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):October 20, 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
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Item 5. Other Events.
1. On October 20, 1999, the Registrant issued a
press release announcing third quarter earnings and fourth
quarter dividend. Attached as Exhibit (20)(i) is a copy of the
Registrant's press release.
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press release dated October 20, 1999
announcing third quarter results and
fourth quarter dividend.
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: October 20, 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 October 20, 1999
Exhibit No. Page
20(i) 5
20(ii) 12
Page 4 of 12 Pages
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FOR IMMEDIATE RELEASE Exhibit (20)(i)
STANLEY REPORTS 3rd QUARTER EARNINGS INCREASE AND FREE CASH
FLOW AT RECORD LEVEL
ALSO ANNOUNCES 4th QUARTER DIVIDEND
New Britain, Connecticut, October 20, 1999: The Stanley Works
(NYSE: "SWK") announced today that third quarter net income was $50
million, or $.56 per diluted share, versus "core" earnings of $49
million, or $.55 per diluted share in the same quarter last year.
This exceeded consensus Wall Street analyst estimates of $.47 per
diluted share. Operating margin was 11.3%, compared with 12.9% core
operating margin in the third quarter of 1998.
Core results in prior reporting periods excluded restructuring
charges, restructuring-related transition costs and certain other
non-recurring costs. As promised and beginning with this quarter
the additional disclosures of restructuring-related costs and
"core" earnings have ceased. Inclusive of such costs, the company
earned $33.4 million, or $.37 per diluted share, in the third
quarter of 1998.
Net sales were $692 million, a slight increase over $690 million
last year. Acquisitions accounted for a 2% increase, offset by a 1%
decline from lower pricing and foreign currency translation. Unit
volume from ongoing businesses declined only nominally, despite
Hechinger's bankruptcy and a work stoppage, since resolved, in a
European hand tools operation. Double-digit volume increases in
residential doors and improvement in U.S. industrial mechanics
tools and fastening systems were offset by declines primarily in
Europe, Asia and Latin America.
John M. Trani, Chairman and Chief Executive Officer, commented: "I
am pleased with the efforts of our people to improve customer
service. Coupled with an impressive array of new products
highlighted at the recent Hardware Show, where Stanley was named
Vendor of the Year, this improvement is enhancing our value
proposition. As a result, order rates in the third quarter were
solid (up 5% versus 1998) and particularly strong toward the end of
the quarter. We are cautiously optimistic about fourth quarter
performance."
Gross margins were 35.4%, exceeding reported 1998 gross margins of
34.3% and "core" 1998 gross margins of 35%, despite the inclusion
in the current quarter of certain costs excluded from core results
in prior periods. The company attributed much of this improvement
to productivity gains emanating from its extensive restructuring
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over the last two years and to the substantial reduction in
transition costs. "During the quarter we made tremendous strides in
managing our manufacturing cost base and implementing related
control systems. We are pursuing productivity improvements
vigorously, while implementing sales and marketing programs to
increase retail sell-through," Mr. Trani added.
Selling, general and administrative expenses were 24.1% of sales,
compared with 25.0% reported and 22.1% on a core basis in the third
quarter of 1998. This increase reflects costs related to new sales
and marketing initiatives designed to drive sales growth at retail,
the inclusion of residual Y2k costs and increases to accounts
receivable reserves.
Third quarter net interest expense was $7 million compared with
$7.4 million in 1998, as higher borrowings for acquisition and
working capital funding were more than offset by lower interest
rates on borrowings. Other income was $6.2 million, resulting
principally from a one-time cash gain upon the liquidation of a
cross-currency financial instrument.
Importantly, the company also reported that third quarter cash
generated by operations improved to $92 million, as compared with
a net cash reduction of $4 million in 1998. Changes in operating
assets and liabilities, including working capital, generated $25
million compared with a $59 million requirement in last year's
third quarter.
Mr. Trani added: "This cash flow performance reflects a high
quality of earnings, as well as the inherent cash-generating
ability of the company. Stanley has positioned itself as a cash-
generating versus a cash-absorptive company. With the bulk of the
1997 restructuring behind us, there is every expectation that this
positioning will manifest itself. This will provide flexibility to
pursue organic growth initiatives and other options to enhance
shareowner value."
Tools segment sales of $526 million were 2% lower than the third
quarter of 1998. An increase of 2% from the ZAG acquisition was
offset by lower unit volumes, primarily in hand tools and fastening
systems in Europe. Tools segment operating margin was 12.8%,
compared with 13.5% in the same period last year, due principally
to the aforementioned sales and marketing initiatives, Y2k costs
and accounts receivable reserve increases.
Doors segment sales increased 8% to $166 million, led by double-
digit percentage increases in unit volume sales of U.S. residential
entry doors and home decor products. This was somewhat offset by
decline in the company's hardware business, primarily associated
with the loss of Hechinger. Doors segment operating profit
decreased to 6.5% of sales, versus 11.1% in the same period last
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year, as the Hardware business was burdened with costs of
relocating production to low-cost locations and meeting customer
delivery requirements.
The company also announced today that its Board of Directors
approved a fourth quarter regular dividend of $.22 per share on the
company's common stock. The dividend is payable on Monday,
December 27, 1999 to shareholders of record at the close of
business on Friday, November 26, 1999. Mr. Trani stated: "We are
proud that 1999 dividend payments extend our records for the
longest consecutive annual and quarterly dividend payments of any
industrial company on the New York Stock Exchange."
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.
Contact: Gerard J. Gould Vance N. Meyer
Director, Investor Relations Director, Communications &
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: (i) to obtain earnings growth from the adjustment of its cost
structure and implementation of related control systems, (ii) to obtain sales
growth from the implementation of its new sales and marketing programs and
(iii) to generate cash with which to pursue options to enhance shareowner
value. 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)
Third Quarter Nine Months
1999 1998 1999 1998
Net Sales $ 692.0 $ 689.6 $ 2,061.2 $ 2,053.3
Costs and Expenses
Cost of sales 446.9 453.2 1,353.4 1,337.1
Selling, general and
administrative 166.9 172.7 522.2 509.9
Interest - net 7.0 7.4 21.9 17.4
Other - net (6.2) 2.7 0.8 9.6
614.6 636.0 1,898.3 1,874.0
Earnings before
income taxes 77.4 53.6 162.9 179.3
Income Taxes 27.1 20.2 57.0 67.3
Net Earnings $ 50.3 $ 33.4 $ 105.9 $ 112.0
Net Earnings Per
Share of Common Stock
Basic $ 0.56 $ 0.37 $ 1.18 $ 1.25
Diluted $ 0.56 $ 0.37 $ 1.18 $ 1.24
Dividends per share $ 0.22 $ 0.215 $ 0.65 $ 0.615
Average shares outstanding
(in thousands)
Basic 89,687 89,367 89,532 89,413
Diluted 89,949 90,102 89,805 90,338
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
October 2 October 3
1999 1998
ASSETS
Cash and cash equivalents $ 131.5 $ 65.2
Accounts receivable 576.0 546.7
Inventories 367.1 388.9
Other current assets 74.8 83.9
Total current assets 1,149.4 1,084.7
Property, plant and equipment 495.9 509.4
Goodwill and other intangibles 187.6 202.9
Other assets 129.0 144.7
$ 1,961.9 $ 1,941.7
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 222.9 $ 211.3
Accounts payable 203.7 160.7
Accrued expenses 309.0 310.3
Total current liabilities 735.6 682.3
Long-term debt 299.2 343.7
Other long-term liabilities 213.5 257.9
Shareowners' equity 713.6 657.8
$ 1,961.9 $ 1,941.7
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THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
1999 1998 1999 1998
Operating Activities
Net earnings $ 50.3 $ 33.4 $ 105.9 $ 112.0
Depreciation and amortization 20.9 20.0 66.2 58.1
Other non-cash items (4.0) 1.1 9.8 11.7
Changes in operating assets
and liabilities 25.2 (58.5) (29.3) (196.0)
Net cash provided (used) by
operating activities 92.4 (4.0) 152.6 (14.2)
Investing and Financing Activities
Capital and software
expenditures (31.1) (18.7) (81.8) (41.4)
Proceeds from sales of
assets 22.1 3.4 37.0 12.2
Business acquisitions - (99.9) - (99.9)
Net borrowing activity (30.3) 135.4 (30.7) 133.8
Net stock transactions (2.5) (3.7) (6.4) (18.8)
Proceeds from swap termination 13.9 - 13.9 -
Cash dividends on common
stock (19.6) (19.1) (57.9) (54.7)
Other 1.8 (5.6) (5.3) (4.0)
Net cash used by investing
and financing activities (45.7) (8.2) (131.2) (72.8)
Increase (Decrease) in Cash and
and Cash Equivalents 46.7 (12.2) 21.4 (87.0)
Cash and Cash Equivalents,
Beginning of Period 84.8 77.4 110.1 152.2
Cash and Cash Equivalents,
End of Third Quarter $ 131.5 $ 65.2 $ 131.5 $ 65.2
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
1999 1998 1999 1998
INDUSTRY SEGMENTS
Net Sales
Tools $ 525.5 $ 535.1 $ 1,584.1 $ 1,580.3
Doors 166.5 154.5 477.1 473.0
Consolidated $ 692.0 $ 689.6 $ 2,061.2 $ 2,053.3
Operating Profit
Tools $ 67.3 $ 72.0 $ 207.9 $ 218.3
Doors 10.9 17.2 32.6 46.1
78.2 89.2 240.5 264.4
Restructuring-related
transition and other
non-recurring costs - (25.5) (54.9) (58.1)
Interest-net (7.0) (7.4) (21.9) (17.4)
Other-net 6.2 (2.7) (0.8) (9.6)
Earnings Before
Income Taxes $ 77.4 $ 53.6 $ 162.9 $ 179.3
GEOGRAPHIC NET SALES
United States $ 496.4 $ 493.8 $ 1,466.5 $ 1,471.2
Other Americas 51.3 51.1 150.5 163.6
Europe 119.0 118.9 372.7 348.4
Asia 25.3 25.8 71.5 70.1
Consolidated $ 692.0 $ 689.6 $ 2,061.2 $ 2,053.3
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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 the company's ability (1) to obtain earnings growth
from productivity improvements, (2) to obtain sales growth from
the implementation of sales and marketing programs and (3) to
generate cash with which to pursue options to enhance shareowner
value are forward looking and inherently subject to risk and
uncertainty.
The company's ability to obtain earnings growth from productivity
improvements is dependent on the success of various initiatives
that are underway or that are being developed to improve
manufacturing operations and to implement related control
systems. The success of these initiatives is dependent on the
company's ability to increase the efficiency of its routine
business processes, to develop and implement process control
systems, to develop and execute comprehensive plans for facility
consolidations, the availability of vendors to perform outsourced
functions, the successful recruitment and training of new
employees, the resolution of any labor issues related to closing
facilities, the need to respond to significant changes in product
demand while any facility consolidation is in process and other
unforeseen events.
The company's ability to achieve sales growth through the
implementation of sales and marketing programs designed to
increase retail sell through is dependent upon a number of
factors, including: (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
and (4) the ability of the company to fulfill increased demand
for its products.
The company's ability to generate cash flow with which to pursue
organic growth initiatives and other business opportunities to
enhance shareowner value is dependent on the continued ability to
deliver strong net income and manage working capital effectively.
The Company's ability to achieve the objectives discussed above
will also be affected by the installation and implementation of
critical business transaction systems associated with its Year
2000 compliance program scheduled for the remainder of this year
as well as by external factors. These external factors 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,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.
Page 12 of 12 Pages
