revenue synergy potential
for the combined company we have reason to believe that execution of these
initiatives will drive significant additional top-line growth in the coming
years."

3Q'10 Segment Results

(Excludes One-Time Charges)

 

                         
    3Q '10   Versus 3Q
'09
($ millions)   Segment   Segment
    Sales   Profit  

Profit
Rate

  Sales   Profit  

Profit
Rate

 

                         
CDIY   $1,289   $170   13.2%   +294%   +251%   -160 Bps
                         
Security   $563   $97   17.2%   +40%   +16%   -360 Bps
                         
Industrial   $517   $80   15.5%   +152%   +327%   +630 Bps


The company has included below a pro forma discussion comparing 3Q'10 to
prior year for the legacy Black & Decker businesses in order to assist with
the understanding of the company on a combined basis:

 

  • Within CDIY, every region of the world
    achieved revenue and profit growth, led by Latin America and Asia. Organic sales
    for legacy CDIY grew 8%. Price and currency each had a negative 1%
    impact. An expanded global distribution network as well as continued
    success of Bostitch branded hand tools helped to drive growth. Legacy Black
    & Decker Power Tools & Accessories organic sales increased approximately
    7% with an 8% increase in unit volume, a 1% decrease due to currency and a
    negative 1% impact due to price. In Professional Power Tools & Accessories,
    sales strength was derived from emerging market growth as well as continued
    success with the compact cordless lithium ion product line introduced late last
    year. Consumer Products Group sales rose in the high single digits, also boosted
    by emerging market growth and strong new product performance. Excluding one-time
    charges, overall segment profit was 13.2%, up from a pro forma 9.6% in 3Q'09.
  • Net sales in Security, excluding the legacy
    Black & Decker Hardware & Home Improvement business, increased 6% versus
    prior year. Acquisition growth (+9%) was partially offset by a 3% decline in
    unit volume. The Convergent Security business grew approximately 1% organically
    as recurring monthly revenue rose in the mid-single digits while installation
    volumes were down marginally versus prior year. The ADT France business (now
    known as Stanley Solutions de Sècuritè, or SSDS) turned profitable in the
    quarter as the integration progressed ahead of schedule. Mechanical Access sales
    were down 5% as a large U.S. retailer's inventory correction and continued weak
    U.S. commercial construction more than offset solid growth at Access
    Technologies. Revenues from the legacy Black & Decker Hardware & Home
    Improvement segment (excluding Price Pfister) increased approximately 4% from
    the prior year due in part to continued success with Kwikset SmartKey(R) which
    more than offset the effect of residential hardware inventory destocking.
    Excluding acquisitions, the segment profit rate was 18.0%.
  • Legacy Stanley Industrial sales grew 23%.
    Unit volume rose 26%, driven primarily by end user demand and secondarily by
    continued global customer supply chain restocking. Unit volume gains in the
    Americas outpaced those in Europe with the Industrial and Automotive Repair
    business posting strong gains as demand for tools and storage continued to
    improve. Currency had a negative 4% impact, while price had a positive 1%
    impact. The legacy Black & Decker Engineered Fastening business also had a
    strong quarter with sales growth of approximately 30% driven by higher than
    expected global vehicle production in the Americas and Japan. Unit volume
    increased 28%, while price had a negative 1% impact and acquisitions added 3%.
    Overall segment profit, excluding one-time charges, improved 6.3 points versus
    prior year to 15.5%, attributable to both the inclusion of Engineered Fastening
    (+160 bps), CRC-Evans (+70 bps) and operating leverage in the legacy Stanley
    business.

 

Executive Vice President and Chief Operating Officer, James M. Loree,
commented, "Our second full quarter as a combined company was characterized by
organizational agility and global teamwork, thus enabling accelerated cost
synergy realization and, as importantly, a strong organic growth performance. We
are harnessing the power of our new global footprint to pursue aggressive growth
strategies in higher growth, developing regions such as Latin America and Asia.
At the same time, we are introducing exciting and innovative new products across
the globe in our major businesses. In addition, while we continue to identify
and evaluate significant revenue synergy opportunities for funding and execution
in 2011 and beyond, our business and regional teams have already begun to
implement quick hits which, although difficult to quantify, clearly contributed
to strong 3Q organic growth. This array of top line drivers along with our early
integration wins has served to mobilize the organization around the theme of
profitable growth which, in turn, has accelerated the cultural assimilation
which is so important to a successful integration."

One-Time Charges

A non-cash inventory step-up charge of $13 million along with $7 million of
facility closure-related charges were reported in gross margin during the
quarter. One-time costs recorded in SG&A and Other, net were both $8 million
for integration-related consulting fees and deal costs, respectively.
Merger-related restructuring charges and asset impairments, primarily associated
with planned facility closures and the severance of employees, totaled $22
million in 3Q'10.

2010 Outlook

The company is increasing its 2010 full year EPS guidance from the prior
range of $3.35 - $3.55 to a range of $3.60 - $3.70, which excludes the $0.21
positive 2Q tax-related benefit and the impact of one-time charges.

Free cash flow, excluding one-time charges and payments, is now expected to
exceed $700 million for 2010, an increase from previous commentary stating that
the number would exceed $600 million.

 

  • Due to the integration, the company expects
    to realize $125 million in cost synergies in 2010, as opposed to the previous
    estimate of $90 million.
  • The company believes 2H'10 net organic sales,
    excluding currency, will increase approximately 5% from 2009 pro forma company
    level, thus implying a modestly positive organic growth outlook in 4Q'10.
  • In-line with historical trends, 4Q'10 gross
    margins are expected to decline 50-80 basis points versus 3Q'10. There will be
    mild headwinds during the quarter from lower absorption and currency.

 

Donald Allan Jr, Senior Vice President and CFO commented, "We were pleased to
be able to raise our full year 2010 EPS guidance range based primarily on our
ability to realize certain cost synergies faster than anticipated. While it is
likely we will exceed our previously announced target of $350 million in cost
synergies, we are in the process of refining this estimate as well as the extent
to which such outperformance will be reinvested in growth synergy projects.
Thus, it is our intent to provide an updated estimate in connection with our
4Q'10 earnings release in January. Our forecast for top line growth of 5% in the
second half of 2010 takes into account that the sales momentum generated by our
new products in the market for the remainder of the year will be partially
offset by normal fourth quarter seasonality within our CDIY business in
particular and tougher pro forma prior year comparisons."

The company will host a conference call with investors today, Wednesday,
October 20th, at 10:00am ET. A slide presentation which will accompany the call
will be available at www.stanleyblackanddecker.com
and will remain available after the call.

The call will be accessible by telephone at (877) 242-3653 and from outside
the U.S. at (763) 416-6917; also, via the Internet at www.stanleyblackanddecker.com
To listen, please go to the web site at least fifteen minutes early to register,
download and install any necessary audio software. A replay will also be
available two hours after the call and can be accessed at (800) 642-1687 or
(706) 645-9291 by entering the conference identification number 15744687.
The replay will also be available as a podcast within 24 hours and can be
accessed on our website and via iTunes.

Stanley Black & Decker, an S&P 500 company, is a diversified global
provider of hand tools, power tools and related accessories, mechanical access
solutions and electronic security solutions, engineered fastening systems, and
more. Learn more at www.stanleyblackanddecker.com

Organic sales growth is defined as total sales growth less sales of companies
acquired in the past twelve months and less foreign currency impacts. Operating
margin is defined as sales less cost of sales less SG&A. Management uses
operating margin and its percentage of net sales as key measures to assess the
performance of the company as a whole, as well as the related measures at the
segment level. The normalized statement of operations and business segment
information, as reconciled to GAAP on pages 8-9 and 13-14, 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.

Free cash flow is defined as cash flow from operations less capital and
software expenditures. Management considers free cash flow an important
indicator 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 to the associated GAAP
measures on pages 11 and 12, are considered meaningful pro forma metrics to aid
the understanding of the company's cash flow performance aside from the material
impact of the Black & Decker merger-related payments and charges.

The term "pro forma" is used to describe the company's results as if Black
& Decker had been included in 2009, rather than from the March 12, 2010
merger date. Such pro forma amounts and measures are provided to facilitate
understanding the company's performance due to the significance of the merger
with Black & Decker. These pro forma measures do not include the effects of
any of the other acquisitions such as CRC Evans acquired in July 2010.

CAUTIONARY STATEMENTS

Under the Private Securities Litigation Reform Act of 1995

Statements in this press release that are not historical, including but not
limited to those regarding the Company's ability to: (i) achieve full year 2010
EPS, excluding one-time charges, in the range of $3.81-$3.91, and excluding the
$0.21 positive 2Q tax related benefit, in the range of $3.60-$3.70; (ii) achieve
or exceed the $350 million in cost synergies previously provided with respect to
the combination with Black & Decker, $125 million of which will be
recognized in 2010; (iii) drive significant additional top-line growth in the
coming years; (iv) generate free cash flow, excluding one-time charges and
payments, for 2010 to exceed $700 million; and (v) achieve, in the second half
of 2010, 5% growth of net organic sales, excluding currency, from 2009 pro forma
company levels; (vi) limit gross margin decline in the 4th quarter of
2010 in the range of 50-80 basis points; are "forward looking statements" and
subject to risk and uncertainty.

The Company's ability to deliver the Results as described above is based on
current expectations and involves inherent risks and uncertainties, including
factors listed below and other factors that could delay, divert, or change any
of them, and could cause actual outcomes and results to differ materially from
current expectations. In addition to the risks, uncertainties and other factors
discussed in this press release, the risks, uncertainties and other factors that
could cause or contribute to actual results differing materially from those
expressed or implied in the forward looking statements include, without
limitation, those set forth under Item 1A Risk Factors of the Company's 2009
Annual Report on Form 10-K and any material changes thereto set forth in any
subsequent Quarterly Reports on Form 10-Q, or those contained in the Company's
other filings with the Securities and Exchange Commission, and those set forth
below.

The Company's ability to deliver the Results is dependent, or based, upon:
(i) the Company's ability to execute integration and achieve the synergies,
capitalize on growth opportunities and achieve the anticipated results of the
combination with Black & Decker; (ii) the Company's success with its
strategic actions, new product development and launch, and acquisitions; (iii)
generating net organic sales increase of 5%, from 2009 pro-forma company levels
during 2H'10; (iv) gross margin decline to be in the range of 50-80 basis
points; (v) successful identification, completion and integration of
acquisitions, as well integration of existing businesses; (vi) the continued
acceptance of technologies used in the Company's products and services; (vii)
the Company's ability to manage existing Sonitrol franchisee and Mac Tools
distributor relationships; (viii) the Company's ability to minimize costs
associated with any sale or discontinuance of a business or product line,
including any severance, restructuring, legal or other costs; (ix) the proceeds
realized with respect to any business or product line disposals; (x) the extent
of any asset impairments with respect to any businesses or product lines that
are sold or discontinued; (xi) the success of the Company's efforts to manage
freight costs, steel and other commodity costs; (xii) the Company's ability to
sustain or increase prices in order to, among other things, offset or mitigate
the impact of steel, freight, energy, non-ferrous commodity and other commodity
costs and any inflation increases; (xiii) the Company's ability to generate free
cash flow and maintain a strong debt to capital ratio; (xiv) the Company's
ability to identify and effectively execute productivity improvements and cost
reductions, while minimizing any associated restructuring charges; (xv) the
Company's ability to obtain favorable settlement of routine tax audits; (xvi)
the ability of the Company to generate earnings sufficient to realize future
income tax benefits during periods when temporary differences become deductible;
(xvii) the continued ability of the Company to access credit markets under
satisfactory terms;(xviii) the Company's ability to negotiate satisfactory
payment terms under which the Company buys and sells goods, services, materials
and products; and (xix) the Company's ability to successfully develop, market
and achieve sales from new products and services.

The Company's ability to deliver the Results is also dependent upon: (i) the
success of the Company's marketing and sales efforts, including the ability to
develop and market new products; (ii) the ability of the Company to maintain or
improve production rates in the Company's manufacturing facilities, respond to
significant changes in product demand and fulfill demand for new and existing
products; (iii) the Company's ability to continue improvements in working
capital through effective management of accounts receivable and inventory
levels; (iv) the ability to continue successfully managing and defending claims
and litigation; (v) the success of the Company's efforts to mitigate any cost
increases generated by, for example, increases in the cost of energy or
significant Chinese Renminbi or other currency appreciation; (vi) the geographic
distribution of the Company's earnings; and (vii) the commitment to and success
of the Stanley Fulfillment System.

The Company's ability to achieve the Results will also be affected by
external factors. These external factors include: pricing pressure and other
changes within competitive markets; the continued consolidation of customers
particularly in consumer channels; inventory management pressures on the
Company's customers; the impact the tightened credit markets may have on the
Company or its customers or suppliers; the extent to which the Company has to
write off accounts receivable or assets or experiences supply chain disruptions
in connection with bankruptcy filings by customers or suppliers; increasing
competition; changes in laws, regulations and policies that affect the Company,
including, but not limited to trade, monetary, tax and fiscal policies and laws;
the timing and extent of any inflation or deflation in 2010; currency exchange
fluctuations; the impact of dollar/foreign currency exchange and interest rates
on the competitiveness of products and the Company's debt program; the strength
of the U.S. and European economies; the extent to which world-wide markets
associated with homebuilding and remodeling stabilize and rebound; the impact of
events that cause or may cause disruption in the Company's manufacturing,
distribution and sales networks such as war, terrorist activities, and political
unrest; and recessionary or expansive trends in the economies of the world in
which the Company operates. The Company undertakes no obligation to publicly
update or revise any forward-looking statements to reflect events or
circumstances that may arise after the date hereof.

 

STANLEY BLACK &
DECKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited, Millions of
Dollars Except Per Share Amounts)
                     
        THIRD
QUARTER
        GAAP
2010
 

One-Time
Charges1

 

Normalized
20102

  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.
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
Charges1

 

Normalized
20102

  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.
STANLEY BLACK &
DECKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited, Millions of
Dollars)
           
           
      October 2,   January 2,
      2010   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
STANLEY BLACK &
DECKER INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW
ACTIVITY
(Unaudited, Millions of
Dollars)
                         
            THIRD
QUARTER
                One-Time        
                Charges and   Normalized    
            GAAP
2010
  Payments1  

20102

  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, 3

  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. 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.
STANLEY BLACK &
DECKER INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW
ACTIVITY
(Unaudited, Millions of
Dollars)
                       
          YEAR TO
DATE
              One-Time        
              Charges
and
  Normalized    
          GAAP
2010
  Payments1  

20102

  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, 3

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

One-Time

 

Normalized

   
          2010  

Charges1

 

20102

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

One-Time

 

Normalized

   
          2010  

Charges1

 

20102

  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. 

 

SOURCE
Stanley Black & Decker
Kate White, 860-827-3833
Director, Investor Relations
kate [dot] white [at] swkbdk [dot] com