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 18, 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 13 Pages
<PAGE>
Item 5. Other Events.
1. On October 18, 2000, 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 18, 2000
announcing third quarter results and fourth quarter
dividend.
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
<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: October 18, 2000 By: Bruce H. Beatt
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 13 Pages
<PAGE>
EXHIBIT INDEX
Current Report on Form 8-K
Dated October 18, 2000
Exhibit No. Page
20(i) 5
20(ii) 12
Page 4 of 13 Pages
<PAGE>
FOR IMMEDIATE RELEASE Exhibit 20(i)
STANLEY REPORTS 3RD QUARTER EPS UP 12%, EXCLUSIVE OF PRIOR YEAR NON-RECURRING
GAIN.
FREE CASH FLOW AT $34 MILLION
New Britain, Connecticut, October 18, 2000: The Stanley Works (NYSE: "SWK")
announced today that third quarter net income was $49 million, or $.56 per
diluted share, versus $45 million, or $.50 per diluted share, in the same
quarter last year, exclusive of one-time benefits in the third quarter of 1999.
This equaled Wall Street analysts' consensus estimates of $.56 per diluted
share. Operating margin was 12.1% compared with 11.3% in the third quarter of
1999.
Reported results in the prior reporting period included a one-time gain of $9
million pre-tax, or $.06 per diluted share, resulting principally from the
liquidation of a cross-currency financial instrument. Including such income, the
company reported net income of $50 million, or $.56 per diluted share, in the
third quarter of 1999.
Net sales were $684 million, a 1% decline from last year. A weak Euro accounted
for a 2% decrease and lower pricing for 1%, partially offset by 2% higher unit
volumes. Despite recent share gains, the company's unit volume growth is
currently being constrained by slower economic growth and the effect of
inventory corrections in certain product lines at major U.S. retailers.
John M. Trani, Chairman and Chief Executive Officer, commented: "The U.S.
economic environment is clearly slowing. Despite that and a weaker Euro, we were
able to deliver earnings growth and strong cash flow due to ongoing cost
management. For the fifth consecutive quarter, our operations team made progress
in lowering our manufacturing cost base. In addition, sequential and
year-over-year improvements in SG&A expenses were achieved, both in terms of
absolute dollars and percent to sales. Margins are continuing to expand to
record levels, and our lower fixed cost structure will deliver operating
leverage when growth resumes.
"With regard to growth, our fill rates to large retail customers have improved
steadily. Coupled with another array of new products highlighted at the recent
Hardware Show, where Stanley was named 'Innovator of the Year' and this summer's
successful customer line reviews, recent
Page 5 of 13 Pages
<PAGE>
commitments for our new products clearly indicate that we are winning market
share. This bodes well for revenue expansion as soon as normal demand patterns
resume."
Gross margins were 35.8%, exceeding 1999 gross margins of 35.4%, as productivity
improvements from a variety of programs more than offset continued commodity
cost increases and pricing pressures. In this regard, the company has already
achieved the level of employment reductions planned for the year 2000.
Selling, general and administrative expenses were $162 million, or 23.7% of
sales, versus 24.1% in the third quarter of 1999 and down $6 million from their
second quarter 2000 level. The company was able to fund increases in sales and
marketing initiatives, while achieving an overall SG&A expense decline of $5
million from third quarter 1999 levels.
Third quarter net interest expense was $7 million, consistent with 1999. Other
income / expense was a $2 million expense, compared with income of $6 million in
1999, as prior-year results included the aforementioned one-time gain.
The company generated strong third quarter cash from operations of $73 million.
This represents 150% of net income and led to the generation of $34 million free
cash flow (cash from operations less capital expenditures and dividends).
Inventories declined $11 million in the quarter as production rates were
successfully rebalanced in consideration of lower demand. Accounts receivable
increased $13 million due to normal third-quarter seasonality. However, the
company improved collections of delinquent accounts during the quarter. Further
strong cash generation is anticipated in the fourth quarter.
Mr. Trani added: "Our cash flow performance again reflects a high quality of
earnings as well as our inherent cash-generating ability. As a result, Stanley
continues to have flexibility to pursue organic growth initiatives and other
options to enhance shareowner value." During the quarter, the company
repurchased 1.0 million shares, bringing its year-to-date total to 4.3 million
shares.
Tools segment sales of $531 million were up 1% over the third quarter of 1999.
An increase of 3% from unit volume, primarily in the Americas, was offset by
declines in Europe. Tools segment operating profit was 12.9% compared with 12.8%
in the same period last year as productivity gains somewhat exceeded unfavorable
currency and pricing.
Page 6 of 13 Pages
<PAGE>
Doors segment sales declined 8% to $154 million, from decreases in unit volume
of U.S. hardware, residential entry doors and home decor products. These
decreases resulted primarily from lower sales to large retail and OEM customers,
largely as a result of lower market demand. Doors segment operating profit
increased to 9.2% of sales versus 6.5% in the same period last year from
productivity gains. The Hardware business continues to shift its production cost
base into lower cost locations. Along with greatly improved fill rates, this
bodes well for continued margin expansion.
The company also announced today that its Board of Directors approved a fourth
quarter regular dividend of $.23 per share on the company's common stock. The
dividend is payable on Tuesday, December 26, 2000 to shareholders of record at
the close of business on Friday, November 24, 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: VP, 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] [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 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.
Page 7 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Third Quarter Nine Months
2000 1999 2000 1999
Net Sales $ 684.4 $ 692.0 $ 2,082.6 $ 2,061.2
Costs and Expenses
Cost of sales 439.4 446.9 1,324.5 1,353.4
Selling, general and
administrative 162.2 166.9 502.2 522.2
Interest - net 7.2 7.0 20.9 21.9
Other - net 1.8 (6.2) 11.5 0.8
610.6 614.6 1,859.1 1,898.3
Earnings before
income taxes 73.8 77.4 223.5 162.9
Income Taxes 25.1 27.1 76.0 57.0
Net Earnings $ 48.7 $ 50.3 $ 147.5 $ 105.9
Net Earnings Per
Share of Common Stock
Basic $ 0.56 $ 0.56 $ 1.68 $ 1.18
Diluted $ 0.56 $ 0.56 $ 1.68 $ 1.18
Dividends per share $ 0.23 $ 0.22 $ 0.67 $ 0.65
Average shares outstanding
(in thousands)
Basic 86,532 89,687 87,721 89,532
Diluted 86,677 89,949 87,927 89,805
Page 8 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
September 30 October 2
2000 1999
ASSETS
Cash and cash equivalents $ 93.3 $ 131.5
Accounts receivable 576.7 576.0
Inventories 388.6 367.1
Other current assets 72.9 74.8
Total current assets 1,131.5 1,149.4
Property, plant and equipment 505.3 495.9
Goodwill and other intangibles 174.9 187.6
Other assets 111.8 129.0
$ 1,923.5 $ 1,961.9
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 293.5 $ 222.9
Accounts payable 222.4 203.7
Accrued expenses 288.4 309.0
Total current liabilities 804.3 735.6
Long-term debt 243.3 299.2
Other long-term liabilities 175.1 213.5
Shareowners' equity 700.8 713.6
$ 1,923.5 $ 1,961.9
Page 9 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
2000 1999 2000 1999
Operating Activities
Net earnings $ 48.7 $ 50.3 $ 147.5 $ 105.9
Depreciation and amortization 20.3 20.9 64.4 66.2
Other non-cash items 2.8 (4.0) 9.9 9.8
Changes in working capital (16.7) (13.2) (80.1) (47.2)
Changes in other operating
assets and liabilities 17.5 38.4 (21.2) 17.9
Net cash provided by
operating activities 72.6 92.4 120.5 152.6
Investing and Financing Activities
Capital and software expenditures (19.3) (31.1) (48.1) (81.8)
Proceeds from sales of assets 6.5 22.1 10.0 37.0
Net borrowing activity 4.3 (30.3) 107.9 (30.7)
Net stock transactions (30.9) (2.5) (107.1) (6.4)
Proceeds from swap termination - 13.9 - 13.9
Cash dividends on common stock (19.8) (19.6) (58.5) (57.9)
Other (3.1) 1.8 (19.4) (5.3)
Net cash used by financing
and investing activities (62.3) (45.7) (115.2) (131.2)
Increase in Cash and
and Cash Equivalents 10.3 46.7 5.3 21.4
Cash and Cash Equivalents,
Beginning of Period 83.0 84.8 88.0 110.1
Cash and Cash Equivalents,
End of Third Quarter $ 93.3 $ 131.5 $ 93.3 $ 131.5
Page 10 of 13 Pages
<PAGE>
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
2000 1999 2000 1999
INDUSTRY SEGMENTS
Net Sales
Tools $ 530.6 $ 525.5 $ 1,621.8 $ 1,584.1
Doors 153.8 166.5 460.8 477.1
Consolidated $ 684.4 $ 692.0 $ 2,082.6 $ 2,061.2
Operating Profit
Tools $ 68.7 $ 67.3 $ 219.2 $ 207.9
Doors 14.1 10.9 36.7 32.6
82.8 78.2 255.9 240.5
Restructuring-related
transition and other
non-recurring costs - - - (54.9)
Interest-net (7.2) (7.0) (20.9) (21.9)
Other-net (1.8) 6.2 (11.5) ( 0.8)
Earnings Before
Income Taxes $ 73.8 $ 77.4 $ 223.5 $ 162.9
Page 11 of 13 Pages
<PAGE>
Exhibit 20(ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
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 earnings
growth this year in the high single or low double digit range, consistent with
the guidance provided by the company in February, (2) to improve productivity
(by approximately $80 million this year) and lower the overall cost structure,
(3) to increase market share and generate sales this year at levels consistent
with those achieved in 1999, (4) to reduce selling, general and administrative
expenses as a percentage of sales, and (5) to drive working capital and
efficiency and continue to generate cash are forward looking and inherently
subject to risk and uncertainty.
The company's ability to improve its productivity 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 generate sales this year at
levels consistent with those achieved in 1999 is dependent upon a number of
factors, including: (i) the ability to recruit and retain a sales force
comprised of employees and manufacturers representatives, (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 increased 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 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.
Page 12 of 13 Pages
<PAGE>
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 drive working capital efficiency and continue to
generate cash are 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 the current slowdown in the economy and other external factors.
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, 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
<PAGE>
