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 21, 1999
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 11 Pages
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Item 5. Other Events.
1. On July 21, 1999, the Registrant issued a
press release announcing second quarter earnings. 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 July 21, 1999
announcing first quarter results.
20(ii) Cautionary statements relating to forward
looking statements included in Exhibit 20(i).
Page 2 of 11 Pages
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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: July 21, 1999 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 July 21, 1999
Exhibit No. Page
20(i) 5
20(ii) 11
Page 4 of 11 Pages
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FOR IMMEDIATE RELEASE Exhibit (20)(i)
STANLEY REPORTS 2ND QUARTER RESULTS
New Britain, Connecticut, July 21, 1999: The Stanley Works (NYSE: "SWK")
announced today that second quarter "core" net income was $48 million, or $.54
per diluted share, compared with core earnings of $52 million, or $.58 per
diluted share last year. Core operating margin was 12.1%, versus 13.5% in the
second quarter of 1998, but improved from the 11.6% operating margin in the
first quarter of 1999. Core results exclude restructuring charges,
restructuring-related transition costs and certain other non-recurring costs.
As previously announced, net sales were $686 million, down 1% from last year.
The ZAG business acquired in August 1998 increased company sales by 3%, but this
increase was offset by a 3% decline in unit sales volume from ongoing businesses
and a 1% decline from slightly lower pricing and foreign currency translation.
In its July 15 news release the company discussed its lower second quarter
sales, citing the effects in hand tools and hardware of poor 1998 fill rates,
since corrected, as well as a weak Latin American market and softening
industrial markets. In addition, the company stated that difficulties associated
with the implementation of SAP software in a part of the doors business
contributed to lower than expected volumes.
Reported earnings were $25 million, or $.28 per diluted share, compared with the
prior year's net income of $42 million, or $.47 per diluted share. These amounts
include $35 million, or $.26 per share, of restructuring-related transition and
other non-recurring costs incurred in the second quarter of this year and $16
million, or $.11 per share, of such costs in last year's second quarter.
Core gross margins were 35.7%, up slightly compared with 35.5% in the second
quarter of 1998 and, sequentially, up more substantially over the 34.8% gross
margins in the first quarter of 1999.
Selling, general and administrative expenses, on a core basis, increased to
23.6% from 22.1% of sales in the second quarter of 1998, reflecting the
lower-than-anticipated sales volumes and higher selling costs inherent in Mac
Direct.
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Second quarter net interest expense increased to $8 million from $5 million in
1998, reflecting working capital increases and acquisition funding. The
company's income tax rate on core earnings was 34% in the second quarter of
1999, versus 37.5% last year, reflecting the continued benefit of structural
changes implemented in late 1998, as well an increase in the portion of the
company's taxable income earned overseas.
Tools segment sales of $533 million were flat with the second quarter of 1998.
An increase of 4.0% from the positive impact of the ZAG acquisition was offset
by lower unit volumes in hand tools in the U.S. and Latin America, fastening
systems in the U.S. and Europe and hydraulic tools. The strength seen in Mac
Tools in previous quarters was absent, as industrial markets softened. The Tools
segment core operating margin was 13.9%, compared with 14.9% in the same period
last year, reflecting the effects of customer service related cost
inefficiencies and higher selling costs inherent in Mac Direct.
Doors segment sales decreased 4.3% versus last year, to $152 million. Strong
unit volume sales of residential entry doors and home decor products in North
America were more than offset by declines in U.S. hardware and access technology
sales, the latter related to the implementation of SAP software. The Doors
segment core operating profit decreased to 5.8% of sales, compared with 8.7% in
the same period last year, largely due to pricing pressures in the hardware
business and difficulties associated with the SAP implementation.
"The decrease in our second quarter earnings was the direct result of unexpected
sales declines occurring in the latter half of the quarter. Responsive actions
taken to decrease expenses did not fully offset the effects of the sales decline
within the remainder of the quarter," said John M. Trani, Chairman and Chief
Executive Officer. "Our gross margins improved, as we have made progress
reducing inefficiencies in manufacturing and distribution."
Mr. Trani continued: "We still have a distance to go to achieve sustained
profitable growth. We are pursuing all available cost reductions vigorously, and
we have just launched several sales and marketing programs designed to increase
retail sell-through."
The company noted a reduction of accounts receivable of $18 million during the
second quarter and a $3 million increase in inventories, the latter attributable
to weak end-of-quarter sales volume. In the first six months of 1999 inventories
have decreased $10 million and order fill rates are continually improving.
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Transition and other costs incurred in the second quarter were $35 million and
represented consulting, moving, start-up and duplicative facility costs incurred
in connection with the company's reallocation of resources announced in mid-1997
and year-2000 compliance costs. The systems advances that assure Y2k compliance
also move the company toward a single set of operating systems. As noted
previously, there will be no difference between reported and "core" earnings in
the third quarter of 1999 and thereafter.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools and
doors and related hardware products for professional, industrial and consumer
use.
Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: Director, Communication &
Public Affairs
(860) 827-3833 office (860) 827-3871 office
(860) 658-2718 home (203) 795-0581 home
[email protected]
This press release contains forward looking statements as to the company's
ability to obtain earnings growth from the adjustment of its cost structure and
sales growth from the implementation of its new sales and marketing programs.
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.
The Stanley Works corporate press releases are available on the company's
internet web site at http://www.stanleyworks.com. Alternatively, they are
available through PR Newswire's "Company News On-Call" service by FAX at
800-758-5804, ext. 874363 or on the internet at http://www.prnewswire.com.
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Second Quarter Six Months
1999 1998 1999 1998
Net Sales $ 685.5 $ 691.8 $ 1,369.2 $1,363.7
Costs and Expenses
Cost of sales 455.1 448.9 906.5 883.9
Selling, general and
administrative 182.2 166.1 355.3 337.2
Interest - net 7.7 5.2 14.9 10.0
Other - net 2.4 4.1 7.0 6.9
647.4 624.3 1,283.7 1,238.0
Earnings before
income taxes 38.1 67.5 85.5 125.7
Income Taxes 12.8 25.3 29.9 47.1
Net Earnings $ 25.3 $ 42.2 $ 55.6 $ 78.6
Net Earnings Per
Share of Common Stock
Basic $ 0.28 $ 0.47 $ 0.62 $ 0.88
Diluted $ 0.28 $ 0.47 $ 0.62 $ 0.87
Dividends per share $ 0.215 $ 0.20 $ 0.43 $ 0.40
Average shares outstanding
(in thousands)
Basic 89,447 89,405 89,439 89,442
Diluted 89,831 90,442 89,751 90,464
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
July 3 July 4
1999 1998
ASSETS
Cash and cash equivalents $ 84.8 $ 77.4
Accounts receivable 534.8 502.9
Inventories 370.8 372.0
Other current assets 77.6 87.4
Total current assets 1,068.0 1,039.7
Property, plant and equipment 490.6 487.6
Goodwill and other intangibles 187.1 104.1
Other assets 142.3 134.6
$ 1,888.0 $ 1,766.0
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 251.7 $ 132.8
Accounts payable 173.6 172.7
Accrued expenses 274.9 302.0
Total current liabilities 700.2 607.5
Long-term debt 298.7 272.0
Other long-term liabilities 208.2 240.6
Shareowners' equity 680.9 645.9
$ 1,888.0 $ 1,766.0
Page 9 of 11 Pages
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Second Quarter Six Months
1999 1998 1999 1998
INDUSTRY SEGMENTS
Net Sales
Tools $ 533.2 $ 532.7 $ 1,058.6 $1,045.2
Doors 152.3 159.1 310.6 318.5
Consolidated $ 685.5 $ 691.8 $ 1,369.2 $1,363.7
Operating Profit
Tools $ 74.1 $ 79.2 $ 140.6 $ 146.3
Doors 8.8 13.9 21.7 28.9
82.9 93.1 162.3 175.2
Restructuring-related
transition and other
non-recurring costs (34.7) (16.3) (54.9) (32.6)
Interest-net (7.7) (5.2) (14.9) (10.0)
Other-net (2.4) (4.1) (7.0) (6.9)
Earnings Before
Income Taxes $ 38.1 $ 67.5 $ 85.5 $ 125.7
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Exhibit (20)(ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
The statements in the company's press release issued today regarding initiatives
and programs being developed and undertaken to improve earnings and sales are
forward looking and inherently subject to risk and uncertainty. The ability to
improve earnings will depend on improved sales and the successful development
and implementation of initiatives to adjust the cost structure. The ability to
improve sales will depend on the successful development and implementation of
programs geared toward our customers and the ultimate users of our products.
As many of these initiatives and programs are still being developed at this
time, the company is unable to identify all of the risk factors that should be
taken into account in gauging its ability to achieve improved sales and
earnings. Some of the risk factors to be considered include: (1) the ability to
recruit and retain a sales force to implement the sales and marketing programs,
(2) the ability of these programs to stimulate demand for products, (3) the
ability of the current sales force to adapt to changes made in the sales
organization and maintain adequate customer coverage, (4) the implementation of
productivity improvements in manufacturing operations, (5) the ability to adapt
output to meet changing demand, (6) the successful installation and
implementation of SAP and other critical business transaction systems scheduled
for the second half of this year and (7) the need to respond to significant
changes in product demand and other unforeseen events.
The ability to achieve improved earnings and sales will also be affected by
external factors that may occur during the remainder of this year. These include
pricing pressure and other changes within competitive markets; the continued
consolidation of customers in consumer channels; increasing 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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