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grown at more than an 18% compound
annual rate since 2001.
We converted over 120% of our 2007 net income to
free cash flow*, topping $600 million for the first time.
We have averaged a conversion rate greater than
120% during the last seven years, and have exceeded
100% in six out of seven years. This track record
reflects more capital discipline today than in the
1990s. One telling fact is that the fixed assets reported
on our balance sheet have declined since 2001,whereas
sales have increased over 50%.
Our outstanding free cash flow enabled us to
increase the dividend for the fourth straight year and
repurchase 5.4 million shares of stock, ending 2007
with lower debt and maintaining our investment grade credit
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rating. Over the last six years, we have repurchased approximately one-third of our outstanding
shares, at average prices consistently below the
average daily closing price each year.
POWER TOOLS AND ACCESSORIES
Results in the Power Tools and Accessories segment
were extremely strong internationally, but that
success could not overcome the weak North American
market. In total, sales decreased 1% for the year.
Operating profit decreased 18%, primarily due to a
large increase in raw material and component prices.
In the U.S. Industrial Products Group, we gained
product listings at key customers in a number of
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important product lines, including cordless, miter
saws, sanders, and accessories. Sales declined significantly, however, in channels that serve residential construction market, the outweighing those
listing gains. We continue to launch innovative new
products, such as DEWALT’s Nano™ line of lithium-
ion cordless products. The 18-volt Nano line is
backward-compatible with previous 18-volt tools,
which enables us to leverage our industry-leading
installed base of cordless systems. This line was
launched late in the year, and should help us in 2008
and beyond.
The Consumer Products Group also experienced
a sales decline in North America, primarily due to a
difficult environment for discretionary goods. Two
of our smaller business units, pressure washers and
automotive and electronics, accounted for roughly
half of the decline. Across the consumer group,
innovation remains the primary focus area, and our
new product vitality remained high. The Pivot Vac®
handheld vacuum and AutoWrench™ handheld power
adjustable wrench contributed solid sales for the
second straight year, and were joined by the popular
Gecko grip level for the 2007 holiday season. In
addition, the new VPX™ line of lithium-ion cordless
tools provides an expandable platform for applications
around the home.
In other parts of the world, we combined growing
markets and strong execution to deliver outstanding
results. The Europe, Middle East and Africa business
posted a fourth straight year of organic sales growth,
led by a double-digit growth rate for the industrial
group. New products focused on concrete applications,
such as rotary hammers, a pavement breaker, angle
grinders and diamond drills, were particularly
important to our success. In Latin America, sales
grew over 20%, marking the third straight year
with greater than 10% growth. The Asian business
also performed very well, with a double-digit rate
of sales growth.
HARDWARE AND HOME IMPROVEMENT
The Hardware and Home Improvement segment,
which is predominantly a North American business,
had a 1% sales decline in 2007. While we were able
to offset commodity inflation with price increases and |