Stanley Black & Decker Reports 2Q 2019 Results
NEW BRITAIN, Conn., July 23, 2019 /PRNewswire/ -- Stanley Black & Decker (NYSE: SWK) today announced second quarter 2019 financial results.
-- 2Q'19 Revenues Totaled $3.8 Billion, Up 3% Versus Prior Year, Driven By
Organic Growth And Acquisitions
-- Operating Margin Rate Was 13.8%; Excluding Charges, Operating Margin
Rate Expanded 60 Basis Points Versus Prior Year To 14.8% As Price
Actions And Cost Control More Than Offset $110 Million Of Tariff,
Commodity And Currency Headwinds
-- 2Q'19 Diluted GAAP EPS Was $2.37; Excluding Charges, 2Q'19 Diluted EPS
Was $2.66
-- Reiterating Full Year Diluted GAAP EPS Guidance Range Of $7.50 - $7.70,
Adjusted EPS Guidance Range Of $8.50 - $8.70 And Free Cash Flow
Conversion Estimate Of Approximately 85% - 90%
2Q'19 Key Points:
-- Net sales for the quarter were $3.8 billion, up 3% versus prior year, as
positive contributions from acquisitions (+3%), price (+2%) and volume
(+1%) more than offset currency (-3%).
-- The gross margin rate for the quarter was 34.6%. Excluding charges, rate
for the quarter was 34.8%, down 80 basis points versus prior year as
volume leverage, productivity and price were more than offset by
commodity inflation, foreign exchange and tariffs.
-- SG&A expenses were 20.8% of sales. Excluding charges, SG&A expenses were
20.1% of sales compared to 21.4% in 2Q'18, reflecting continued
disciplined cost management, including savings from the 4Q'18 cost
reduction program.
-- Other, net totaled $62.2 million for the quarter. Excluding charges,
Other, net totaled $57.7 million compared to $32.2 million in 2Q'18 due
to a favorable resolution of a prior claim in 2018.
-- The tax rate was 12.8%. Excluding charges, the tax rate was 11.6% versus
7.0% in 2Q'18.
-- Average diluted shares outstanding for the quarter were 150.4 million
versus 152.5 million a year ago, primarily reflecting share repurchases
executed during 2018.
-- Working capital turns for the quarter were 6.7, up 0.1 turns versus
prior year.
Stanley Black & Decker's President and CEO, James M. Loree, commented, "We achieved a strong second quarter financial performance which included above-market organic growth led by Tools & Storage, 60 basis points of operating margin rate expansion, and earnings per share growth, while successfully overcoming $110 million in external pre-tax margin headwinds.
"We are well-positioned to continue to deliver share gains from our growth catalysts, including the ongoing Craftsman brand rollout, Lenox and Irwin revenue synergies, our breakthrough innovations - including FlexVolt, Atomic and Xtreme - e-commerce and emerging markets. The organization is also focused on margin expansion as we control costs, execute pricing actions and capture the $300 - $500 million three-year savings associated with the margin resiliency initiative.
"Our seasoned management team is operating with agility and leveraging our SFS 2.0 operating system to successfully navigate a dynamic operating environment, and pursue our vision: to become known as one of the world's leading innovators, deliver top-quartile financial performance and elevate our commitment to corporate social responsibility."
2Q'19 Segment Results
---
($ in M)
---
Sales Profit Charges
(1)
Profit
Profit Profi
t Rate
Ex
-Charges
Rate Ex-
Charges
(1) (1)
---
Tools & Storage $2,626 $440.0 $7.5 $447.5 16.8% 17.0%
---
Industrial $650 $95.1 $11.3 $106.4 14.6% 16.4%
---
Security $485 $38.0 $16.3 $54.3 7.8% 11.2%
---
(1) See Merger And Acquisition (M&A) Related And Other Charges On Page 5
-- Tools & Storage net sales increased 2% versus 2Q'18 as volume (+3%) and
price (+2%) were partially offset by currency (-3%). The 5% organic
growth for the quarter was led by North America (+7%) and Europe (+5%),
more than offsetting a decline in emerging markets (-2%). North America
organic growth was driven by the rollout of the Craftsman brand, new
product innovation, including the continued expansion of the DEWALT
cordless power tool system, and price realization which was partially
offset by a modest decline in industrial-focused businesses. Europe
delivered share gains supported by continued successful commercial
actions and new product introductions. Emerging markets realized the
benefits from price, new product launches and e-commerce expansion,
which was more than offset by a three-point impact from market
contractions in Argentina, Mexico and Turkey. The Tools & Storage
segment profit rate, excluding charges, was 17.0%, an 80 basis point
expansion from the 2Q'18 rate of 16.2%, as the benefits from volume
leverage, pricing and cost control offset the impact from currency,
commodity inflation and tariffs.
-- Industrial net sales increased 13% versus 2Q'18 as the IES Attachments
acquisition (+18%) was partially offset by volume (-3%) and currency
(-2%). Engineered Fastening organic revenues were down 4% as automotive
and industrial market declines were partially offset by continued
fastener penetration gains. Infrastructure organic revenues were up 2%
primarily due to stronger onshore pipeline project and inspection
activity in Oil & Gas, partially offset by lower Hydraulic Tools volumes
which were impacted by a difficult scrap steel market. The Industrial
segment profit rate, excluding charges, was 16.4%, down from the 2Q'18
rate of 16.8%, as productivity gains and cost control were more than
offset by the impact from lower Engineered Fastening volume and
commodity inflation.
-- Security net sales declined 3% versus 2Q'18 as bolt-on commercial
electronic security acquisitions (+2%) and price (+1%) were more than
offset by currency (-3%), lower volume (-2%) and the Sargent & Greenleaf
divestiture (-1%). North America organic growth was flat as higher
volumes within healthcare were offset by lower automatic doors
installations. Europe was down 2% organically as growth within France
was offset by adverse market conditions in Sweden and the UK. The
overall Security segment profit rate, excluding charges, was 11.2%,
which was up 120 basis points versus the prior year, as a focus on cost
containment was partially offset by investments to support the business
transformation in commercial electronic security.
Donald Allan Jr., Executive Vice President and CFO, commented, "Security continued to demonstrate forward progress on its business transformation, delivering operating margin rate and dollar expansion for the third consecutive quarter with an intense focus on operational efficiency and cost control. We are encouraged by some early signs that point to the value creation potential of our targeted commercial investments in electronic security and we expect they will begin to positively impact organic growth in the second half of 2019 and beyond."
Updated 2019 Outlook
Management is reiterating its 2019 EPS outlook of $7.50 - $7.70 on a GAAP basis and $8.50 - $8.70 on an adjusted basis and its free cash flow conversion estimate of approximately 85% - 90%.
The following reflects the key assumption changes to the Company's prior EPS outlook:
-- An incremental $50 million in external headwinds primarily due to the
increase of 'List 3' China tariffs to 25% net of somewhat lower
commodity inflation expectations
-- A modestly reduced expectation for organic volume growth which reflects
a slower market outlook for industrial & emerging markets due to global
macro conditions
-- Offsetting these impacts are incremental pricing actions, benefits from
the margin resiliency initiatives and the strong operational
out-performance during the second quarter
Allan continued, "Stanley Black & Decker's outlook for 2019 includes above-market organic growth of 4%, adjusted earnings per share growth of 4% - 7% and strong free cash flow generation against an anticipated $390 million in external headwinds. The organization is focused on delivering earnings growth and margin expansion in 2019 and beyond by successfully leveraging our continued strong organic growth, pricing actions, $250 million cost reduction program and margin resiliency initiative to successfully navigate a dynamic operating environment.
"We believe the Company is well-positioned for sustained above-market organic growth with operating leverage, strong free cash flow conversion and top-quartile shareholder returns over the long-term."
The difference between 2019 GAAP and Adjusted EPS guidance is $1.00, consisting of acquisition-related and other charges. These forecasted charges primarily relate to deal and integration costs, restructuring, Security business transformation and margin enhancement initiatives, and inventory step-up amortization.
Merger And Acquisition ("M&A") Related And Other Charges
Total pre-tax M&A related and other charges in 2Q'19 were $32.9 million, primarily related to restructuring, deal and integration costs, as well as Security business transformation & margin enhancement initiatives. Gross margin included $10.7 million of these charges while SG&A included $26.6 million. Other, net and Restructuring included $4.5 million and $8.3 million of these charges, respectively. M&A related and other charges in 2Q'19 also included a pre-tax gain of $17.2 million related to the sale of Sargent & Greenleaf.
Share of net earnings of equity method investment included $10.2 million of charges related to an inventory step-up fair value adjustment.
The Company will host a conference call with investors today, July 23, 2019, at 8:00 am 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 and an accompanying slide presentation will be available through a live webcast on the "Investors" section of Stanley Black & Decker's website, www.stanleyblackanddecker.com under the subheading "News & Events." The event can also be accessed by telephone within the U.S. at (877) 930-8285, from outside the U.S. at +1 (253) 336-8297. Please use the conference identification number 2568494. A replay will also be available two hours after the call and can be accessed on the "Investors" section of Stanley Black & Decker's website, or at (855) 859-2056 / +1 (404) 537-3406 using the passcode 2568494. 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, electronic security solutions, healthcare solutions, engineered fastening systems, and more. Learn more at www.stanleyblackanddecker.com.
Investor Contacts:
Dennis Lange
Vice President, Investor Relations
dennis.lange@sbdinc.com
(860) 827-3833
Cort Kaufman
Director, Investor Relations
cort.kaufman@sbdinc.com
(860) 515-2741
Media Contacts:
Shannon Lapierre
Vice President, Communications & Public Relations
shannon.lapierre@sbdinc.com
(860) 827-3575
Organic sales growth is defined as total sales growth less the sales of companies acquired and divested in the past twelve months and any foreign currency impacts. Operating margin is defined as sales less cost of sales and selling, general and administrative expenses. 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. 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. Free cash flow conversion is defined as free cash flow divided by net income. The normalized statement of operations and business segment information, as reconciled to GAAP on pages 12 to 15, is considered relevant to aid analysis of the Company's margin and earnings results aside from the material impact of the M&A related and other charges.
CAUTIONARY STATEMENTS
Under the Private Securities Litigation
Reform Act of 1995
This document contains "forward-
looking statements" within the meaning
of Section 27A of the Securities Act
of 1933, as amended, and Section 21E
of the Securities Exchange Act of
1934, as amended. All statements other
than statements of historical fact are
"forward-looking statements" for
purposes of federal and state
securities laws, including any
projections or guidance of earnings,
revenue or other financial items; any
statements of the plans, strategies
and objectives of management for
future operations; any statements
concerning proposed new products,
services or developments; any
statements regarding future economic
conditions or performance; any
statements of belief; and any
statements of assumptions underlying
any of the foregoing. Forward-looking
statements may include, among other,
the words "may," "will," "estimate,"
"intend," "continue," "believe,"
"expect," "anticipate" or any other
similar words.
Although the Company believes that the
expectations reflected in any of its
forward-looking statements are
reasonable, actual results could
differ materially from those projected
or assumed in any of its forward-
looking statements. The Company's
future financial condition and results
of operations, as well as any forward-
looking statements, are subject to
change and to inherent risks and
uncertainties, such as those disclosed
or incorporated by reference in the
Company's filings with the Securities
and Exchange Commission.
Important factors that could cause the
Company's actual results, performance
and achievements, or industry results
to differ materially from estimates or
projections contained in its forward-
looking statements include, among
others, the following: (i)
successfully developing, marketing and
achieving sales from new products and
services and the continued acceptance
of current products and services; (ii)
macroeconomic factors, including
global and regional business
conditions (such as Brexit), commodity
prices, inflation, and currency
exchange rates; (iii) laws,
regulations and governmental policies
affecting the Company's activities in
the countries where it does business,
including those related to tariffs,
taxation, and trade controls,
including section 301 tariffs and
section 232 steel and aluminum
tariffs; (iv) the economic environment
of emerging markets, particularly
Latin America, Russia, China and
Turkey; (v) realizing the anticipated
benefits of mergers, acquisitions,
joint ventures, strategic alliances or
divestitures; (vi) pricing pressure
and other changes within competitive
markets; (vii) availability and price
of raw materials, component parts,
freight, energy, labor and sourced
finished goods; (viii) the impact the
tightened credit markets may have on
the Company or its customers or
suppliers; (ix) 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; (x) the Company's
ability to identify and effectively
execute productivity improvements and
cost reductions; (xi) potential
business and distribution disruptions,
including those related to physical
security threats, information
technology or cyber-attacks,
epidemics, sanctions or natural
disasters; (xii) the continued
consolidation of customers,
particularly in consumer channels;
(xiii) managing franchisee
relationships; (xiv) the impact of
poor weather conditions; (xv)
maintaining or improving production
rates in the Company's manufacturing
facilities, responding to significant
changes in product demand and
fulfilling demand for new and existing
products; (xvi) changes in the
competitive landscape in the Company's
markets; (xvii) the Company's non-
U.S. operations, including sales to
non-U.S. customers; (xviii) the
impact from demand changes within
world-wide markets associated with
homebuilding and remodeling; (xix)
potential adverse developments in new
or pending litigation and/or
government investigations; (xx)
changes in the Company's ability to
obtain debt on commercially reasonable
terms and at competitive rates; (xxi)
substantial pension and other
postretirement benefit obligations;
(xxii) potential environmental
liabilities; (xxiii) work stoppages or
other labor disruptions; and (xxiv)
changes in accounting estimates.
Additional factors that could cause
actual results to differ materially
from forward-looking statements are
set forth in the Annual Report on Form
10-K and in the Quarterly Report on
Form 10-Q, including under the
heading "Risk Factors," "Management's
Discussion and Analysis of Financial
Condition and Results of Operations"
and in the Consolidated Financial
Statements and the related Notes.
Forward-looking statements in this
press release speak only as of the
date hereof, and forward-looking
statements in documents attached that
are incorporated by reference speak
only as of the date of those
documents. The Company does not
undertake any obligation to update or
release any revisions to any forward-
looking statement or to report any
events or circumstances after the date
hereof or to reflect the occurrence of
unanticipated events, except as
required by law.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
SECOND QUARTER YEAR-TO-DATE
2019 2018 2019 2018
NET SALES $3,761.3 $3,643.6 $7,094.9 $6,852.9
COSTS AND EXPENSES
Cost of sales 2,461.5 2,356.5 4,689.5 4,400.1
Gross margin 1,299.8 1,287.1 2,405.4 2,452.8
% of Net Sales 34.6% 35.3% 33.9% 35.8%
Selling, general and administrative 782.3 805.8 1,561.2 1,591.4
% of Net Sales 20.8% 22.1% 22.0% 23.2%
Operating margin 517.5 481.3 844.2 861.4
% of Net Sales 13.8% 13.2% 11.9% 12.6%
Other - net 62.2 119.3 127.6 177.3
(Gain) loss on sales of businesses (17.2) 0.8 (17.2) 0.8
Restructuring charges 8.5 13.4 17.2 36.3
Income from operations 464.0 347.8 716.6 647.0
Interest - net 60.3 53.4 118.1 100.8
EARNINGS BEFORE INCOME TAXES AND EQUITY INTEREST 403.7 294.4 598.5 546.2
Income taxes 51.6 1.0 76.3 82.7
NET EARNINGS BEFORE EQUITY INTEREST 352.1 293.4 522.2 463.5
Share of net earnings of equity method investment 5.3 5.6 -
NET EARNINGS 357.4 293.4 527.8 463.5
Less: net gain (loss) attributable to non-controlling
interests 1.1 (0.2) 1.6 (0.7)
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS $356.3 $293.6 $526.2 $464.2
EARNINGS PER SHARE OF COMMON STOCK
Basic $2.41 $1.96 $3.56 $3.09
Diluted $2.37 $1.93 $3.50 $3.03
DIVIDENDS PER SHARE $0.66 $0.63 $1.32 $1.26
WEIGHTED-AVERAGE SHARES OUTSTANDING (in thousands)
Basic 148,099 149,748 147,982 150,101
Diluted 150,358 152,494 150,139 153,124
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
June 29,
December 29,
2019 2018
ASSETS
Cash and cash equivalents $310.7 $288.7
Accounts and notes receivable, net 1,823.9 1,607.8
Inventories, net 2,863.2 2,373.5
Other current assets 347.4 299.4
Total current assets 5,345.2 4,569.4
Property, plant and equipment, net 1,933.3 1,915.2
Goodwill and other intangibles, net 12,954.9 12,441.1
Other assets 1,290.2 482.3
Total assets $21,523.6 $19,408.0
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $1,461.6 $376.1
Current maturities of long-term debt 3.1 2.5
Accounts payable 2,323.8 2,233.2
Accrued expenses 1,864.6 1,389.8
Total current liabilities 5,653.1 4,001.6
Long-term debt 3,909.1 3,819.8
Other long-term liabilities 3,728.1 3,746.7
Stanley Black & Decker, Inc. shareowners' equity 8,228.0 7,836.2
Non-controlling interests' equity 5.3 3.7
Total liabilities and shareowners' equity $21,523.6 $19,408.0
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR-TO-DATE
2019 2018 2019 2018
OPERATING ACTIVITIES
Net earnings $357.4 $293.4 $527.8 $463.5
Depreciation and amortization 141.7 127.7 279.5 251.3
(Gain) loss on sales of businesses (17.2) 0.8 (17.2) 0.8
Share of net earnings of equity method investment (5.3) (5.6)
Changes in working capital(1) 35.9 (185.0) (580.9) (729.3)
Other (11.5) (38.9) (133.9) (137.7)
Net cash provided by (used in) operating activities 501.0 198.0 69.7 (151.4)
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (97.2) (111.7) (186.8) (218.0)
Proceeds (payments) from sales of businesses, net of
cash sold 76.7 (1.7) 76.7 (1.9)
Business acquisitions, net of cash acquired 0.2 (505.6) (676.0) (506.8)
Purchases of investments (8.3) (6.3) (253.7) (10.3)
Net investment hedge settlements 37.8 3.9 20.3
Payments on long-term debt (400.0)
Proceeds from debt issuance, net of fees (0.7) 496.2
Stock purchase contract fees (10.1) (10.1) (20.2) (20.2)
Net short-term (repayments) borrowings (330.6) 753.6 1,089.3 1,135.6
Premium paid on equity option (57.3)
Proceeds from issuances of common stock 14.4 9.5 24.6 22.6
Purchases of common stock for treasury (1.1) (201.3) (9.2) (212.7)
Cash dividends on common stock (97.7) (94.2) (195.3) (189.1)
Effect of exchange rate changes on cash 0.2 (87.8) 5.0 (59.9)
Other (7.7) (10.7) (2.6)
Net cash used in investing and financing activities (461.9) (217.8) (56.2) (100.3)
Increase (decrease) in cash, cash equivalents and restricted
cash 39.1 (19.8) 13.5 (251.7)
Cash, cash equivalents and restricted cash, beginning of
period 285.8 423.2 311.4 655.1
Cash, cash equivalents and restricted cash, end of period $324.9 $403.4 $324.9 $403.4
Free Cash Flow Computation(2)
Operating cash flow $501.0 $198.0 $69.7 $(151.4)
Less: capital and software expenditures (97.2) (111.7) (186.8) (218.0)
Free cash flow (before dividends) $403.8 $86.3 $(117.1) $(369.4)
Reconciliation of Cash, Cash Equivalents and Restricted Cash
June 29,
December 29,
2019 2018
Cash and cash equivalents $310.7 $288.7
Restricted cash included in Other current assets 14.2 22.7
Cash, cash equivalents and restricted cash $324.9 $311.4
(1)
Working capital is comprised of accounts receivable, inventory, accounts payable and deferred revenue.
(2) 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.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR-TO-DATE
2019 2018 2019 2018
NET SALES
Tools & Storage $2,626.0 $2,567.8 $4,918.3 $4,783.6
Industrial 649.9 573.1 1,204.9 1,077.3
Security 485.4 502.7 971.7 992.0
Total $3,761.3 $3,643.6 $7,094.9 $6,852.9
SEGMENT PROFIT
Tools & Storage $440.0 $398.6 $705.8 $700.0
Industrial 95.1 85.5 166.1 166.0
Security 38.0 48.1 77.5 93.6
Segment Profit 573.1 532.2 949.4 959.6
Corporate Overhead (55.6) (50.9) (105.2) (98.2)
Total $517.5 $481.3 $844.2 $861.4
Segment Profit as a Percentage of Net Sales
Tools & Storage 16.8% 15.5% 14.4% 14.6%
Industrial 14.6% 14.9% 13.8% 15.4%
Security 7.8% 9.6% 8.0% 9.4%
Segment Profit 15.2% 14.6% 13.4% 14.0%
Corporate Overhead
(1.5%)
(1.4%)
(1.5%)
(1.4%)
Total 13.8% 13.2% 11.9% 12.6%
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars Except Per Share Amounts)
SECOND QUARTER 2019
Reported
Acquisition-
Normalized(3)
Related
Charges &
Other(1)
Gross margin $1,299.8 $10.7 $1,310.5
% of Net Sales 34.6% 34.8%
Selling, general and administrative 782.3 (26.6) 755.7
% of Net Sales 20.8% 20.1%
Operating margin 517.5 37.3 554.8
% of Net Sales 13.8% 14.8%
Earnings before income taxes and equity
interest 403.7 32.9 436.6
Income taxes 51.6 (0.9) 50.7
Share of net earnings of equity method
investment 5.3 10.2 15.5
Net earnings attributable to common
shareowners 356.3 44.0 400.3
Diluted earnings per share of common stock $2.37 $0.29 $2.66
(1) Acquisition-related charges and other relates primarily to restructuring, deal and integration costs,
Security business
transformation and margin enhancement initiatives, a gain on a sale of a business, and inventory step-
up amortization.
SECOND QUARTER 2018
Reported
Acquisition-
Normalized(3)
Related
Charges &
Other(2)
Gross margin $1,287.1 $8.8 $1,295.9
% of Net Sales 35.3% 35.6%
Selling, general and administrative 805.8 (25.5) 780.3
% of Net Sales 22.1% 21.4%
Operating margin 481.3 34.3 515.6
% of Net Sales 13.2% 14.2%
Earnings before income taxes 294.4 126.7 421.1
Income taxes 1.0 28.5 29.5
Net earnings attributable to common
shareowners 293.6 98.2 391.8
Diluted earnings per share of common stock $1.93 $0.64 $2.57
(2) Acquisition-related charges and other relates primarily to inventory step-up, integration and
consulting costs, and an
environmental remediation settlement.
(3) The normalized 2019 and 2018 information, 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 acquisition-related and
other charges.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars Except Per Share Amounts)
YEAR-TO-DATE 2019
Reported
Acquisition-
Normalized(3)
Related
Charges &
Other(1)
Gross margin $2,405.4 $17.1 $2,422.5
% of Net Sales 33.9% 34.1%
Selling, general and administrative 1,561.2 (49.6) 1,511.6
% of Net Sales 22.0% 21.3%
Operating margin 844.2 66.7 910.9
% of Net Sales 11.9% 12.8%
Earnings before income taxes and equity
interest 598.5 85.5 684.0
Income taxes 76.3 11.5 87.8
Share of net earnings of equity method
investment 5.6 13.6 19.2
Net earnings attributable to common
shareowners 526.2 87.6 613.8
Diluted earnings per share of common stock $3.50 $0.59 $4.09
(1) Acquisition-related charges and other relates primarily to restructuring, deal and integration costs,
Security business
transformation and margin enhancement initiatives, a gain on a sale of a business, and inventory step-
up amortization.
YEAR-TO-DATE 2018
Reported
Acquisition-
Normalized(3)
Related
Charges &
Other(2)
Gross margin $2,452.8 $10.5 $2,463.3
% of Net Sales 35.8% 35.9%
Selling, general and administrative 1,591.4 (41.9) 1,549.5
% of Net Sales 23.2% 22.6%
Operating margin 861.4 52.4 913.8
% of Net Sales 12.6% 13.3%
Earnings before income taxes 546.2 151.8 698.0
Income taxes 82.7 10.5 93.2
Net earnings attributable to common
shareowners 464.2 141.3 605.5
Diluted earnings per share of common stock $3.03 $0.92 $3.95
(2) Acquisition-related charges and other relates primarily to inventory step-up, integration and
consulting costs, an
environmental remediation settlement, and a tax charge related to the enactment of new U.S. tax
legislation.
(3) The normalized 2019 and 2018 information, 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 acquisition-related and
other charges.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP SEGMENT PROFIT FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
SECOND QUARTER 2019
Reported
Acquisition-
Normalized(3)
Related and
Other
Charges(1)
SEGMENT PROFIT
Tools & Storage $440.0 $7.5 $447.5
Industrial 95.1 11.3 106.4
Security 38.0 16.3 54.3
Segment Profit 573.1 35.1 608.2
Corporate Overhead (55.6) 2.2 (53.4)
Total $517.5 $37.3 $554.8
Segment Profit as a Percentage of Net
Sales
Tools & Storage 16.8% 17.0%
Industrial 14.6% 16.4%
Security 7.8% 11.2%
Segment Profit 15.2% 16.2%
Corporate Overhead (1.5%)
(1.4%)
Total 13.8% 14.8%
(1) Acquisition-related and other charges relates primarily to inventory step-up amortization, integration
costs, and Security
business transformation and margin enhancement initiatives.
SECOND QUARTER 2018
Reported
Acquisition-
Normalized(3)
Related
Charges(2)
SEGMENT PROFIT
Tools & Storage $398.6 $17.8 $416.4
Industrial 85.5 10.9 96.4
Security 48.1 2.0 50.1
Segment Profit 532.2 30.7 562.9
Corporate Overhead (50.9) 3.6 (47.3)
Total $481.3 $34.3 $515.6
Segment Profit as a Percentage of Net
Sales
Tools & Storage 15.5% 16.2%
Industrial 14.9% 16.8%
Security 9.6% 10.0%
Segment Profit 14.6% 15.4%
Corporate Overhead (1.4%)
(1.3%)
Total 13.2% 14.2%
(2) Acquisition-related charges relate primarily to inventory step-up and integration and consulting
costs.
(3) The normalized 2019 and 2018 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 acquisition-
related and other charges.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP SEGMENT PROFIT FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
YEAR-TO-DATE 2019
Reported
Acquisition-
Normalized(3)
Related and
Other
Charges(1)
SEGMENT PROFIT
Tools & Storage $705.8 $20.1 $725.9
Industrial 166.1 17.3 183.4
Security 77.5 27.1 104.6
Segment Profit 949.4 64.5 1,013.9
Corporate Overhead (105.2) 2.2 (103.0)
Total $844.2 $66.7 $910.9
Segment Profit as a Percentage of Net
Sales
Tools & Storage 14.4% 14.8%
Industrial 13.8% 15.2%
Security 8.0% 10.8%
Segment Profit 13.4% 14.3%
Corporate Overhead (1.5%)
(1.5%)
Total 11.9% 12.8%
(1) Acquisition-related and other charges relates primarily to inventory step-up amortization, integration
costs, and Security
business transformation and margin enhancement initiatives.
YEAR-TO-DATE 2018
Reported
Acquisition-
Normalized(3)
Related
Charges(2)
SEGMENT PROFIT
Tools & Storage $700.0 $32.5 $732.5
Industrial 166.0 12.9 178.9
Security 93.6 3.3 96.9
Segment Profit 959.6 48.7 1,008.3
Corporate Overhead (98.2) 3.7 (94.5)
Total $861.4 $52.4 $913.8
Segment Profit as a Percentage of Net
Sales
Tools & Storage 14.6% 15.3%
Industrial 15.4% 16.6%
Security 9.4% 9.8%
Segment Profit 14.0% 14.7%
Corporate Overhead (1.4%)
(1.4%)
Total 12.6% 13.3%
(2) Acquisition-related charges relate primarily to inventory step-up and integration and consulting
costs.
(3) The normalized 2019 and 2018 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 acquisition-
related and other charges.
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SOURCE Stanley Black & Decker
