UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 28, 1997
or
[ ] Transition Report Pursuant to Section 13 of 15(d) of
the Securities Exchange Act of 1934
For the transition period from
[ ] to [ ]
Commission file number 1-5224
I.R.S. Employer Identification Number 06-0548860
THE STANLEY WORKS
(a Connecticut Corporation)
1000 Stanley Drive
New Britain, Connecticut 06053
Telephone: (860) 225-5111
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: shares of the
company's Common Stock ($2.50 par value) were outstanding 89,001,677
as of August 1, 1997.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Second Quarter Six Months
1997 1996 1997 1996
------ ------ ------- -------
Net Sales $ 673.6 $ 677.2 $ 1,320.2 $ 1,312.5
Costs and Expenses
Cost of sales 446.1 453.0 877.5 882.3
Selling, general and
administrative 153.8 153.1 307.0 302.1
Interest - net 4.4 5.4 8.7 11.9
Other - net 13.6 4.4 17.2 7.9
Restructuring and
asset write-offs 137.2 3.8 132.6 3.8
------ ------ ------- -------
755.1 619.7 1,343.0 1,208.0
------ ------ ------- -------
Earnings (Loss) before
income taxes (81.5) 57.5 (22.8) 104.5
Income Taxes (17.0) 24.9 5.0 42.3
------ ------ ------- -------
Net Earnings (Loss) $ (64.5) $ 32.6 $ (27.8) $ 62.2
====== ====== ======= =======
Net Earnings (Loss) Per
Share of Common Stock $ (0.72) $ 0.37 $ (0.31) $ 0.70
======= ====== ======= =======
Dividends per share $ 0.185 $ 0.18 $ 0.37 $ 0.36
======= ====== ======= =======
Average shares outstanding
(in thousands) 88,987 88,825 88,878 88,830
======= ====== ======= =======
See notes to consolidated financial statements.
-1-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
June 28 December 28
1997 1996
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 107.6 $ 84.0
Accounts receivable 457.1 446.3
Inventories 323.4 338.1
Other current assets 52.8 42.5
-------- --------
Total Current Assets 940.9 910.9
Property, plant and equipment 1,160.3 1,224.4
Less: accumulated depreciation (652.0) (654.0)
-------- --------
508.3 570.4
Goodwill and other intangibles 73.6 98.9
Deferred income taxes 47.6 -
Other assets 96.4 79.4
-------- --------
$ 1,666.8 $ 1,659.6
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 25.9 $ 4.9
Current maturities of long-term debt 50.5 15.1
Accounts payable 114.6 130.8
Accrued expenses 299.2 230.8
-------- --------
Total Current Liabilities 490.2 381.6
Long-term debt 295.8 342.6
Other liabilities 164.1 155.3
Shareholders' Equity
Common stock 230.9 230.9
Retained earnings 858.3 919.0
Foreign currency translation adjustment (57.2) (45.5)
ESOP debt (229.8) (234.8)
-------- --------
802.2 869.6
Less: cost of common stock in treasury 85.5 89.5
-------- --------
Total Shareholders' Equity 716.7 780.1
-------- --------
$ 1,666.8 $ 1,659.6
======== ========
See notes to consolidated financial statements.
-2-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Millions of Dollars)
Second Quarter Six Months
1997 1996 1997 1996
------ ------ ------ ------
Operating Activities
Net earnings(loss) $(64.5) $ 32.6 $(27.8) $ 62.2
Depreciation and amortization 18.9 18.7 37.4 38.8
Restructuring and asset write-offs 137.2 3.8 132.6 3.8
Other non-cash items (27.0) 12.3 (14.1) 17.3
Changes in operating assets
and liabilities (16.4) 32.2 (76.8) 13.8
------ ------ ------ ------
Net cash provided by
operating activities 48.2 99.6 51.3 135.9
Investing Activities
Capital expenditures (19.3) (17.4) (36.5) (31.1)
Capitalized software (3.9) (5.6) (6.6) (10.8)
Proceeds from sales of businesses - 13.3 34.8 15.2
Investment in affiliated company (22.2) - (22.2) -
Other 2.5 (6.0) 3.3 (2.7)
------ ------ ------ ------
Net cash used by
investing activities (42.9) (15.7) (27.2) (29.4)
Financing Activities
Payments on long-term debt (1.8) (3.1) (3.4) (6.5)
Proceeds from long-term borrowings 2.3 2.3
Net short-term borrowings 21.9 (16.3) 21.4 (39.0)
Proceeds from issuance of common stock 5.4 4.2 15.4 27.1
Purchase of common stock for treasury (9.5) (17.8) (47.0)
Cash dividends on common stock (16.0) (16.5) (34.7)
------ ------ ------ ------
Net cash provided (used) by
financing activities 27.8 (40.7) 1.4 (100.1)
Effect of Exchange Rate Changes on Cash (1.9) (3.0) (1.9) (2.3)
------ ------ ------ ------
Increase in Cash and
Cash Equivalents 31.2 40.2 23.6 4.1
Cash and Cash Equivalents,
Beginning of Period 76.4 39.3 84.0 75.4
------ ------ ------ ------
Cash and Cash Equivalents,
End of Second Quarter $107.6 $ 79.5 $107.6 $ 79.5
====== ====== ====== ======
See notes to consolidated financial statements.
-3-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited, Millions of Dollars)
Six Months
1997 1996
-------- -------
Balance at beginning of year $ 780.1 $ 734.6
Net earnings (loss) (27.8) 62.2
Currency translation adjustment (11.7) 8.0
Cash dividends declared (33.0) (32.3)
Net common stock activity (0.4) (18.9)
Tax benefit related to stock options 3.0 5.8
ESOP debt 5.0 4.7
ESOP tax benefit 1.5 1.6
-------- -------
Balance at end of second quarter $ 716.7 $ 765.7
======== =======
See notes to consolidated financial statements.
-4-
THE STANLEY WORKS AND SUBSIDIARIES
NOTES TO (Unaudited) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1997
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form 10-Q and
Article 10 of Regulation S-X and do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of both normal and recurring items) considered necessary for a
fair presentation of the results of operations for the interim periods have
been included. For further information, refer to the consolidated financial
statements and footnotes included in the company's Annual Report on Form
10-K for the year ended December 28, 1996.
NOTE B - Earnings Per Share
Earnings per share are based upon the weighted average number of common
shares outstanding. The exercise of outstanding stock options would not
result in a material dilution of earnings per share. (See Exhibit 11)
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This
Statement simplifies the computation of earnings per share (EPS) and
makes the computation more consistent with those of other countries.
The implementation will require the disclosure of basic and diluted EPS.
The company will adopt this Statement during the fourth quarter. The
company does not expect the adoption of this new standard to significantly
affect reported earnings per share amounts.
NOTE C - Inventories
The components of inventories at the end of the second quarter of 1997
and at year-end 1996, in millions of dollars, is as follows:
June 28 December 28
1997 1996
------ ------
Finished products $ 221.3 $ 223.2
Work in process 55.5 61.7
Raw materials 44.8 50.9
Supplies 1.8 2.3
------ ------
$ 323.4 $ 338.1
====== ======
-5-
NOTE E - Stock Option Charge
At the end of 1996, the company recruited a new chief executive officer. The
new CEO's employment agreement provided for stock option grants. These grants
included an option to purchase 1,000,000 shares of common stock at an exercise
price of $27.562. At the April 23, 1997 Annual Meeting, the shareholders
approved the stock option grants. As a result, second quarter operating
results included an $11 million, or $.07 per share, non-cash charge,
representing the difference between the exercise price for the 1,000,000 share
option and the fair market value of that option as of April 23, 1997.
NOTE F - Cash Flow Information
Interest paid during the second quarters of 1997 and 1996 amounted to $7.7
million and $7.3 million, respectively. Interest paid for the six months of
1997 and 1996 amounted to $12.8 million and $14.2 million, respectively.
Income taxes paid during the second quarters of 1997 and 1996 were $39.4
million and $28.8 million, respectively. Income taxes paid for the six months
of 1997 and 1996 were $56.7 million and $29.5 million, respectively.
NOTE G - Restructuring and Asset Write-offs
In the second quarter, the company announced plans to streamline its
manufacturing, sales, distribution and administrative operations, removing
redundancies. The company will reduce manufacturing and distribution facility
locations from 123 to 70, selling 11 and closing 42. Many of the closures
will be effected by consolidating operations into other Stanley facilities,
others by outsourcing work to vendors. In addition, the company reorganized
its operations into a product management structure, where eight product groups
will be focusing on customers and sales growth through development of new
products and expanding market shares. In support of this structure,
manufacturing, engineering, sales and service, finance, human resource and
information technology functions will be centralized. This will facilitate
common systems and consolidation of redundant functions. The charges related
to these restructuring actions will be recorded in the second and third
quarters of 1997. Total restructuring charges and asset write-offs estimated
for 1997 are $240 million. The implementation of these restructuring
initiatives will also result in additional transition costs which are expected
to be incurred through 1998. The restructuring reserves are expected to be
utilized by the end of 1999. For the six month period ended June 28, 1997,
restructuring and asset write-off charges of $133 million included the write-
down of assets ($76 million), severance for the termination of 2,100 employees
($39 million), other exit costs ($25 million) and gains on the divestiture of
two businesses ($7 million).
During the first six months of 1997, the company made severance and other exit
payments of $8 million. At June 28, 1997, the reserve balance for the
company's restructuring activities was $86 million.
-6-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The attached table, "Price/Volume Information" provides detail of the changes
in net sales by business segment and geographic region. In addition, the
attached tables, "Business Segment Information", provide clarification of
reported operating results for the second quarter and six month periods of
1997 and 1996, reconciling them with normalized "core" results. Core results
exclude restructuring charges and restructuring-related transition costs
associated with the company's plan for sustained profitable growth announced
on July 18, 1997, the company's restructuring program that began in 1995 and a
one-time non-cash charge related to stock options granted to the company's new
chairman and chief executive officer. Restructuring-related transition costs
represent consulting, plant and equipment relocation, duplicate facility costs
and other operational expenses that in management's judgment are being
incurred directly as a result of the growth and restructuring initiatives.
This supplemental "core" information forms the basis for some of the following
commentary.
Reported net sales for the quarter were $674 million, a decrease of less
than 1% from sales of $677 million in the same quarter of 1996. Ongoing
businesses experienced unit volume growth of 6% with particular strength in
fastening systems and consumer tools. Business and product line divestitures
decreased sales by $32 million, or 5%, from prior year levels. Price declines
and effects of foreign currency decreased sales by a combined 2%. North
American unit volume growth was 5%, while European volume growth was a very
strong 11%. The European volume gains were somewhat offset by a 1% price
decline and a 4% negative currency impact. Net sales for the six month period
increased by 1% to $1,320 million despite a 4% decline from divestitures.
A significant restructuring and asset write-off charge associated with the
company's plan for sustained profitable growth, accounted for a reported net
loss for the quarter of $65 million, or $.72 per share, as compared with the
prior year's net income of $33 million, or $.37 per share. For the six month
period, the net loss was $28 million or $.31 per share compared with net
income of $62 million or $.70 per share in the prior year. In addition to the
restructuring and asset write-off charge, the company also recorded $24
million, or $.16 per share, of restructuring-related transition costs and a
one-time non-cash charge in connection with stock options issued to the
company's new chief executive officer. On a year to date basis, the
restructuring-related transition costs and the non-cash charge were $33
million or $.23 per share compared with $15 million, or $.11 per share in the
prior year.
Normalized or "core" earnings for the second quarter ended June 28, 1997
increased significantly. Excluding restructuring and other charges discussed
above, normalized or "core" net income in the second 1997 quarter
was $50 million, or $.56 per share, a 15% increase over prior year core
earnings of $43 million, or $.49 per share.
-7-
Gross margins reported for the second quarter, on a core basis, were 34.9% of
sales compared with 33.7% in the prior year's quarter and for the six months
were 34.5% compared with 33.2%. Volume increases and the positive effects of
previously announced restructuring initiatives, including strong contributions
from company-wide procurement efforts, accounted for most of the improvement
in gross margin.
On a core basis, operating expenses as a percent of sales for the second
quarter were 22.1% compared with 22.0% and for the six month period were 22.5%
compared with 22.4%.
Second quarter consolidated "core" segment operating profit margin
improved to 14.7% of sales from 12.9% and, for the six months, to 13.7% from
11.9% in the prior year.
In the Tools segment overall, second quarter unit volume sales increased
7% over last year. Consumer tools unit growth was 10% with particular
strength in North America. Industrial tools increased 3%, primarily
reflecting improved storage systems results in the U.S. Engineered tools
increased 7% in unit volume, reflecting continued strong sales of fastening
tools and fasteners in the U. S. and Europe. Core operating profits in the
Tools segment for the quarter increased to 16.0% of sales, from 13.3% a year
ago. This improvement resulted from higher sales volume, savings from cross-
divisional purchasing efforts, other restructuring initiatives and performance
improvements in the mechanics tools operations.
The Hardware segment saw 1% unit growth in the quarter, with continued
strong demand for Home Decor products in the U.S., Canadian and European
markets. Demand in the U. S. consumer market for traditional hardware
products declined from robust levels seen in recent quarters. Core operating
profits decreased to 14.2% of sales, from 16.0% in the prior year. This
decline resulted from inclusion in 1996 of a gain realized upon resolution of
a legal matter.
The Specialty Hardware segment experienced 3% unit growth in the second
quarter. Core operating results decreased to a 5.6% profit on sales, from a
7.7% operating profit last year. This decrease was principally due to a 2%
price decline resulting from the continuation of an extremely competitive
pricing environment. The company continues to maintain its strategic decision
to defend its market share.
On July 18, 1997, the company announced initiatives designed
to deliver profitable sales growth on a sustained basis. Increased
expenditures will be made on new product development and expansion into a
number of "near-neighbor" or related products. Considerably greater
resources will be allocated to brand development, including advertising,
so that customers think of Stanley first and are always informed
about the company's new products. To support this thrust, a
corporate marketing and brand development function has been established,
whose focus will be the nurturing and leveraging of the Stanley brand.
-8-
Funding for these initiatives will come from streamlining manufacturing,
sales, distribution and administrative operations. Manufacturing and
distribution facility locations will decrease from 123 to 70. Additional
savings will come from the company's previously announced reorganization of
its operations into a product management structure, and the centralization of
manufacturing, engineering, sales and service, finance, human resource and
information technology. Overall, these actions will change the composition of
the company's workforce and will reduce net employment levels by 4,500 people.
In total, restructuring charges and asset write-offs of $240 million,
including $140 million of cash costs and $100 million of non-cash costs, plus
restructuring-related transition costs of $100 million, are anticipated in
connection with these actions. The restructuring charges and asset write-offs
will be recorded entirely in 1997, with $137 million having been taken in the
second quarter and the remainder to follow in the third quarter. The $100
million of non-cash restructuring charges relate to write-offs of non-
productive assets including goodwill and capitalized software. The
restructuring-related transition costs will be incurred throughout the
remainder of 1997 and 1998.
Liquidity and Sources of Capital
Net cash provided by operating activities for the first six months of 1997 was
$51.3 million, substantially less than the prior year. Operating
cash flow in the prior year was unusually high as it reflected a non-recurring
income tax refund and lower working capital levels. The level of operating cash
flow in 1997 while lower than 1996, is consistent with historical levels.
Capital expenditures for the first six months of 1997 and 1996
were $43.1 million and $41.9 million, respectively. For the current year,
capital expenditures will be approximately $100 million. The company
anticipates that its operating cash flow and borrowing capacity will enable
it to fund its growth and restructuring initiatives, capital expenditures and
dividends.
At June 28, 1997, the reserve balance for the restructuring initiatives was
$86 million. Severance and other exit cost payments amounted to $8 million
for the first six months of 1997.
Accounting Change
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
This Statement simplifies the computation of earnings per share (EPS) and
makes the computation more consistent with those of other countries. The
implementation will require the disclosure of basic and diluted EPS. The
company will adopt this Statement during the fourth quarter. The company does
not expect the adoption of this new standard to significantly affect reported
earnings per share amounts.
-9-
Cautionary Statements
Under the Private Securities Litigation Reform Act of 1995
Certain risks and uncertainties are inherent in the company's ability to
achieve the sustained profitable growth as outlined in the "Results of
Operations" section.
The company's ability to achieve this expected growth is dependent on several
factors. These factors include the ability to develop new products that will
be successful in the marketplace; to expand into "near neighbor" or related
products; to position Stanley(R) as a "Great Brand" in the marketplace; and to
position the company as a low cost producer.
These initiatives are in turn dependent on several factors. These include the
company's ability to generate the necessary cost savings to fund these
initiatives from a reallocation of resources, including the simplification of
the organization, the change in the composition of the workforce and the
standardization of the operating mechanisms. The success of the reallocation
is dependent upon the ability of the company's employees, with the help of
outside consultants, to develop and execute comprehensive plans to provide for
smooth transitions for all elements of the reallocation; the ability to retain
existing employees throughout the transition; the successful recruitment and
training of new employees for the positions that relate to the growth
initiatives; the need to respond to significant changes in product demand
during the transition; and unforeseen events. The company's ability to
achieve the expected cost savings is also dependent on the reallocation
generating internal efficiencies, and on the ability of the organization to
withstand pricing pressures; the continued consolidation of customers in
consumer channels; increasing global competition; changes in trade, monetary
and fiscal policies and laws; inflation and currency exchange fluctuations;
and recessionary or expansive trends in the economies of the world in which
the company operates. The achievement of "near neighbor" and related product
growth and the ability of the company to become a low cost producer will
depend upon the ability to successfully identify, negotiate, consummate and
integrate into operations joint ventures and/or strategic alliances.
-10-
THE STANLEY WORKS AND SUBSIDIARIES
PRICE/VOLUME INFORMATION
(Unaudited, Millions of Dollars)
NET SALES
Second Quarter
----------------------------------------------------
Unit ACQ/
1997 Price Volume DVT Currency 1996
----------------------------------------------------
INDUSTRY SEGMENTS
Tools
Consumer $ 188.2 - 10% (3)% (2)% $ 179.7
Industrial 141.6 2% 3% (3)% - 138.5
Engineered 186.4 (1)% 7% - (1)% 177.3
------ ------
Total Tools 516.2 - 7% (2)% (1)% 495.5
Hardware 86.2 (3)% 1% - - 87.9
Specialty Hardware 71.2 (2)% 3% (25)% - 93.8
------ ------
Consolidated $ 673.6 (1)% 6% (5)% (1)% $ 677.2
====== ======
GEOGRAPHIC AREAS
United States $ 479.7 (1)% 4% (6)% - $ 493.2
Europe 106.3 (1)% 11% (1)% (4)% 101.0
Other Areas 87.6 1% 11% (5)% (2)% 83.0
------ ------
Consolidated $ 673.6 (1)% 6% (5)% (1)% $ 677.2
====== ======
Year to Date
----------------------------------------------------
Unit ACQ/
1997 Price Volume DVT Currency 1996
----------------------------------------------------
INDUSTRY SEGMENTS
Tools
Consumer $ 366.2 - 8% (4)% (1)% $ 356.5
Industrial 274.2 2% - (2)% - 274.8
Engineered 358.5 (1)% 7% - (1)% 341.3
------- -------
Total Tools 998.9 - 6% (2)% (1)% 972.6
Hardware 179.3 (1)% 6% - - 171.1
Specialty Hardware 142.0 (2)% 6% (20)% - 168.8
------- -------
Consolidated $ 1,320.2 - 6% (4)% (1)% $ 1,312.5
======= =======
GEOGRAPHIC AREAS
United States $ 935.5 (1)% 5% (5)% - $ 942.7
Europe 214.1 (1)% 7% - (4)% 209.1
Other Areas 170.6 1% 9% (3)% (1)% 160.7
------- -------
Consolidated $ 1,320.2 - 6% (4)% (1)% $ 1,312.5
======= =======
-11-
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Second Quarter 1997
-----------------------------------------------------
Related Core
Restrg Transition Profit
Reported Charges Costs* Core Margin
-----------------------------------------------------
INDUSTRY SEGMENTS
Tools $ (38.3) $ 110.7 $ 10.4 $ 82.8 16.0%
Hardware 2.6 7.5 2.1 12.2 14.2%
Specialty Hardware (9.8) 13.7 - 3.9 5.6%
------ ----- ----- -----
Total (45.5) 131.9 12.5 98.9 14.7%
Net corporate
expenses (29.6) 5.3 11.0 (13.3)
Interest expense (6.4) - - (6.4)
------ ----- ----- -----
Earnings(loss)before
income taxes $ (81.5) $ 137.2 $ 23.5 $ 79.2
====== ===== ===== =====
GEOGRAPHIC AREAS
United States $ (19.1) $ 87.6 $ 8.5 $ 77.0 16.1%
Europe (12.0) 24.1 2.4 14.5 13.6%
Other Areas (14.4) 20.2 1.6 7.4 8.4%
------ ----- ----- -----
Total $ (45.5) $ 131.9 $ 12.5 $ 98.9 14.7%
====== ===== ===== =====
Second Quarter 1996
----------------------------------------------------
Related Core
Restrg Transition Profit
Reported Charges Costs Core Margin
----------------------------------------------------
INDUSTRY SEGMENTS
Tools $ 58.8 $ 0.7 $ 6.3 $ 65.8 13.3%
Hardware 12.7 - 1.4 14.1 16.0%
Specialty Hardware 6.7 - 0.5 7.2 7.7%
----- ----- ----- -----
Total 78.2 0.7 8.2 87.1 12.9%
Net corporate
expenses (13.7) 3.1 - (10.6)
Interest expense (7.0) - - (7.0)
----- ----- ----- -----
Earnings before
income taxes $ 57.5 $ 3.8 $ 8.2 $ 69.5
===== ===== ===== =====
GEOGRAPHIC AREAS
United States $ 63.4 $ 0.1 $ 7.5 $ 71.0 14.4%
Europe 9.3 - 0.4 9.7 9.6%
Other Areas 5.5 0.6 0.3 6.4 7.7%
----- ----- ----- -----
Total $ 78.2 $ 0.7 $ 8.2 $ 87.1 12.9%
===== ===== ===== =====
* Includes stock option charge.
-12-
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Year to Date 1997
----------------------------------------------------
Related Core
Restrg Transition Profit
Reported Chgs Costs* Core Margin
----------------------------------------------------
INDUSTRY SEGMENTS
Tools $ 17.7 $ 111.8 $ 18.0 $ 147.5 14.8%
Hardware 14.4 7.9 4.0 26.3 14.7%
Specialty Hardware (7.5) 14.3 0.2 7.0 4.9%
----- ----- ----- -----
Total 24.6 134.0 22.2 180.8 13.7%
Net corporate
expenses (35.4) (1.4) 11.1 (25.7)
Interest expense (12.0) - - (12.0)
----- ----- ----- -----
Earnings(loss)before
income taxes $ (22.8) $ 132.6 $ 33.3 $ 143.1
===== ===== ===== =====
GEOGRAPHIC AREAS
United States $ 34.1 $ 88.8 $ 16.1 $ 139.0 14.9%
Europe (0.7) 24.5 3.5 27.3 12.8%
Other Areas (8.8) 20.7 2.6 14.5 8.5%
----- ----- ----- -----
Total $ 24.6 $ 134.0 $ 22.2 $ 180.8 13.7%
===== ===== ===== =====
Year to Date 1996
----------------------------------------------------
Related Core
Restrg Transition Profit
Reported Chgs Costs Core Margin
----------------------------------------------------
INDUSTRY SEGMENTS
Tools $ 110.7 $ 0.7 $ 10.5 $ 121.9 12.5%
Hardware 22.3 - 2.2 24.5 14.3%
Specialty Hardware 9.0 - 1.0 10.0 5.9%
----- ----- ----- -----
Total 142.0 0.7 13.7 156.4 11.9%
Net corporate
expenses (22.9) 3.1 1.3 (18.5)
Interest expense (14.6) - - (14.6)
----- ----- ----- -----
Earnings before
income taxes $ 104.5 $ 3.8 $ 15.0 $ 123.3
===== ===== ===== =====
GEOGRAPHIC AREAS
United States $ 108.8 $ 0.1 $ 11.9 $ 120.8 12.8%
Europe 20.9 - 1.0 21.9 10.5%
Other Areas 12.3 0.6 0.8 13.7 8.5%
----- ----- ----- -----
Total $ 142.0 $ 0.7 $ 13.7 $ 156.4 11.9%
===== ===== ===== =====
* Includes stock option charge.
-13-
PART II - OTHER INFORMATION
Item 4. - Submission of Matters to a Vote of Security-Holders
(a) The company's annual meeting of shareholders was held on April 23, 1997.
(c)(i) The following directors were elected:
Shares Voted Shares
For Withheld Non-Votes
------------ --------- ---------
Edgar R. Fiedler 73,935,498 1,178,152 0
Eileen S. Kraus 73,827,377 1,286,273 0
John M. Trani 73,465,463 1,648,187 0
(ii) The amendment to the 1990 Stock Option Plan was approved by
the following vote:
Shares Voted Shares Voted Shares Voted
For Against Abstaining Non-Votes
------------ ------------ ------------ ---------
65,174,959 8,653,460 1,285,231 0
(iii) Ernst & Young LLP was approved as the company's independent
auditors by the following vote:
Shares Voted Shares Voted Shares Voted
For Against Abstaining Non-Votes
------------ ------------ ------------ ---------
73,939,604 804,849 369,196 0
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
(1) See Exhibit Index on page 16
(b) Reports on Form 8-K.
(1) Registrant filed a Current Report on Form 8-K, dated April 16,
1997, in respect of the Registrant's press release announcing
first quarter results.
(2) Registrant filed a Current Report on Form 8-K, dated April 23,
1997, to designate the Registrant's Executive Officers.
(3) Registrant filed a Current Report on Form 8-K, dated May 16,
1997, in respect of the Registrant's announcement of Stanley
Day in New York City on July 18, 1997.
(4) Registrant filed a Current Report on Form 8-K, dated June 25,
1997, in respect of the Registrant's communication relating to
an analyst meeting in New York City on July 18, 1997.
-14-
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: August 12, 1997 By: Theresa F. Yerkes
Theresa F. Yerkes
Vice President and
Controller (Chief Financial
Officer, Chief Accounting
Officer and Authorized
Signatory of the Registrant)
-15-
EXHIBIT INDEX
(11) Statement re Computation of Per Share Earnings
(12) Statement re Computation of Ratios
(27) Financial Data Schedule
-16-
Exhibit 11
THE STANLEY WORKS AND SUBSIDIARIES
STATEMENT OF PER SHARE EARNINGS
(dollars and shares in thousands except per share amounts)
SECOND QUARTER ENDED SIX MONTHS ENDED
June 28 June 29 June 28 June 29
1997 1996 1997 1996
------- ------- ------- -------
Earnings per common share:
Weighted average shares outstanding 88,987 88,825 88,878 88,830
======= ======= ======= =======
Net Earnings (Loss) ($64,520) $32,557 ($27,806) $62,190
======= ======= ======= =======
Per share amounts ($0.72) $0.37 ($0.31) $0.70
======= ======= ======= =======
PRIMARY:
Weighted average shares outstanding 88,987 88,825 88,878 88,830
Dilutive common stock equivalents -
based on the treasury stock method
using average market price 1,736 1,407 1,588 1,342
------- ------- ------- -------
90,723 90,232 90,466 90,172
======= ======= ======= =======
Per share amounts ($0.71) $0.36 ($0.31) $0.69
======= ======= ======= =======
FILLY DILUTED:
Weighted average shares outstanding 88,987 88,825 88,878 88,830
Dilutive common stock equivalents -
based on the treasury stock method
using average market price 1,814 1,407 1,645 1,374
------- ------- ------- -------
90,801 90,232 90,523 90,204
======= ======= ======= =======
Per share amounts ($0.71) $0.36 ($0.31) $0.69
======= ======= ======= =======
Note: This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because it results in dilution of less
than 3%.
Exhibit 12
THE STANLEY WORKS AND SUBSIDIAIRES
COMPUTATION OF EARNINGS TO FIXED CHARGES
(In Millions of Dollars)
SECOND QUARTER SIX MONTHS
1997 1996 1997 1996
------ ------ ----- -----
Earnings (loss) before income taxes ($81.5) $57.5 ($22.8) $104.5
Add:
Portion of rents representative of
interest factor $2.9 $3.4 $6.2 $6.7
Interest expense 6.2 6.8 11.7 14.3
Amortization of expense on
long-term debt 0.1 0.1
Amortization of capitalized interest 0.1 0.1 0.2
------ ------ ----- -----
Income (loss) as adjusted ($72.3) $67.9 ($4.7) $125.8
====== ====== ===== =====
Fixed charges:
Interest expense $6.2 $6.8 $11.7 $14.3
Amortization of expense
on long-term debt 0.1 0.1
Capitalized interest 0.1 0.1
Portion of rents representative of
interest factor 2.9 3.4 6.2 6.7
------ ------ ----- -----
Fixed charges $9.2 $10.4 $18.0 $21.2
====== ====== ===== =====
Ratio of earnings to fixed charges (A) N/A 6.53 N/A 5.93
====== ====== ===== =====
(A) Due to signficant restructuring charges and asset write-offs recorded in
the second quarter of 1997, income as computed above, was inadequate to
cover fixed charges. The deficiency was $81.5 for the second quarter and
$22.7 for the first six months of 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 107,600
<SECURITIES> 0
<RECEIVABLES> 457,100
<ALLOWANCES> 0
<INVENTORY> 323,400
<CURRENT-ASSETS> 940,900
<PP&E> 1,160,300
<DEPRECIATION> 652,000
<TOTAL-ASSETS> 1,666,800
<CURRENT-LIABILITIES> 490,200
<BONDS> 295,800
0
0
<COMMON> 230,900
<OTHER-SE> 485,800
<TOTAL-LIABILITY-AND-EQUITY> 1,666,800
<SALES> 1,320,200
<TOTAL-REVENUES> 1,320,200
<CGS> 877,500
<TOTAL-COSTS> 877,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,700
<INCOME-PRETAX> (22,800)
<INCOME-TAX> 5,000
<INCOME-CONTINUING> (27,800)
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<CHANGES> 0
<NET-INCOME> (27,800)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> 0
</TABLE>
