Toolmaker says profit rose 51% in quarter

Black & Decker's bottom line helped by DeWalt sales growth

October 28, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Power-tool maker Black & Decker Corp. said profit jumped 51 percent in the third quarter, led by double-digit sales growth in its DeWalt line of professional products.

Net earnings rose to $112.5 million, or $1.37 per share, in the quarter that ended Sept. 26, from $74.4 million, or 95 cents per share, in the third quarter a year earlier, the company said yesterday. Excluding discontinued operations, the company had quarterly earnings of $111.3 million, or $1.35 per share, compared with $73.2 million, or 94 cents per share, a year earlier.

Towson-based Black & Decker, which sells its own brand of products for consumers and the DeWalt professional line, reported a 15 percent gain in sales, to a record $1.28 billion, from $1.11 billion in the third quarter of 2003.

The sales growth reflected strength in each of Black & Decker's business segments - power tools, which had a 6 percent sales gain; hardware and home improvement, with a 7 percent gain; and fastening and assembly systems, up 13 percent.

In the United States, the DeWalt line posted a double-digit sales increase for the fourth quarter in a row, with especially strong growth in DeWalt's equipment and cordless lines, the company said. At the same time, sales of Black & Decker-brand consumer products were down. The company said that retailers are waiting until closer to the holiday season to place orders, but that it expects growth in the fourth quarter.

Also yesterday, the company boosted its earnings expectations to a range of $1.53 to $1.58 a share for the quarter and from $5.33 to $5.38 for the year. It said it expects earnings of about $6 per diluted share in 2005.

"This is a company that's doing extraordinarily well right now, with a very bullish outlook," said Eric Bosshard, director of research for Cleveland-based Midwest Research.

Margin grew

For the third quarter, the company said it was able to improve its operating margin to 12.3 percent from 11.5 percent, as increased productivity, restructuring and favorable exchange rates outweighed increases in costs of raw materials, including steel.

"The company is continuing to execute quite impressively when considering the higher material costs that they're facing," Bosshard said. "They're clearly continuing to gain share driven by successful new product innovations, driving earnings gains from very good cost management."

That strategy - introducing new products such as the DeWalt cordless nailer and an automatic tape measure for consumers, as well as cutting costs - is paying off, enabling the company to improve not only earnings but cash flow to go toward acquisitions, said Nolan D. Archibald, chairman and chief executive.

For the quarter, the company had $82 million in free cash flow, which is cash flow from operations less capital expenses. For the first nine months of the year, the company had $205.2 million in free cash flow - $115 million more than during the first nine months of 2003.

"Our outstanding cash flow enabled us to acquire Pentair Tools Group, and thereby capitalize on our core strengths to create value," Archibald said.

Black & Decker completed the Pentair purchase this month for about $775 million in cash, marking the company's biggest acquisition in more than a decade. The acquisition is expected to help Black & Decker sell more power tools in the booming commercial construction industry and expand product offerings in lines where Black & Decker has low market share. It adds several big name brands to the Black & Decker lineup, including Porter-Cable, Delta and DeVilbiss Air Power.

May cut 700 jobs

As Black & Decker merges its global operations with those of the Pentair Tools Group, it plans to eliminate as many as 700 jobs, including up to 20 professional tool engineering positions at the Towson headquarters, and close two factories.

Archibald said yesterday that the company plans to continue evaluating potential acquisitions.

Shares of Black & Decker closed down 51 cents at $79.83 yesterday on the New York Stock Exchange.

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