Black & Decker Corp. posts a stellar first quarter

Head of power tools Galli quits

company has $39 million profit


April 22, 1999|By William Patalon III | William Patalon III,SUN STAFF

A stunning first-quarter profit report posted by Black & Decker Corp. yesterday was virtually overshadowed by the resignation of Joseph Galli, the charismatic president of the company's power tools business, and a man many viewed as the eventual successor to Nolan D. Archibald, Black & Decker's chairman, president and chief executive officer.

The revelation was buried in the company's first-quarter earnings report, released well after the stock market's close.

The company said Galli "resigned to pursue other interests." Replacing him will be Paul F. McBride, 43, who joins the company after 21 years at General Electric Co. Galli's resignation was surprising, will likely be viewed as a big loss, and had a bizarre undertone because his successor -- an executive recruited from outside -- was already in position to take Galli's spot.

"It is definitely a negative in my opinion. [Galli] really brought a brand-new perspective," said Ivy Zelman, an analyst who follows the company for Credit Suisse First Boston. "It was definitely a timing thing with Galli, with Nolan not wanting to retire and Galli not wanting to wait around. A conflict was brewing."

Zelman found it particularly striking that -- considering the time it takes to recruit a high-level executive -- McBride was in place and ready to step in just as Galli announced his resignation. Indeed, Zelman believes Galli was forced out.

In a statement, Archibald said Galli "has expressed an interest in advancing his management career to a higher level, and we have agreed it makes sense for him to pursue this goal outside of Black & Decker."

Company spokeswoman Barbara B. Lucas said Galli "wanted to be CEO sooner rather than later," but declined to elaborate on whatever discussions Archibald and Galli might have had. However, she noted that strong managers remain in place to head the power-tools subsidiaries. Several were promoted yesterday.

Analysts have lauded Galli, 41, for his energy, creativity and contributions to the company's resurgence, which was scripted by Archibald, 55, and several hoped Galli would one day lead Black & Decker.

Galli did not respond to a request for an interview, placed through a family member.

Zelman, the analyst, worried that the management shake-up might cast a pall over a profit report of a company "that's absolutely on fire."

Net earnings for the quarter were $39.2 million, or 44 cents per share, compared with a net loss of $971.4 million, or $10.21 per share, for the same three-month period a year ago.

Last year's operating numbers were obscured by writeoffs, without which Black & Decker would have earned $28.6 million, or 29 cents per share.

Even so, Black & Decker's first-quarter, per-share earnings number beat analysts' estimates by 9 cents per share -- or about 26 percent.

Sales from continuing operations rose 11 percent to $978.5 million.

Pub Date: 4/22/99

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