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Black & Decker Corporation (BDK) PowerPoint PPT Presentation

Black & Decker Corporation (BDK) Ryan Stonier, Kent DeBruin, Sarada Weerasinghe, Neil Naran, and LakeyaOmogun April 18, 2007 Board of Directors NOLAN D. ARCHIBALD Chairman, President, and Chief Executive Officer CHARLES E. FENTON Senior Vice President and General Counsel

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Black & Decker Corporation (BDK)

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Black decker corporation bdk l.jpg

Black & Decker Corporation(BDK)

Ryan Stonier, Kent DeBruin, Sarada Weerasinghe, Neil Naran, and LakeyaOmogun

April 18, 2007


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Board of Directors

  • NOLAN D. ARCHIBALD

    Chairman, President, and Chief Executive Officer

  • CHARLES E. FENTON

    Senior Vice President and General Counsel

  • MICHAEL D. MANGAN

    Senior Vice President and Chief Financial Officer

  • PAUL F. McBRIDE

    Senior Vice President – Human Resources and Corporate Initiatives

  • CHRISTINA M. McMULLEN

    Vice President and Controller

  • JAMES R. RASKIN

    Vice President – Business Development

  • MARK M. ROTHLEITNER

    Vice President – Investor Relations and Treasurer

  • NATALIE A. SHIELDS

    Vice President and Corporate Secretary


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Mergers & Acquisitions

  • Sequiam Corporation, a leading provider of innovative consumer lifestyle biometric technology and services, announced today that its BioLock biometric deadbolt technology is being showcased by Black and Decker's Kwikset Corporation under its brand name "Smart Scan"


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News

  • A biometrics company called Sequiam is marketing a battery-powered deadbolt lock that can is activated only with the swipe of an authorized fingerprint. It is being manufactured by Black and Decker Corp. and could be one of the hottest selling product.

  • Black & Decker Corp raised its first-quarter profit and sales forecasts on Monday, citing strong international demand for power tools and favorable U.S. order trends, and its shares rose nearly 7 percent in extended trading.

  • The Black & Decker Corporation announced that, due to better-than-expected sales and operating margin, net earnings per diluted share are anticipated to be approximately $1.60 for the first quarter of 2007. The Corporation expects to report 3% sales growth for the quarter, primarily from currency translation and the 2006 acquisition of Vector Products, Inc.

  • Consumer products companies Sara Lee Corp. and Black & Decker Corp. are among the companies seen as most likely to pursue aggressive strategies to raise their share price at the expense of their bondholders in 2007.


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Industry

  • Outlook is neutral; future margin for expansion is limited

  • Even with strong employment and low inflation the housing market is down

  • Things that are favorable:

    • 35-65 age group is growing and considered in peak spending years; expected to replace old tools

    • Houses have been increasing in size

    • Home ownership has increased compared to renting; home owners more likely to remodel


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OCF = $622.7 M

Increased around 1.5% last 3 yrs.

Cap. Ex.=$104.6 M

Less than depreciation by about $50 M

Purchased Vector in 2006 for $158.5 M

In 2005 purchased Porter-Cable and Delta Tools Group, and sold Flex

Expects cap. spending to be $120 M in 2007

Financing CF=$(1,124.9) ; way up from past 3 years

Repurchase of stock for $896 M

Decrease in short term borrowings by $309 M

Repayment of notes of $155 M

Cash Flows


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Short-term debt very sporadic due to new contract agreements

Long-term debt very stable past 3 yrs.

5.3% of assets are intangible, has been increasing past 5 years.

51.52% of assets are short-term

Past 3 yrs. Have been above 50%

43.57% of liabilities are short-term

Down from past 2 years

Cash = $233.3 M

An inability to obtain raw materials or finished goods could affect ability to make products; or increase in price of raw materials could adversely affect manufacturing possibilities

TIE= 10.03 industry = 6.11

CR=2.703 in 2006 and 1.48 in 2005

QR = .92 is just below 10 yr. Average

D/E=1.357 industry=.919

Working capital = $923.8 M in 2006, $1083.4 M in 2005, and $1134.6 M in 2004

$55 M settlement in 2006

High taxes payments due

Balance Sheet Liquidity


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ROA is above its 5 year average

ROE is slightly above its 5 year average

ROI is above its 5 year average

Inventory turnover is about the same as it’s been

Accounts Payable Ratio = 14.06

ROA, ROE, ROI all outperformed the S&P 500 in 2006

Performance Metrics


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Profitability

  • Black and Decker is at the top of its industry with an…

  • ROE of 35.65

  • ROA of 8.77.


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Margins

  • Black and Decker enjoys above average industry margins despite their size.

  • This is due to various patents and a strong brand.


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Free Cash Flow

  • Black and Decker has had strong free cash flow for the last 5 years.

  • They are using this cash to buy back stock, purchase business and increase dividends.

  • They have increased their total dividend payment in each of the last 5 years.

  • In the last five years the total shares outstanding has decreased each year, going from 80 million to 67 million.


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Earnings

  • In the last five years their diluted EPS has increased from $2.84 to $6.55 per share.

  • In this time their stock price has only gone from about $50 to $81. Or a 62% increase in price vs. a %130 increase in EPS.

  • Projections for this year are slightly lower at $6.29 a share, but will rise again to $7.23 a share.

  • Also BDK has beaten analysts estimates in 13 out of the last 15 quarters by an average of about 3.5 cents a share.


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Competitors

  • There are 3 Major competitors for Black and Decker

  • American Standard Companies

  • Danaher Corp.

  • Makita Corp.


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American Standard Companies

  • The largest employer with 62000+ employees

  • Has a Quarterly growth of 6.1% (YOY)

  • Has the Largest Revenue in the industry with $11.2 (Billion TTM)

  • But has only a Net Income of $541 Million

    Conclusion- Is a major competitor to Black and Decker but does not pose the greatest threat to them.


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Danaher Corp.

  • Is a large employer with 45000+ employees

  • Has a Quarterly growth of 17% (YOY)

  • Has one of the a Largest Revenues in the industry with $9 (Billion TTM)

  • Has also the highest Net Income at $1.2 (Billion TTM)

    Conclusion- Is the largest player in the industry and poses the biggest threat to Black and Decker


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Makita Corp.

  • Has only 8600 employees

  • Has the largest Quarterly growth of 19% (YOY)

  • Has the lowest Revenue with 2.2 (Billion TTM)

  • Has the smallest Net Income in the industry $262 million

    Conclusion-Does not pose a major threat to Black and Decker in the short term future but in the long term future can be a major competitor.


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Customers

Black and Decker has 3 Major customers

  • Wal-Mart

  • Home Depot

  • Lowes


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Wal-Mart

  • Is the largest customer of Black and Decker products

  • Is much larger than Black and Decker itself

  • Has been in agreement with Black and Decker on a long term


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Home Depot

  • Is the second largest buyer of Black and Decker products

  • Has been in business with Black and Decker for an extended period of time

  • Is larger in size compared to Black and Decker

  • Will probably be the strongest buyer and supporter of Black and Decker products in the future


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Lowe’s

  • Compared to Wal-Mart and Home Depot Lowe’s is the smallest buyer of Black and Decker products

  • Lowe’s does not support Black and Decker products very much and is likely to stop buying from Black and Decker and switch to Danaher Corporation


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Customer Conclusion

  • It is not easy for Wal-Mart, Home Depot and Lowe’s to cancel trading agreements with Black and Decker but it can be estimated that Lowe’s might switch to Danaher if Black and Decker continues to perform badly.

  • Black and Decker have been able to keep its major customers satisfied by providing a quality service to them. Which is key because if not all of B&D’s customers would move to its competitors


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