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): September 23, 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)
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Exhibit Index is located on Page 4
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Item 5. Other Events.
1. On September 23, 1998, the Registrant issued a press release
discussing the third quarter, near-term and long-term business outlook.
Attached as Exhibit (20)(i) is a copy of the Registrant's press release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c)20(i) Press Release dated September 23, 1998 discussing the third
quarter, near-term and long-term business outlook.
20(ii)Cautionary statements relating to forward looking statements
included in Exhibit 20(i).
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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: September 23, 1998 By: Stephen S. Weddle
-----------------
Name: Stephen S. Weddle
Title: Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Current Report on Form 8-K
Dated September 23, 1998
Exhibit No. Page
20(i) 5
20 (ii) 6
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Exhibit (20) (i)
THE STANLEY WORKS DISCUSSES 3RD QUARTER, NEAR-TERM
AND LONG-TERM BUSINESS OUTLOOK
New Britain, Connecticut, September 23, 1998: The Stanley Works (NYSE: "SWK")
said today it expects "core" earnings for its third quarter, which will end
October 3, to be similar to levels achieved in the same period last year. In the
third quarter of 1997, the company reported "core" earnings of $49 million, or
$.54 per diluted share, on revenues of $651 million. Core results exclude
restructuring charges, restructuring-related transition costs and certain other
non-recurring costs.
Core earnings will be lower than current Wall Street analysts' consensus
estimate of $.62 per diluted share. While overall incoming orders are solid
despite a slowing in Europe, core operating margins have eroded recently from
three factors:
- An inability to operate cost effectively while
aggressively pursuing higher customer service levels;
- Lower prices in certain segments of industrial and
engineered tools in order to maintain market share; and
- A greater mix to lower margin consumer products, especially in the home
center channel.
In addition, working capital to support customer service and cash used to fund
the recent ZAG acquisition have increased interest expense.
The company indicated that the current complexity of its operations and the
unnecessary depth of its product offerings preclude performance at levels
expected by customers and inhibit efficient growth. Management is pursuing a
dramatic product-pruning program to remove low-selling items while focusing
production on high-volume offerings. Several task forces have been charged with
pursuing operating improvements and better integration of production and sales
planning.
John M. Trani, Chairman and Chief Executive Officer, commented: "While we expect
these measures to dramatically improve on-time delivery and profitability, they
are unlikely to be completed until the middle of 1999. Until then, we anticipate
nominal sales growth and quarterly core earnings at levels similar to those
actually achieved in the respective prior year quarter." The company's core
earnings per fully diluted share were $.55 in the fourth quarter of 1997, $.51
in the first quarter of 1998 and $.58 in the second quarter of 1998.
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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
implement the operating changes necessary to improve customer service and
achieve nominal sales growth and quarterly core earnings per share at prior year
levels through mid-1999 and to achieve growth and improved profitability in the
long term.
The operating changes currently underway include a sku reduction program to
eliminate low-selling items, better integration of production and sales
planning, improving delivery to customers and the continuing reallocation of
resources that is aimed at simplifying the organization, changing the workforce
composition and standardizing operating mechanisms. The failure to make these
changes or to achieve the benefits expected from these changes in accordance
with current plans may adversely affect the levels of sales growth and earnings
expected in future quarters.
The benefits expected from the sku reduction program are decreased complexity
and cost in operations. In order to achieve these benefits, however, the
reduction must be effectively managed so that the margin on discontinued
products is preserved as the remaining inventories are sold off. In addition,
the company's ability to better integrate production and sales planning in order
to meet customer requirements for on-time delivery, quality and value will
depend on the implementation of the necessary process improvements in its
manufacturing operations in accordance with the current plan. The ability to
improve customer deliveries will depend on the implementation of procedures and
policies to better manage the distribution process.
The ability of the resource reallocation to provide additional cost savings is
dependent upon the development and execution of comprehensive plans for the
facility
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consolidations; the ability of the organization to complete the transition to a
product management structure without losing focus on the business; the ability
to recruit, train and retain high level employees to execute the necessary
changes; the availability of vendors to perform non-core functions on a cost
effective basis; the need to respond to significant changes in product demand
during the transition; the complexity and ultimate extent of year-2000
compliance efforts; and unforeseen events.
The company's ability to generate long term growth depends on successfully
freeing up resources to fund new product and brand development and new ventures
to broaden its markets. Success at developing new products will depend on the
ability of the new product development process to foster creativity and identify
new products that will be successful in the marketplace. Success at developing
the Stanley(R) brand will depend on the effectiveness of the Stanley: Make
Something Great(TM) campaign and other actions being planned to enhance the
image of the Stanley(R) brand and increase sales. The achievement of growth
through new ventures will depend upon the ability to successfully identify,
negotiate, consummate and integrate into operations acquisitions, joint ventures
and/or strategic alliances.
The company's ability to achieve the estimated earnings results and long term
growth will also be affected by external factors. These include pricing
pressures within the company's markets and the need to defend market share in
the face of intense price competition; other changes in the company's
competitive markets; 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.
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