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 28, 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)
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Item 5. Other Events.
1. On January 28, 1999 the Registrant announced
fourth quarter and year end results. 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 January 28, 1999 announcing
fourth quarter and year end results.
20(ii)Cautionary statements relating to forward look-
ing 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: January 28, 1999 By: Stephen S. Weddle
-----------------
Name: Stephen S. Weddle
Title: Vice President, General
Counsel and Secretary
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Exhibit 20 (i)
FOR IMMEDIATE RELEASE
THE STANLEY WORKS REPORTS 4TH QUARTER EARNINGS
New Britain, Connecticut, January 28, 1999: The Stanley Works (NYSE: "SWK")
announced that "core" earnings increased 2% in its fiscal year ended January 2,
1999, but decreased 11% in its fourth quarter. Core results exclude
restructuring charges, restructuring-related transition costs and certain other
non-recurring costs as defined below.
Fourth quarter core net income was $44.5 million, or $.50 per diluted share,
compared with prior year core earnings of $50.1 million, or $.55 per diluted
share. Reported earnings were $25.8 million, or $.29 per diluted share, compared
with the prior year's fourth quarter net income of $26.5 million, or $.29 per
diluted share. These amounts reflect $27.8 million, or $.21 per share, of
restructuring-related transition and other non-recurring costs incurred in the
fourth quarter this year and $29.6 million, or $.20 per share in the prior year.
Net sales declined 3% to $676 million from $699 million last year. These results
included 3% growth from acquisitions, more than offset by a 6% decline in
ongoing business. A fourteenth week in the fourth quarter of 1997 accounted for
approximately half of the volume decrease. Volume was soft in hand tools in the
U.S., hand tools and fastening systems in Europe, and across industrial and
commercial markets in North America.
John M. Trani, Chairman and Chief Executive Officer, commented: "Weak order
rates experienced in September continued throughout the quarter. Industrial
markets remained soft and the normal year-end flurry of retail customer orders
did not materialize, particularly in the U.K. and France. Existing inventory
levels at key customers are sufficient and now are a quarterly focus for them as
well."
Core gross margin in the fourth quarter was 33.3% of sales versus 34.3% in 1997,
as a result of lower volume and a mix to lower-margin consumer products. In
addition, productivity programs and successful pricing initiatives were more
than offset by continued production and distribution inefficiencies.
Selling, general and administrative expenses, excluding restructuring- related
transition costs and other non-recurring costs, were 22.4% of sales, up from
21.9% in the fourth quarter last year. This increase
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resulted from higher selling costs as anticipated for the MacDirect(TM)
initiative, increased engineering expenses, and costs to improve customer
service. Core operating margin decreased to 10.8% of sales from 12.4% in the
prior year. Interest expense increased to $5.7 million from $3.7 million,
reflecting working capital increases and acquisition funding.
For the full year 1998, core earnings increased 2% and earnings per share 3% to
$193 million or $2.14 per diluted share in 1998 versus $188 million or $2.08 per
share in 1997. Net sales were $2,729 million, a 2% increase over 1997. Volume
from ongoing businesses was up 2% on the strength of mechanics tools.
The company's income tax rate on core earnings decreased to 30.4% for the fourth
quarter and 36% for the full year 1998 from 37.5% in both comparable periods of
1997. These decreases reflected favorable tax settlements in the fourth quarter
that yielded cash refunds, as well as tax initiatives that were finalized during
the quarter.
Mr. Trani stated: "While the quarter was below our expectation, there are
several encouraging signs. First, fill rates in our Hardware product line have
been fixed, and we are aggressively pursuing orders. Second, overall fill rates
have been improving slowly and the 80,000-sku reduction is nearing completion,
representing 61% of the total stock-keeping units. Third, MacDirect(TM)
continues to grow at a double-digit rate. Fourth, the ZAG acquisition is proving
to be a winner, and we expect double-digit growth in its sales and earnings in
1999. ZAG's backlog went from less than $2 million at the end of 1997 to nearly
$9 million at the end of 1998 primarily as a result of winning business at
several large Stanley customers.
"Nonetheless, the inefficiencies in our manufacturing processes are all too
clear. The complexity of our operating structure and lack of an integrated
production and sales planning system have resulted in more than $50 million in
higher costs to improve customer service through sheer brute force. The good
news is that these problems are correctable, although not overnight."
Transition and other costs incurred in the fourth quarter were $28 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. To a great extent, the latter expenditures are
being incurred for systems advances that move the company toward a single set of
operating systems.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
hardware and door systems for professional, industrial and consumer use.
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Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: Director,
(860) 827-3833 office Communication & Public
(860) 658-2718 home Affairs
(860) 827-3871 office
(203) 795-0581 home
This press release contains forward looking statements as to the company's
ability improve customer service and to obtain revenue 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.
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.
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
January 2 January 3
1999 1998
ASSETS
Cash and cash equivalents $ 110.1 $ 152.2
Accounts receivable 517.0 472.5
Inventories 380.9 301.2
Other current assets 78.4 79.4
Total current assets 1,086.4 1,005.3
Property, plant and equipment 511.4 513.2
Goodwill and other intangibles 196.9 104.1
Deferred income taxes 34.0 36.1
Other assets 104.2 100.0
$ 1,932.9 $ 1,758.7
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 222.0 $ 130.8
Accounts payable 172.1 155.5
Accrued expenses 217.7 236.7
Accrued restructuring 90.3 99.7
Total current liabilities 702.1 622.7
Long-term debt 344.8 283.7
Other long-term liablities 216.6 244.5
Shareholders' equity 669.4 607.8
$ 1,932.9 $ 1,758.7
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Twelve Months
1998 1997 1998 1997
Net Sales $ 675.8 $ 698.8 $ 2,729.1 $ 2,669.5
Costs and Expenses
Cost of sales 455.7 469.3 1,792.8 1,783.4
Selling, general and
administrative 174.8 172.5 684.7 627.7
Interest - net 5.7 3.7 23.1 16.6
Other - net 3.5 2.7 13.1 21.9
Restructuring and
asset write-offs - - - 238.5
639.7 648.2 2,513.7 2,688.1
Earnings (Loss) before
income taxes 36.1 50.6 215.4 (18.6)
Income Taxes 10.3 24.1 77.6 23.3
Net Earnings (Loss) $ 25.8 $ 26.5 $ 137.8 $ (41.9)
Net Earnings (Loss) Per
Share of Common Stock
Basic $ 0.29 $ 0.30 $ 1.54 $ (0.47)
Diluted $ 0.29 $ 0.29 $ 1.53 $ (0.47)
Dividends per share $ 0.215 $ 0.20 $ .83 $ 0.77
Average shares outstanding
(in thousands)
Basic 89,375 89,517 89,408 89,470
Diluted 89,745 90,534 90,193 89,470
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Exhibit (20) (ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Certain statements contained in the company's press release filed as Exhibit
20(i) to this Form 8-K regarding the achievement of revenue growth and improved
customer service are forward looking and are, therefore, inherently subject to
risk and uncertainty.
There are currently many operating changes underway to improve customer service.
These include a sku reduction program to eliminate low-selling items, better
integration of production and sales planning, improved 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 company's failure to make these changes or to achieve the
benefits expected from these changes in accordance with current plans may
adversely affect the level of revenues 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 manage better the distribution process. The ability of the resource
reallocation to provide the expected benefits is dependent upon the development
and execution of comprehensive plans for the facility 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 achieve revenue growth and improved customer service
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;
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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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