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productivity, lower volume in the lockset business and
costs to launch new products drove a 17% drop in
operating profit.
The Kwikset and Weiser lockset businesses have
strong new construction market share in the U.S.
and Canada, respectively, which pressured sales
significantly this year. However, we continued to do
well at retail, and began rolling out SmartKey™ in
this channel. This system revolutionizes residential
security by enabling property owners to re-key their
locks quickly and safely. It has received a very
positive initial reaction, and should continue to help
us mitigate the housing decline in 2008.
The Price Pfister plumbing products business
is less tied to housing starts, and was able to grow
sales solidly in 2007. Since 2003, this business
has delivered nearly a 10% annualized sales growth
rate. We are winning in a rapidly-changing marketplace
with attractive styles and finishes at reasonable
prices. Recently introduced products, such as Treviso™
Tuscan Bronze™ for the bath and the Hanover™
pull-down in the kitchen, drove strong sales for key
product portfolios.
FASTENING AND ASSEMBLY SYSTEMS
The Fastening and Assembly Systems segment
(Emhart Teknologies) is our most global business,
and not coincidentally, the best performing segment
in 2007. We continued our run of steady, strong
results with 4% sales growth and an 11% increase in
operating profit. Despite challenges for our U.S.
automotive customers in recent years, this segment
has increased sales for six consecutive years. In both
Asia and Europe, our sales rose faster than automotive
production in 2007, demonstrating the benefits of
our focus on customer-driven solutions. We will
continue to pursue growth in the Emhart business
to take advantage of its strong global platform.
LOOKING AHEAD
In the difficult North American economic environment
we face today, 2008 will be a challenging year.
With this in mind, we will balance 2008 objectives
with long-term goals. We will make sure we have the right resources for
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our current situation, while
preserving capabilities to take advantage of growth
opportunities in the future.
Our proven long-term approach will continue to
be our road map. We will look for ways to strengthen
and expand our superior brands. Our new product
machine will remain vibrant and we expect product
vitality to stay strong. The expanding use of lithium-ion batteries is an important trend, and we remain
confident in our exclusive technology and ability
to develop products around it. In addition to in-house
product development, we will look at potential
acquisitions for new products and categories. While
prices for acquisitions have been high, the tightening
of credit markets could present better opportunities
going forward. Our end-user efforts around the world
continue to help us grow rapidly in construction hot
spots. As always, we will add value in the distribution
channels through research-driven merchandizing,
supply chain expertise and best-in-class training of
store associates.
Our marketing efforts will be complemented by
cost initiatives: ongoing movement of manufacturing to
low-cost regions, appropriate reductions in workforce
levels and tight control over discretionary spending.
Cash generation, which has been a key to re-shaping
our financial model, will remain a top priority, and we
will continue investing our cash wisely.
Black & Decker is a stronger, better balanced
company than ever. As we work through a difficult
economic environment, we believe this strength will
serve us well and our stockholders will be rewarded
with outstanding returns.
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Nolan D. Archibald
Chairman, President, and Chief Executive Officer
February 18, 2008
* Please refer to the Reconciliation of Non-GAAP
Financial Measures on page eight of this report. |