Stanley Black & Decker (NYSE: SWK) reported Q1 EPS of $1.20, $0.10 better than the analyst estimate of $1.10. Revenue for the quarter came in at $3.1 billion versus the consensus estimate of $3.25 billion.

• 1Q'20 Revenues Totaled $3.1 Billion, Down 6% Versus Prior Year, With A 7% Organic Decline Primarily Related To Impacts From COVID-19
• 1Q'20 Diluted GAAP EPS Was $0.88; Excluding Charges, 1Q'20 Diluted EPS Was $1.20, Reflecting $60 Million In External Headwinds And Coronavirus Related Volume Declines Partially Offset By Margin Resiliency Actions
• Recently Announced Cost Reduction Program Expected To Deliver $1 Billion In Annualized Savings With $500 Million In 2020
• Continues Suspension Of Guidance But Currently Expects Second Quarter To Be The Trough For 2020 Revenue Decline

1Q'20 Key Points:

• Net sales for the quarter were $3.1 billion, down 6% versus prior year, as acquisitions (+2%) and price (+1%) were more than offset by volume (-8%) and currency (-1%).
• Gross margin rate for the quarter was 32.7%. Excluding charges, the rate was 33.0%, down 40 basis points from prior year as price, margin resiliency and other cost controls in late March were more than offset by lower volumes, higher manufacturing costs related to the virus as well as currency and tariff headwinds. Higher manufacturing costs resulted from significant increases in PPE and freight costs.
• SG&A expenses were 23.9% of sales. Excluding charges, SG&A expenses were 23.0% of sales compared to 22.7% in 1Q'19, reflecting tight cost management and headcount reductions from 2019 actions partially offsetting the impact from lower volumes.
• The tax rate was 8.8%. Excluding charges, the tax rate was 12.5% versus 15.0% in 1Q'19.
• Working capital turns for the quarter were 6.0, up 0.2 turns from prior year.

"In the first quarter, as we navigated through the early stages of one of the more challenging global crises the world has experienced, our team demonstrated great agility and resiliency in tackling the supply chain and initial demand impacts from the global pandemic as well as the carry-over headwinds from tariffs and currency. We are making critical decisions around those priorities every day to protect the company, our employees and all of our stakeholders. We are proud of how quickly and effectively our employees have responded and are confident in our ability to maintain the vitality, strength and sustainability of our 177 year old company."

Liquidity & 2020 Outlook

Stanley Black & Decker believes it is in a strong financial position and has significant flexibility to navigate this volatile period:

• Maintains strong investment grade credit ratings
• Possesses approximately $1B of cash on-hand as of quarter end
• Manages a robust and highly rated commercial paper program ($3B program with $1.7B outstanding as of quarter end).
• Carries $3 billion of revolving credit facilities backed by a well-capitalized, diversified bank group
• Has the ability to generate additional cash proceeds of $750 million in the second quarter upon the successful remarketing of its Series C Convertible Preferred Stock, pursuant to its 2017 Equity Units Transaction

In addition, the Company plans to reduce capital expenditures and temporarily suspend acquisition-related activity and share repurchases until the demand outlook is clearer. The near term priority for capital deployment will be focused on deleveraging in line with our strong, investment grade credit ratings. From a portfolio perspective, the Company is deferring the Security strategic review until after the environment stabilizes.

On April 2nd, the Company withdrew its full year guidance as a result of the uncertain macro environment. The Company anticipates COVID-19 driven demand disruptions to negatively impact 2020 results versus prior guidance and will provide context on scenario planning for its businesses on today's earnings call.

Donald Allan Jr., Executive Vice President and CFO, commented, "In an environment that continues to change each day, we are doing everything we can to evaluate and prepare for the wide variety of scenarios that could occur in 2020 and beyond. We are continuing to suspend our guidance for now and are experiencing substantial revenue declines early in the second quarter which we currently expect will represent the trough quarter for the year. We have moved quickly and decisively in the initial steps we have taken so far – including our capital deployment focus and $1 billion cost reduction program – to ensure we maintain a strong operational foundation and balance sheet during this unpredictable period. We are confident that once through this event we will be in a position of strength to benefit from a recovery."

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