Financial analysis report Essay Example | Topics and Well Written Essays - 1500 words

Financial analysis report - Essay Example Some of the strategic business sales include sale of two European security hardware business namely Corbin and NEMEF during January 2004 and sale of DOM security hardware in November 2005. The analysis of the performance of Black & Decker Corporation is split into two parts. Part One deals with the company's situation for 10 years post acquisition of Emhart Corporation for $2.8 billion in 1989. Part two would deal with the performance of the company during more recent times, including the year 2005 and first quarter of 2006. The financial performance of Black & Decker post its acquisition of Emhart Corporation had been standard. A simple glance at the ten year consolidated financials would tell us that sales has grown only by an average of 42% ($1348 Million) during 1989 to 1999. A deeper analysis throws light on the fact that sales numbers have grown only from 1989 to 1994. Post 1994, though sales during 1996-1997 shot up to $4900 million mark, the rest of the period have only had a stable number revolving around the $4,500 Million mark. A quick glimpse at the 10year financials shocks the reader that the Operating Income has grown over 100% during 1989 - 1999 period. But analysis reveals that the average growth in Operating income over the 10 years has been very meager with negative growth being recorded in 3 out of the 10 years. Actual average stands at 9.4% growth as an average of 10 years. In the year 1998, the company recorded an earning (loss) from continuing operations at ($754.6) Million, but qu ickly took hold of the situation and revised its earnings from continuing operations to a profit of $300.3 Million the next year. A striking feature of the company is its large reduction in number of employees from 1989 to 1999. The company's employee strength stood at 38,600 during 1989, while it reported its employee strength at 22,106 during 1999. Ironic to a growing company, this gross reduction of 74.6% in 10 years is surprising. I believe the shareholder of the company would have been quite disappointed seeing the NIL or minimal growth in the dividends declared. The dividends declared stayed constantly at $0.40 per share from 1989 to 1995 and increase by a meager $0.08 to $0.48 from 1996 until 1999. Analysis of the ratios of the company for the period 1989 - 1999 reveals the following. The average of operating income ratio over the 10year period stood at 6.79% (CAGR 74%) with the highest recording at 11.86%(1999). Though this seems quite low, the company has posed a net profit record for the majority of the ten years. The net profit average stood at 0.48% (CAGR 5.30%). This had a positive impact of the stock prices, which is also evidenced by the growing prices of the company stocks during the period from $10 range (1989) to $60+ range during 1999. The average return on the total assets for the 10year period stood as low as average of 0.03%. This shows the in-effectiveness with which the company has deployed the capital though not a conclusive evidence. The average earnings per share (EPS) over the 10year period stood at 0.22 per share, which seems good for the average dividend of 0.40 to 0.48 per