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): July 19, 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 15 pages
Exhibit Index is located on Page 4
Item 5. Other Events.
1. On July 19, 1995, the Registrant issued two
press releases.
Attached as Exhibit (20)(i) and (20) (ii) are
copies of the Registrant's press releases. These Exhibits are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(c) (20)(i) Press release dated July 19, 1995
reporting on Stanley's second quarter
sales and earnings.
(20)(ii) Press release dated July 19, 1995
announcing Stanley s initiatives for
profitable growth.
Page 2 of 15
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: July 19, 1995 By: Stephen S. Weddle
Name: Stephen S. Weddle
Title: Vice President,
General Counsel
and Secretary
Page 3 of 15
EXHIBIT INDEX
Current Report on Form 8-K
Dated July 19, 1995
Exhibit No. Page
(20)(i) 5
(20)(ii) 13
Page 4 of 15
July 19, 1995 Exhibit (20) (i)
STANLEY ANNOUNCES SECOND QUARTER RESULTS
New Britain, Connecticut (NYSE:SWK)..."A sudden decline in orders
within U.S. consumer and construction related markets affected
our second quarter sales and earnings. This weakening order
activity appears to be the result of both soft retail sales and
the effort by some retailers to reduce inventory levels,"
reported Richard H. Ayers, Chairman and Chief Executive Officer
of The Stanley Works.
Net sales for the second quarter were $656 million, or 4% higher
than the second quarter last year. In contrast to the strong
gains we had been experiencing in recent quarters across all
business segments, unit volume growth in the second quarter
occurred principally in industrial markets and Europe. Internal
growth slowed to 3% compared with 9% growth experienced in the
first quarter. Price increases and foreign currency translation
contributed 2% to sales while divestiture activity resulted in a
1% decrease.
Mr. Ayers continued, "We responded quickly to the lower volumes
by adjusting factory activity in order to manage inventory
levels. This action resulted in lower gross margins and
earnings. We also continued to experience a significant decline
in gross margins associated with the ongoing integration of our
mechanics tools manufacturing facilities."
Net earnings of $31.5 million, or $.71 per share, were 7% lower
than prior year net earnings of $33.7 million, or $.75 per share.
Gross margins for the quarter of 32.3% were below the margins of
33.4% reported in the second quarter last year.
Operating expenses were 22.7% of sales compared with 22.2% last
year. The company has embarked on a program of growth
initiatives which include an assessment of our business and
organizational strategies to optimize future performance, as well
as specific activities targeted at expanding our markets and
geographic reach. As these critical long-term initiatives were
already underway, the sudden weakening in sales growth resulted
in higher ratios than either planned or experienced in the prior
year.
Interest-net expense for the second quarter was $8.1 million or
1.2% of sales, generally consistent with the prior year. Other-
net expenses were $4.4 million compared with $9.0 million last
year. Other-net in the prior year included additional charges
for environmental expenses and facility closings.
Page 5 of 15
Net sales for the first six months of 1995 were $1.3 billion, up
7% from 1994 sales of $1.2 billion. Net earnings of $60.2
million, or $1.36 per share, were 2% higher than prior year
earnings of $59.3 million, or $1.32 per share.
Net sales in the United States for the second quarter, up 2% from
the prior year, reflected the significant weakening in consumer
and construction markets. Unit volume growth, which had been 9%
in the first quarter, added only 3% to sales. Volume gains were
primarily concentrated in the industrial category. Price
increases added 1% to sales. The effect of recent divestiture
activity reduced sales by 2%. The rationalization of mechanics
tools manufacturing and the falloff in volume resulted in a
decline in operating profits.
European sales and operating profits continued to improve. Net
sales were 21% above the prior year with unit volume growth
adding 7% and price increases adding 2%. The translation of
strong European currencies increased sales by 12%. Operating
margins improved to 11.2% from 9.3%, primarily the effect of
efficiencies obtained from the increased volume.
Net sales in Other Areas decreased 1% over the prior year, the
net effect of price increases and currency translation effects.
Unit volume, which was flat overall, reflected decreases in
Canada, Latin America (especially Mexico) and Australia with only
the Pacific Rim showing unit volume gains. Operating margins of
8.1% were improved from the first quarter of this year, although
below the prior year level.
Net sales for the Tools segment were up 5% over the prior year
with price increases adding 2% and foreign currency adding 1%.
Unit volume reflected a 4% increase, coming almost entirely from
the industrial tool category and Europe. The net incremental
effect of divestiture activity reduced sales by 2%. Operating
margins were reduced by the continuing costs associated with
closing and integrating mechanics tools facilities and by the
sudden downturn in U.S. consumer and construction demand. A
lower but continuing level of cost related to the mechanics tools
changes is expected into the fourth quarter of this year.
Net sales in the Hardware segment increased by 4%, with 2% from
pricing and 2% from foreign currency translation. Operating
margins for the quarter were lower than the prior year, the
result of flat unit volume, a competitive pricing environment,
and continuing operational changes and inefficiencies in our
French Acmetrack business.
Net sales in the Specialty Hardware segment increased 2% over the
prior year entirely from unit volume gains. Operating profits
and margins were less than reported last year because of lower
than expected consumer demand in the Doors business.
Page 6 of 15
Mr. Ayers concluded, "We are encouraged by the prospect that
lower interest rates will help improve both consumer and
construction markets but we do not expect growth rates to return
to the levels experienced in the first quarter. We are
addressing costs that will help short-term results and provide
full-year profit gains over 1994. Continued growth in Europe and
in our U.S. industrial tools businesses, combined with the steps
currently being taken, will provide us with improved comparisons
in the second half of this year."
CONTACT: Patricia McLean
Manager, Corporate Communications
(203) 827-3833
Page 7 of 15
<TABLE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Millions of Dollars)
<CAPTION>
SECOND QUARTER SIX MONTHS
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 655.5 $ 628.8 $ 1,298.8 $ 1,214.5
Costs and Expenses
Cost of sales 443.6 418.6 881.2 813.0
Selling, general and
administrative 148.6 139.4 295.9 273.2
Interest - net 8.1 7.8 15.6 15.2
Other - net 4.4 9.0 9.0 17.8
------- ------- -------- --------
604.7 574.8 1,201.7 1,119.2
------- ------- -------- --------
Earnings Before Income Taxes 50.8 54.0 97.1 95.3
Income Taxes 19.3 20.3 36.9 36.0
------- ------- -------- --------
Net Earnings $ 31.5 $ 33.7 $ 60.2 $ 59.3
======= ======= ======== ========
Net Earnings Per Share of
Common Stock $ 0.71 $ 0.75 $ 1.36 $ 1.32
======= ======= ======== ========
Dividends per share $ 0.35 $ 0.34 $ 0.70 $ 0.68
Average shares outstanding 44,366 44,829 44,388 44,798
(in thousands)
</TABLE>
Page 8 of 15
<TABLE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<CAPTION>
July 1 July 2
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 44.8 $ 33.8
Accounts receivable 436.6 416.4
Inventories 415.6 352.6
Other current assets 35.4 32.4
------- -------
Total current assets 932.4 835.2
Property, plant and equipment 557.0 557.8
Goodwill and other intangibles 160.8 169.7
Other assets 86.9 80.9
------- -------
$ 1,737.1 $ 1,643.6
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 137.9 $ 86.3
Accounts payable 98.5 101.2
Accrued expenses 184.8 194.2
------- -------
Total current liabilities 421.2 381.7
Long-term debt 396.3 385.6
Other long-term liabilities 152.7 158.0
Shareholders' equity 766.9 718.3
------- -------
$ 1,737.1 $ 1,643.6
======= =======
</TABLE>
Page 9 of 15
<TABLE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
<CAPTION>
SECOND QUARTER SIX MONTHS
1995 1994 1995 1994
Operating Activities
<S> <C> <C> <C> <C>
Net Earnings $ 31.5 $ 33.7 $ 60.2 $ 59.3
Depreciation and amortization 20.8 21.6 42.7 42.8
Other non-cash items 6.9 11.2 13.1 16.5
Changes in operating assets
and liabilities (28.0) (27.0) (90.7) (85.0)
------ ------ ------ ------
Net cash provided by
operating activities 31.2 39.5 25.3 33.6
Investing Activities
Capital expenditures (14.2) (17.9) (27.2) (31.1)
Proceeds from sales of assets 4.8 0.3 6.4
Business acquisitions (1.0) (5.1) (1.0) (5.1)
Other (4.4) (2.7) (9.5) (3.0)
------ ------ ------ ------
Net cash used by
investing activities (19.6) (20.9) (37.4) (32.8)
Financing Activities
Payments on long-term debt (1.3) (0.2) (1.6) (0.7)
Net short-term borrowings 13.4 (3.7) 42.5 34.5
Proceeds from issuance of common stock 0.4 0.3 0.9 0.6
Purchase of common stock for treasury (3.8) (0.8) (10.2) (0.8)
Cash dividends on common stock (15.6) (15.2) (45.6) (45.1)
------ ------ ------ ------
Net cash used by
financing activities (6.9) (19.6) (14.0) (11.5)
Effect of Exchange Rate Changes on Cash (0.4) (1.7) 1.6 0.8
------ ------ ------ ------
Increase (decrease) in Cash and
Cash Equivalents 4.3 (2.7) (24.5) (9.9)
Cash and Cash Equivalents,
Beginning of Period 40.5 36.5 69.3 43.7
------ ------ ------ ------
Cash and Cash Equivalents,
End of Second Quarter $ 44.8 $ 33.8 $ 44.8 $ 33.8
====== ====== ====== ======
</TABLE>
Page 10 of 15
<TABLE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Millions of Dollars)
<CAPTION>
SIX MONTHS
1995 1994
<S> <C> <C>
Balance at beginning of year $ 744.2 $ 680.9
Net earnings 60.2 59.3
Currency translation adjustment (7.2) 1.2
Cash dividends declared (30.6) (30.5)
Net common stock activity (5.0) 3.2
ESOP debt 5.3 4.2
-------- --------
Balance at end of second quarter $ 766.9 $ 718.3
======== ========
</TABLE>
Page 11 of 15
<TABLE>
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Millions of Dollars)
<CAPTION>
SECOND QUARTER SIX MONTHS
1995 1994 1995 1994
INDUSTRY SEGMENTS
Net Sales
Tools
<S> <C> <C> <C> <C>
Consumer $ 183.3 $ 179.2 $ 356.8 $ 341.8
Industrial 140.3 129.5 284.1 260.0
Engineered 172.9 165.9 339.4 314.5
-------- -------- -------- --------
Total Tools 496.5 474.6 980.3 916.3
Hardware 81.7 78.7 166.4 156.3
Specialty Hardware 77.3 75.5 152.1 141.9
-------- -------- -------- --------
Consolidated $ 655.5 $ 628.8 $ 1,298.8 $ 1,214.5
======== ======== ======== ========
Operating Profit
Tools $ 57.9 $ 59.3 $ 110.9 $ 107.7
Hardware 7.7 10.8 16.2 19.7
Specialty Hardware 3.5 4.2 6.1 7.3
-------- -------- -------- --------
Total 69.1 74.3 133.2 134.7
Net corporate expenses (9.0) (10.7) (17.9) (21.7)
Interest expense (9.3) (9.6) (18.2) (17.7)
-------- -------- -------- --------
Earnings before
income taxes $ 50.8 $ 54.0 $ 97.1 $ 95.3
======== ======== ======== ========
GEOGRAPHIC AREAS
Net Sales
United States $ 466.0 $ 457.3 $ 920.6 $ 877.5
Europe 104.5 86.0 212.3 174.4
Other Areas 85.0 85.5 165.9 162.6
-------- -------- -------- --------
Consolidated $ 655.5 $ 628.8 $ 1,298.8 $ 1,214.5
======== ======== ======== ========
Operating Profit
United States $ 50.5 $ 57.4 $ 97.2 $ 102.2
Europe 11.7 8.0 24.1 17.7
Other Areas 6.9 8.9 11.9 14.8
-------- -------- -------- --------
Total $ 69.1 $ 74.3 $ 133.2 $ 134.7
======== ======== ======== ========
</TABLE>
Page 12 of 15
July 19, 1995 Exhibit (20)(ii)
STANLEY CEO ANNOUNCES INITIATIVES FOR PROFITABLE GROWTH
New Britain, Connecticut (NYSE:SWK)...At a meeting of financial analysts and
investment professionals in New York City today, Richard H. Ayers, Chairman
and Chief Executive Officer, outlined Stanley's aggressive strategies to
achieve profitable growth for both the short and long term.
Mr. Ayers cited specific initiatives and strategies to achieve profitable
growth and said that the company was positioning itself to reach a target
sales figure of $4 billion in 1999. Stanley's sales in 1994 were $2.5
billion.
He emphasized a change in corporate culture at Stanley, commenting that "ever
since the company's worldwide managers' meeting in early 1994, we've been
changing Stanley's focus. Instead of concentrating on expense controls, we
have asked our managers to share ideas, skills and resources to grow our
company."
Stanley is focusing on growth initiatives within four strategic areas that
include an assessment of what Mr. Ayers termed "full potential achievement"
for all business units, as well as global expansion, new product development
and enhanced customer relationships.
Mr. Ayers commented on each of Stanley's strategies for growth, beginning with
full potential achievement. The company has engaged an outside consultant to
assist in a critical evaluation of the full potential for each of its current
businesses. The analysis includes markets, market share and competitive cost
position. The objective is to focus on issues which will enhance value for
shareholders.
Page 13 of 15
Commenting on global expansion, Mr. Ayers said, "We continue to expand Stanley
into new markets around the world, particularly those areas where growth rates
for our types of products are highest. We have been strengthening the
management of our Asian tool businesses and we will be making additional
investments in our factories in Thailand and Indonesia to support a
significant increase in business which we believe is achievable with the right
combination of quality and cost structure. We are also continuing our
expansion into China, India and throughout Eastern Europe."
Concerning new products, Mr. Ayers said, "New product development has been a
priority of ours for several years. We feature product development ideas from
all Stanley businesses at our annual innovation fair and we use the event to
share and develop new concepts among our businesses. These efforts are
working. Approximately one third of our internal growth came from new
products in 1994 and we see this pace accelerating."
Mr. Ayers also took the opportunity to comment on recent changes that will
significantly enhance customer relationships. He cited plans to develop a
common order management system and consolidate the company's U.S. distribution
network for consumer businesses. Mr. Ayers said these efforts "indicate a
flexiblity that enables us to respond to continually changing customer needs
and send a clear and important message regarding the future of our company."
In order to ensure that the appropriate resources are available to fuel these
profitable growth strategies, Mr. Ayers revealed plans to take $150 million
out of Stanley's cost structure by the end of 1997. He noted that perhaps
half of these savings will appear in improved margins and the balance will be
used to aggressively pursue sales growth. He commented, "We are developing a
total cost structure that permits us to provide an even better value to
customers."
The analysis of business units conducted by the company to date has also
identified individual products and groups of products which are a drain on
performance. Mr. Ayers said that products not carrying their weight or
requiring inappropriate levels of indirect costs will be eliminated. He
expects that these steps, combined with ongoing efforts to improve working
capital productivity, may reduce working capital and other assets by $250
million in the same 30-month period, enabling us to increase value for our
shareholders through acquisitions or stock purchases.
Page 14 of 15
The group was also told that there would likely be restructuring charges
associated with this process, but the extent and timing of those charges are
unknown at this time.
Mr. Ayers concluded, "The actions we are taking are going to yield significant
outcomes for our company in both sales opportunities and profit improvements.
Focusing on the products and brands where we are strong - led by Stanley - and
having an even more effective cost structure, will enable us to be more
aggressive in increasing share with our customers. We believe we can grow
sales in our current markets at the same time that we continue our aggressive
pursuit of growth opportunities through new product development and global
expansion. The goal, and we believe the net result of these activities, will
be enhanced value for Stanley shareholders."
The Stanley Works is a worldwide manufacturer of tools, hardware and specialty
hardware for consumer, home improvement, professional and industrial use.
##############
CONTACT: Patricia McLean
Manager, Corporate Communications
(203) 827-3833
Page 15 of 15
