Financial pinch felt at Black & Decker

Toolmaker suffers earnings decrease, will cut 400 jobs

January 26, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Black & Decker Corp. said yesterday that the softening U.S. economy pushed its profits down in the fourth quarter and is forcing the company to eliminate 400 jobs.

The Towson-based toolmaker earned $52.5 million, or 64 cents a share, in the three months that ended Dec. 31, down 54 percent from the income of $115 million, or $1.31 a share, it made in the last quarter of 1999.

The results included a charge of $39.1 million related to the company's decision to cut positions and transfer some production operations from the United Kingdom to plants in Asia that operate more cheaply. Without the charge, earnings per share would have met analysts' expectations of 98 cents.

Sales for the quarter dropped 6 percent to $1.3 billion.

"The fourth-quarter sales decline was primarily in North America, where sales decreased in the mid-single digits due to a significant slowing in the U.S. economy and the decision of several of our major customers to manage their inventories by delaying or reducing reorders," Nolan D. Archibald, chairman, president and chief executive officer, said in a conference call.

For the year, profit declined 6 percent to $282 million, or $3.34 a share, and sales rose 9 percent to $4.56 billion.

The company said that "a large majority" of the 400 job cuts will occur in the United Kingdom. However, about 40 jobs could be cut in Towson because the company has decided to fold its accessory division - which handles items such as sandpaper and drill bits - into the DeWalt professional business unit and the Black & Decker consumer unit.

The reorganization plan is expected to save the company about $20 million next year, Archibald said.

"It was obviously a disappointing quarter, but they're operating in a very challenging market right now and I think they did as good a job as any company could, considering how tough the end market is now," said Midwest Research analyst Eric Bosshard, adding that he thinks the restructuring makes sense.

"I'm always glad to see a company be proactive in trying to improve its cost structure," he said.

Manufacturers in general are facing hard times. The National Association of Purchasing Management's factory index dropped from 47.7 in November to 43.7 in December, the fifth consecutive monthly decline.

Last week, Atlanta-based Home Depot, one of the largest sellers of Black & Decker products, also blamed the weak economy when it warned that its fourth-quarter earnings per share would be about 20 cents, down about 20 percent from the fourth quarter of 1999.

Lowe's Cos. Inc., the world's second-largest home improvement retailer behind Home Depot, also warned of slower-than-expected sales for the quarter.

"The issues are primarily external here," Bosshard said of Black & Decker's performance. "It's not Black & Decker execution."

Black & Decker shares were almost unchanged yesterday, closing down 6 cents at $41.88.

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