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 19, 2000
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The Stanley Works
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(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-0548860
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Stanley Drive, New Britain, Connecticut 06053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(860) 225-5111
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Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 13 Pages
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Item 5. Other Events.
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1. On July 19, 2000, the Registrant announced second
quarter 2000 results. Attached as Exhibit 20(i) is a copy of the
Registrant's press release.
Item 7. Financial Statements and Exhibits.
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(c) 20(i) Press Release dated July 19, 2000
announcing second quarter 2000 results.
20(ii) Cautionary statements relating to
forward looking statements included in
Exhibit 20(i) and made today in a
conference call with industry analysts,
shareowners and other participants.
Page 2 of 13 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 19, 2000 By: Jennifer O. Estabrook
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Name: Jennifer O. Estabrook
Title: Vice President, General Counsel
and Secretary
Page 3 of 13 Pages
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EXHIBIT INDEX
Current Report on Form 8-K
Dated July 19, 2000
Exhibit No. Page
20 (i) 5
20 (ii) 12
Page 4 of 13 Pages
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Exhibit 20 (i)
STANLEY REPORTS IMPROVED SECOND QUARTER SALES AND PROFITS
LED BY STRONG U.S. INDUSTRIAL SALES AND CONSUMER HAND TOOLS SALES VOLUMES
New Britain, Connecticut, July 19, 2000: The Stanley Works (NYSE: "SWK")
announced that second quarter net income was $51 million, or $.58 per diluted
share, equaling the First Call consensus of Wall Street analyst estimates. In
the second quarter last year, the company had "core" earnings of $48 million, or
$.54 per diluted share.
Core results in 1999 excluded restructuring charges, restructuring-related
transition costs and certain other non-recurring costs. In mid-1999, these costs
were eliminated, and the additional disclosure of "core" earnings ceased.
Inclusive of such costs, the company earned $25 million, or $.28 per diluted
share, in the second quarter of 1999.
Net sales were $703 million, 3% higher than last year. Overall unit volume
increased 5% on strength across consumer and industrial tool channels in the
Americas, offset by a 1% decline from foreign currency translation and a 1%
decline from unfavorable pricing. Sales increased 3% in the Tools segment and 2%
in Doors. Sales increased 5% in the Americas and 13% in Asia, while sales in
Europe declined 9%. The decline in Europe was principally attributable to
unfavorable currency translation.
John M. Trani, Chairman and Chief Executive Officer, commented: "While our
overall sales growth was modest, unit volume increased 6% in the Americas. We
redirected a portion of our direct sales force to the construction supply
channel and supported their efforts with increased coverage by our fastening
SWAT teams. These efforts yielded double-digit percentage growth in the sales of
fastening products in this channel.
"At the same time, our fill rates to large retail customers have remained at
consistent high levels, and our lead-times have declined. This has allowed them
to adjust their inventories to lower levels. Despite this impact, sales to these
customers grew at double-digit rates. In summary, our solid fill rates, steady
stream of new products and 'War in the Store' in-store merchandising initiatives
are producing better results."
Page 5 of 13 Pages
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Somewhat offsetting these sales gains were the expected lingering effects of the
mid-1999 Hechinger liquidation upon the company's hardware business, greater
than anticipated weakness of European currencies and weaker sales of fastening
products to retail customers.
Gross margin improved 70 basis points to 36.4% compared with second-quarter 1999
"core" gross margin of 35.7%, despite increasing commodity cost pressures.
Benefits continue to be realized from the combination of improved cost controls,
continuing and carryover restructuring benefits, higher volume and continued
progress on material cost.
Selling, general and administrative expenses were $168 million or 23.9% of
sales, versus 23.6% in the second quarter of 1999 and down, as expected, 80
basis points from the 24.7% first quarter 2000 level. Operating income was $88
million, or 12.5% of sales, versus $83 million "core" operating income, or 12.1%
of sales, in the second quarter of 1999.
Mr. Trani continued: "Productivity is our primary opportunity for short-term
improvement and we are on track to achieve the expected $80 million for 2000. In
addition, it's encouraging that SG&A expenses declined as a percentage of sales
and were 20 basis points below the goal of equaling the Q3 1999 level. We are
lowering our cost structure and serving our customers better, two prerequisites
for achieving sustained, profitable growth."
Overall the company's $50 million of operating cash flow approximated net income
levels and led to the generation of $18 million free cash flow (cash from
operations, less capital expenditures and dividends) compared with $11 million
in the second quarter of 1999.
Tools sales increased 2.7% over the second quarter of 1999. Operating margin was
14.0%, compared with 13.9% "core" operating margin in the same period last year.
Doors segment sales increased 2.0% versus last year's second quarter. The Doors
segment operating margin was 7.2% of sales versus 5.8% "core" operating margin
in the second quarter of last year, reflecting slightly higher volume and
productivity increases, somewhat offset by a continuing shift in the mix of
product to lower-margin customers in the retail channel.
Mr. Trani expressed cautious optimism: "As expected, productivity was the story
again this quarter. For the fourth consecutive quarter, our operations team made
progress in lowering our cost base. In addition, sales are beginning to
increase. Unit volume growth of 5% was the highest in seven quarters and has
increased in each of four consecutive quarters."
Page 6 of 13 Pages
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Reflecting its confidence in the near-term outlook, the company repurchased
another 1.2 million of its common shares during the quarter, bringing its
year-to-date total to 3.3 million shares. The company is continuing its share
repurchase program into the second half of 2000.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools, door
systems and related hardware for professional, industrial and consumer use.
Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: Director,
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Communication & Public Affairs
(860) 827-3833 office (860) 827-3871 office
(860) 658-2718 home (203) 795-0581 home
[email protected] [email protected]
This press release contains forward-looking statements. 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 www.stanleyworks.com. Alternatively, they are available
through PR Newswire's "Company News On-Call" service by FAX at 800-758-5804,
ext. 874363.
Page 7 of 13 Pages
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
<TABLE>
<S> <C> <C> <C> <C>
Second Quarter Six Months
2000 1999 2000 1999
Net Sales $ 702.8 $ 685.5 $ 1,398.2 $ 1,369.2
Costs and Expenses
Cost of sales 447.1 455.1 885.1 906.5
Selling, general and
administrative 168.1 182.2 340.0 355.3
Interest - net 7.2 7.7 13.7 14.9
Other - net 3.7 2.4 9.7 7.0
626.1 647.4 1,248.5 1,283.7
Earnings before
income taxes 76.7 38.1 149.7 85.5
Income Taxes 26.1 12.8 50.9 29.9
Net Earnings $ 50.6 $ 25.3 $ 98.8 $ 55.6
Net Earnings Per
Share of Common Stock
Basic $ 0.58 $ 0.28 $ 1.12 $ 0.62
Diluted $ 0.58 $ 0.28 $ 1.12 $ 0.62
Dividends per share $ 0.22 $ 0.215 $ 0.44 $ 0.43
Average shares outstanding
(in thousands)
Basic 87,614 89,447 88,293 89,439
Diluted 87,827 89,831 88,526 89,751
</TABLE>
Page 8 of 13 Pages
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
<TABLE>
<S> <C> <C>
July 1 July 3
2000 1999
ASSETS
Cash and cash equivalents $ 83.0 $ 84.8
Accounts receivable 564.1 534.8
Inventories 399.9 370.8
Other current assets 71.7 77.6
Total current assets 1,118.7 1,068.0
Property, plant and equipment 511.8 490.6
Goodwill and other intangibles 178.8 187.1
Other assets 101.2 142.3
$ 1,910.5 $ 1,888.0
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 289.3 $ 251.7
Accounts payable 220.4 173.6
Accrued expenses 267.6 274.9
Total current liabilities 777.3 700.2
Long-term debt 252.9 298.7
Other long-term liabilities 175.9 208.2
Shareowners' equity 704.4 680.9
$ 1,910.5 $ 1,888.0
</TABLE>
Page 9 of 13 Pages
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THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
<TABLE>
<S> <C> <C> <C> <C>
Second Quarter Six Months
2000 1999 2000 1999
Operating Activities
Net earnings $ 50.6 $ 25.3 $ 98.8 $ 55.6
Depreciation and amortization 20.4 21.2 44.1 45.3
Other non-cash items (0.1) 9.4 7.1 13.8
Changes in working capital (1.8) 7.2 (63.4) (34.0)
Changes in other operating
assets and liabilities (18.7) (7.4) (38.7) (20.5)
Net cash provided by
operating activities 50.4 55.7 47.9 60.2
Investing and Financing Activities
Capital and software expenditures (12.8) (25.7) (28.8) (50.7)
Proceeds from sales of assets 2.8 9.5 3.5 14.9
Net borrowing activity (24.3) (9.8) 103.6 (0.4)
Net stock transactions (32.2) (3.3) (76.2) (3.9)
Cash dividends on common stock (19.2) (19.2) (38.7) (38.3)
Other (10.6) (2.9) (16.3) (7.1)
Net cash used by financing
and investing activities (96.3) (51.4) (52.9) (85.5)
Increase (Decrease) in Cash and
and Cash Equivalents (45.9) 4.3 (5.0) (25.3)
Cash and Cash Equivalents,
Beginning of Period 128.9 80.5 88.0 110.1
Cash and Cash Equivalents,
End of Second Quarter $ 83.0 $ 84.8 $ 83.0 $ 84.8
</TABLE>
Page 10 of 13 Pages
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
<TABLE>
<S> <C> <C> <C> <C>
Second Quarter Six Months
2000 1999 2000 1999
INDUSTRY SEGMENTS
Net Sales
Tools $ 547.5 $ 533.2 $ 1,091.2 $ 1,058.6
Doors 155.3 152.3 307.0 310.6
Consolidated $ 702.8 $ 685.5 $ 1,398.2 $ 1,369.2
Operating Profit
Tools $ 76.4 $ 74.1 $ 150.5 $ 140.6
Doors 11.2 8.8 22.6 21.7
87.6 82.9 173.1 162.3
Restructuring-related
transition and other
non-recurring costs - (34.7) - (54.9)
Interest-net (7.2) (7.7) (13.7) (14.9)
Other-net (3.7) (2.4) (9.7) ( 7.0)
Earnings Before
Income Taxes $ 76.7 $ 38.1 $ 149.7 $ 85.5
</TABLE>
Page 11 of 13 Pages
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Exhibit 20 (ii)
CAUTIONARY STATEMENTS
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Under the Private Securities Litigation Reform Act of 1995
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The statements in the company's press release attached to this Current Report on
Form 8-K and made today in a conference call with industry analysts, shareowners
and other participants regarding the company's ability (1) to achieve $80
million in productivity improvements this year, (2) to lower the overall cost
structure to become more competitive, (3) to increase market share and achieve
sales growth of 3-4% this year, (4) to reduce selling, general and
administrative expenses as a percentage of sales, (5) to deliver over $250
million in cash flow from operations this year and (6) to decrease working
capital by $50 million this year are forward looking and inherently subject to
risk and uncertainty.
The company's ability to improve productivity by $80 million this year and to
lower the 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
mitigate the effects of any material cost inflation, 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. In addition, the
company's ability to leverage the benefits of gross margin improvements is
dependent upon achieving the targeted level of selling, general and
administrative expenses.
The company's ability to increase market share and achieve 3-4% sales growth
this year is dependent upon a number of factors, including: (i) the ability to
recruit and retain a sales force comprised of employees and manufacturers reps,
(ii) the success of the "War in the Store" initiatives to increase retail sell
through and stimulate demand for the company's products, (iii) the ability of
the sales force to adapt to changes made in the sales organization and achieve
adequate customer coverage, (iv) the ability of the company to fulfill increased
demand for its products, (v) the absence of pricing pressures from customers and
competitors and the ability to defend market share in the face of price
competition, (vi) the ability to improve the cost structure in order to
Page 12 of 13 Pages
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fund new product and brand development and (vii) the acceptance of the company's
new products in the marketplace as well as the ability to satisfy demand for
these products.
The company's ability to reduce selling, general and administrative expenses as
a percentage of sales is dependent upon the success of various process
improvement activities, the continued success of changes to the sales
organization and the reduction of transaction costs.
The company's ability to generate $250 million of cash flow from operations in
2000, to improve working capital by $50 million this year and sustain improved
collection efforts is dependent on achieving its earnings growth targets and the
continued success of improvements in processes to manage inventory and
receivables levels.
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 13 of 13 Pages
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