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): January 29, 1998
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:(860) 225-5111
Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 13 Pages
Item 5. Other Events.
1. On January 29, 1998, The Stanley Works elected
Craig A. Douglas to the office of Treasurer. Stanley also issued a
press release announcing higher 4th quarter earnings; growth and
restructuring initiatives on track.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(c) 20(i) Press release dated January 29, 1998
announcing 4th quarter and year end
results.
(c) 20(ii) Cautionary statements relating to forward
looking statements included in Exhibit
20(i).
Page 2 of 13 Pages
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: January 29, 1998 By: Stephen S. Weddle
Name: Stephen S. Weddle
Title: Vice President,
General Counsel
and Secretary
Page 3 of 13 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated January 29, 1998
Exhibit No. Page
20(i) 5
20(ii) 13
Page 4 of 13 Pages
FOR IMMEDIATE RELEASE Exhibit (20)(i)
THE STANLEY WORKS ANNOUNCES HIGHER 4TH QUARTER EARNINGS; GROWTH
AND RESTRUCTURING INITIATIVES ON TRACK
New Britain, Connecticut, January 29, 1998: The Stanley Works (NYSE:
"SWK") announced that "core" earnings increased by 16% in its fourth
quarter and 15% in its fiscal year ended January 3, 1998. Core results
exclude restructuring charges, restructuring-related transition costs
and certain other non-recurring costs.
Fourth quarter core net income increased to $50 million, or $.55 per
share, from prior year fourth quarter core earnings of $43 million, or
$.48 per share. The company improved core operating margins to 12.4%
from 11.3% last year. The improvement was driven by higher volume,
improved productivity and reduced material costs, partially offset by
weaker prices and a stronger dollar.
Fourth quarter net sales were up 2% to $699 million from $685 million
in the same period last year, including the negative effects of
pricing, currency translation and net divestiture activities. Unit
sales volume from ongoing businesses was up 8.5%. This increase was
led by strong performances in industrial and consumer mechanics tools,
fastening systems, entry doors, automated access doors and mirrored
closet doors in North America. Hand tool and consumer mechanics tool
sales volumes in Latin America were also strong. A fourteenth week in
the fiscal quarter provided 2-3% of the unit sales volume increase.
"Again this quarter, our people delivered on shareholder expectations
while staying on track with our major initiatives," said John M. Trani,
Chairman and Chief Executive Officer. "We are particularly encouraged
by the results in sales and manufacturing in a year when we completely
re-aligned both organizations. Our 1.1 point improvement in core
operating margin shows progress toward establishing the lower cost
structure we need to invest for growth. With a solid level of orders
at year-end, our company is well-positioned for a solid 1998. The
current range of 1998 analyst estimates is $2.35 to $2.45 core
earnings per share, which is consistent with our expectations."
For the full year 1997, core earnings increased to $188 million, or
$2.11 per share, up 15% from 1996 core earnings of $163 million, or
$1.83 per share. Net sales were $2,670 million, essentially unchanged
from 1996. Volume from ongoing businesses was up 6%, with strength in
mechanics tools, fastening systems and door products.
Page 5 of 13 Pages
Core segment operating profits improved to 13.8%, up from 12.2% in
1996. The Tools segment delivered the strongest operating profit
improvement, rising to 15.2% from 13.4% last year, despite an
increasingly competitive pricing environment for fastening systems.
Hardware operating profits declined to 13.2% from 13.7% last year due
to operational problems experienced in implementing new distribution
systems. Specialty Hardware operating profit improved to 4.9% from
4.2% in 1996.
Reported fourth quarter net income was $27 million, or $.30 per share,
compared with the prior year's net loss of $3 million, or $.03 per
share. These amounts reflect $30 million, or $.21 per share, of
restructuring-related transition costs incurred in the fourth quarter
this year and $41 million, or $.36 per share, of restructuring charges
and $18 million, or $.15 per share, of restructuring-related
transition costs incurred in last year's fourth quarter. The
restructuring-related costs represent consulting, moving, start-up and
duplicative facility costs, as well as certain non-recurring CEO
recruitment costs. As previously announced, the company expects to
incur approximately $100 million of restructuring-related transition
costs related to the growth initiatives announced in 1997 through mid-
1999 period.
For the full year, reported results were a net loss of $42 million, or
$.47 per share, compared with net income of $97 million, or $1.09 per
share in 1996. The full year 1997 includes restructuring charges of
$238 million, or $2.00 per share, and restructuring-related transition
and other costs of $82 million, or $.58 per share.
The attached table, "Business Segment Information", provides
clarification of reported results for the fourth quarters of 1997 and
1996, and the related full years, reconciling them with normalized
core results.
The Stanley Works, an S&P 500 company, is a worldwide supplier of
tools, hardware and doors for professional, industrial and consumer
use.
Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: (860)827-3871 office
(860) 827-3833 office (203)929-9502 home
This press release contains forward looking statements as to the company's
earnings performance and ability to complete the reallocation of its resources
in order to achieve sustained, profitable growth. Cautionary statements
accompanying these forward looking statements are set forth, along with this
news release, in a Form 8-K filed with the Securities and Exchange Commission
today.
Page 6 of 13 Pages
The Stanley Works corporate press releases are available through PR Newswire's
"Company News On-Call" service. By FAX: dial 1-800-758-5804, ext. 874363 or
on the internet at: http://www.prnewswire.com or http://www.StanleyWorks.com.
Page 7 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Twelve Months
1997 1996 1997 1996
Net Sales $ 698.8 $ 685.4 $ 2,669.5 $ 2,670.8
Costs and Expenses
Cost of sales 469.3 464.8 1,783.4 1,795.5
Selling, general and
administrative 172.5 154.7 627.7 608.5
Interest - net 3.7 5.4 16.6 22.5
Other - net 2.7 8.9 21.9 22.3
Restructuring and asset
asset write-offs - 40.9 238.5 47.8
648.2 674.7 2,688.1 2,496.6
Earnings (Loss) before
income taxes 50.6 10.7 (18.6) 174.2
Income Taxes 24.1 13.7 23.3 77.3
Net Earnings (Loss) $ 26.5 $ (3.0) $ (41.9) $ 96.9
Net Earnings (Loss) Per
Share of Common Stock
Basic $ 0.30 $ (0.03) $ (0.47) $ 1.09
Diluted $ 0.29 $ (0.03) $ (0.47) $ 1.08
Dividends per share $ 0.20 $ 0.185 $ 0.77 $ 0.73
Average shares outstanding
(in thousands)
Basic 89,517 89,124 89,470 89,152
Diluted 90,534 89,789 90,472 89,804
Page 8 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
January 3,1998 December 28,
1997 1996
ASSETS
Cash and cash equivalents $ 152.2 $ 84.0
Accounts receivable 472.5 446.3
Inventories 301.2 338.1
Other current assets 79.4 42.5
Total current assets 1,005.3 910.9
Property, plant and equipment 513.2 570.4
Goodwill and other intangibles 104.1 98.9
Deferred income taxes 36.1 -
Other assets 100.0 79.4
$ 1,758.7 $ 1,659.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 130.8 $ 20.0
Accounts payable 155.5 130.8
Accrued expenses 236.7 203.9
Accrued restructuring 99.7 26.9
Total current liabilities 622.7 381.6
Long-term debt 283.7 342.6
Other long-term liabilities 244.5 155.3
Shareholders' equity 607.8 780.1
$ 1,758.7 $ 1,659.6
Page 9 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
PRICE/VOLUME INFORMATION
(Unaudited, Millions of Dollars)
NET SALES
Fourth Quarter
Unit ACQ/
1997 Price Volume DVT Currency 1996
INDUSTRY SEGMENTS
Tools
Consumer $ 199.9 (1)% 5% (1)% (4)% $ 202.9
Industrial 148.0 - 9% - - 135.2
Engineered 186.9 (2)% 10% 3% (2)% 171.8
Total Tools 534.8 (1)% 7% 1% (2)% 509.9
Hardware 87.4 (5)% 9% - (1)% 85.0
Specialty Hardware 76.6 - 13% (27)% (1)% 90.5
Consolidated $ 698.8 (1)% 8% (3)% (2)% $ 685.4
GEOGRAPHIC AREAS
United States $ 500.6 (2)% 9% (5)% - $ 490.5
Europe 111.7 - 6% 5% (7)% 107.6
Other Areas 86.5 2% 11% (7)% (7)% 87.3
Consolidated $ 698.8 (1)% 8% (3)% (2)% $ 685.4
Year to Date
Unit ACQ/
1997 Price Volume DVT Currency 1996
INDUSTRY SEGMENTS
Tools
Consumer $ 754.0 - 6% (3)% (3)% $ 751.1
Industrial 552.2 1% 3% (1)% - 538.7
Engineered 717.4 (1)% 7% 1% (2)% 686.4
Total Tools 2,023.6 - 5% (1)% (2)% 1,976.2
Hardware 352.2 (2)% 6% - - 340.4
Specialty Hardware 293.7 (1)% 7% (23%) - 354.2
Consolidated $2,669.5 (1)% 6% (4)% (1)% $ 2,670.8
GEOGRAPHIC AREAS
United States $1,900.6 (1)% 5% (5)% - $ 1,911.5
Europe 423.6 (1)% 6% 1% (6)% 421.8
Other Areas 345.3 1% 9% (5)% (3)% 337.5
Consolidated $2,669.5 (1)% 6% (4)% (1)% $ 2,670.8
Page 10 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Fourth Quarter 1997
Related Core
Restrg Transition Profit
Reported Charges Costs Core Margin
INDUSTRY SEGMENTS
Tools $ 59.1 $ - $ 20.3 $ 79.4 14.8%
Hardware 5.3 - 5.1 10.4 11.9%
Specialty Hardware 1.4 - 1.9 3.3 4.3%
Total 65.8 - 27.3 93.1 13.3%
Net corporate -
expenses (8.9) - 2.3 (6.6)
Interest expense (6.3) - - (6.3)
Earnings before
income taxes $ 50.6 $ - $ 29.6 $ 80.2
GEOGRAPHIC AREAS
United States $ 47.4 $ - $ 23.4 $ 70.8 14.1%
Europe 9.6 - 2.0 11.6 10.4%
Other Areas 8.8 - 1.9 10.7 12.4%
Total $ 65.8 $ - $ 27.3 $ 93.1 13.3%
Fourth Quarter 1996
Related Core
Restrg Transition Profit
Reported Charges Costs* Core Margin
INDUSTRY SEGMENTS
Tools $ 29.2 $ 40.2 $ 7.8 $ 77.2 15.1%
Hardware 10.5 - 1.2 11.7 13.8%
Specialty Hardware (4.6) 0.3 0.8 (3.5) (3.9%)
Total 35.1 40.5 9.8 85.4 12.5%
Net corporate
expenses (17.3) 0.4 8.3 (8.6)
Interest expense (7.1) - - (7.1)
Earnings before
income taxes $ 10.7 $ 40.9 $ 18.1 $ 69.7
GEOGRAPHIC AREAS
United States $ 44.4 $ 15.5 $ 8.8 $ 68.7 14.0%
Europe (6.3) 15.3 1.1 10.1 9.4%
Other Areas (3.0) 9.7 (0.1) 6.6 7.6%
Total $ 35.1 $ 40.5 $ 9.8 $ 85.4 12.5%
*1996 includes CEO recruitment costs.
Page 11 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Year to Date 1997
Related Core
Restrg Transition Profit
Reported Charges Costs Core Margin
INDUSTRY SEGMENTS
Tools $ 61.1 $ 194.8 $ 51.9 $ 307.8 15.2%
Hardware 16.4 17.8 12.4 46.6 13.2%
Specialty Hardware (12.3) 23.5 3.3 14.5 4.9%
Total 65.2 236.1 67.6 368.9 13.8%
Net corporate
expenses (59.1) 2.4 14.0 (42.7)
Interest expense (24.7) - - (24.7)
Earnings(loss)before
income taxes $ (18.6) $ 238.5 $ 81.6 $ 301.5
GEOGRAPHIC AREAS
United States $ 83.1 $ 145.6 $ 53.4 $ 282.1 14.8%
Europe (18.5) 61.8 7.6 50.9 12.0%
Other Areas 0.6 28.7 6.6 35.9 10.4%
Total $ 65.2 $ 236.1 $ 67.6 $ 368.9 13.8%
Year to Date 1996
Related Core
Restrg Transition Profit
Reported Charges Costs* Core Margin
INDUSTRY SEGMENTS
Tools $ 196.6 $ 44.6 $ 24.1 $ 265.3 13.4%
Hardware 42.4 - 4.4 46.8 13.7%
Specialty Hardware 12.2 0.3 2.3 14.8 4.2%
Total 251.2 44.9 30.8 326.9 12.2%
Net corporate
expenses (48.9) 2.9 9.7 (36.3)
Interest expense (28.1) - - (28.1)
Earnings before
income taxes $ 174.2 $ 47.8 $ 40.5 $ 262.5
GEOGRAPHIC AREAS
United States $ 212.5 $ 17.2 $ 26.2 $ 255.9 13.4%
Europe 24.8 17.1 2.5 44.4 10.5%
Other Areas 13.9 10.6 2.1 26.6 7.9%
Total $ 251.2 $ 44.9 $ 30.8 $ 326.9 12.2%
*1997 includes stock option charge and 1996 includes CEO recruitment
costs.
Page 12 of 13 Pages<PAGE>
Exhibit (20) (ii)
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 core earnings per share performance
currently estimated by management and the lower cost structure,
which will enable reinvestment for growth. These include the
ability of the company 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 itself as a low cost producer.
Each of these initiatives is in turn dependent on several
factors. These include the company's ability to generate the cost
savings necessary to fund these initiatives from a reallocation
of resources, including the simplification of its organization,
changes in the composition of its workforce and the
standardization of its operating mechanisms. The success of this
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; 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
external factors during the period of transition. These include
pricing pressures and other changes in the competitive
environment; the continued consolidation of customers in consumer
channels; increasing global competition; changes in trade,
monetary and fiscal policies and laws; inflation; currency
exchange fluctuations and the impact of dollar/foreign currency
exchange rates on the competitiveness of products; 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.
Page 13 of 13 Pages
