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 27, 2000
The Stanley Works
(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-0548860
(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 18 Pages
<PAGE>
Item 5. Other Events.
1. On January 27, 2000 the Registrant announced fourth
quarter 1999 results and first quarter 2000 dividends. Attached as Exhibit
(20)(i) is a copy of the Registrant's press release.
2. On January 27, 2000, The Stanley Works distributed a
document containing Supplemental Fourth Quarter Information to its analysts and
certain of its investors in advance of a teleconference call. Attached as
Exhibit 20 (iii) is a copy of the Supplemental Fourth Quarter Information.
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press Release dated January 27, 2000 announcing
fourth quarter 1999 results and first quarter dividends.
20(ii)Cautionary statements relating to forward looking
statements included in Exhibit 20 (i).
20(iii)Supplemental Fourth Quarter Information provided to its
analysts and certain of its investors in advance of a
teleconference call.
Page 2 of 18 Pages
<PAGE>
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 27, 2000 By: Stephen S. Weddle
Name: Stephen S. Weddle
Title: Vice President, General
Counsel and Secretary
Page 3 of 18 Pages
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EXHIBIT INDEX
Current Report on Form 8-K
Dated January 27, 2000
Exhibit No. Page
20 (i) 5
20 (ii) 13
20 (iii) 15
Page 4 of 18 Pages
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Exhibit 20 (i)
FOR IMMEDIATE RELEASE
STANLEY REPORTS 4TH QUARTER 1999 RESULTS
ALSO ANNOUNCES FIRST QUARTER DIVIDEND
New Britain, Connecticut, January 27, 2000: The Stanley Works (NYSE: "SWK")
announced today that fourth quarter net income was $43.4 million, or $.48 per
diluted share, excluding special credits and charges recorded in the quarter.
This exceeded consensus Wall Street analyst estimates of $.46 per diluted share.
In the same quarter last year, the company had "core" earnings of $44.5 million,
or $.50 per diluted share. Pre-tax earnings of $66.7 million, excluding the
special credits and charges, were 4% higher than the $64.0 million "core"
pre-tax income earned in the fourth quarter of 1998. The quarter's effective
income tax rate was 35% in 1999, compared with 30.5% in 1998 when favorable tax
settlements and certain tax initiatives were finalized. Inclusive of the special
credits and charges, discussed below, reported net income was $44.1 million, or
$.49 per fully-diluted share.
Core results in prior reporting periods excluded restructuring charges,
restructuring-related transition costs and certain other non-recurring costs. As
promised and beginning with the third quarter of 1999, the additional
disclosures of restructuring-related costs and "core" earnings ceased. Inclusive
of such costs, the company earned $25.8 million, or $.29 per diluted share, in
the fourth quarter of 1998.
Excluding effects of special credits and charges, net sales were $693 million,
an increase of 3% over $676 million last year. Unit volume from ongoing business
increased 3% and there was a 1% decline from foreign currency translation. On a
segment basis, sales increased 1% in Tools and 7% in Doors. On a geographic
basis, the sales increase was principally in the Americas.
John M. Trani, Chairman and Chief Executive Officer, commented: "We experienced
volume increases in excess of 5% from most of the products we sell through
consumer channels - specifically hand tools, consumer mechanics tools, entry
doors, home decor and consumer storage (ZAG). Despite the liquidation of
Hechinger, Hardware sales were flat with 1998 levels. There was also strength in
sales of Mac(R) Tools, hydraulic tools, air tools and automatic doors to the
industrial markets. Offsetting these consumer and industrial sales gains was a
significant volume decline in industrial mechanics tools, where despite strong
demand,
Page 5 of 18 Pages
<PAGE>
difficulties resulting from the installation of a new distribution information
system temporarily interrupted shipments. The distribution center problems have
since been resolved. Our investments in new products and marketing programs are
serving us well despite mixed underlying markets."
Gross margin improved 200 basis points to 35.3%, excluding special credits and
charges, from "core" 1998 gross margin of 33.3%. This improvement is
attributable to a combination of improved cost controls in operations, the
company's extensive restructuring over the last two years and higher volume.
"For the second consecutive quarter we made tremendous strides managing our
manufacturing cost base and implementing related control systems. Our operations
team is delivering on its commitment to rationalize our cost structure," Mr.
Trani added.
Selling, general and administrative expenses, excluding special credits and
charges, were 24.5% of sales, compared with 22.4% on a core basis in the fourth
quarter of 1998. This increase reflects costs related to sales and marketing
initiatives designed to drive sales growth at retail and some year-end
strengthening of accounts receivable reserves.
Lower borrowings and interest rates produced a 15% reduction in interest expense
to $7.6 million compared to $8.9 million last year. Due to higher interest
income received in 1998 from a tax refund, net interest of $6.0 million was
essentially flat with the prior year. The company expects the lower interest
expense to continue into 2000, as debt levels were reduced in the second half.
In the fourth quarter, the company completed a re-evaluation of remaining
reserves established in 1997 for restructuring initiatives and determined that
certain actions contemplated at that time will not occur. Accordingly, the
company recorded one-time special credits to income of $62 million pre-tax, or
$.44 per diluted share after-tax, reversing reserves established for such
actions.
At the same time, plans were completed for new initiatives designed to achieve
productivity gains. These included facility closures, related relocation of
production, personnel reductions, outsourcing of non-core activities and related
asset impairments. In addition, a review of financial routines, operating
mechanisms and systems in the Mechanics Tools businesses was completed. As a
result of these plans and reviews, one-time special charges to income of $61
million pre-tax, or $.43 per diluted share after-tax, were recorded. The sum of
these credits and charges increased overall reported earnings by $1 million
pre-tax, or $.01 per diluted share after-tax.
Page 6 of 18 Pages
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For the full year 1999, the company reported net sales, excluding special
credits and charges, of $2,755 million, a 1% increase over $2,729 million in
1998. Net income for 1999, excluding the aforementioned special charges and
credits as well as restructuring- related transition costs in the first two
quarters, was $185 million or $2.06 per diluted share in 1999. In 1998, core net
income was $193 million or $2.14 per diluted share.
The company reported that fourth quarter cash generated by operations was $70
million, essentially matching the 1998 level. Mr. Trani added: "While we did
realize improvements in working capital this quarter, they were not as
significant as we expected, in part due to the aforementioned industrial
distribution conversion. Nonetheless, cash flow from operations was a strong
$222 million in 1999 versus $56 million in 1998.
"Since mid-1999 when the restructuring-related transition costs essentially
ended, we have generated over $162 million cash from operations, as compared
with $60 million in the first half of the year. We have every expectation that
this year will show greater working capital efficiency and enhanced cash
generation."
Tools sales of $532 million were 1% higher than the fourth quarter of 1998.
Particular strength occurred in U.S. hand tools, consumer mechanics tools, Mac
Tools, consumer storage (ZAG) and hydraulic tools, offset by lower sales in
Europe, primarily in hand tools and fastening systems. European sales were
impacted by $8 million of negative foreign currency, versus a $3 million
positive impact in 1998. Tools segment operating margin, excluding special
credits and charges, was 11.3% compared with 11.4% in the same period last year.
Productivity gains offset the aforementioned industrial distribution conversion.
Doors sales increased 7% to $159 million, led by continued double- digit growth
of U.S. residential entry doors and home decor products. Doors segment operating
profit decreased to 5.7% of sales, versus 8.6% in the same period last year, due
to year-end volume rebates in the doors business and costs associated with
meeting customer delivery requirements in access technologies.
The company also announced today that its Board of Directors approved a first
quarter regular dividend of $.22 per share on the company's common stock. The
dividend is payable on Friday, March 24, 2000 to shareholders of record at the
close of business on Monday, March 6, 2000.
Page 7 of 18 Pages
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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 lower the overall cost structure to become more competitive,
(ii) to obtain sales growth from the implementation of its new sales and
marketing programs and (iii) to drive working capital efficiency and generate
cash. 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.
Page 8 of 18 Pages
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<TABLE>
<CAPTION>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Twelve Months
---------------------------- -----------------------------
1999 1998 1999 1998
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 690.6 $ 675.8 $ 2,751.8 $ 2,729.1
COSTS AND EXPENSES
Cost of sales 460.5 455.7 1,813.9 1,792.8
Selling, general and administrative 180.8 174.8 703.0 684.7
Interest - net 6.0 5.7 27.9 23.1
Other - net (3.3) 3.5 (2.5) 13.1
Restructuring credit (21.3) - (21.3) -
--------------
622.7 639.7 2,521.0 2,513.7
------------- ------------ -------------- -------------
EARNINGS BEFORE INCOME 67.9 36.1 230.8 215.4
TAXES
Income Taxes 23.8 10.3 80.8 77.6
NET EARNINGS $ 44.1 $ 25.8 $ 150.0 $ 137.8
============= ============ ============== =============
NET EARNINGS PER SHARE
OF COMMON STOCK
Basic $ 0.49 $ 0.29 $ 1.67 $ 1.54
============= ============ ============== =============
Diluted $ 0.49 $ 0.29 $ 1.67 $ 1.53
============= ============ ============== =============
DIVIDENDS PER SHARE $ 0.22 $ 0.215 $ 0.87 $ 0.83
============= ============ ============== =============
AVERAGE SHARES OUTSTANDING
(in thousands)
Basic 89,942 89,375 89,626 89,408
============= ============ ============== =============
Diluted 90,159 89,745 89,887 90,193
============= ============ ============== =============
</TABLE>
Page 9 of 18 Pages
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<TABLE>
<CAPTION>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
January 1 January 2
2000 1999
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 88.0 $ 110.1
Accounts receivable 546.1 517.0
Inventories 381.2 380.9
Other current assets 75.7 78.4
Total current assets 1,091.0 1,086.4
------------ -------------
Property, plant and equipment 520.6 511.4
Goodwill and other intangibles 185.2 196.9
Other assets 93.8 138.2
$ 1,890.6 $ 1,932.9
============ =============
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 157.0 $ 222.0
Accounts payable 225.0 172.1
Accrued expenses 311.0 308.0
Total current liabilities 693.0 702.1
------------ -------------
Long-term debt 290.0 344.8
Other long-term liabilities 172.2 216.6
Shareowners' equity 735.4 669.4
$ 1,890.6 $ 1,932.9
============ =============
</TABLE>
Page 10 of 18 Pages
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<TABLE>
<CAPTION>
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Fourth Quarter Twelve Months
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 44.1 $ 25.8 $ 150.0 $ 137.8
Depreciation and amortization 19.4 21.6 85.6 79.7
Other non-cash items 26.6 20.8 36.4 32.5
Changes in working capital 22.1 48.8 (25.1) (112.1)
Changes in other operating assets and liabilities (42.5) (46.6) (24.6) (81.7)
------------ ------------ ------------- ------------
Net cash provided by operating activities 69.7 70.4 222.3 56.2
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (21.1) (23.3) (102.9) (64.7)
Proceeds from sales of assets (1.9) 0.6 35.1 12.8
Business acquisitions - - - (99.9)
Net borrowing activity (65.8) 13.8 (96.5) 147.6
Net stock transactions (4.0) (1.3) (10.4) (20.1)
Proceeds from swap termination - - 13.9 -
Cash dividends on common stock (20.6) (19.2) (78.5) (73.9)
Other 0.2 3.9 (5.1) (0.1)
------------ ------------ ------------- ------------
Net cash used by investing and financing activities (113.2) (25.5) (244.4) (98.3)
Increase (Decrease) in Cash and Cash Equivalents (43.5) 44.9 (22.1) (42.1)
Cash and Cash Equivalents, Beginning of Period 131.5 65.2 110.1 152.2
------------ ------------ ------------- ------------
Cash and Cash Equivalents, End of Fourth Quarter $ 88.0 $ 110.1 $ 88.0 $ 110.1
============ ============ ============= ============
</TABLE>
Page 11 of 18 Pages
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<TABLE>
<CAPTION>
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Fourth Quarter Twelve Months
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INDUSTRY SEGMENTS
Net Sales
Tools $ 532.1 $ 527.5 $ 2,116.2 $ 2,107.8
Doors 158.5 148.3 635.6 621.3
------------- ------------ ------------ ------------
Consolidated $ 690.6 $ 675.8 $ 2,751.8 $ 2,729.1
============= ============ ============ ============
Operating Profit
Tools $ 40.2 $ 60.3 $ 248.1 $ 278.6
Doors 9.1 12.8 41.7 58.9
------------- ------------ ------------ ------------
49.3 73.1 289.8 337.5
Restructuring-related transition and
other non-recurring (costs) credits 21.3 (27.8) (33.6) (85.9)
Interest - net (6.0) (5.7) (27.9) (23.1)
Other - net 3.3 (3.5) 2.5 (13.1)
------------- ------------ ------------ ------------
Earnings before income taxes $ 67.9 $ 36.1 $ 230.8 $ 215.4
============= ============ ============ ============
</TABLE>
Page 12 of 18 Pages
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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 lower the overall cost structure to become more
competitive, (2) to obtain sales growth from the implementation of sales and
marketing programs and (3) to drive working capital efficiency and continue to
generate cash are forward looking and inherently subject to risk and
uncertainty.
The company's ability to lower its cost structure 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 comprised of employees and manufacturers reps 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 achieve sales growth from the sale of new products will
depend on the acceptance of those products in the marketplace and the company's
ability to satisfy demand for the new products.
The company's ability to drive working capital efficiency and continue to
generate free cash flow is dependent on the continued success of the
improvements in manufacturing operations in eliminating the inefficiencies and
customer service issues that have plagued the company over the last year and a
half as well as the company's ability to control operating expenses.
Page 13 of 18 Pages
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The company's ability to achieve the objectives discussed above will also be
affected 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 14 of 18 Pages
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Exhibit 20 (iii)
[Stanley Logo]
The Stanley Works
Fourth Quarter 1999 Financial Statement Review
Questions & Answers
1. Setting aside the one-time special credits and charges in Q4 1999 and the
restructuring-related transition and other costs in Q4 1998, how do the
underlying income statements for these two periods compare?
Attached is a supplemental schedule, entitled "Supplemental Schedule A", which
compares the income statements both excluding and including these unusual items.
2. How were the restructuring credits and charges recorded within the
company's income statement? I.e. which line items were impacted and
by how much?
Attached is a supplemental schedule, entitled "Supplemental Schedule B", which
depicts the impacts upon each income statement line. This schedule has
individual columns for 1999's restructuring credits, restructuring charges and
other charges, as well as 1998's transition and Y2k costs.
3. How much was the impact of the new distribution system installation
upon shipments in the 4th quarter?
This installation temporarily interrupted the pace of shipments. Aside from the
sales decline in the industrial mechanics tools business, total Stanley Works
sales increased nearly 5% over the fourth quarter of 1998, excluding effects of
special credits and charges.
4. What were the components of 4th quarter net interest?
Interest, net Q4 1999 Q4 1998
Interest expense $7.6MM $8.9MM -15%
Interest income (1.6MM) (3.2MM)
$6.0MM $5.7MM + 5%
Page 15 of 18 Pages
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5. What were segment profits aside from the 1999 special charges?
Segment Q4 1999 Q4 1998
Tools Reported $40.2MM $60.3MM
Special charges 20.1MM -
$60.3MM $60.3MM
% of segment sales 11.3% 11.4%
Doors Reported $ 9.1MM $12.8MM
Special charges - -
$ 9.1MM $12.8MM
% of segment sales 5.7% 8.6%
Page 16 of 18 Pages
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<TABLE>
<CAPTION>
Supplemental Schedule A
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations
Fourth Quarters 1999 vs. 1998
(in millions, except per-share data)
EXCLUDING ONE-TIME
CREDITS & CHARGES IN 1999
vs.
"CORE" IN 1998
- --------------------------------------
AS REPORTED
------------------------------------------
% Increase / % Increase /
1999 1998 (Decrease) 1999 1998 (Decrease)
---------------------------- -------------- ---------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 693.4 675.8 3% $ 690.6 675.8 2%
Cost of sales 448.9 451.0 0% 460.5 455.7 1%
---------------------------- ----------------------------
Gross margin 244.5 224.8 9% 230.1 220.1 5%
35.3% 33.3% 33.3% 32.6%
Selling, general and
administrative expenses 170.2 151.6 12% 180.8 174.8 3%
---------------------------- ----------------------------
24.5% 22.4% 26.2% 25.9%
Operating income 74.3 73.2 2% 49.3 45.3 9%
10.7% 10.8% 7.1% 6.7%
Interest, net 6.0 5.7 5% 6.0 5.7 5%
Restructuring credit - - (21.3) -
Other, net 1.6 3.5 -54% (3.3) 3.5 -194%
---------------------------- ----------------------------
Earnings before income
taxes 66.7 64.0 4% 67.9 36.1 88%
9.6% 9.5% 9.8% 5.3%
Income taxes 23.3 19.5 19% 23.8 10.3 131%
---------------------------- ----------------------------
% tax rate 35.0% 30.4% 35.0% 28.5%
Net earnings 43.4 44.5 -2% 44.1 25.8 71%
============================ ============================
6.3% 6.6% 6.4% 3.8%
Ave. shares outstanding
(diluted) 90.159 89.745 90.159 89.745
Earnings Per Share
(diluted) $ 0.48 0.50 -4% $ 0.49 $ 0.29 69%
============================ ===============================
</TABLE>
Page 17 of 18 Pages
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<TABLE>
<CAPTION>
Supplemental Schedule B
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations
Fourth Quarters 1999 vs. 1998
(in millions, except per-share data)
Unaudited
Excluding Reversal Restructuring Restructuring-
Special of 1997 & Other Related
Credits Restructuring Special Transition &
& Charges Reserves Charges Reported "Core" Y2k Costs Reported
--------------------------------------------------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 693.4 $ (2.8) $ 690.6 $675.8 $ - $ 675.8
Cost of sales 448.9 11.6 460.5 451.0 4.7 455.7
-------------------------------------------------- ------------------------------------
Gross margin 244.5 (14.4) 230.1 224.8 (4.7) 220.1
35.3% 33.3%
Selling, general and
administrative
Expenses 170.2 10.6 $ 180.8 151.6 23.2 174.8
--------------------------------------------------- ------------------------------------
24.5% 22.4%
Operating income 74.3 (25.0) 49.3 73.2 (27.9) 45.3
10.7% 10.8%
Interest, net 6.0 6.0 5.7 - 5.7
Restructuring credit - (61.8) 40.5 (21.3)
Other, net 1.6 - (4.9) (3.3) 3.5 - 3.5
---------------------------------------------------- ------------------------------------
Earnings before
income taxes 66.7 61.8 (60.6) 67.9 64.0 (27.9) 36.1
9.6%
Income taxes 23.3 21.6 (21.2) 23.8 19.5 (9.2) 10.3
---------------------------------------------------- ------------------------------------
% tax rate 35.0% 35.0% 30.4% 28.5%
Net earnings $ 43.4 $ 40.2 $ (39.4) $ 44.1 $ 44.5 (18.7) $ 25.8
============= ====================================== ========== ==========================
6.3%
Ave. shares
outstanding
(diluted) 90.159 90.159 90.159 90.159 89.745 89.745 89.745
Earnings Per Share
(diluted) $ 0.48 $ 0.44 $ (0.43) $ 0.49 $ 0.50 $ (0.21) $ 0.29
============= ====================================== =============== ==========================
</TABLE>
Page 18 of 18 Pages
<PAGE>
