SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM-U-3A-2
Statement by Holding Company Claiming Exemption Under Rule U-3A-2 from the
Provisions of the
Public Utility Holding Company Act of 1935
THE STANLEY WORKS
hereby files with the Securities and Exchange Commission, pursuant to Rule 2,
its statement claiming exemption as a holding company from the provisions of
the Public Utility Holding Company Act of 1935, and submits the following
information:
1. Name, State of organization, location and nature of business of
claimant and every subsidiary thereof, other than any exempt wholesale
generator (EWG) or foreign utility company in which claimant directly or
indirectly holds an interest.
The Stanley Works ("Stanley") is a Connecticut corporation with its principal
place of business at 1000 Stanley Drive, New Britain, Connecticut 06053. A list
of its subsidiary companies is attached hereto and identified as Attachment 1.
A description of the nature of Stanley's businesses and that of its
subsidiaries, except for The Farmington River Power Company ("FRPC"), is
attached hereto and identified as Attachment 2. The business of FRPC involves
the generation, sale and distribution of electricity within the State of
Connecticut.
2. A brief description of the properties of claimant and each of its
subsidiary public utility companies used for the generation, transmission, and
distribution of electric energy for sale, or for the production, transmission,
and distribution of natural or manufactured gas, indicating the location of
principal generating plants, transmissions lines, producing fields, gas
manufacturing plants, and electric and gas distribution facilities, including
all such properties which are outside the State in which claimant and its
subsidiaries are organized and all transmission or pipelines which deliver or
receive electric energy or gas at the borders of such State.
<PAGE>
Stanley owns no properties used for such purposes either within or without the
State of Connecticut.
FRPC owns and operates the Rainbow Dam Hydroelectric Facility located on the
Farmington River in Windsor, Connecticut. The hydroelectric facility consists
of the Rainbow Dam, a power house with an 8 megawatt generating capacity,
switching and transformer equipment, flow and flood rights and various storage
and outbuildings all located in Windsor, Connecticut. In addition FRPC owns
transmission line rights of way, running for approximately 22 miles within the
State of Connecticut from the Rainbow Dam facility to New Britain, Connecticut.
FRPC also owns a substation and various distribution lines all located within
New Britain, Connecticut.
FRPC does not own any property located outside the State of Connecticut and
does not own any property located on or in proximity to the borders of the
State of Connecticut.
3. The following information for the last calendar year with respect to
claimant and each of its subsidiary public utility companies:
(a) Number of kwh. of electric energy sold (at retail or wholesale), and
Mcf. of natural or manufactured gas distributed at retail.
Stanley - None.
FRPC sold 34,663,200 kwh. of electric energy during 1994.
(b) Number of kwh. of electric energy and Mcf. of natural or manufactured
gas distributed at retail outside the State in which each such company is
organized.
Stanley - None.
FRPC - None.
(c) Number of kwh. of electric energy and Mcf. of natural or manufactured
gas sold at wholesale outside the State in which each such company is
organized, or at the State line.
Stanley - None.
FRPC - None.
(d) Number of kwh. of electric energy and Mcf. of natural or manufactured
gas purchased outside the State in which each such company is organized or at
the State line.
<PAGE>
Stanley - None.
FRPC - None.
4. The following information for the reporting period with respect to
claimant and each interest it holds directly or indirectly in an EWG or a
foreign utility company, stating monetary amounts in United States dollars:
(a) Name, location, business address and description of the facilities
used by the EWG or foreign utility company for the generation, transmission and
distribution of electric energy for sale or for the distribution at retail of
natural or manufactured gas.
Not Applicable
(b) Name of each system company that holds an interest in such EWG or
foreign utility company; and description of the interest held.
Not Applicable
(C) Type and amount of capital invested, directly or indirectly, by the
holding company claiming exemption; any direct or indirect guarantee of the
security of the EWG or foreign utility company by the holding company claiming
exemption; and any debt or other financial obligation for which there is
recourse, directly or indirectly, to the holding company claiming exemption or
another system company, other than the EWG or foreign utility company.
Not Applicable
(d) Capitalization and earnings of the EWG or foreign utility company
during the reporting period.
Not Applicable
(e) Identify any service, sales or construction contract(s) between the
EWG or foreign utility company and a system company, and describe the services
to be rendered or goods sold and fees or revenues under such agreement(s).
Not Applicable
The above-named claimant has caused this statement to be duly executed on its
behalf by its authorized officer on this 28th day of February, 1995.
The Stanley Works
By: Thomas J. Williams
Associate General Counsel
and Assistant Secretary
CORPORATE SEAL
Attest: Brenda Bemben
Name, title and address of officer to whom notices and correspondence
concerning this statement should be addressed.
Thomas J. Williams Associate General Counsel & Asst. Sec'y.
(Name) (Title)
1000 Stanley Drive, New Britain, CT 06053
(Address)
<PAGE>
EXHIBIT A
<TABLE>
Consolidated Statements of Earnings
The Stanley Works and Subsidiaries
Fiscal years ended December 31, 1994, January 1, 1994 and January 2, 1993
<CAPTION>
(Millions of Dollars, except per share amounts) 1994 1993 1992
<S> <C> <C> <C>
Net Sales $2,510.9 $2,273.1 $2,195.6
Costs and Expenses
Cost of sales 1,684.0 1,553.0 1,466.0
Selling, general and administrative 560.4 512.3 526.7
Interest-net 29.0 25.2 26.5
Other-net 35.7 34.6 18.3
------- ------- -------
2,309.1 2,125.1 2,037.5
------- ------- -------
Earnings before Income Taxes and
Cumulative Effect of Accounting Change 201.8 148.0 158.1
Income Taxes
Currently Payable 90.3 61.0 72.2
Deferred (13.8) (5.6) (12.2)
----- ----- ----
76.5 55.4 60.0
Earnings before Cumulative Effect
of Accounting Change 125.3 92.6 98.1
Cumulative effect of accounting change for
postemployment benefits (8.5)
------- ------- ------
Net Earnings $125.3 $84.1 $98.1
======= ======= ======
Earnings Per Share of Common Stock:
Before cumulative effect of accounting change $2.80 $2.06 $2.15
Cumulative effect of accounting change (.19)
------- ------- ------
Net Earnings Per Share of Common Stock $2.80 $1.87 $2.15
======== ======= ======
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
The Stanley Works and Subsidiaries
December 31, 1994 and January 1, 1994
<CAPTION>
(Millions of Dollars) 1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $69.3 $43.7
Accounts and notes receivable 410.3 371.2
Inventories 369.2 308.1
Other current assets 39.7 35.6
------- -------
Total Current Assets 888.5 758.6
Property, Plant and Equipment 559.8 566.5
Goodwill and Other Intangibles 164.6 171.5
Other Assets 88.2 80.3
------- --------
Total Assets $1,701.1 $1,576.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $82.8 $42.3
Current maturities of long-term debt 10.9 9.8
Accounts payable 125.3 103.3
Accrued expenses 195.1 197.6
Income taxes 7.4 4.1
------- -----
Total Current Liabilities 421.5 357.1
Long-Term Debt 387.1 377.2
Deferred Income Taxes 14.4 36.0
Other Liabilities 133.9 125.7
Shareholders' Equity
Preferred Stock, without par value:
Authorized and unissued 10,000,000 shares
Common Stock, par value $2.50 per share:
Authorized 110,000,000 shares;
issued 46,171,705 shares in 1994 and 1993 115.4 115.4
Capital in excess of par value 70.1 73.1
Retained earnings 937.8 871.1
Foreign currency translation adjustment (56.3) (56.7)
ESOP debt (253.7) (261.5)
-------- --------
813.3 741.4
Less: cost of common stock in treasury
(1,722,330 shares in 1994 and 1,476,074
shares in 1993) 69.1 60.5
-------- --------
Total Shareholders' Equity 744.2 680.9
--------- ---------
Total Liabilities and Shareholders' Equity $1,701.1 $1,576.9
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
The Stanley Works and Subsidiaries
Fiscal years ended December 31, 1994, January 1, 1994 and January 2, 1993
<CAPTION>
(Millions of Dollars) 1994 1993 1992
<S> <C> <C> <C>
Operating Activities:
Net earnings $125.3 $84.1 $98.1
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 81.8 80.7 78.5
Gain on sale of non-operating asset (29.0) (25.8)
Provision for postemployment benefits 13.6
Other non-cash items 18.3 9.4 16.0
Changes in operating assets and liabilities:
Accounts and notes receivable (46.2) (19.7) 13.1
Inventories (69.8) (15.5) (6.6)
Accounts payable and accrued expenses 34.9 16.0 17.2
Income taxes (11.9) 1.0 1.8
Other (3.9) 5.9 (7.3)
------ ------ ------
Net cash provided by operating activities 128.5 146.5 185.0
------ ------ ------
Investing Activities:
Capital expenditures (66.4) (69.7) (65.1)
Proceeds from sales of assets 11.0 6.6 8.2
Proceeds from sale of non-operating asset 38.9 35.2
Business acquisitions (5.1) (13.3) (105.8)
Other (9.7) (13.2) (10.6)
------ ------ ------
Net cash used by investing activities (70.2) (50.7) (138.1)
------ ------ ------
Financing Activities:
Payments on long-term debt (2.9) (133.8) (69.8)
Proceeds from long-term borrowings 78.5 120.2
Net short-term financing 40.9 22.3 5.1
Proceeds from issuance of common stock 4.2 4.6 3.6
Purchase of common stock for treasury (16.3) (42.3) (25.0)
Cash dividends on common stock (61.5) (60.5) (57.5)
------ ------ ------
Net cash used by financing activities (35.6) (131.2) (23.4)
------ ------ ------
Effect of exchange rate changes on cash 2.9 (2.0) (.7)
------ ------ ------
Increase (decrease) in cash and cash equivalents 25.6 (37.4) 22.8
Cash and cash equivalents, beginning of year 43.7 81.1 58.3
------ ------ ------
Cash and cash equivalents, end of year $69.3 $43.7 $81.1
====== ====== ======
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
The Stanley Works and Subsidiaries
Fiscal years ended December 31, 1994, January 1, 1994 and January 2, 1993
(Millions of Dollars)
<CAPTION>
Capital Trans-
In Excess lation Share-
Common of Par Retained Adjust- ESOP Treasury holders'
Stock Value Earnings ments Debt Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 28, 1991 $115.4 $77.3 $800.5 $(8.1) $(276.1) $(10.7) $698.3
Net earnings 98.1 98.1
Currency translation adj. (33.4) (33.4)
Cash dividends declared
- $1.28 per share (58.5) (58.5)
Issuance of common stock (1.5) 10.1 8.6
Purchase of common stock (27.7) (27.7)
ESOP debt 7.3 7.3
ESOP tax benefit 3.6 3.6
------------------------------------------------------------
Balance January 2, 1993 115.4 75.8 843.7 (41.5) (268.8) (28.3) 696.3
Net earnings 84.1 84.1
Currency translation adj (15.2) (15.2)
Cash dividends declared
- $1.34 per share (60.1) (60.1)
Issuance of common stock (2.7) 15.7 13.0
Purchase of common stock (47.9) (47.9)
ESOP debt 7.3 7.3
ESOP tax benefit 3.4 3.4
----------------------------------------------------------
Balance January 1, 1994 115.4 73.1 871.1 (56.7) (261.5) (60.5) 680.9
Net earnings 125.3 125.3
Currency translation adj .4 .4
Cash dividends declared
- $1.38 per share (61.9) (61.9)
Issuance of common stock (3.0) 13.3 10.3
Purchase of common stock (21.9) (21.9)
ESOP debt 7.8 7.8
ESOP tax benefit 3.3 3.3
------------------------------------------------------------
Balance December 31, 1994 $115.4 $70.1 $937.8 $(56.3) $(253.7) $(69.1) $744.2
============================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FARMINGTON RIVER POWER
STATEMENT OF EARNINGS
FISCAL YEARS ENDED DECEMBER 31, 1994 AND JANUARY 1, 1994
(in thousands of dollars)
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
COSTS AND EXPENSES
COST OF SALES $91.9 $75.8
OTHER-NET 12.7 (8.7)
---------- -----------
EARNINGS BEFORE INCOME TAXES 104.6 67.1
---------- -----------
INCOME TAXES 36.3 23.5
---------- -----------
NET EARNINGS $68.3 $43.6
========== ===========
</TABLE>
<PAGE>
<TABLE>
FARMINGTON RIVER POWER
BALANCE SHEETS
DECEMBER 31, 1994 AND JANUARY 1, 1994
(in thousands of dollars)
<CAPTION>
1994 1993
ASSETS
<S> <C> <C>
CURRENT ASSETS
INVENTORIES $2.8 $7.3
OTHER CURRENT ASSETS (.6) -
---------- ---------
TOTAL CURRENT ASSETS $2.2 7.3
PROPERTY, PLANT, & EQUIPMENT 2,626.5 2,183.6
OTHER ASSETS - (.7)
----------- ---------
TOTAL ASSETS $2,628.7 $2,190.2
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $620.1 $20.9
AFFILIATE ACCOUNTS PAYABLE - 1,710.2
ACCRUED EXPENSES 71.8 89.2
INCOME TAXES 37.1 24.1
------------ ---------
TOTAL CURRENT LIABILITIES 729.0 1,844.4
DEFERRED INCOME TAXES 10.7 11.5
SHAREHOLDERS' EQUITY
AFFILIATE INVESTMENT 1,237.3 (249.1)
COMMON STOCK 150.0 150.0
RETAINED EARNINGS 501.7 433.4
------------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,889.0 334.3
------------- -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $2,628.7 $2,190.2
============= ===========
</TABLE>
<PAGE>
<TABLE>
FARMINGTON RIVER POWER
TRIAL BALANCE
DECEMBER 1994
<CAPTION>
<S> <C>
OPERATING SUPPLIES 2,823
INVENTORY - GROSS 2,823
NET INVENTORY 2,823
PREPAID INSURANCE (230)
PPD PROP, BL & MCH INS. (448)
PREPAID EXPENSES (676)
OTHER CURRENT ASSETS (676)
TOTAL CURRENT ASSETS 2,147
LAND 117,884
LAND IMPROVEMENTS 30,335
BUILDINGS 3,365,731
MACHINERY & EQUIPMENT 430,102
OFFICE FURN & EQUIP 8,888
TRANSPORTATION EQUIP 62,318
CONSTR IN PROGRESS 40,662
PROP, PLANT & EQUIP-GROSS 4,055,920
ACC DEPR - LAND IMPROV (22,793)
ACC DEPR - BUILDINGS (938,068)
ACC DEPR - MACH & EQUIP (407,284)
ACC DEPR - FURN & EQUIP (5,178)
ACC DEPR - TRANSP EQUIP (56,087)
ACC DEPR TOTAL (1,429,410)
NET PROP,PLANT & EQUIP 2,626,510
TOTAL LONG TERM ASSETS 2,626,510
TOTAL ASSETS 2,628,657
A/P - TRADE 610,607
MISC P/R DED 9,150
STOCK SUBSCRIPTIONS 368
TOT MISC P/R DEDUCT 9,518
ACCOUNTS PAYABLE 620,125
ACCRUED PAYROLL 1,394
OTH ACCR P/R EXP 9,982
ACCR P/R TAXES 4,647
PROPERTY TAXES 60,401
SALES TAXES 1,001
ACCRUED AUTO LIABILITY 4,150
ACCRUED LIABILITIES 81,575
ACCD INC TAX - C/Y - FED 37,120
ACCRUED TAXES 37,120
PENS LIAB - DEF CONTRIB (9,832)
ACCRUED PENSION (9,832)
TOTAL CURRENT LIAB 728,988
DEF NATL INC TAXES 7,414
DEF LOCAL INC TAXES 3,248
DEFERRED TAXES 10,662
TOTAL LT LIABILITIES 10,662
TOTAL LIABILITIES 739,650
AFFIL - INVESTMENTS 1,237,299
COMM STK SUBSIDIARY CO 150,000
TOTAL COMMON STOCK 150,000
RETAINED EARNINGS - BEG 433,401
NET INCOME 68,307
RETAINED EARNINGS - END 501,708
TOTAL EQUITY 1,889,007
PLANT ENG EXPENSE (91,862)
OTHER COST OF SALES (91,862)
OTHER COST/CREDITS (91,862)
COST OF SALES (91,862)
ACTUAL GROSS PROFIT 91,862
OPERATING PROFIT 91,862
G/L ASSET DISP-TAX-RE (12,765)
OTHER - NET (12,765)
PRETAX PROFIT 104,627
INCOME TAXES - U.S. 36,781
INCOME TAXES - STATE (461)
INCOME TAXES 36,320
NET EARNINGS 68,307
</TABLE>
<PAGE>
EXHIBIT B
FINANCIAL DATA SCHEDULE
[ARTICLE] OPUR3
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STANLEY
WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF EARNINGS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] DEC-31-1994
[BOOK-VALUE] PER-BOOK
[TOTAL-ASSETS] 1,701,100
[TOTAL-OPERATING-REVENUES] 2,510,900
[NET-INCOME] 125,300
</TABLE>
<PAGE>
EXHIBIT C
Not Applicable
<PAGE>
ATTACHMENT 1
Page 1 of 4 pages
(All subsidiaries are included in the Consolidated Financial
Statements of The Stanley Works)
Jurisdiction of
Corporate Name Incorporation
The Stanley Works Connecticut
The Farmington River Power Company Connecticut
Mac Tools, Inc. Ohio
Stanley-Vidmar, Inc. Connecticut
Stanley-Vidmar Systems, Inc. Delaware
Stanley Germany Inc. Delaware
Stanley International Sales, Inc. Delaware
Stanley Inter-America Distribution
Center, Inc. Delaware
Stanley Foreign Sales Corporation Virgin Islands
Stanley Works Financial Inc. Delaware
Stanley Magic-Door, Inc. Delaware
Stanley Home Automation, Inc. Delaware
General Rental Co., Inc. Florida
Taylor Financial Corp. Nevada
American Brush Company, Inc. Massachusetts
Jensen Tools, Inc. Delaware
Wondura Products, Inc. New Jersey
LaBounty Manufacturing, Inc. Minnesota
Allied Construction (49%) U.K.
Equipment, Ltd.
<PAGE> Page 2 of 4 pages
Jurisdiction of
Incorporation
(The Stanley Works)
Stanley-Bostitch, Inc. Delaware
Stanley-Bostitch Holding Corporation Delaware
Hartco Company Illinois
The Stanley Works Funding Corporation Delaware
Stanley Mail Media, Inc. Delaware
Stanley Canada Inc. Ontario, Canada
Stanley Acmetrack Limited Ontario, Canada
Stanley Tools (N.Z.) Ltd. New Zealand
Ferramentas Stanley Ltda. Brazil
Herramientas Stanley
S.A. de C.V. Mexico
Herramientas Stanley S.A. Colombia
Stanley-Bostitch, S.A. de C.V. Mexico
Stanley Tools SpA Italy
S.I.C.F.O.-Stanley S.A. France
Stanley Europe B.V. Netherlands
Stanley Atlantic, Inc. Delaware
The Stanley Works Ltd. U.K.
Mosley-Stone Ltd. U.K.
Stanley Works
(Nederland) B.V. Netherlands
Stanley Magic-Door
Netherlands B.V. Netherlands
<PAGE> Page 3 of 4 pages
Jurisdiction of
Incorporation
(The Stanley Works)
Placements et Rangements
Nirva S.a.R.L. France
Societe Civile Immobiliere WAT France
Stanley Iberica Spain
Stanley Vaerktoej ApS Denmark
Stanley Svenska A.B. Sweden
Suomen Stanley OY Finland
Bostitch G.m.b.H. Germany
Friess G.m.b.H. Germany
Stanley Bostitch S.A. France
Soc. de Fab. Bostitch S.A. (Simax) France
Bostitch (Europe) AG Switzerland
Bostitch AG Switzerland
S.A. Stanley Works Belgium N.V. Belgium
Stanley International Delaware
Holdings Inc.
Stanley Pacific Inc. Delaware/Australia
Stanley-Bostitch
Pty. Limited Australia
The Stanley Works Pty. Ltd. Australia
Stanley Works Asia Pacific Pte. Ltd. Singapore
The Stanley Works
(Hong Kong) Ltd. Hong Kong
The Stanley Works Sales
(Philippines), Inc. Philippines
<PAGE> Page 4 of 4 pages
Jurisdiction of
Incorporation
(The Stanley Works)
Stanley Tools Ltd. Taiwan
Chiro Tool Manufacturing Corporation Taiwan
The Stanley Works
(Bermuda) Ltd. Bermuda
The Stanley Works Japan K.K. Japan
Stanley Works Ltd. Thailand
Stanley Tools Poland Ltd. (51%) Poland
Tona a.s. Pecky (78%) Czech Republic
Dudley Shearing Sales Limited U.K.
P.T. Stanley Works Indonesia Indonesia
Stanley Works Malaysia Sdn. Bhd. Malaysia
Stanley Fastening Systems Poland Ltd. Poland
The names of certain subsidiaries have been omitted because such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<PAGE>
ATTACHMENT 2
Narrative Description of Business. Registrant's operations can be
classified into three industry segments: Tools, Hardware and Specialty
Hardware.
Tools. The Tools segment consists of consumer, industrial and
engineered tools. Consumer tools includes hand tools such as measuring
instruments, planes, hammers, knives, wrenches, sockets, screwdrivers, saws,
chisels, boring tools, masonry, tile and drywall tools, paint preparation and
paint application tools. Industrial tools includes industrial and mechanics
hand tools, including STANLEY-PROTO industrial tools and MAC mechanics
tools and high-density industrial storage and retrieval systems. Engineered
tools includes air tools, hydraulic tools and STANLEY-BOSTITCH fastening
tools and fasteners.
Hardware. The hardware segment consists of hardware such as hinges,
hasps, brackets, bolts, latches, closet hardware and organizer systems and
other shelving, screen and storm door hardware, hardware for sliding, folding
and pocket doors, residential door hardware, mirrors and mirrored closet
doors.
<PAGE>
Specialty Hardware. The specialty hardware segment consists of
residential door systems such as original and replacement garage and entry
doors, power-operated doors and gates and home automation products, including
garage door openers, electronic controls and other similar products.
Competition. The company competes on the basis of its manufacturing
capabilities, extensive distribution system and merchandising service, the
breadth of its product lines, its reputation for product quality, its well-
known trademarks and its electronic data interchange ("EDI") capabilities.
The company believes that its significant long-term investments have made it
an industry leader in the utilization of EDI.
The company encounters active competition in all of its activities from
both larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses.
In 1993, the company's approximately $70 million investment in new equipment
and advanced business systems resulted in improved manufacturing processes
and decreased inventories and transaction costs both for the company and its
customers.
In the company's consumer hand tool and consumer hardware businesses, a
small number of competitors produce a range of products somewhat comparable
to the company's, but the majority of its competitors compete only with
respect to one or more individual products within a particular line. The
company believes that it is the largest manufacturer of consumer hand tools
in the world and that it offers the broadest line of such products. The
company believes that its market position in the U.S. and Canada for consumer
hardware is comparable to or greater than that of its major competitors and
that it offers the broadest line of hinges and home hardware, which
represents the most important part of its hardware product sales.
In the company's industrial hand tool business in the U.S., the company
believes that it is a leading manufacturer of high-density industrial storage
cabinets. In the company's engineered hand tool business in the U.S., the
company believes that it is the leader in the manufacture and sale of
pneumatic fastening tools and related fasteners to professional contractors
and to the furniture and pallet industries as well as the leading
manufacturer of portable and mounted hydraulic tools.
In the company's non-consumer hardware business in the U.S., the company
believes that it is a leading manufacturer of residential and architectural
hardware products, mirrored closet doors and hardware for sliding, folding
and pocket doors and screen and storm door hardware;
<PAGE>
and a leading supplier of closet rods, supports, brackets and wall mirrors.
In the company's specialty hardware business, the company believes that
it is a leader in the U.S. with respect to the manufacture and sale of
insulated steel residential entry doors, garage door openers and automatic
sliding and swinging doors and gate openers for commercial and industrial
use.
Customers. A substantial portion of the company's products are sold
through home centers and mass merchant distribution channels in the U.S. A
consolidation of retailers in these channels is occurring. These customers
constitute a growing percent of the company's sales and are important to the
company's operating results. While this consolidation and the geographic
expansion of these large retailers provide the company with opportunities for
growth, the increasing size and importance of individual customers creates a
certain degree of exposure to potential volume loss. The loss of certain of
the larger home centers as customers could have a material adverse effect on
each of the company's business segments until either such customers are
replaced or the company makes the necessary adjustments to compensate for the
loss of business. The company has addressed this issue by strategically
focusing on excellence in customer service, new product innovations, and
distribution channel development.
Raw Materials. The company's products are manufactured primarily of
steel and other metals, although some are of wood or plastic. The raw
materials required are available from a number of sources at competitive
prices. The company does not purchase a significant amount of its supplies
under long-term contracts. However, it has relationships of long standing
with many of its suppliers. The company has experienced no difficulties in
obtaining supplies in recent periods.
Backlog. At February 5, 1994, the company had approximately $130
million in unfilled orders compared to $126 million in unfilled orders at
February 6, 1993. All these orders are reasonably expected to be filled
within the current fiscal year. Most customers place orders for immediate
shipment and as a result, the company produces primarily for inventory,
rather than to fill specific orders.
Patents and Trademarks. No segment of Registrant's business is
dependent, to any significant degree, on patents, licenses, franchises or
concessions. The company owns numerous patents, none of which are material
to the company's operations as a whole. These patents expire from time to
time over the next 17 years. The company holds licenses, franchises and
concessions, none of which individually or in the aggregate is material to
the company's operations as a whole. These licenses, franchises and
concessions vary in duration from one to 17 years.
The company has numerous trademarks that are utilized in its businesses
worldwide. The STANLEY and STANLEY (in a notched rectangle) trademarks are
material to all three business segments. These well-known trademarks enjoy a
reputation for excellence. In addition, in the Tools segment, the Bostitch ,
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Powerlock , Tape Rule Case Design (Powerlock) , MAC Tools , Proto , and
Vidmar trademarks are material to the business.
Environmental Regulations. The company is subject to various
environmental laws and regulations in the U.S. and foreign countries where it
has operations. Future laws and regulations are expected to be increasingly
stringent and will likely increase the company's expenditures related to
environmental matters.
The company is involved with remedial and other environmental compliance
activities at some of its current and former sites. Additionally, the
company, together with other parties, has been named a potentially
responsible party ("PRP") with respect to nine Superfund sites. Current laws
potentially impose joint and several liability upon each PRP. In assessing
its potential liability at these sites, the company has considered the
following: the solvency of the other PRP's, whether responsibility is being
disputed, the terms of existing agreements, experience at similar sites, and
the fact that its volummetric contribution at these sites is relatively
small.
The company's policy is to accrue environmental investigatory and
remediation costs for identified sites when it is probable that a liability
has been incurred and the amount of loss can be reasonably estimated. The
amount of liability recorded is based on an evaluation of currently available
facts with respect to each individual site and includes such factors as
existing technology, presently enacted laws and regulations, and prior
experience in remediation of contaminated sites. The amounts recorded do not
take into account any claims for recoveries from insurance or third parties.
As assessments and remediation progress at individual sites, the amounts
recorded are reviewed periodically and adjusted to reflect additional
technical and legal information which becomes available. As of year-end
1993, the company had reserves of $18 million, primarily for remediation
activities associated with company-owned properties as well as for Superfund
sites.
Actual costs to be incurred at identified sites in future periods may
vary from the estimates, given the inherent uncertainties in evaluating
environmental exposures. Subject to the imprecision in estimating future
environmental costs, the company does not expect that any sum it may have to
pay in connection with environmental matters in excess of the amounts
recorded will have a materially adverse effect on its financial position,
results of operations or liquidity.
Power-generating Subsidiary. Under the General Statutes of Connecticut,
the company is deemed to be a "holding company" as a result of its being the
sole shareholder of Farmington River Power Co., a power-generating subsidiary
of the company since 1916. Under such statute, no organization or person may
take any action to acquire control of such a holding company without the
prior approval of the Connecticut Department of Public Utility Control.
Employees. During 1993, the company had an average of 18,988 employees,
approximately 12,750 of whom were employed in the U.S. Of these U.S.
employees, approximately 23% are covered by collective bargaining agreements
with approximately 12 labor unions. The large majority of the company's
hourly- and weekly-paid employees outside the U.S. are covered by collective
bargaining agreements. Approximately 1,200 of the hourly-paid production and
maintenance employees who are employed by the company's operations in New
Britain, Connecticut are covered by agreements with the International
Association of Machinists and Aerospace Workers that expire in May 1994. The
balance of the company's labor agreements expire in 1993, 1994, 1995 and
1996. There have been no significant interruptions or curtailments of the
company's operations in recent years due to labor disputes. The company
believes that its relationship with its employees is good.
