File No.
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
To Be Filed Annually Prior to March 1
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
<PAGE>
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.
Stanley owns no properties used for the purposes listed above 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 27,943,200 kwh. of electric energy during 1995.
(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.
<PAGE>
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.
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
<PAGE>
The above-named claimant has caused this statement to be duly executed on its
behalf by its authorized officer on this 27th day of February, 1996.
The Stanley Works
By: Thomas J. Williams
Associate General Counsel
and Assistant Secretary
CORPORATE SEAL
Attest:
Jennifer O. Estabrook
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
<CAPTION>
Fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994
Millions of Dollars, except per share amounts) 1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Net Sales ................................... $ 2,624.3 $2,510.9 $2,273.1
Costs and Expenses
Cost of sales ...................... 1,789.7 1,684.0 1,553.0
Selling, general and administrative .... 591.7 560.4 512.3
Interest-net ........................... 30.3 29.0 25.2
Other-net .............................. 14.3 35.7 34.6
Restructuring and asset write-offs . 85.5
--------- --------- ---------
2,511.5 2,309.1 2,125.1
--------- --------- ---------
Earnings before Income Taxes and
Cumulative Effect of Accounting Change . 112.8 201.8 148.0
Income Taxes ................................ 53.7 76.5 55.4
---------- ---------- --------
Earnings before Cumulative Effect
of Accounting Change .................... 59.1 125.3 92.6
Cumulative effect of accounting change for
postemployment benefits ................. (8.5)
--------- --------- ---------
Net Earnings ................................ $ 59.1 $ 125.3 $ 84.1
========= ========= =========
Earnings Per Share of Common Stock:
Before cumulative effect of accounting change $ 1.33 $ 2.80 $ 2.06
Cumulative effect of accounting change ...... (.19)
--------- --------- ---------
Net Earnings Per Share of Common Stock ...... $ 1.33 $ 2.80 $ 1.87
========= ========= =========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Consolidated Balance Sheets
The Stanley Works and Subsidiaries
December 30, 1995 and December 31, 1994
(Millions of Dollars) 1995 1994
------- ------
ASSETS
Current Assets
Cash and cash equivalents $75.4 $69.3
Accounts and notes receivable 438.7 410.3
Inventories 349.1 369.2
Other current assets 51.9 39.7
------- -------
Total Current Assets 915.1 888.5
Property, Plant and Equipment 532.1 559.8
Goodwill and Other Intangibles 131.8 164.6
Other Assets 91.0 88.2
------- --------
Total Assets $1,670.0 $1,701.1
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $77.2 $82.8
Current maturities of long-term debt 14.1 10.9
Accounts payable 112.7 125.3
Accrued expenses 183.7 202.5
------- -----
Total Current Liabilities 387.7 421.5
Long-Term Debt 391.1 387.1
Deferred Income Taxes 16.4 14.4
Other Liabilities 140.2 133.9
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 1995 and 1994 115.4 115.4
Capital in excess of par value 68.4 70.1
Retained earnings 937.6 937.8
Foreign currency translation adjustment (70.6) (56.3)
ESOP debt (244.3) (253.7)
-------- --------
806.5 813.3
Less: cost of common stock in treasury
(1,792,290 shares in 1995 and 1,722,330
shares in 1994) 71.9 69.1
-------- --------
Total Shareholders' Equity 734.6 744.2
--------- ---------
Total Liabilities and Shareholders' Equity $1,670.0 $1,701.1
========= =========
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
The Stanley Works and Subsidiaries
Fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994
(Millions of Dollars) 1995 1994 1993
------- ------- ------
Operating Activities:
Net earnings $ 59.1 $125.3 $84.1
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 81.2 81.8 80.7
Restructuring and asset write-offs 85.5
Gain on sale of non-operating asset (29.0)
Provision for postemployment benefits 13.6
Other non-cash items 32.3 18.3 9.4
Changes in operating assets and liabilities:
Accounts and notes receivable (23.3) (46.2) (19.7)
Inventories (4.5) (69.8) (15.5)
Accounts payable and accrued expenses (27.8) 34.9 16.0
Income taxes (24.1) (11.9) 1.0
Other (.3) (3.9) 5.9
------ ------ ------
Net cash provided by operating activities 178.1 128.5 146.5
------ ------ ------
Investing Activities:
Capital expenditures (66.5) (66.4) (69.7)
Proceeds from sales of assets 4.3 11.0 6.6
Proceeds from sale of non-operating asset 38.9
Business acquisitions (3.3) (5.1) (13.3)
Other (19.8) (9.7) (13.2)
------ ------ ------
Net cash used by investing activities (85.3) (70.2) (50.7)
------ ------ ------
Financing Activities:
Payments on long-term debt (83.5) (2.9) (133.8)
Proceeds from long-term borrowings 86.0 78.5
Net short-term financing (5.1) 40.9 22.3
Proceeds from issuance of common stock 5.7 4.2 4.6
Purchase of common stock for treasury (13.2) (16.3) (42.3)
Cash dividends on common stock (75.2) (61.5) (60.5)
------ ------ ------
Net cash used by financing activities (85.3) (35.6) (131.2)
------ ------ ------
Effect of exchange rate changes on cash (1.4) 2.9 (2.0)
------ ------ ------
Increase (decrease) in cash and cash equivalents 6.1 25.6 (37.4)
<PAGE>
Cash and cash equivalents, beginning of year 69.3 43.7 81.1
------ ------ ------
Cash and cash equivalents, end of year $75.4 $69.3 $43.7
====== ====== ======
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
The Stanley Works and Subsidiaries
<CAPTION>
Fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994
(Millions of Dollars)
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 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
Net earnings 59.1 59.1
Currency translation adj (14.3) (14.3)
Cash dividends declared
- $1.42 per share (62.6) (62.6)
Issuance of common stock (1.7) 13.9 12.2
Purchase of common stock (16.7) (16.7)
ESOP debt 9.4 9.4
ESOP tax benefit 3.3 3.3
------------------------------------------------------------
Balance December 30, 1995 $115.4 $68.4 $937.6 $(70.6) $(244.3) $(71.9) $734.6
============================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
FARMINGTON RIVER POWER
STATEMENT OF EARNINGS
<CAPTION>
FISCAL YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994 (in thousands of
dollars)
1995 1994
------------ ------------
<S> <C> <C>
COSTS AND EXPENSES
COST OF SALES $101.3 $91.9
OTHER-NET 5.0 12.7
RESTRUCTURING AND ASSET WRITE-OFFS (12.9)
------------ ------------
EARNINGS BEFORE INCOME TAXES 93.4 104.6
------------ ------------
INCOME TAXES 31.4 36.3
------------ ------------
NET EARNINGS $62.0 $68.3
============ ============
</TABLE>
<PAGE>
<TABLE>
FARMINGTON RIVER POWER
BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(in thousands of dollars)
<CAPTION>
1995 1994
--------------- ---------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
ACCOUNTS RECEIVABLE $(1.2) $ -
INVENTORIES 2.8 2.8
OTHER CURRENT ASSETS (7.4) .6
--------------- ---------------
TOTAL CURRENT ASSETS (5.8) 2.2
PROPERTY, PLANT, & EQUIPMENT 2,610.0 2,626.5
--------------- ---------------
TOTAL ASSETS $2,604.2 $2,628.7
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $12.4 $620.1
ACCRUED EXPENSES 227.8 71.8
INCOME TAXES 37.7 37.1
--------------- ---------------
TOTAL CURRENT LIABILITIES 277.9 729.0
DEFERRED INCOME TAXES 4.4 10.7
SHAREHOLDERS' EQUITY
AFFILIATE INVESTMENT 1,608.2 1,237.3
COMMON STOCK 150.0 150.0
RETAINED EARNINGS 563.7 501.7
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 2,321.9 1,889.0
--------------- ---------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $2,604.2 $2,628.7
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FARMINGTON RIVER POWER
TRIAL BALANCE
DECEMBER 1995
<S> <C>
MISCELLANEOUS REC (1,200)
OPERATING SUPPLIES 2,823
PREPAID EXPENSES (7,400)
LAND 117,885
LAND IMPROVEMENTS 30,335
BUILDINGS 3,365,731
MACHINERY & EQUIPMENT 287,658
OFFICE FURN & EQUIP 8,888
TRANSPORTATION EQUIP 28,347
CONSTR IN PROGRESS 117,629
PROP, PLANT & EQUIP-GROSS 3,956,473
ACC DEPR - LAND IMPROV (23,588)
ACC DEPR - BUILDINGS (1,023,886)
ACC DEPR - MACH & EQUIP (268,114)
ACC DEPR - FURN & EQUIP (5,409)
ACC DEPR - TRANSP EQUIP (25,513)
ACC DEPR TOTAL (1,346,510)
PAYROLL DEDUCTIONS 12,425
ACCRUED PAYROLL 1,509
OTH ACCR P/R EXP 13,241
ACCR P/R TAXES 7,520
PROPERTY TAXES 199,535
SALES TAXES 5,032
ACCRUED ITEMS - OTHER 965
ACCRUED LIABILITIES 227,802
<PAGE>
ACCD INC TAX - FEDERAL 37,713
DEF NATL INC TAXES 3,074
DEF LOCAL INC TAXES 1,275
AFFIL - INVESTMENTS 1,608,198
COMM STK SUBSIDIARY CO 150,000
RETAINED EARNINGS - BEG 501,707
NET INCOME 61,992
RETAINED EARNINGS - END 563,699
COST OF SALES 101,303
GAIN/LOSS ON DISPOSAL OF ASSETS 5,000
ASSET IMPAIRMENT (12,904)
PRETAX PROFIT 93,399
INCOME TAXES - U.S. 33,380
INCOME TAXES - STATE (1,973)
INCOME TAXES 31,407
NET EARNINGS 61,992
</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-30-1995
[PERIOD-END] DEC-30-1995
[BOOK-VALUE] PER-BOOK
[TOTAL-ASSETS] 1,670,000
[TOTAL-OPERATING-REVENUES] 2,624,300
[NET-INCOME] 59,100
</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
Stanley Mechanics Tools, Inc. Ohio
Stanley Storage Systems, Inc. Connecticut
Stanley Germany Inc. Delaware
Stanley International Sales, Inc. Delaware
Stanley Inter-America, 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
American Brush Company, Inc. Massachusetts
Jensen Tools, Inc. Delaware
LaBounty Manufacturing, Inc. Minnesota
<PAGE>
Page 2 of 4 pages
Jurisdiction of
Incorporation
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.
R.J. Lendrum Limited U.K.
Stanley Works
(Nederland) B.V. Netherlands
<PAGE>
Page 3 of 4 pages
Jurisdiction of
Incorporation
Stanley Magic-Door
Netherlands B.V. Netherlands
Placements et Rangements
Nirva S.a.R.L. France
Societe Civile Immobiliere WAT France
Stanley Iberica S.A. 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
<PAGE>
Page 4 of 4 pages
Jurisdiction of
Incorporation
The Stanley Works
(Hong Kong) Ltd. Hong Kong
The Stanley Works Sales
(Philippines), Inc. Philippines
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. (LTD) (78%) Czech Republic
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(R) industrial tools and MAC(R) mechanics tools and high-density
industrial storage and retrieval systems. Engineered tools includes air tools,
hydraulic tools and STANLEY-BOSTITCH(R) 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.
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 and electronic controls.
Competition. The company competes on the basis of its reputation for product
quality, its well-known trademarks, its commitment to customer service, the
breadth of its product lines and its emphasis on product innovation, and its
manufacturing efficiencies. The company is also striving to find new customers
both within the markets that it currently serves and in new markets around the
world. As a part of this effort, the company is also exploring new ways to reach
its customers for example, through specialty product catalogs, television sales
and on-line services.
The company encounters active competition in all of its businesses 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
1994, the company invested approximately $70 million in facilities, new
equipment and technology in order to achieve operational excellence in
manufacturing, new product innovation and enhanced customer service.
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
<PAGE>
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 hardware products,
mirrored closet doors and hardware for sliding, folding and pocket doors; 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 and power-operated sliding and swinging doors.
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 would 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 believes that the specific initiatives undertaken in order to
establish a strong foundation for growth will also help to address this issue.
These initiatives include product innovation, market development to reach new
customers and enhancing customer relationships. At the core of these efforts is
the Stanley Customer Support Division, which was established in 1994. The
mission of this Division is to make it easier for customers to do business with
the company's consumer divisions through the development of a common order
fulfillment system and a more efficient distribution network to support
customers. This initiative includes the development of a global information
infrastructure so that the company can provide a higher level of customer
service to its customers worldwide.
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 and the
company has relationships of long standing with many of its suppliers. The
company has experienced no difficulties in obtaining supplies
<PAGE>
in recent periods.
Backlog. At February 4, 1995, the company had approximately $155 million in
unfilled orders compared with $130 million in unfilled orders at February 5,
1994. 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(R) and STANLEY (in a notched rectangle)(R) 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(R),
Powerlock(R), Tape Rule Case Design (Powerlock)(R), LaBounty(R), MAC Tools(R),
Proto(R), Jensen(R), Goldblatt(R) and Vidmar(R) 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 many other parties, has been named as a potentially responsible
party ("PRP") in a number of administrative proceedings for the remediation of
various waste sites, including eight 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.
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As of December 31, 1994, the company had reserves of $24 million, primarily for
remediation activities associated with company-owned properties as well as for
Superfund sites.
The amount recorded for identified contingent liabilities is based on
estimates. Amounts recorded are reviewed periodically and adjusted to reflect
additional technical and legal information that becomes available. Actual costs
to be incurred 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.
Employees. During 1994, the company had approximately 20,000 employees,
approximately 13,000 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 majority of the company's hourlyand
weekly-paid employees outside the U.S. are covered by collective bargaining
agreements. The company's labor agreements in the U.S. expire in 1995, 1996,
1997 and 1998. 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.
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