SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): Oct. 18, 1995
The Stanley Works
(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-058860
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Stanley Drive, New Britain, Connecticut 06053
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(203) 225-5111
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 13 pages
Exhibit Index is located on Page 4
Item 5. Other Events.
1. On October 18, 1995, the Registrant issued a
press release.
Attached as Exhibit (20)(i) is a copy of the
Registrant's press release. This Exhibit is incorporated herein
by reference.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(c) (20)(i) Press release dated October 18, 1995
announcing Stanley s third quarter
operating results including
restructuring charges.
Page 2 of 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized
THE STANLEY WORKS
Date: October 18, 1995 By: Stephen S. Weddle
Name: Stephen S. Weddle
Title: Vice President,
General Counsel
and Secretary
Page 3 of 13
EXHIBIT INDEX
Current Report on Form 8-K
Dated October 18, 1995
Exhibit No. Page
(20)(i) 5
Page 4 of 13
Exhibit (20)(i)
FOR IMMEDIATE RELEASE October 18, 1995
STANLEY THIRD QUARTER OPERATING RESULTS INCLUDE
RESTRUCTURING CHARGES
New Britain, Connecticut (NYSE:SWK) ... The Stanley Works today
reported third quarter operating profits together with charges
related to the initial phase of recently announced restructuring
plans which resulted in a net loss for the quarter. Richard H.
Ayers, Chairman and Chief Executive Officer stated, "We believe
Stanley shareholders will be pleased with these actions to
establish a more cost-effective base upon which to grow future
sales and profits. Our ability to return superior value over the
long run is dependent on taking these aggressive actions."
Commenting on quarterly sales Mr. Ayers continued, "The abrupt
downturn in the U.S. consumer and construction markets
experienced last quarter continued to dampen sales growth and
profitability in the third quarter. Net sales of $656 million
were 4% higher than the prior year's quarter. Volume growth
contributed 2% as a result of strength in our European markets
and our engineered tool category in the U.S., both of which
offset the lackluster sales activity in U.S. consumer markets.
Price increases added 2% to sales."
Gross margins were 31.7% compared with 32.7% reported in the
third quarter last year. Margins continued to be affected by
costs associated with the closure and integration of
manufacturing facilities at our Mechanics Tools division. In
addition, our efforts to control inventories resulted in the
underabsorption of factory overheads. To a lesser extent,
margins were also affected by the competitive pricing environment
in U.S. markets.
Operating expenses were 22.6% up from 22.1% last year. Included
in third quarter operating expenses were approximately $2.6
million of charges for strategic consulting work related to the
company's planning and implementation of restructuring
activities.
Other-net was $3.7 million compared with $9.1 million last year.
The prior year included charges associated with divestiture
activity in the quarter as well as higher foreign currency
transaction losses and environmental expenses.
Restructuring charges of $41.5 million, or $.71 per share, were
also reported as part of third quarter operating results.
Included in these charges were $30.4 million for the closure of
manufacturing and distribution operations which will ultimately
Page 5 of 13
result in a workforce reduction of about 450 people. Also
included were approximately $11.1 million in charges to reduce
the book value of assets associated with
underperforming businesses.
Tax expense of $8.6 million reflected the non-deductibility of
costs included in the restructuring charge. Excluding these
items, the effective tax rate was approximately 38% compared with
37.5% in the prior year.
As a result of the restructuring charges, a net loss for the
quarter of $1.7 million, or $.04 per share, was reported compared
with net earnings of $32.2 million, or $.72 per share, in the
third quarter 1994. Net sales for the first nine months of 1995
were $2.0 billion, up 6% over prior year sales of $1.8 billion.
Net earnings for the nine month period, including restructuring
charges, were $58.5 million, or $1.32 per share, compared with
$91.5 million, or $2.04 per share, in the prior year period.
Net sales for the Tools segment in the third quarter were up 4%
over the prior year. Volume and price contributed equally to the
increase. Operating margins, excluding charges related to
restructuring, were 10.8% in the current quarter, compared with
margins of 11.5% reported in the prior year. Operating margins
would have been similar to last year without the effects of
Mechanics Tools manufacturing integration costs.
Net sales in the Hardware segment increased by 2%, almost
entirely the result of price increases. Operating margins
declined from 9.7% to 6.4%, excluding the effects of
restructuring, and reflected weakness in the Canadian and
European home decor markets as well as continued weakness in the
U.S. hardware market. Additionally, unrecovered cost increases
experienced in certain raw materials, especially corrugated
packaging, depressed margins.
Net sales in the Specialty Hardware segment increased 2%, with
price and volume each adding 1%. Operating margins were 9.5%,
without restructuring related charges, comparable to 9.2%
reported in the prior year.
Within our geographic regions, net sales in the U.S. increased by
4%. Volume contributed 3% and price added 1%. Excluding
restructuring charges, operating margins declined to 10.7% from
11.9% in the prior year. European markets continued to be strong
with net sales increasing 15%, with 7% from volume growth. Price
increases added 2% to sales, currency added 5% and the net effect
of recent acquisitions added 1%. European operating margins,
excluding restructuring charges, were 10.1%, improved from prior
year margins of 8.7%. Net sales in Other Areas declined 10%,
entirely from volume, due to weakness in Canadian, Mexican and
Page 6 of 13
Australian markets. Operating margins, as a result, decreased to
6.2% from 8.6%.
Mr. Ayers stated, "While we would like to be encouraged by the
recent rebound in U.S. housing starts and sales of existing
homes, consumer activity at retail remains weak compared with
last year. We continue to see internal growth from our European
businesses coupled with positive translation from stronger
European currencies. However, significant weakness remains in
our Canadian, Mexican and Australian markets with no appreciable
improvement in sight. These trends may continue for the next
three to six months. We recognized these developments in the
second quarter and have been taking the actions necessary to
reduce costs and control inventories."
He concluded, "Internally, we will continue to focus on our
restructuring plans in the fourth quarter and beyond. As
previously announced, a charge for a salaried workforce reduction
of approximately 350 employees together with additional
restructuring charges will be included in the fourth quarter. We
believe the actions we have taken and will take in the future
will provide us with long-term growth and enhanced value for our
shareholders."
CONTACT: Patricia McLean
Manager, Corporate Communications
(203) 827-3833
Page 7 of 13
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Millions of Dollars)
THIRD QUARTER NINE MONTHS
1995 1994 1995 1994
Net Sales $ 655.7 $ 632.6 $ 1,954.5 $ 1,847.1
Costs and Expenses
Cost of sales 448.0 425.7 1,329.2 1,238.7
Selling, general and
administrative 148.0 139.5 443.9 412.7
Interest - net 7.6 6.9 23.2 22.1
Other - net 3.7 9.1 12.7 26.9
Restructuring 41.5 - 41.5 -
------- ------- -------- --------
648.8 581.2 1,850.5 1,700.4
------- ------- -------- --------
Earnings Before Income Taxes 6.9 51.4 104.0 146.7
Income Taxes 8.6 19.2 45.5 55.2
------- ------- -------- --------
Net Earnings (Loss) $ (1.7)$ 32.2 $ 58.5 $ 91.5
======= ======= ======== ========
Net Earnings (Loss) Per Share
of Common Stock $ (0.04)$ 0.72 $ 1.32 $ 2.04
======= ======= ======== ========
Dividends per share $ 0.36 $ 0.35 $ 1.06 $ 1.03
Average shares outstanding 44,290 44,838 44,359 44,810
(in thousands)
See notes to consolidated financial statements.
Page 8 of 13
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
September 30 October 1
1995 1994
ASSETS
Cash and cash equivalents $ 48.5 $ 38.8
Accounts receivable 453.4 439.0
Inventories 391.1 370.7
Other current assets 35.6 33.9
------- -------
Total current assets 928.6 882.4
Property, plant and equipment 543.0 561.8
Goodwill and other intangibles 145.8 168.0
Other assets 83.8 86.2
------- -------
$ 1,701.2 $ 1,698.4
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 112.6 $ 103.4
Accounts payable 98.9 102.0
Accrued expenses 202.9 217.7
------- -------
Total current liabilities 414.4 423.1
Long-term debt 396.3 386.4
Other long-term liabilities 140.8 146.6
Shareholders' equity 749.7 742.3
------- -------
$ 1,701.2 $ 1,698.4
======= =======
See notes to consolidated financial statements.
Page 9 of 13
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
THIRD QUARTER NINE MONTHS
1995 1994 1995 1994
Operating Activities
Net Earnings (Loss) $ (1.7)$ 32.2 $ 58.5 $ 91.5
Depreciation and amortization 21.0 19.7 63.7 62.5
Restructuring charges 41.5 - 41.5 -
Other non-cash items 0.5 7.0 13.6 23.5
Changes in operating assets
and liabilities (10.8) (39.1) (101.5) (124.1)
------ ------ ------ ------
Net cash provided by
operating activities 50.5 19.8 75.8 53.4
Investing Activities
Capital expenditures (17.5) (17.5) (44.7) (48.6)
Proceeds from sales of assets .3 1.0 .6 7.4
Business acquisitions (2.3) - (3.3) (5.1)
Other (3.3) (1.9) (12.8) (4.9)
------ ------ ------ ------
Net cash used by
investing activities (22.8) (18.4) (60.2) (51.2)
Financing Activities
Payments on long-term debt (81.9) (1.2) (83.5) (1.9)
Proceeds from long-term borrowings 84.2 - 84.2 -
Net short-term borrowings (24.2) 17.1 18.3 51.6
Proceeds from issuance of common stock 1.8 2.9 2.7 3.5
Purchase of common stock for treasury (2.3) (1.2) (12.5) (2.0)
Cash dividends on common stock (0.7) (15.7) (46.3) (60.8)
------ ------ ------ ------
Net cash provided (used) by
financing activities (23.1) 1.9 (37.1) (9.6)
Effect of Exchange Rate Changes on Cash (0.9) 1.7 0.7 2.5
------ ------ ------ ------
Increase (decrease) in Cash and
Cash Equivalents 3.7 5.0 (20.8) (4.9)
Cash and Cash Equivalents,
Beginning of Period 44.8 33.8 69.3 43.7
------ ------ ------ ------
Cash and Cash Equivalents,
End of Third Quarter $ 48.5 $ 38.8 $ 48.5 $ 38.8
====== ====== ====== ======
See notes to consolidated financial statements.
Page 10 of 13
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Millions of Dollars)
NINE MONTHS
1995 1994
Balance at beginning of year $ 744.2 $ 680.9
Net earnings 58.5 91.5
Currency translation adjustment (9.4) 6.1
Cash dividends declared (46.6) (46.2)
Net common stock activity (4.0) 3.7
ESOP debt 7.0 6.3
-------- -------
Balance at end of third quarter $ 749.7 $ 742.3
======== =======
See notes to consolidated financial statements.
Page 11 of 13
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Millions of Dollars)
THIRD QUARTER NINE MONTHS
1995 1994 1995 1994
INDUSTRY SEGMENTS
Net Sales
Tools
Consumer $ 181.9 $ 177.5 $ 538.7 $ 519.3
Industrial 131.4 129.4 415.5 389.4
Engineered 170.9 158.2 510.3 472.7
-------- -------- -------- --------
Total Tools 484.2 465.1 1,464.5 1,381.4
Hardware 81.1 79.3 247.5 235.6
Specialty Hardware 90.4 88.2 242.5 230.1
-------- -------- -------- --------
Consolidated $ 655.7 $ 632.6 $ 1,954.5 $ 1,847.1
======== ======== ======== ========
Operating Profit
Tools $ 20.7 $ 53.6 $ 131.6 $ 161.3
Hardware (0.9) 7.7 15.3 27.4
Specialty Hardware 7.7 8.1 13.8 15.4
-------- -------- -------- --------
Total 27.5 69.4 160.7 204.1
Net corporate expenses (11.8) (10.6) (29.7) (32.3)
Interest expense (8.8) (7.4) (27.0) (25.1)
-------- -------- -------- --------
Earnings before
income taxes $ 6.9 $ 51.4 $ 104.0 $ 146.7
======== ======== ======== ========
GEOGRAPHIC AREAS
Net Sales
United States $ 472.6 $ 452.9 $ 1,393.2 $ 1,330.4
Europe 100.3 87.4 312.6 261.8
Other Areas 82.8 92.3 248.7 254.9
-------- -------- -------- --------
Consolidated $ 655.7 $ 632.6 $ 1,954.5 $ 1,847.1
======== ======== ======== ========
Operating Profit
United States $ 19.1 $ 53.9 $ 116.3 $ 156.1
Europe 3.3 7.6 27.4 25.3
Other Areas 5.1 7.9 17.0 22.7
-------- -------- -------- --------
Total $ 27.5 $ 69.4 $ 160.7 $ 204.1
======== ======== ======== ========
See notes to consolidated financial statements.
Page 12 of 13
THE STANLEY WORKS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the third quarter 1995, restructuring and other related charges
totaling $44.1 million were incurred as part of the initial phase of
the company's plan to aggressively reduce its cost structure and asset
base. These charges reflected the decision to exit several small,
underperforming businesses, such as shoe repair and generic fasteners;
to close manufacturing operations related to other non-performing
product lines; and to close three distribution centers as part of a
plan to consolidate order and distribution management and facilities
for North American consumer products. $30.4 million of the charge is
related to the write-down of facilities and equipment, inventories and
other assets and the accrual of related severance costs associated
with these plans. In addition, a strategic reassessment based on
revised operating plans was completed for several other small
businesses resulting in an $11.1 million write-off of goodwill. Also
included in the third quarter operating expenses were $2.6 million of
charges for consulting work for planning and implementation of
restructuring activities. Restructuring related charges of $31.5
million, $6.1 million and $.9 million were included in the Tools,
Hardware and Specialty Hardware segments, respectively.
Page 13 of 13
