Earnings fall 30% at Black & Decker

Sales shrink 5.7%

economy blamed

April 25, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

Black & Decker Corp., the nation's largest producer of power tools, announced a 30 percent drop in first-quarter earnings yesterday and warned that its profit for the next quarter and all of 2001 would be less than previously expected.

The Towson-based company posted net income of $33.1 million, equal to 40 cents a share, for the three months ended April 1, down from $47 million, or 54 cents a share, for last year's first quarter. The earnings per share matched analysts' estimates.

Sales totaled $979 million compared with $1.04 billion in the 2000 quarter, a dip of 5.7 percent.

The company blamed the lower earnings on a softening economy that has some of its biggest customers, including Home Depot Inc. and Lowe's Cos. Inc. cutting back on orders for such items as saws, drills and routers. Sales in the power tools and accessories segment were down 3 percent.

"This is a case of a company going up against economic headwinds in the U.S. and Europe," said James Lucas, an analyst with Janney Montgomery Scott.

Lucas said he was surprised by the amount of inventory the company has on hand. The company's inventory level has risen $34 million since the end of last year.

"They began cutting back on production the last two weeks of December, and they still have high levels of inventory," Lucas said. "This says their tools are not moving."

In a statement, Nolan D. Archibald, chairman, president and chief executive, said the company expects second-quarter earnings to be in the range of 50 cents to 60 cents per share and earnings for the full year to be between $3.10 and $3.25 a share.

"They are more optimistic than I," said R. Bentley Offut, of Offut Securities. "We have a `hold' on their stock, and we have lowered our estimate of [annual] earnings to $3 a share."

Lucas pointed out that sales in the fastening and assembly system division, which serves the automotive industry, were off 7 percent in the quarter. "That's a $500 million business and it's not doing well," he said.

The company said sales of its hardware and home improvement units, which make Kwikset and Society Brass Collection locks and door handles, were flat in the quarter. Sales of Price Pfister plumbing fixtures also declined.

Archibald said the company will be coming out with a variety of new products, including two new miter saws, pneumatic nailing products and a line of electric lawn mowers before the end of the year.

Black & Decker is counting on brisk sales of the new lines to bring its inventory down to the $844 million it had at the end of 2000.

"They are excited about these new products, but I don't know about the demand for them," Lucas said. "It's hard to bank on them."

Black & Decker said it plans to slow production at some manufacturing plants in the second quarter but not at its Easton plant, which makes a line of professional cordless power tools.

Barbara Lucas, a company spokeswoman, said the Easton plant, which had cut employment from about 1,600 workers to about 1,100 earlier this year, is again hiring.

The company expects to boost employment to about 1,300, primarily through the use of temporary workers.

"We are still operating at below capacity," she said," but we are in a growth or rebuilding mode at Easton."

Black & Decker shares rose 22 cents to $39.98 yesterday.

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