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Stanley Black & Decker Reports 3Q 2015 Results

The following excerpt is from the company's SEC filing.

… Stanley Black & Decker

(NYSE: SWK)

today announced third quarter 2015 financial results.

3Q’15 Revenues Totaled $2.8 Billion, As Strong Organic Growth Of 6% Was More Than Offset By 8% Currency Impact

3Q’15 Operating Margin Rate Expanded 70 Basis Points To A Post-Merger Record 14.8% Despite $70 Million Of Currency Headwinds

3Q’15 Diluted GAAP EPS Was $1.55 Up 1% From 3Q’14 As Strong Operational Performance More Than Offset Tax And Restructuring Headwinds

Raising 2015 Full Year GAAP EPS Guidance Range To $5.80 To $5.95, From $5.70 To $5.90, Up 8% To 11% Versus 2014

3Q’15 Key Points:

Net sales for the period were $2.8 billion, down 2% versus prior year, as positive volume (+5%) and price (+1%) were more than offset by currency (-8%).

Gross margin rate for the quarter was 36.3%, down slightly from the prior year rate of 36.4% as favorable volume leverage, price, productivity, cost actions and commodity deflation substantially offset unfavorable currency.

SG&A expenses were 21.5% of sales compared to 22.3% in 3Q’14 reflecting volume leverage and cost control.

Operating margin rate was 14.8% compared to 14.1% in 3Q’14, as actions to improve profitability and generate solid operating leverage more than offset significant unfavorable currency.

Restructuring charges for the quarter were $14.0 million compared to a restructuring credit of $0.2 million in 3Q’14.

Exhibit 99.1

Tax rate was 24.5% compared to the 3Q’14 rate of 19.1% as a result of higher U.S. vs. foreign earnings in the third quarter of 2015 compared to the prior year and the impact of statutory expirations on certain foreign tax positions in last year’s third quarter.

Average diluted shares outstanding for the quarter were 150.8 million versus 160.6 million a year ago, reflecting the cumulative impact of our recent share repurchase actions including approximately $200 million of opportunistic share repurchases during the quarter capitalizing on recent equity market declines.

Working capital turns for the quarter were 6.4 compared to 6.5 for 3Q’14. Free cash flow for the quarter was $171 million versus $189 million for 3Q’14.

Stanley Black & Decker’s Chairman and CEO, John F. Lundgren, commented, “We achieved continued share gains across much of the portfolio in the third quarter and remain on track to deliver strong organic growth for the year. This organic growth momentum, combined with a sharp focus on cost management and price realization, positions us to deliver meaningful margin expansion and 8-11% EPS growth in 2015 despite severe currency pressure and volatile economic conditions in a number of our markets.

“We continue to leverage our world-class franchises and brands to deliver substantial organic growth and margin expansion, while generating strong free cash flow and maintaining a shareholder friendly capital allocation approach. Although market conditions remain challenging in the near-term, we are confident that our agile leadership team, focus on execution and robust pipeline of innovative new products will enable us to continue our strong performance trend.”

3Q’15 Segment Results

($ in M)

Profit

Profit Rate

Tools & Storage

$1,838

$307.8

Security

Industrial

Tools & Storage net sales increased 2% versus 3Q’14 as volume (+8%) and price (+1%), more than offset unfavorable currency (-7%). Organic growth remained strong across all regions with North America +11%, Europe +7% and the emerging markets +6%. Share gains from innovative new products and brand extensions combined with a healthy underlying U.S. tool market continued to fuel growth in North America despite softness in Canada and industrial channels. Europe continued its above-market organic growth performance due to share gains from new products combined with leveraging an expanded retail footprint and solid commercial momentum in what remains a muted market. The continued roll out of our mid-price-point product offerings along with pricing actions fueled solid organic growth within the emerging markets, most notably in Latin America and portions of Asia, despite continuing pressure in Russia and China. Overall Tools & Storage segment profit rate was 16.7%, up from the 3Q’14 rate of 15.7%, as volume leverage, price, productivity, cost management and lower commodity prices more than offset significant currency pressures.

Security net sales decreased 8% versus 3Q’14 as price (+1%) was more than offset by lower volumes (-2%) and currency (-7%). Positive momentum accelerated in Europe with organic growth of 4% led by higher installation revenues and broad-based growth throughout the region. Europe’s order rates remained strong, up double-digits for the quarter, with recurring revenue attrition contained within the target range of 10-12%. Organic revenues within North America were flat as growth across the mechanical businesses was offset by lower volumes within the electronics business. Emerging markets organic revenues were lower due primarily to slowing market conditions in China. Overall Security segment profit rate was 11.9%, up 150 basis points from the 2Q’15 rate and 30 basis points lower than prior year. The sequential

improvement in the rate reflects continued margin expansion within Europe and improved operating performance across the North America businesses.

Industrial net sales decreased 7% versus 3Q’14 as price (+1%) was more than offset by lower volumes (-1%) and currency (-7%). Engineered Fastening achieved 3% organic growth as strong global automotive and electronics revenues more than offset weaker industrial volumes. As expected, Infrastructure organic revenues decreased 10% due to lower Oil & Gas volumes resulting from delayed or suspended onshore pipeline construction and reduced offshore activity, as well as lower Hydraulic Tools volume due to difficult scrap steel market conditions. Overall Industrial segment profit rate was 17.8%, up from the 3Q’14 rate of 17.7%, as favorable volume leverage from Engineered Fastening, productivity gains and cost control more than offset the impacts of currency and lower Infrastructure volumes.

President and Chief Operating Officer, James M. Loree, commented, “Our results for the quarter, in which we again generated organic growth at the high end of expectations, demonstrate that our commitment to delivering sustained, above-market organic growth is taking root. The Tools...


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