UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the quarterly period ended September 27, 2009
 
or
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

 
For the transition period from
   
to
   

Commission File Number: 1-01553

THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)

Maryland
52-0248090
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
   
701 East Joppa Road
 
Towson, Maryland
21286
(Address of principal executive offices)
(Zip Code)
   
(410) 716-3900
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES   o NO
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o YES   o NO
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES   x NO
 
The number of shares of Common Stock outstanding as of October 23, 2009:  60,231,022
 
 

 

THE BLACK & DECKER CORPORATION

INDEX – FORM 10-Q

September 27, 2009

   
Page
     
PART I – FINANCIAL INFORMATION
   
     
   
     
 
3
     
 
4
     
 
5
     
 
6
     
 
7
     
 
24
     
 
41
     
 
41
     
PART II – OTHER INFORMATION
   
     
 
42
     
 
42
     
 
44
     
Item 5. Other Information    44
     
 
45
     
SIGNATURES
 
47
     
 

 
 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amounts)
                         
   
Three Months Ended
   
Nine Months Ended
 
    September 27,     September 28,     September 27,     September 28,  
    2009     2008     2009     2008  
Sales
  $ 1,208.7     $ 1,570.8     $ 3,473.8     $ 4,708.3  
Cost of goods sold
    808.4       1,061.9       2,360.5       3,144.7  
Selling, general, and administrative
expenses
    309.6       373.4       913.9       1,167.5  
Restructuring and exit costs
          15.6       11.9       33.9  
Operating Income
    90.7       119.9       187.5       362.2  
Interest expense (net of interest
income)
    22.3       13.4       61.1       44.7  
Other expense (income)
    .8       (3.0 )     (3.2 )     (2.6 )
Earnings Before Income Taxes
    67.6       109.5       129.6       320.1  
Income taxes
    12.2       23.7       31.0       70.2  
Net Earnings
  $ 55.4     $ 85.8     $ 98.6     $ 249.9  
                                 
                                 
                                 
Net Earnings Per Common Share –
Basic
  $ .91     $ 1.43     $ 1.63     $ 4.11  
Shares Used in Computing Basic
Earnings Per Share (in Millions)
    59.5       59.2       59.4       59.9  
                                 
Net Earnings Per Common Share –
Assuming Dilution
  $ .91     $ 1.41     $ 1.62     $ 4.04  
Shares Used in Computing Diluted
Earnings Per Share (in Millions)
    59.6       60.1       59.5       60.9  
                                 
Dividends Per Common Share
  $ .12     $ .42     $ .66     $ 1.26  
 
See Notes to Consolidated Financial Statements (Unaudited).

- 3 - -


CONSOLIDATED BALANCE SHEET (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Amount)
             
 
  September 27,
  2009
 
  December 31,
  2008
 
Assets
           
Cash and cash equivalents
  $ 821.5     $ 277.8  
Trade receivables
    972.6       924.6  
Inventories
    793.5       1,024.2  
Other current assets
    257.1       377.0  
Total Current Assets
    2,844.7       2,603.6  
Property, Plant, and Equipment
    489.6       527.9  
Goodwill
    1,226.7       1,223.2  
Other Assets
    827.0       828.6  
    $ 5,388.0     $ 5,183.3  
Liabilities and Stockholders’ Equity
               
Short-term borrowings
  $     $ 83.3  
Current maturities of long-term debt
          .1  
Trade accounts payable
    443.8       453.1  
Other current liabilities
    793.6       947.4  
Total Current Liabilities
    1,237.4       1,483.9  
Long-Term Debt
    1,722.2       1,444.7  
Postretirement Benefits
    682.9       669.4  
Other Long-Term Liabilities
    498.4       460.5  
Stockholders’ Equity
               
Common stock, par value $.50 per share
    30.1       30.0  
Capital in excess of par value
    36.9       14.3  
Retained earnings
    1,595.5       1,536.8  
Accumulated other comprehensive income (loss)
    (415.4 )     (456.3 )
Total Stockholders’ Equity
    1,247.1       1,124.8  
    $ 5,388.0     $ 5,183.3  
 
See Notes to Consolidated Financial Statements (Unaudited).

- 4 - -


CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
                                     
 
  Outstanding
Common
 Shares
 
  Par
 Value
 
  Capital in
 Excess of
 Par Value
 
  Retained
 Earnings
 
  Accumulated
 Other
 Comprehensive
 Income (Loss)
 
  Total
 Stockholders’
 Equity
 
Balance at December 31, 2007
    62,923,723     $ 31.5     $ 27.0     $ 1,498.5     $ (98.3 )   $ 1,458.7  
Comprehensive income (loss):
                                               
Net earnings
                      249.9             249.9  
Net gain on derivative
instruments (net of tax)
                            40.8       40.8  
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax)
                            (34.2 )     (34.2 )
Amortization of actuarial losses
and prior service cost (net of tax)
                            10.7       10.7  
Comprehensive income
                      249.9       17.3       267.2  
Cash dividends ($1.26 per share)
                      (76.5 )           (76.5 )
Common stock issued under
stock-based plans (net of
forfeitures)
    305,122       .2       31.1                   31.3  
Purchase and retirement of
common stock
    (3,136,382 )     (1.6 )     (52.3 )     (148.4 )           (202.3 )
Balance at September 28, 2008
    60,092,463     $ 30.1     $ 5.8     $ 1,523.5     $ (81.0 )   $ 1,478.4  
                                                 
 
  Outstanding
 Common
 Shares
 
  Par
 Value
 
  Capital in
 Excess of
 Par Value
 
  Retained
 Earnings
 
  Accumulated
 Other
Comprehensive
 Income (Loss)
 
  Total
 Stockholders’
 Equity
 
Balance at December 31, 2008
    60,092,726     $ 30.0     $ 14.3     $ 1,536.8     $ (456.3 )   $ 1,124.8  
Comprehensive income (loss):
                                               
Net earnings
                      98.6             98.6  
Net loss on derivative
instruments (net of tax)
                            (47.5 )     (47.5 )
Foreign currency translation
adjustments, less effect of
hedging activities (net of tax)
                            79.5       79.5  
Amortization of actuarial losses
and prior service cost (net of tax)
                            8.9       8.9  
Comprehensive income
                      98.6       40.9       139.5  
Cash dividends ($.66 per share)
                      (39.9 )           (39.9 )
Common stock issued under
stock-based plans (net of
forfeitures)
    190,248       .1       24.8                   24.9  
Purchase and retirement of
common stock
    (58,056 )           (2.2 )                 (2.2 )
Balance at September 27, 2009
    60,224,918     $ 30.1     $ 36.9     $ 1,595.5     $ (415.4 )   $ 1,247.1  
 
See Notes to Consolidated Financial Statements (Unaudited).

- 5 - -


 
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions)
       
   
Nine Months Ended
 
 
  September 27,
  2009
 
  September 28,
  2008
 
Operating Activities
           
Net earnings
  $ 98.6     $ 249.9  
Adjustments to reconcile net earnings to cash flow
from operating activities:
               
Non-cash charges and credits:
               
Depreciation and amortization
    95.6       104.7  
Stock-based compensation
    23.1       20.9  
Amortization of actuarial losses and
prior service cost
    8.9       10.7  
Restructuring and exit costs
    11.9       33.9  
Other
    (5.0 )     .2  
Changes in selected working capital items:
               
Trade receivables
    (21.0 )     (112.1 )
Inventories
    251.1       37.6  
Trade accounts payable
    (10.8 )     87.7  
Other current liabilities
    (81.0 )     (64.7 )
Restructuring spending
    (33.3 )     (15.4 )
Other assets and liabilities
    (103.9 )     (37.9 )
Cash Flow From Operating Activities
    234.2       315.5  
Investing Activities
               
Capital expenditures
    (48.2 )     (77.6 )
Proceeds from disposal of assets
    3.1       20.2  
Purchase of business, net of cash required
          (23.8 )
Cash outflow associated with purchase of previously
acquired business
    (1.4 )      
Cash inflow from hedging activities
    193.9       40.3  
Cash outflow from hedging activities
    (15.4 )     (29.7 )
Cash Flow From Investing Activities
    132.0       (70.6 )
Financing Activities
               
Net decrease in short-term borrowings
    (84.3 )     (108.7 )
Proceeds from issuance of long-term debt (net of debt
issue costs of $2.7 and $.3, respectively)
    343.1       224.7  
Payments on long-term debt
    (50.1 )     (.1 )
Purchase of common stock
    (2.2 )     (202.3 )
Issuance of common stock
    2.4       8.8  
Cash dividends
    (39.9 )     (76.5 )
Cash Flow From Financing Activities
    169.0       (154.1 )
Effect of exchange rate changes on cash
    8.5       (5.2 )
Increase In Cash And Cash Equivalents
    543.7       85.6  
Cash and cash equivalents at beginning of period
    277.8       254.7  
Cash And Cash Equivalents At End Of Period
  $ 821.5     $ 340.3  
 
See Notes to Consolidated Financial Statements (Unaudited).

- 6 - -

 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Black & Decker Corporation and Subsidiaries

Note 1:  Accounting Policies
 
Basis of Presentation
The accompanying unaudited consolidated financial statements of The Black & Decker Corporation (collectively with its subsidiaries, the Corporation) have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations.

Operating results for the three- and nine-month periods ended September 27, 2009, are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008.

Comprehensive Income
Accounting standards generally accepted in the United States require that, as part of a full set of financial statements, entities must present comprehensive income, which is the sum of net income and other comprehensive income. Other comprehensive income represents total non-stockholder changes in equity. For the nine months ended September 27, 2009, and September 28, 2008, the Corporation has presented comprehensive income in the accompanying Consolidated Statement of Stockholders’ Equity. Comprehensive income for the three months ended September 27, 2009, and September 28, 2008, was $78.2 million and $51.6 million, respectively.

Adoption of New Accounting Standards
The following describes new accounting standards that have been adopted by the Corporation.  The adoption of each of these new accounting standards was required under accounting principles generally accepted in the United States.

As more fully disclosed in Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, effective January 1, 2008, the Corporation adopted a new accounting standard for measuring the fair value of financial assets and financial liabilities. The Corporation adopted the fair value measurement and disclosure requirements for non-financial assets and liabilities as of January 1, 2009. That adoption did not have a material impact on the Corporation’s financial position or results of operations.

Effective January 1, 2009. the Corporation adopted a new accounting standard that requires enhanced disclosures about an entity’s derivative and hedging activities, without a change to existing standards relative to measurement and recognition. That adoption did not have any effect on the Corporation’s financial position or results of operations. The Corporation’s disclosure about its derivative and hedging activities are included in Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, and in Note 9.
 
- 7 - -

 
Effective January 1, 2009, the Corporation adopted a new accounting standard that clarifies whether instruments granted in share-based payment transactions should be included in the computation of earnings per share using the two-class method prior to vesting. See Note 5 of Notes to Consolidated Financial Statements for application of the two-class method to the Corporation’s stock-based plans. The new accounting standard requires that all prior-period earnings per share presented be adjusted retrospectively. Accordingly, basic and diluted earnings per share for the three months ended September 28, 2008, have been adjusted to $1.43 and $1.41, respectively, from $1.45 and $1.42, respectively. Basic and diluted earnings per share for the nine months ended September 28, 2008, have been adjusted to $4.11 and $4.04, respectively, from $4.17 and $4.09, respectively.
 
Note 2:  Inventories
The classification of inventories at the end of each period, in millions of dollars, was as follows:
             
 
  September 27,
  2009
 
  December 31,
  2008
 
FIFO cost
           
Raw materials and work-in-process
  $ 192.7     $ 263.9  
Finished products
    617.2       783.8  
      809.9       1,047.7  
Adjustment to arrive at LIFO inventory value
    (16.4 )     (23.5 )
    $ 793.5     $ 1,024.2  
 
Inventories are stated at the lower of cost or market. The cost of United States inventories is based primarily on the last-in, first-out (LIFO) method; all other inventories are based on the first-in, first-out (FIFO) method.
 
Note 3:  Short-Term Borrowings, Current Maturities of Long-Term Debt, and Long-Term Debt
The terms of the of the Corporation’s $1.0 billion commercial paper program and its supporting $1.0 billion senior unsecured revolving credit facility are more fully disclosed in Note 7 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008. The Corporation’s average borrowings outstanding under its commercial paper program, its unsecured revolving credit facility, and other short-term borrowing arrangements were $196.5 million and $697.9 million for the nine-month periods ended September 27, 2009, and September 28, 2008, respectively. The amount available for borrowing under the Corporation’s unsecured revolving credit facility was approximately $1.0 billion at September 27, 2009.

In April 2009, the Corporation issued senior unsecured notes in the principal amount of $350.0 million. The notes bear interest at a fixed rate of 8.95% and are due in 2014.

In June 2009, the Corporation amended the terms of a $50.0 million term loan agreement to provide for periodic repayments and borrowings up to the original loan amount through the maturity date of April 2011. The Corporation is required to pay a commitment fee on the unutilized portion of the facility. At September 27, 2009, no borrowings were outstanding under this agreement.
 
- 8 - -

 
Indebtedness of subsidiaries of the Corporation in the aggregate principal amounts of $150.0 million and $152.8 million were included in the Consolidated Balance Sheet at September 27, 2009 and December 31, 2008, respectively, in short-term borrowings, current maturities of long-term debt, and long-term debt.

Note 4:  Stockholders’ Equity
During the nine months ended September 28, 2008, the Corporation repurchased 3,136,382 shares of its common stock at a total cost of $202.3 million. To reflect that repurchase in its Consolidated Balance Sheet, the Corporation: (i) first, reduced its common stock by $1.6 million, representing the aggregate par value of the shares repurchased; (ii) next, reduced capital in excess of par value by $52.3 million (representing the available balance of capital in excess of par value in each quarter of purchase); and (iii) last, charged the residual of $148.4 million to retained earnings.
 
Note 5:  Earnings Per Share
The computations of basic and diluted earnings per share for each period are as follows:
             
   
Three Months Ended
   
Nine Months Ended
 
(Amounts in Millions Except Per Share Data)
  September 27,
  2009
 
  September 28,
  2008
 
  September 27,
  2009
 
  September 28,
  2008
 
Numerator:
                       
Net earnings 
  $ 55.4     $ 85.8     $ 98.6     $ 249.9  
Dividends on stock-based plans
    (.2 )     (.4 )     (.7 )     (1.1 )
Undistributed earnings allocable to stock-based plans
    (1.1 )     (1.0 )     (1.2 )     (2.7 )
Numerator for basic and diluted earnings
per share  – net earnings available to
common stockholders
  $  54.1     $  84.4     $  96.7     $  246.1  
Denominator:
                               
Denominator for basic earnings per share
– weighted-average shares
    59.5       59.2       59.4       59.9  
Employee stock options
    .1       .9       .1       1.0  
Denominator for diluted earnings per
share – adjusted weighted-average
shares and assumed conversions
    59.6       60.1       59.5       60.9  
Basic earnings per share
  $ .91     $ 1.43     $ 1.63     $ 4.11  
Diluted earnings per share
  $ .91     $ 1.41     $ 1.62     $ 4.04  
 
As of September 27, 2009, and September 28, 2008, options to purchase approximately 5.7 million and 2.5 million shares of common stock, respectively, with a weighted-average exercise price of $60.09 and $83.28 per share, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.
 

- 9 - -


Note 6:  Business Segments
The following table provides selected financial data for the Corporation’s reportable business segments (in millions of dollars):
   
Reportable Business Segments
                   
Three Months Ended September 27, 2009
  PowerTools
& Accessories
 
  Hardware &
Home
Improvement
 
  Fastening
& Assembly
Systems
 
Total
 
  Currency
 Translation
 Adjustments
 
  Corporate,
 Adjustment, &
 Eliminations
    Consolidated  
                                         
Sales to unaffiliated customers
  $ 869.5     $ 192.9     $ 132.8   $ 1,195.2     $ 13.5     $     $ 1,208.7  
Segment profit (loss) (for Consoli-
dated, operating income)
    65.8       24.8       12.3     102.9       2.7       (14.9 )     90.7  
Depreciation and amortization
    21.8       4.7       5.3     31.8       .4       .3       32.5  
Capital expenditures
    7.6       4.6       1.3     13.5       .2             13.7  
                                                       
Three Months Ended September 28, 2008
                                                     
Sales to unaffiliated customers
  $ 1,094.4     $ 231.2     $ 173.8   $ 1,499.4     $ 71.4     $     $ 1,570.8  
Segment profit (loss) (for Consoli-
dated, operating income before
restructuring and exit costs)
    83.0       26.1       27.6     136.7       7.8       (9.0 )     135.5  
Depreciation and amortization
    21.5       4.8       5.2     31.5       1.2       .1       32.8  
Capital expenditures
    13.4       3.8       3.9     21.1       .7       2.0       23.8  
                                                       
Nine Months Ended September 27, 2009
                                                     
Sales to unaffiliated customers
  $ 2,561.7     $ 554.7     $ 381.7   $ 3,498.1     $ (24.3 )   $     $ 3,473.8  
Segment profit (loss) (for Consoli-
dated, operating income before
restructuring and exit costs)
    154.5       53.8       22.0     230.3       6.1       (37.0 )     199.4  
Depreciation and amortization
    64.3       14.2       16.3     94.8       (.1 )     .9       95.6  
Capital expenditures
    32.5       11.1       4.1     47.7       (.1 )     .6       48.2  
                                                       
Nine Months Ended September 28, 2008
                                                     
Sales to unaffiliated customers
  $ 3,259.8     $ 682.6     $ 544.8   $ 4,487.2     $ 221.1     $     $ 4,708.3  
Segment profit (loss) (for Consoli-
dated, operating income before
restructuring and exit costs)
    258.5       63.9      
86.9
    409.3       27.6       (40.8 )     396.1  
Depreciation and amortization
    68.6       15.6       16.2     100.4       3.5       .8       104.7  
Capital expenditures
    44.9       13.8       13.1     71.8       2.4       3.4       77.6  
 
The Corporation operates in three reportable business segments:  Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems. The Power Tools and Accessories segment has worldwide responsibility for the manufacture and sale of consumer and industrial power tools and accessories, lawn and garden products, and electric cleaning, automotive, lighting, and household products, as well as for product service. In addition, the Power Tools and Accessories segment has responsibility for the sale of security hardware to customers in Mexico, Central America, the Caribbean, and South America; and for the sale of plumbing products to customers outside the United States and Canada. The Hardware and Home Improvement segment has worldwide responsibility for the manufacture and sale of security hardware (except for the sale of security hardware in Mexico, Central America, the Caribbean, and South America). The Hardware and Home Improvement segment also has responsibility for the manufacture of plumbing products and for the sale of plumbing products to customers in the United States and Canada. The Fastening and Assembly Systems segment has worldwide responsibility for the manufacture and sale of fastening and assembly systems.
 
- 10 - -

 
The profitability measure employed by the Corporation and its chief operating decision maker for making decisions about allocating resources to segments and assessing segment performance is segment profit (for the Corporation on a consolidated basis, operating income before restructuring and exit costs). In general, segments follow the same accounting policies as those described in Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, except with respect to foreign currency translation and except as further indicated below. The financial statements of a segment’s operating units located outside of the United States, except those units operating in highly inflationary economies, are generally measured using the local currency as the functional currency. For these units located outside of the United States, segment assets and elements of segment profit are translated using budgeted rates of exchange. Budgeted rates of exchange are established annually and, once established, all prior period segment data is restated to reflect the current year’s budgeted rates of exchange. The amounts included in the preceding table under the captions “Reportable Business Segments” and “Corporate, Adjustments, & Eliminations” are reflected at the Corporation’s budgeted rates of exchange for 2009. The amounts included in the preceding table under the caption “Currency Translation Adjustments” represent the difference between consolidated amounts determined using those budgeted rates of exchange and those determined based upon the rates of exchange applicable under accounting principles generally accepted in the United States.

Segment profit excludes interest income and expense, non-operating income and expense, adjustments to eliminate intercompany profit in inventory, and income tax expense. In addition, segment profit excludes restructuring and exit costs. In determining segment profit, expenses relating to pension and other postretirement benefits are based solely upon estimated service costs. Corporate expenses, as well as certain centrally managed expenses, including expenses related to share-based compensation, are allocated to each reportable segment based upon budgeted amounts. While sales and transfers between segments are accounted for at cost plus a reasonable profit, the effects of intersegment sales are excluded from the computation of segment profit. Intercompany profit in inventory is excluded from segment assets and is recognized as a reduction of cost of goods sold by the selling segment when the related inventory is sold to an unaffiliated customer. Because the Corporation compensates the management of its various businesses on, among other factors, segment profit, the Corporation may elect to record certain segment-related expense items of an unusual or non-recurring nature in consolidation rather than reflect such items in segment profit. In addition, certain segment-related items of income or expense may be recorded in consolidation in one period and transferred to the various segments in a later period.
 
- 11 - -

 
The reconciliation of segment profit to the Corporation’s earnings before income taxes for each period, in millions of dollars, is as follows:
                         
   
Three Months Ended
   
Nine Months Ended
 
 
 September 27,
2009
 
  September 28,
2008
 
  September 27,
2009
 
  September 28,
2008
 
Segment profit for total reportable business
    segments
  $ 102.9     $ 136.7     $ 230.3     $ 409.3  
Items excluded from segment profit:
                               
Adjustment of budgeted foreign exchange rates
  to actual rates
    2.7       7.8       6.1       27.6  
Depreciation of Corporate property
    (.3 )     (.1 )     (.9 )     (.8 )
Adjustment to businesses’ postretirement
  benefit expenses booked in
  consolidation
    (2.9 )     (.9 )     (8.9 )     (2.8 )
Other adjustments booked in
  consolidation directly related to
  reportable business segments
    .3       (.5 )     5.4       (3.8 )
    Amounts allocated to businesses in
  arriving at segment profit in excess of
  (less than) Corporate center operating
  expenses, eliminations, and other
  amounts identified above
    (12.0 )     (7.5 )     (32.6 )     (33.4 )
Operating income before restructuring and
exit costs
    90.7       135.5       199.4       396.1  
Restructuring and exit costs
          15.6       11.9       33.9  
Operating income
    90.7       119.9       187.5       362.2  
Interest expense, net of interest income
    22.3       13.4       61.1       44.7  
Other expense (income)
    .8       (3.0 )     (3.2 )     (2.6
Earnings before income taxes
  $ 67.6     $ 109.5     $ 129.6     $ 320.1  

 

- 12 - -


Note 7:  Postretirement Benefits
The Corporation’s pension and other postretirement benefit plans are more fully disclosed in Notes 1 and 12 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008. The following tables present the components of the Corporation’s net periodic cost related to its defined benefit pension plans for the three and nine months ended September 27, 2009 and September 28, 2008 (in millions of dollars):
             
    Pension Benefits Plans     Pension Benefits Plans  
    In the United States     Outside of the United States  
    Three Months Ended     Three Months Ended  
 
  September 27,
  2009
 
  September 28,
  2008
 
  September 27,
  2009
 
  September 28,
  2008
 
Service cost
  $ 4.8     $ 5.6     $ 2.0     $ 3.1  
Interest cost
    16.5       15.9       8.9       10.6  
Expected return on plan assets
    (17.4 )     (19.5 )     (8.7 )     (10.4 )
Amortization of prior service cost
    .4       .6       .3       .4  
Amortization of net actuarial loss
    4.6       4.0             1.2  
Net periodic cost
  $ 8.9     $ 6.6     $ 2.5     $ 4.9  
 

             
    Pension Benefits Plans     Pension Benefits Plans  
    In the United States     Outside of the United States  
    Nine Months Ended    
Nine Months Ended
 
 
  September 27,
  2009
 
  September 28,
  2008
 
  September 27,
  2009
 
  September 28,
  2008
 
Service cost
  $ 14.5     $ 16.9     $ 5.6     $ 9.4  
Interest cost
    49.4       47.8       24.8       32.1  
Expected return on plan assets
    (52.2 )     (58.4 )     (24.0 )     (31.6 )
Amortization of prior service cost
    1.1       1.6       .7       1.1  
Amortization of net actuarial loss
    13.8       11.9             3.7  
Net periodic cost
  $ 26.6     $ 19.8     $ 7.1     $ 14.7  
 
The Corporation’s defined postretirement benefits consist of several unfunded health care plans that provide certain postretirement medical, dental, and life insurance benefits for certain United States retirees and employees. The postretirement medical benefits are contributory and include certain cost-sharing features, such as deductibles and co-payments. The net periodic cost related to these defined postretirement benefit plans were $.7 million and $2.1 million for the three and nine months ended September 27, 2009, and $.7 million and $1.9 million for the three and nine months ended September 28, 2008, respectively.
 
- 13 - -

 
Note 8:  Fair Value Measurements
The following table presents the fair value of the Corporation’s financial instruments as of September 27, 2009 (in millions of dollars):
                         
 
  Quoted Prices in
 Active Markets for
Identical Assets
(Level 1)
 
  Significant Other
 Observable Inputs
(Level 2)
 
  Permitted
 Netting (a)
 
  September 27,
  2009
(Total)
 
Assets:
                       
Investments
  $ 32.4     $ 24.3     $     $ 56.7  
Derivatives
    2.8       158.3       (106.0 )     55.1  
Liabilities:
                               
Derivatives
    (.4 )     (108.6 )     106.0       (3.0 )
Debt
          (1,775.6 )           (1,775.6 )
(a)
Accounting principles generally accepted in the United States permits the netting of derivative receivables and derivative payables when a legally enforceable master netting arrangement exits.

The carrying amounts of investments and derivatives are equal to their fair value. The carrying amount of debt at September 27, 2009, is $1,722.2 million.

Investments, derivative contracts and debt are valued using quoted market prices for identical or similar assets and liabilities. Investments classified as Level 1 include those whose fair value is based on identical assets in an active market. Investments classified as Level 2 include those whose fair value is based upon identical assets in markets that are less active. The fair value for derivative contracts are based upon current quoted market prices and are classified as Level 1 or Level 2 based on the nature of the underlying markets in which these derivatives are traded. The fair value of debt is based upon current quoted market prices in markets that are less active.

Note 9:  Derivative Financial Instruments
The Corporation’s objectives and strategies for using derivative instruments are more fully disclosed in Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008. The following table summarizes the contractual amount of foreign currency forward exchange contracts as of September 27, 2009, in millions of dollars, which were entered into to hedge forecasted purchases or to hedge foreign currency denominated assets, liabilities, and firm commitments. Foreign currency amounts were translated at current rates as of the reporting date. The “Buy” amounts represent the United States dollar equivalent of commitments to purchase currencies, and the “Sell” amounts represent the United States dollar equivalent of commitments to sell currencies.
             
    Buy     Sell  
Forward exchange contracts to hedge forecasted purchases
  $ 401.3     $ (396.4 )
Forward exchange contracts to hedge foreign currency
  denominated assets, liabilities and firm commitments
     3,524.2       (3,462.8 )
 
The notional amount of commodity contracts outstanding at September 27, 2009, was 9.6 million pounds and 2.2 million pounds of commodity contracts for zinc and copper, respectively. As of
- 14 - -

 
September 27, 2009, the notional amount of the Corporation’s portfolio of fixed-to-variable interest rate swap instruments was $325.0 million. As of September 27, 2009, the notional amount of the Corporation’s net investment hedges consisted of contracts to sell the British Pound Sterling in the amount of £377.7 million. The notional amount of derivative instruments not designated as hedging instruments at September 27, 2009 was not material.

The following table details the fair value of derivative financial instruments included in the Consolidated Balance Sheet as of September 27, 2009 (in millions of dollars):
         
 
Asset Derivatives
 
Liability Derivatives
 
 
Balance Sheet Location
  Fair
 Value
 
Balance Sheet Location
  Fair
 Value
 
Derivatives Designated as Hedging Instruments
               
Interest rate contracts
Other current assets
  $ 4.3  
Other current liabilities
  $  
 
Other assets
    29.9  
Other long-term liabilities
     
Foreign exchange contracts
Other current assets
    112.8  
Other current liabilities
    47.4  
 
Other assets
    1.5  
Other long-term liabilities
    1.7  
Net investment contracts
Other current assets
     
Other current liabilities
    49.0  
Commodity contracts
Other current assets
    2.2  
Other current liabilities
    .3  
 
Other assets
    .6  
Other long-term liabilities
     
Total Derivatives Designated as Hedging Instruments
    $ 151.3       $ 98.4  

Derivatives Not Designated as Hedging Instruments
               
                 
Foreign exchange contracts
Other current assets
  $ 9.8  
Other current liabilities
  $ 10.6  
Total Derivatives
    $ 161.1       $ 109.0  
 
The fair value of derivative financial instruments in the preceding table is presented prior to the netting of derivative receivables and derivative payables as disclosed in Note 8.

The following table details the impact of derivative financial instruments in the Consolidated Statement of Earnings for the three and nine months ended September 27, 2009 (in millions of dollars):
                       
Derivatives in Cash Flow
   Hedging Relationships
Three Months Ended
   September 27, 2009
  Amount of Gain
 (Loss) Recognized
 in OCI (a)
[Effective Portion]
 
Location of Gain
 (Loss) Reclassified
 from OCI into
 Income [Effective
 Portion]
  Amount of Gain
 (Loss) Reclassified
 from OCI into
 Income [Effective
 Portion]
 
Location of Gain
 (Loss) Recognized
 in Income
 [Ineffective Portion]
  Amount of Gain
 (Loss) Recognized
 in Income
 [Ineffective
 Portion]
 
Foreign exchange contracts
  $ 11.5  
Cost of goods sold
  $ 11.0  
Cost of goods sold
  $ .1  
         
Interest expense, net
    .1  
Interest expense, net
     
         
Other expense
 (income)
    27.0  
Other expense
 (income)
     
Commodity contracts
    2.5  
Cost of goods sold
    (1.5 )
Cost of goods sold
     
Total
  $ 14.0       $ 36.6       $ .1  
 
- 15 - -


         
Derivatives in Fair Value Hedging Relationships
Three Months Ended September 27, 2009
Location of Gain (Loss)
 Recognized in Income
  Amount of Gain (Loss)
 Recognized in Income
 
Interest rate contracts
Interest expense, net
  $ 5.8  

               
Derivatives in Net Investment Hedging Relationships
Three Months Ended September 27, 2009
  Amount of Gain (Loss)
 Recognized in OCI
 [Effective Portion]
 
Location of Gain
 (Loss) Recognized in
 Income [Ineffective
Portion]
  Amount of Gain (Loss)
 Recognized in Income
 [Ineffective Portion]
 
Foreign exchange contracts
  $ (23.6 )
Other expense
 (income)
  $  

         
Derivatives Not Designated as Hedging Instruments
Three Months Ended September 27, 2009
Location of Gain (Loss)
 Recognized in Income
  Amount of Gain (Loss)
 Recognized in Income
 
Foreign exchange contracts
Cost of goods sold
  $ (.2 )
 
Other expense (income)
    .5  
Total
    $ .3  

                       
Derivatives in Cash Flow
   Hedging Relationships
Nine Months Ended
   September 27, 2009
  Amount of Gain
(Loss) Recognized
in OCI
[Effective Portion]
 
Location of Gain
 (Loss) Reclassified
 from OCI into
Income [Effective
 Portion]
  Amount of Gain
(Loss) Reclassified
from OCI into
Income [Effective
Portion]
 
Location of Gain
 (Loss) Recognized in
 Income [Ineffective
 Portion]
  Amount of Gain
(Loss) Recognized
in Income
[Ineffective
Portion]
 
Foreign exchange contracts
  $ 71.6  
Cost of goods sold
  $ 37.3  
Cost of goods sold
  $  
         
Interest expense, net
    2.3  
Interest expense, net
     
         
Other expense
 (income)
    97.5  
Other expense
 (income)
    .1  
Commodity contracts
    6.2  
Cost of goods sold
    (5.7 )
Cost of goods sold
     
Total
  $ 77.8       $ 131.4       $ .1  
 
         
Derivatives in Fair Value Hedging Relationships
Nine Months Ended September 27, 2009
Location of Gain (Loss)
 Recognized in Income
  Amount of Gain (Loss)
 Recognized in Income
 
Interest rate contracts
Interest expense, net
  $ (6.4 )

               
Derivatives in Net Investment Hedging Relationships
Nine Months Ended September 27, 2009
  Amount of Gain (Loss)
 Recognized in OCI
 [Effective Portion]
 
Location of Gain
 (Loss) Recognized in
 Income [Ineffective
 Portion]
  Amount of Gain (Loss)
 Recognized in Income
 [Ineffective Portion]
 
Foreign exchange contracts
  $ (82.2 )
Other expense
 (income)
  $  

         
Derivatives Not Designated as Hedging Instruments
Nine Months Ended September 27, 2009
Location of Gain (Loss)
 Recognized in Income
  Amount of Gain (Loss)
 Recognized in Income
 
Foreign exchange contracts
Cost of goods sold
  $ (.1 )
 
Other expense (income)
    1.5  
Total
    $ 1.4  
 
 (a) OCI is defined as Accumulated Other Comprehensive income (loss), a component of stockholders’ equity.

 
- 16 - -


Amounts deferred in accumulated other comprehensive income (loss) at September 27, 2009, that are expected to be reclassified into earnings during the next twelve months, represent an after-tax gain of $8.9 million. The amount expected to be reclassified into earnings during the next twelve months includes unrealized gains and losses related to open foreign currency and commodity contracts. Accordingly, the amounts that are ultimately reclassified into earnings may differ materially.

Note 10:  Stock-Based Compensation
The number of shares/units granted under the Corporation’s stock option and restricted stock plans during the nine months ended September 27, 2009, together with the weighted exercise price and the related weighted-average grant-date fair values, were as follows:
                   
   
Underlying
Shares
 
  Exercise
 Price
 
  Grant- Date
 Fair Value
 
Options Granted
    795,940     $ 38.28     $ 11.55  
Restricted Stock Granted
    95,300             $ 38.28  
Restricted Stock Units Granted
    488,610             $ 38.28  
 
The options granted are exercisable in equal annual installments over a period of four years. Under the restricted stock plans, restrictions generally expire four years from the date of grant.

As more fully disclosed in Note 1 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, the fair value of stock options is determined using the Black-Scholes option valuation model, which incorporates assumptions surrounding volatility, dividend yield, the risk-free interest rate, expected life, and the exercise price as compared to the stock price on the grant date. The following table summarizes the significant weighted-average assumptions used to determine the grant-date fair value of options granted during the nine months ended September 27, 2009:
         
Volatility
    35.4 %  
Dividend yield
    2.00 %  
Risk-free interest rate
    2.23 %  
Expected life in years
    6.0    
 
Note 11:  Interest Expense (Net of Interest Income)
Interest expense (net of interest income) for each period, in millions of dollars, was as follows:
             
   
Three Months Ended
   
Nine Months Ended
 
 
  September 27,
  2009
 
  September 28,
  2008
 
  September 27,
 2009
 
  September 28,
  2008
 
Interest expense
  $ 23.7     $ 25.3     $ 67.7     $ 74.8  
Interest (income)
    (1.4 )     (11.9 )     (6.6 )     (30.1 )
    $ 22.3     $ 13.4     $ 61.1     $ 44.7  

Note 12:  Other Expense (Income)
Other expense (income) was $.8 million and $(3.0) million for the three months ended September 27, 2009, and September 28, 2008, respectively and was $(3.2) million and $(2.6) million for the nine months ended September 27, 2009, and September 28, 2008, respectively. Other expense (income) income for nine months ended September 27, 2009 includes a $6.0

- 17 - -

 
million insurance settlement related to an environmental matter. Other expense (income) for the three- and nine-month periods ended September 28, 2008, benefited from a gain on the sale of a non-operating asset.

Note 13:  Income Taxes
Consolidated income tax expense of $12.2 million and $31.0 million was recognized on the Corporation’s earnings before income taxes of $67.6 million and $129.6 million for the three- and nine-month periods ended September 27, 2009, respectively. Consolidated income tax expense of $23.7 million and $70.2 million was recognized on the Corporation’s earnings before income taxes of $109.5 million and $320.1 million for the three- and nine-month periods ended September 28, 2008, respectively. Consolidated income tax expense included a tax benefit of $3.5 million and $9.1 million recognized on the $11.9 million and $33.9 million pre-tax restructuring charges during the nine-month periods ended September 27, 2009, and September 28, 2008, respectively. The Corporation’s effective tax rate was 18.0% and 21.6% for the three-month periods ended September 27, 2009, and September 28, 2008, respectively, and 23.9% and 21.9% for the nine-month periods ended September 27, 2009, and September 28, 2008, respectively.  The Corporation’s effective tax rate for the three- and nine-month periods ended September 27, 2009, benefited from favorable adjustments associated with new facts regarding certain income tax matters and the favorable resolution of certain tax audits. The Corporation’s effective tax rate for the three- and nine-month periods ended September 28, 2008, benefited from; (i) favorability associated with  the finalization of closing agreements, in the third quarter of 2008, of the settlement of income tax litigation between the Corporation and the U.S. government agreed in late 2007 and more fully described in Note 11 of Notes to Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008; and (ii) the favorable resolution of certain tax audits.

The amount of unrecognized tax benefits, including the amount of related interest, and the amount, if recognized, that would not affect the annual effective tax rate at the end of each period, in millions of dollars, was as follows:
             
 
  September 27,
  2009
 
  December 31,
  2008
 
Unrecognized tax benefits (including interest of
$27.8 in 2009 and $24.3 in 2008)
  $ 283.9     $ 255.8  
Amount, if recognized, that would not affect the
annual effective tax rate
    40.6       38.0  
 
At September 27, 2009, the Corporation classified $49.5 million of its liabilities for unrecognized tax benefits within other current liabilities.

As more fully disclosed in Note 11 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, the Corporation is subject to periodic examinations by taxing authorities in many countries and, currently, is undergoing periodic examinations of its tax returns in the United States (both federal and state), Canada, Germany and the United Kingdom. The final outcome of the future tax consequences of these examinations and legal proceedings, as well as the outcome of competent authority proceedings, changes in regulatory tax laws, or interpretation of those tax laws, changes in income tax rates, or expiration of statutes of limitation, could impact the Corporation’s
 
- 18 - -


financial statements. The Corporation is subject to the effects of these matters occurring in various jurisdictions. Accordingly, the Corporation has tax reserves recorded for which it is reasonably possible that the amount of the unrecognized tax benefit will increase or decrease within the next twelve months. Any such increase or decrease could have a material effect on the financial results for any particular fiscal quarter or year. However, based on the uncertainties associated with litigation and the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, which could include formal legal proceedings, it is not possible to estimate the impact of any such change.
 
Note 14:  Restructuring Actions
A summary of restructuring activity during the nine-month period ended September 27, 2009, is set forth below (in millions of dollars):
                         
 
  Severance
 Benefits
 
  Write-Down to
 Fair Value Less
 Costs to Sell of
 Certain Long-
Lived Assets
 
  Other
 Charges
    Total  
Restructuring reserve at December 31, 2008
  $ 35.6     $     $ 2.0     $ 37.6  
Reserves established in 2009
    11.1       .4       .4       11.9  
Utilization of reserves:
                               
Cash
    (32.7 )           (.6 )     (33.3 )
Non-cash
          (.4 )           (.4 )
Foreign currency translation
    1.4                   1.4  
Restructuring reserve at September 27, 2009
  $ 15.4     $     $ 1.8     $ 17.2  
 
The Corporation’s restructuring actions that were initiated prior to 2009 are more fully disclosed in Note 18 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008.

During the nine-month period ended September 27, 2009, the Corporation recorded a restructuring charge of $11.9 million. The principal components of this restructuring charge related to the elimination of direct and indirect manufacturing positions as well as selling, general, and administrative positions. As a result, a severance benefits accrual of $11.1 million was included in the restructuring charge, of which $8.9 million related to the Power Tools and Accessories segment, $1.4 million related to the Hardware and Home Improvement segment, and $.8 million related to the Fastening and Assembly Systems segment. The severance benefits accrual included the elimination of approximately 1,500 positions including approximately 1,200 manufacturing related positions.  The restructuring charge also included a $.4 million write-down to fair value of certain long-lived assets for the Hardware and Home Improvement segment. In addition, the restructuring charge reflected $.3 million and $.1 million related to the early termination of lease agreements by the Power Tools and Accessories segment and Fastening and Assembly Systems segment, respectively, necessitated by the restructuring actions.

Of the remaining $17.2 million restructuring accrual at September 27, 2009, $14.8 million relates to the Power Tools and Accessories segment, $1.9 million relates to the Hardware and Home Improvement segment and $.5 million relates to the Fastening and Assembly Systems segment.
 
- 19 - -


The Corporation anticipates that the remaining actions contemplated under the $17.2 million accrual will be completed during 2009 and 2010.

Note 15:  Litigation and Contingent Liabilities
As more fully disclosed in Note 20 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008, the Corporation is involved in various lawsuits in the ordinary course of business.

These lawsuits primarily involve claims for damages arising out of the use of the Corporation’s products and allegations of patent and trademark infringement. The Corporation also is involved in litigation and administrative proceedings involving employment matters, commercial disputes and income tax matters. Some of these lawsuits include claims for punitive as well as compensatory damages.

The Corporation also is party to litigation and administrative proceedings with respect to claims involving the discharge of hazardous substances into the environment. Some of these assert claims for damages and liability for remedial investigations and clean-up costs with respect to sites that have never been owned or operated by the Corporation but at which the Corporation has been identified as a potentially responsible party. Other matters involve current and former manufacturing facilities.

The Environmental Protection Agency (EPA) and the Santa Ana Regional Water Quality Control Board have each initiated administrative proceedings against the Corporation and certain of the Corporation’s current or former affiliates alleging that the Corporation and numerous other defendants are responsible to investigate and remediate alleged groundwater contamination in and adjacent to a 160-acre property located in Rialto, California. The cities of Colton and Rialto, as well as Goodrich Corporation, also initiated lawsuits against the Corporation and certain of the Corporation’s former or current affiliates in the Federal District Court for California, Central District alleging similar claims that the Corporation is liable under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act, and state law for the discharge or release of hazardous substances into the environment and the contamination caused by those alleged releases. These cases were voluntarily dismissed without prejudice in June 2008. The City of Colton also has a companion case in California State court, which is currently stayed for all purposes. Certain defendants in that case have cross-claims against other defendants and have asserted claims against the State of California. The administrative proceedings and the lawsuits generally allege that West Coast Loading Corporation (WCLC), a defunct company that operated in Rialto between 1952 and 1957, and an as yet undefined number of other defendants are responsible for the release of perchlorate and solvents into the groundwater basin, and that the Corporation and certain of the Corporation’s current or former affiliates are liable as a “successor” of WCLC. The Corporation believes that neither the facts nor the law support an allegation that the Corporation is responsible for the contamination and is vigorously contesting these claims.

The EPA has provided an affiliate of the Corporation a “Notice of Potential Liability” related to environmental contamination found at the Centredale Manor Restoration Project Superfund site, located in North Providence, Rhode Island. The EPA has discovered dioxin, polychlorinated biphenyls, and pesticide contamination at this site. The EPA alleged that an affiliate of the Corporation is liable for site cleanup costs under CERCLA as a successor to the liability of
 
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Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the EPA’s costs related to this site. The EPA, which considers the Corporation to be the primary potentially responsible party (PRP) at the site, is expected to release a draft Feasibility Study Report, which will identify and evaluate remedial alternatives for the site, in 2010. The estimated remediation costs related to this site (including the EPA’s past costs as well as costs of additional investigation, remediation, and related costs, less escrowed funds contributed by PRPs who have reached settlement agreements with the EPA), which the Corporation considers to be probable and can be reasonably estimable, range from approximately $49.5 million to approximately $100 million, with no amount within that range representing a more likely outcome. The Corporation’s reserve for this environmental remediation matter of $49.5 million reflects the probability that the Corporation will be identified as the principal financially viable PRP upon issuance of the EPA draft Feasibility Study Report. The Corporation has not yet determined the extent to which it will contest the EPA’s claims with respect to this site. Further, to the extent that the Corporation agrees to perform or finance remedial activities at this site, it will seek participation or contribution from additional PRPs and insurance carriers. As the specific nature of the environmental remediation activities that may be mandated by the EPA at this site have not yet been determined, the ultimate remedial costs associated with the site may vary from the amount accrued by the Corporation at September 27, 2009.

As of September 27, 2009, the Corporation’s aggregate probable exposure with respect to environmental liabilities, for which accruals have been established in the consolidated financial statements, was $101.3 million. These accruals are reflected in other current liabilities and other long-term liabilities in the Consolidated Balance Sheet.

Total future costs for environmental remediation activities will depend upon, among other things, the identification of any additional sites, the determination of the extent of contamination at each site, the timing and nature of required remedial actions, the technologies available, the nature and terms of cost sharing arrangements with other PRPs, the existing legal requirements and nature and extent of future environmental laws, and the determination of the Corporation’s liability at each site. The recognition of additional losses, if and when they may occur, cannot be reasonably predicted.

In the opinion of management, amounts accrued for exposures relating to product liability claims, environmental matters, income tax matters, and other legal proceedings are adequate and, accordingly, the ultimate resolution of these matters is not expected to have a material adverse effect on the Corporation’s consolidated financial statements. As of September 27, 2009, the Corporation had no known probable but inestimable exposures relating to product liability claims, environmental matters, income tax matters, or other legal proceedings that are expected to have a material adverse effect on the Corporation. There can be no assurance, however, that unanticipated events will not require the Corporation to increase the amount it has accrued for any matter or accrue for a matter that has not been previously accrued because it was not considered probable. While it is possible that the increase or establishment of an accrual could have a material adverse effect on the financial results for any particular fiscal quarter or year, in the opinion of management there exists no known potential exposure that would have a material adverse effect on the financial condition or on the financial results of the Corporation beyond any such fiscal quarter or year.
 
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Note 16: Subsequent Events
On November 2, 2009, the Corporation announced that it had entered into a definitive merger agreement to create Stanley Black & Decker in an all-stock transaction. Under the terms of the transaction, which has been approved by the Boards of Directors of both the Corporation and The Stanley Works, the Corporation’s shareholders will receive a fixed ratio of 1.275 shares of The Stanley Works common stock for each share of the Corporation’s common stock that they own. Consummation of the transaction, which is subject to customary closing conditions, including obtaining certain regulatory approvals as well as shareholder approval from the shareholders of both the Corporation and The Stanley Works, is expected to occur in the first half of 2010.

The provisions of the definitive merger agreement provide for a termination fee, in the amount of $125 million, to be paid by either the Corporation or by The Stanley Works under certain circumstances, including circumstances in which the Board of Directors of The Stanley Works or the Corporation withdraw or modify adversely their recommendation of the proposed transaction.

Approval of the definitive merger agreement by the Corporation’s Board of Directors constituted a “change in control” as defined in certain agreements with employees. That “change in control” resulted in the following events, all of which will be recognized in the Corporation’s financial statements for the quarter ending December 31, 2009:

 
i.
Under the terms of two restricted stock plans, all restrictions lapse on outstanding, but non-vested, restricted stock and restricted stock units, except for those held by the Corporation’s Chairman, President, and Chief Executive Officer. As a result of that lapse, the Corporation will recognize previously unrecognized compensation expense in the amount of approximately $33 million, restrictions will lapse on approximately 486,000 restricted shares, and the Corporation will issue approximately 481,000 shares in satisfaction of the restricted stock units. Those 967,000 shares will be reduced by shares with a fair value equal to amounts necessary to satisfy employee tax withholding requirements.

 
ii.
Under the terms of severance agreements with 19 of its key employees, all unvested stock options held by those individuals, aggregating approximately 1.1 million options, immediately vest. As a result, the Corporation will recognize previously unrecognized compensation expense associated with those options in the amount of approximately $9 million.
 
 
iii.
Under the terms of The Black & Decker Supplemental Executive Retirement Plan, which covers six key employees, the participants become fully vested. As a result, the Corporation expects to recognize additional pension expense of approximately $5 million.
 
The events described in paragraphs i. through iii. above require accounting recognition in the Corporation’s financial statements for the quarter ending December 31, 2009, as the approval of the definitive merger agreement by the Corporation’s Board of Directors on November 2, 2009, constituted a “change in control” under certain agreements with employees and resulted in the occurrence—irrespective of whether or not the proposed merger is ultimately consummated—of those events.  Additional payments upon a change in control—that are solely payable upon consummation of the proposed merger or termination of certain employees—will not be
 
- 22 - -

 
recognized in the Corporation’s financial statements until: (1) consummation of the proposed merger, which is subject to customary closing conditions, including obtaining certain regulatory approvals, as well as shareholder approval from the shareholders of both the Corporation and The Stanley Works, and therefore cannot be considered probable until such approvals are obtained; or (2) if prior to consummation of the proposed merger, the Corporation reaches a determination to terminate an affected employee, irrespective of whether the proposed merger is consummated.

On November 2, 2009, the Corporation’s Board of Directors amended the terms of The Black & Decker 2008 Executive Long-Term Incentive/Retention Plan to remove the provision whereby cash payouts under the plan are adjusted upward or downward proportionately to the extent that the Corporation’s common stock exceeds or is less than $67.78. As a result of this modification, the Corporation will recognize additional compensation expense of approximately $3 million in its financial statements for the quarter ending December 31, 2009.

The Corporation also expects that it will incur fees for various advisory, legal, and accounting services associated with the proposed merger. The Corporation estimates that these outside service fees, which will be expensed as incurred, will approximate $25 million, with approximately $7.5 to $10 million of expenses expected to be recognized in the quarter ending December 31, 2009. The anticipated $25 million of outside service fees includes approximately $10.5 million of fees that are only payable upon consummation of the proposed merger. The Corporation’s estimate of outside service fees is based upon current forecasts of expected service activity. There is no assurance that the amount of these fees could not increase significantly in the future if circumstances change.

The Corporation has evaluated subsequent events through November 5, 2009, the date of issuance of these financial statements, and determined that: (i) no subsequent events have occurred that would require recognition in its consolidated financial statements as of September 27, 2009, or for the three- and nine-month periods then ended; and (ii) no other subsequent events have occurred that would require disclosure in the notes thereto.
 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW
The Corporation is a global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology-based fastening systems. As more fully described in Note 6 of Notes to Consolidated Financial Statements, the Corporation operates in three reportable business segments—Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems—with these business segments comprising approximately 73%, 16%, and 11%, respectively, of the Corporation’s sales for the nine-month period ended September 27, 2009.

The Corporation markets its products and services in over 100 countries. During 2008, approximately 55%, 25%, and 20% of its sales were made to customers in the United States, in Europe (including the United Kingdom and Middle East), and in other geographic regions, respectively. The Power Tools and Accessories and Hardware and Home Improvement segments are subject to general economic conditions in the countries in which they operate as well as to the strength of the retail economies. The Fastening and Assembly Systems segment is also subject to general economic conditions in the countries in which it operates as well as to automotive and industrial demand.

As described in Note 16 of Notes to Consolidated Financial Statements, on November 2, 2009, the Corporation announced that it had entered into a definitive merger agreement to create Stanley Black & Decker in an all-stock transaction. Under the terms of the transaction, which has been approved by the Boards of Directors of both the Corporation and The Stanley Works, the Corporation’s shareholders will receive a fixed ratio of 1.275 shares of The Stanley Works common stock for each share of the Corporation’s common stock that they own. Consummation of the transaction, which is subject to customary closing conditions, including obtaining certain regulatory approvals as well as shareholder approval from the shareholders of both the Corporation and The Stanley Works, is expected to occur in the first half of 2010.

An overview of certain aspects of the Corporation’s performance during the three- and nine-month periods ended September 27, 2009, follows:
 
·  
The Corporation continued to face a difficult demand environment during 2009 due to the impact of the global recession. Sales for the three-month period ended September 27, 2009, decreased by 23% from the corresponding 2008 period to $1.2 billion. This reduction was the result of a 21% decline in unit volume and a 3% unfavorable impact from foreign currency attributable to the effects of a stronger U.S. dollar, partially offset by 1% of favorable price. That unit volume decline was experienced across all business segments and throughout all geographic regions. Sales for the nine-month period ended September 27, 2009, decreased by 26%, from the corresponding 2008 periods to $3.5 billion. This reduction was the result of a 23% decline in unit volume and a 4% unfavorable impact from foreign currency attributable to the effects of a stronger U.S. dollar, partially offset by 1% of favorable price. That unit volume decline was experienced across all business segments and throughout all geographic regions. The Corporation expects that continued weakness in economic conditions will result in a sales decline of approximately 23% in 2009, as compared to 2008, including a 3% unfavorable impact from foreign currency.
 
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·  
Operating income as a percentage of sales for the three- and nine-month periods ended September 27, 2009, decreased by approximately 10 basis points and 230 basis points, respectively, from the corresponding periods in 2008.  Of the 10 basis point decline for the three-month period ended September 27, 2009, an increase in selling, general, and administrative expenses contributed approximately 180 basis points but was substantially offset by an increase in gross margin of approximately 70 basis points and a decrease of $15.6 million in restructuring and exit costs that contributed a favorable 100 basis points.  Of the 230 basis point decline for the nine-month period ended September 27, 2009, a reduction in gross margin contributed approximately 120 basis points and an increase in selling, general, and administrative expenses contributed approximately 150 basis points, both of which were partially offset by a $22.0 million reduction in restructuring and exit costs that contributed a favorable 40 basis points.  Gross margin as a percentage of sales increased in the three-month period ended September 27, 2009, as compared to the corresponding period in 2008, as a result of the favorable effects of commodity deflation, restructuring and cost reduction initiatives, and pricing, which were partially offset by the unfavorable effects of lower volumes, including the deleveraging of fixed costs.  Gross margin as a percentage of sales declined in the nine-month period ended September 27, 2009, as compared to the corresponding period in 2008, as a result of the unfavorable effects of lower volumes, including the de-leveraging of fixed costs, commodity inflation, and unfavorable mix, which were partially offset by the favorable effects of pricing, restructuring and cost reduction initiatives, productivity gains, and a favorable comparison to prior year inventory write-downs. Despite a 17% and 22% reduction in selling, general, and administrative expenses in the three- and nine-month periods ended September 27, 2009 from the corresponding 2008 levels, selling, general, and administrative expenses as a percentage of sales increased in the three- and nine-month periods ended September 27, 2009, over the 2008 levels, due to the de-leveraging of expenses over a lower sales base.
 
·
Interest expense (net of interest income) increased over the corresponding 2008 periods by $8.9 million and $16.4 million for the three- and nine-month periods ended September 27, 2009, respectively, primarily as a result of the early April 2009 issuance of $350.0 million of 8.95% senior notes due 2014 and of the effects of lower interest rate spreads earned on the Corporation’s foreign currency hedging activities.
 
·
The Corporation’s effective tax rate was 18.0% and 21.6% for the three-month periods ended September 27, 2009, and September 28, 2008, respectively, and 23.9% and 21.9% for the nine-month periods ended September 27, 2009, and September 28, 2008, respectively. The Corporation’s effective tax rate for the three-month period ended September 27, 2009, was lower than the comparable 2008 period as the impact of favorable adjustments associated with new facts regarding certain income tax matters and the favorable resolution of certain tax audits in the 2009 period had a greater impact on the effective rate than the impact of a favorable resolution of tax matters that occurred during the comparable 2008 period. While the Corporation’s effective tax rate for the nine-month periods ended September 27, 2009 and 2008, benefited from favorable adjustments associated with new facts regarding certain income tax matters and the favorable resolution of certain tax audits, the Corporation’s effective tax rate for the nine-month period ended September 27, 2009, increased over that of the comparable 2008 period primarily as a result of the leveraging effect of the interest component on reserves for uncertain tax positions, included as a component of tax expense, on lower earnings before income taxes in the 2009 period.
 
- 25 - -

 
·
Net earnings were $55.4 million, or $.91 per share on a diluted basis, for the three-month period ended September 27, 2009, as compared to net earnings of $85.8 million, or $1.41 per share on a diluted basis, for the corresponding period in 2008. For the nine-month period ended September 27, 2009, net earnings were $98.6 million, or $1.62 per share on a diluted basis, as compared to $249.9 million, or $4.04 per share on a diluted basis, for the corresponding period in 2008.

The preceding information is an overview of certain information for the three- and nine-month periods ended September 27, 2009, and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety.

In the discussion and analysis of financial condition and results of operations that follows, the Corporation generally attempts to list contributing factors in order of significance to the point being addressed.

RESULTS OF OPERATIONS

Sales
The following chart sets forth an analysis of the consolidated changes in sales for the three- and nine-month periods ended September 27, 2009 and September 28, 2008:
 
  Analysis of Changes in Sales
   
Three Months Ended
   
Nine Months Ended
 
(Dollars in Millions)
  September 27,
  2009
 
  September 28,
 2008
 
  September 27,
  2009
 
  September 28,
  2008
 
Total sales
  $ 1,208.7     $ 1,570.8     $ 3,473.8     $ 4,708.3  
Unit volume
    (21 )%     (6 )%     (23 )%     (7 )%
Price
    1 %     (1 )%     1 %     (1 )%
Currency
    (3 )%     3 %     (4 )%     4 %
Change in total sales
    (23 )%     (4 )%     (26 )%     (4 )%
 
Total consolidated sales for the three- and nine-month periods ended September 27, 2009, decreased by 23% and 26%, respectively, from the corresponding 2008 periods. Unit volume declined 21% and 23% for the three- and nine-month periods ended September 27, 2009, respectively. The unit volume decline was experienced across all business segments and throughout all geographic regions. Pricing actions had a 1% favorable impact on sales for both the three- and nine-month periods ended September 27, 2009. The effects of a stronger U.S. dollar, as compared to most other currencies, particularly the euro, Canadian dollar, Brazilian real, British pound, and Mexican peso, resulted in a 3% and 4% decrease  in consolidated sales for the three- and nine-month periods ended September 27, 2009, respectively.

Earnings
A summary of the Corporation’s consolidated gross margin, selling, general, and administrative expenses, restructuring and exit costs, and operating income—all expressed as a percentage of sales—follows:
 
- 26 - -


             
   
Three Months Ended
   
Nine Months Ended
 
(Percentage of sales)
  September 27,
2009
 
  September 28,
2008
 
September 27,
2009
 
  September 28,
2008
 
Gross margin
    33.1 %     32.4 %     32.0 %     33.2 %
Selling, general, and administrative
    expenses
    25.6 %     23.8 %     26.3 %     24.8 %
Restructuring and exit costs
    %     1.0 %     .3 %     .7 %
Operating income
    7.5 %     7.6 %     5.4 %     7.7 %
 
The Corporation reported consolidated operating income of $90.7 million, or 7.5% of sales, for the three months ended September 27, 2009, as compared to operating income of $119.9 million, or 7.6% of sales, for the corresponding period in 2008. Operating income for the nine months ended September 27, 2009, was $187.5 million, or 5.4% of sales, as compared to operating income of $362.2 million, or 7.7% of sales, for the corresponding period in 2008.

Consolidated gross margin as a percentage of sales increased by 70 basis points from the 2008 level to 33.1% for the three-month period ended September 27, 2009 as a result of  the favorable effects of commodity deflation, restructuring and cost reduction initiatives, and pricing, which were offset by the unfavorable effects of lower volumes, including the de-leveraging of fixed costs. Consolidated gross margin as a percentage of sales declined by 120 basis points from the 2008 level to 32.0% for the nine-month period ended September 27, 2009 as a result of the unfavorable effects of lower volumes, including the de-leveraging of fixed costs, commodity inflation and unfavorable mix, which were partially offset by the favorable effects of pricing, restructuring benefits, productivity gains, and a favorable comparison to prior year inventory write-downs.

Consolidated selling, general, and administrative expenses as a percentage of sales increased by 180 basis points and 150 basis points over the 2008 levels to 25.6% and 26.3% for the three- and nine-month periods ended September 27, 2009, respectively. Those increases in selling, general, and administrative expenses as a percentage of sales were primarily due to the de-leveraging of expenses over a lower sales base. Selling, general, and administrative expenses for the three- and nine-month periods ended September 27, 2009, declined from the 2008 levels by $63.8 million to $309.6 million and by $253.6 million to $913.9 million, respectively. Those declines were due to several factors, including: (i) cost reduction initiatives and restructuring savings; (ii) decreases in variable selling expenses due to lower sales volumes; and (iii) the favorable effects of foreign currency translation.

In the first quarter of 2009, the Corporation recognized restructuring and exit costs of $11.9 million, related to actions in its Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems segments. As more fully described in Note 14 of Notes to Consolidated Financial Statements, these restructuring charges primarily reflect actions to reduce the Corporation’s selling, general, and administrative expenses and to improve its manufacturing cost base.
 
- 27 - -

 
Consolidated net interest expense (interest expense less interest income) for the three months ended September 27, 2009, and September 28, 2008, was $22.3 million and $13.4 million, respectively. Consolidated net interest expense (interest expense less interest income) for the nine months ended September 27, 2009, and September 28, 2008, was $61.1 million and $44.7 million, respectively. The increase in net interest expense for both the three- and nine-month periods ended September 27, 2009, was primarily the result of the early April 2009 issuance of $350.0 million of 8.95% senior notes due 2014 and of the effects of lower interest rate spreads earned on the Corporation’s foreign currency hedging activities.

Other expense (income) was $.8 million and $(3.0) million for the three months ended September 27, 2009, and September 28, 2008, respectively and was $(3.2) million and $(2.6) million for the nine months ended September 27, 2009, and September 28, 2008, respectively. Other expense (income) for the nine-month period ended September 27, 2009, includes the benefit of a $6.0 million insurance settlement related to an environmental matter. Other expense (income) for the three- and nine-month periods ended September 28, 2008, benefited from a gain on the sale of a non-operating asset.

Consolidated income tax expense of $12.2 million and $31.0 million was recognized on the Corporation’s earnings before income taxes of $67.6 million and $129.6 million for the three- and nine-month periods ended September 27, 2009, respectively. The Corporation’s effective tax rate was 18.0% and 21.6% for the three-month periods ended September 27, 2009, and September 28, 2008, respectively, and 23.9% and 21.9% for the nine-month periods ended September 27, 2009, and September 28, 2008, respectively. The Corporation’s effective tax rate for the three-month period ended September 27, 2009, was lower than the comparable 2008 period as the impact of favorable adjustments associated with new facts regarding certain income tax matters and the favorable resolution of certain tax audits in the 2009 period had a greater impact on the effective rate than the impact of the favorable resolution of tax matters that occurred during the comparable 2008 period. While the Corporation’s effective tax rate for the nine-month period ended September 27, 2009, benefited from favorable adjustments associated with new facts regarding certain income tax matters and the favorable resolution of certain tax audits, the Corporation’s effective tax rate for the nine-month period ended September 27, 2009, increased over the rate of the comparable 2008 period primarily as a result of the leveraging effect of the interest component on reserves for uncertain tax positions, included as a component of tax expense, on lower earnings before income taxes in the 2009 period.

The Corporation reported net earnings of $55.4 million, or $.91 per share on a diluted basis, for the three-month period ended September 27, 2009, as compared to net earnings of $85.8 million, or $1.41 per share on a diluted basis, for the corresponding period in 2008. Net earnings for the three-month period ended September 28, 2008, included the effects of an after-tax restructuring charge of $12.6 million ($15.6 million before taxes). The Corporation reported net earnings of $98.6 million, or $1.62 per share on a diluted basis, for the nine-month period ended September 27, 2009, as compared to net earnings of $249.9 million, or $4.04 per share on a diluted basis, for the corresponding period in 2008. Net earnings for the nine-month periods ended September 27, 2009, and September 28, 2008, included the effects of an after-tax restructuring charge of $8.4 million ($11.9 million before taxes) and $24.8 million ($33.9 million before taxes), respectively.
 
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BUSINESS SEGMENTS
As more fully described in Note 6 of Notes to Consolidated Financial Statements, the Corporation operates in three reportable business segments: Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems.

Power Tools and Accessories
Segment sales and segment profit for the Power Tools and Accessories segment, determined on the basis described in Note 6 of Notes to Consolidated Financial Statements, were as follows (dollars in millions):
             
   
Three Months Ended
   
Nine Months Ended
 
 
  September 27,
 2009
 
  September 28,
 2008
 
  September 27,
 2009
 
  September 28,
 2008
 
Sales to unaffiliated customers
  $ 869.5     $ 1,094.4     $ 2,561.7     $ 3,259.8  
Segment profit
    65.8       83.0       154.5       258.5  
 
Sales to unaffiliated customers in the Power Tools and Accessories segment during the third quarter of 2009 decreased by 21% from the corresponding period in 2008.

During the third quarter of 2009, sales in North America decreased 23% from the prior year’s level primarily due to continued weak demand in the United States as a result of sharp declines in residential and commercial construction activity. Sales of industrial power tools and accessories in the United States decreased 23% as a result of a continued decline in construction activity, with sales down in all key channels. Sales of consumer power tools and accessories in the United States decreased 20% from the 2008 level. That decrease was principally attributable to continued weak demand in the core tools category as well as to lower sales in the automotive and electric product category. In Canada, sales decreased approximately 30% from the prior year’s level, with a 31% decline in sales of industrial power tools and accessories and a 25% decline in sales of consumer power tools and accessories.

In Europe, sales decreased 23% during the third quarter of 2009 from the prior year’s level, with declines experienced in all major markets. The sales decline was particularly severe in Eastern Europe. During the third quarter of 2009, European sales of industrial power tools and accessories declined by 24% and sales of consumer power tools and accessories declined by 22% from the prior year’s levels.

Sales in other geographic areas decreased at a mid-single-digit rate during the third quarter of 2009 from the prior year’s level. In Latin America, sales declined at a mid-single-digit rate, as sales declines in the Caribbean, Central America, and Mexico, which were adversely affected by the economic downturn in the United States, were partially offset by sales growth in other parts of the region, including Brazil and Argentina. Sales in Asia/Pacific increased at a mid-single-digit rate, with gains in India and Australia more than offsetting declines in most other countries.

Segment profit as a percentage of sales for the Power Tools and Accessories segment was 7.6%, which was flat to the third quarter of 2008. As percentages of sales, an increase in gross margin of 110 basis points was offset by a 110 basis point increase in selling, general, and administrative expenses. The increase in gross margin as a percentage of sales was principally due to the favorable effects of pricing, restructuring and cost reduction initiatives, and component cost
 
- 29 - -

 
deflation. The increase in selling, general, and administrative expenses as a percentage of sales resulted from the de-leveraging of expenses over lower sales, which more than offset the favorable effects of restructuring and cost reduction initiatives and reductions in variable selling expenses.
 
Sales to unaffiliated customers in the Power Tools and Accessories segment during the nine months ended September 27, 2009, decreased by 21% from the corresponding period in 2008.

During the nine months ended September 27, 2009, sales in North America decreased 22% from the prior year’s level primarily due to continued weak demand in the United States as a result of depressed housing activity and decelerating commercial construction. Sales of industrial power tools and accessories in the United States decreased 27%, with lower sales in the independent channel and at retail. Sales of consumer power tools and accessories in the United States decreased at a mid-single-digit rate from the 2008 level. In Canada, sales decreased 28%, with a 31% decline in sales of industrial power tools and accessories and a double-digit rate of decline in consumer power tools and accessories.

Sales in Europe decreased 28% during the nine months ended September 27, 2009, from the level experienced in the corresponding 2008 period due to the impact of the global recession. Sales declined across all markets and in all key product lines. The sales decline was particularly severe in Eastern Europe, Scandinavia, and the United Kingdom, and the Central European and Iberian regions. During the nine months ended September 27, 2009, European sales of industrial power tools and accessories declined by 31% and sales of consumer power tools and accessories declined by 23% from the prior year’s levels.

Sales in other geographic areas decreased at a high-single-digit rate during the nine months ended September 27, 2009, from the level experienced in the corresponding period in 2008. This decrease primarily resulted from a mid-single-digit rate of decline in Latin America, with double-digit rates of declines experienced in the Caribbean, Central America, and Mexico—areas more closely tied to the U.S. economy than others in the region. Sales in Asia/Pacific decreased at a high-single-digit rate.

Segment profit as a percentage of sales for the Power Tools and Accessories segment was 6.0% for the nine months ended September 27, 2009, as compared to 7.9% for the corresponding period in 2008. As percentages of sales, the decrease in segment profit resulted from a 60 basis point decrease in gross margin and a 130 basis point increase in selling, general, and administrative expenses. The decrease in gross margin as a percentage of sales was principally due to the unfavorable effects of commodity inflation (including the appreciation of the Chinese renminbi), lower volumes, including the de-leveraging of fixed costs, and unfavorable mix, which more than offset favorable price, a positive comparison to inventory write-downs in the prior year, and the benefit of restructuring and cost reduction initiatives. The increase in selling, general, and administrative expenses as a percentage of sales resulted from the de-leveraging of expenses over lower sales, which more than offset the favorable effects of restructuring and cost reduction initiatives and a reduction in variable selling expenses.
 
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Hardware and Home Improvement
Segment sales and segment profit for the Hardware and Home Improvement segment, determined on the basis described in Note 6 of Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
             
   
Three Months Ended
   
Nine Months Ended
 
 
  September 27,
 2009