-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NNjzspgMjczLYzyA858qxdwZY9ySCB+oKDoD2gSxVaycaxppRWXDUUFiQiyOZTb9 +oxcfdB5q31m1lTTjtWrLg== 0000093556-98-000033.txt : 19981022 0000093556-98-000033.hdr.sgml : 19981022 ACCESSION NUMBER: 0000093556-98-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981021 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981021 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANLEY WORKS CENTRAL INDEX KEY: 0000093556 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 060548860 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-05224 FILM NUMBER: 98728272 BUSINESS ADDRESS: STREET 1: 1000 STANLEY DRIVE STREET 2: P O BOX 7000 CITY: NEW BRITAIN STATE: CT ZIP: 06053 BUSINESS PHONE: (860) 225-5111 MAIL ADDRESS: STREET 1: 1000 STANLEY DR CITY: NEW BRITAIN STATE: CT ZIP: 06053 8-K 1 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 21, 1998 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) Page 1 of 15 Pages Exhibit Index is located on Page 4 Item 5. Other Events. 1. On October 21, 1998, the Registrant issued a press release announcing third quarter results and fourth quarter dividend. 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 October 21, 1998 announcing third quarter results and fourth quarter dividend. 20(ii) Cautionary statements relating to forward looking statements included in Exhibit 20(i). Page 2 of 15 Pages 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 21, 1998 By: Stephen S. Weddle ----------------- Name: Stephen S. Weddle Title: Vice President, General Counsel and Secretary Page 3 of 15 Pages EXHIBIT INDEX Current Report on Form 8-K Dated October 21, 1998 Exhibit No. Page 20(i) 5 20 (ii) 14 Page 4 of 15 Pages Exhibit (20) (i) THE STANLEY WORKS ANNOUNCES CORE EARNINGS UP SLIGHTLY IN 3RD QUARTER; ALSO ANNOUNCES 4TH QUARTER DIVIDEND New Britain, Connecticut, October 21, 1998: The Stanley Works (NYSE: "SWK") announced that "core" earnings increased slightly in its third quarter ended October 3, 1998 to $49.4 million, or $.55 per diluted share, from prior year third quarter core earnings of $48.9 million, or $.54 per diluted share. Core results exclude restructuring charges, restructuring-related transition costs and certain other non-recurring costs as defined below. Reported earnings were $33.4 million, or $.37 per diluted share, compared with the prior year's third quarter net loss of $40.6 million, or $.46 per diluted share. These amounts reflect $25.5 million, or $.18 per share, of restructuring- related transition and other non-recurring costs incurred in the third quarter this year and $105.9 million, or $.87 per share, of restructuring charges and $18.7 million, or $.14 per share, of restructuring-related transition and other non-recurring costs incurred in the third quarter last year. Net sales were up 6% to $689.6 million from $650.5 million last year. These results included a 2% positive impact from acquisitions and a 1% combined negative effect of pricing and currency translation. Unit sales volume from ongoing businesses was up 5%. This increase was led by the Mac Tools and U.S. consumer components of mechanics tools, hand tools in the U.S. and Europe and fastening systems in North America. Core gross margin was 35.0%, versus 34.2% in 1997, as a result of higher unit volumes and cost reduction efforts, including the savings generated by company-wide productivity programs. This improvement was somewhat offset by price decreases to maintain market share in certain industrial and engineered tools businesses and a mix to lower-margin consumer products, particularly to home centers. In addition, production and distribution inefficiencies offset realized savings. Page 5 of 15 Pages Despite the increase in core gross margin, core operating margin was almost flat at 12.9%. Selling, general and administrative expenses, excluding restructuring-related transition costs and other non-recurring costs, were 22.1% of sales, up from 21.2% in the third quarter last year. This increase resulted from higher MacDirect selling costs, a doubling of engineering expenses, and costs incurred to achieve the higher volume and improve customer service. Interest expense increased to $7.4 million compared to $4.2 million last year, reflecting working capital increases and funding of the August 5th acquisition of ZAG Industries, Ltd. Core segment operating margin was 14.0% vs. 14.6% in 1997, as the tools segment declined to 14.7% from 16.5% last year, from the aforementioned factors. Hardware operating margin increased to 12.1% from 11.6% last year. Specialty Hardware operating margin improved to 11.0% from 5.6% in 1997, reflecting favorable pricing, savings generated in component procurement and effects of the early-1998 divestiture of European access technologies operations. "This was the twelfth consecutive quarter in which core earnings grew, the last seven while we have been undergoing fundamental changes in virtually every area of our company," said John M. Trani, Chairman and Chief Executive Officer. "Sales volumes for the quarter continued to show moderate growth, although we experienced a relatively weak order rate in the month of September. We expect improvement in customer service, the mitigation of costs associated with those efforts, and revenues from new products to accelerate growth in sales and operating margin by mid-1999." Restructuring-related transition costs incurred in the third quarter were $12.7 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. As previously announced, the company expects to incur a total of $100 million of such transition costs throughout the two-year period ending June 1999 and has incurred $46.4 million to date. Page 6 of 15 Pages In addition to restructuring-related transition costs, other non-recurring costs excluded from "core" results include year- 2000 systems compliance costs. Such costs were $12.7 million in the third quarter and, to date, are $25.2 million. The company expects to incur approximately another $25 million of such year-2000 systems compliance costs through 1999. To a great extent, these expenditures are being incurred for systems advances that move the company toward its important objective of a single set of operating systems. The attached table, "Business Segment Information", provides clarification of reported results for the third quarters of and nine-month periods of 1998 and 1997, reconciling them with normalized core results. The company also announced today that its Board of Directors approved a fourth quarter regular dividend of $.215 per share on the company's common stock. The dividend is payable on Monday, December 28, 1998 to shareholders of record at the close of business on Friday, November 27, 1998. Mr. Trani stated: " We are pleased to be able to announce this fourth quarter dividend for our shareowners, and we are proud that 1998 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, hardware and door systems for professional, industrial and consumer use. Investors Gerard J. Gould Media Vance N. Meyer Contact: Director, Investor Relations Contact: Director, Communication (860) 827-3833 office & Public Affairs (860) 658-2718 home (860) 827-3871 office (203) 795-0581 home This press release contains forward looking statements as to the anticipated level of spending on Y2K compliance and the company's ability improve customer service, to mitigate costs associated with those efforts, and to obtain revenues from new products in order to accelerate sales growth and operating margin improvement by mid 1999. Cautionary statements Page 7 of 15 Pages 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. Page 8 of 15 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts) Third Quarter Nine Months 1998 1997 1998 1997 Net Sales $ 689.6 $ 650.5 $ 2,053.3 $ 1,970.7 Costs and Expenses Cost of sales 453.2 436.6 1,337.1 1,314.1 Selling, general and administrative 172.7 148.2 509.9 455.2 Interest - net 7.4 4.2 17.4 12.9 Other - net 2.7 2.0 9.6 19.2 Restructuring and asset write-offs - 105.9 - 238.5 636.0 696.9 1,874.0 2,039.9 Earnings (Loss) before income taxes 53.6 (46.4) 179.3 (69.2) Income Taxes 20.2 (5.8) 67.3 (0.8) Net Earnings (Loss) $ 33.4 $ (40.6) $ 112.0 $ (68.4) Net Earnings (Loss) Per Share of Common Stock Basic $ 0.37 $ (0.46) $ 1.25 $ (0.77) Diluted $ 0.37 $ (0.46) $ 1.24 $ (0.77) Dividends per share $ 0.215 $ 0.20 $ 0.615 $ 0.57 Average shares outstanding (in thousands) Basic 89,367 89,571 89,413 89,468 Diluted 90,102 89,571 90,338 89,468 Page 9 of 15 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars) October 3 September 27 1998 1997 ASSETS Cash and cash equivalents $ 65.2 $ 146.7 Accounts receivable 546.7 483.2 Inventories 388.9 307.7 Other current assets 83.9 80.6 Total current assets 1,084.7 1,018.2 Property, plant and equipment 509.4 503.2 Goodwill and other intangibles 202.9 72.7 Deferred income taxes 37.2 36.8 Other assets 107.5 105.7 $ 1,941.7 $ 1,736.6 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings $ 211.3 $ 98.6 Accounts payable 160.7 124.7 Accrued expenses 238.4 233.6 Accrued restructuring 71.9 118.8 Total current liabilities 682.3 575.7 Long-term debt 343.7 288.9 Other long-term liabilities 257.9 231.9 Shareholders' equity 657.8 640.1 $ 1,941.7 $ 1,736.6 Page 10 of 15 Pages THE STANLEY WORKS AND SUBSIDIARIES PRICE/VOLUME INFORMATION (Unaudited, Millions of Dollars) NET SALES Third Quarter Unit ACQ/ 1998 Price Volume DVT Currency 1997 INDUSTRY SEGMENTS Tools Consumer $ 205.5 - 8% 6% (2)% $ 183.8 Industrial 147.2 1% 9% - - 134.1 Engineered 182.4 (1)% 3% 5% (1)% 172.0 Total Tools 535.1 - 6% 4% (1)% 489.9 Hardware 81.6 (3)% (1)% - (1)% 85.5 Specialty Hardware 72.9 1% 3% (6)% (1)% 75.1 Consolidated $ 689.6 - 5% 2% (1)% $ 650.5 GEOGRAPHIC AREAS United States $ 494.3 (1)% 7% - - $ 464.5 Europe 118.9 - 3% 16% 3% 97.8 Other Areas 76.4 2% (4)% - (11)% 88.2 Consolidated $ 689.6 - 5% 2% (1)% $ 650.5 Year to Date Unit ACQ/ 1998 Price Volume DVT Currency 1997 INDUSTRY SEGMENTS Tools Consumer $ 562.2 1% 4% 2% (3)% $ 542.7 Industrial 449.4 - 8% - - 415.6 Engineered 568.7 (2)% 5% 5% (1)% 530.5 Total Tools 1,580.3 - 5% 3% (2)% 1,488.8 Hardware 264.2 (2)% 3% - (1)% 264.8 Specialty Hardware 208.8 2% 3% (8)% (1)% 217.1 Consolidated $ 2,053.3 - 5% 1% (2)% $ 1,970.7 GEOGRAPHIC AREAS United States $ 1,472.7 (1)% 7% (1)% - $ 1,400.0 Europe 348.4 1% 3% 10% (2)% 311.9 Other Areas 232.2 2% (2)% (1)% (9)% 258.8 Consolidated $ 2,053.3 - 5% 1% (2)% $ 1,970.7 Page 11 of 15 Pages THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars) OPERATING PROFIT Third Quarter 1998 Transition Core Restrg & Other Profit Reported Charges Costs Core Margin INDUSTRY SEGMENTS Tools $ 61.2 $ - $ 17.4 $ 78.6 14.7% Hardware 6.5 - 3.4 9.9 12.1% Specialty Hardware 3.3 - 4.7 8.0 11.0% Total 71.0 - 25.5 96.5 14.0% Net corporate expenses (8.7) - - (8.7) Interest expense (8.7) - - (8.7) Earnings before income taxes $ 53.6 $ - $ 25.5 $ 79.1 GEOGRAPHIC AREAS United States $ 51.1 $ - $ 21.5 $ 72.6 14.7% Europe 11.3 - 1.9 13.2 11.1% Other Areas 8.6 - 2.1 10.7 14.0% Total $ 71.0 $ - $ 25.5 $ 96.5 14.0% Third Quarter 1997 Transition Core Restrg & Other Profit Reported Charges Costs Core Margin INDUSTRY SEGMENTS Tools $(15.7) $ 83.0 $ 13.6 $ 80.9 16.5% Hardware (3.3) 9.9 3.3 9.9 11.6% Specialty Hardware (6.2) 9.2 1.2 4.2 5.6% Total (25.2) 102.1 18.1 95.0 14.6% Net corporate expenses (14.8) 3.8 0.6 (10.4) Interest expense (6.4) - - (6.4) Earnings (loss) before income taxes $(46.4) $ 105.9 $ 18.7 $ 78.2 GEOGRAPHIC AREAS United States $ 1.5 $ 56.8 $ 13.9 $ 72.2 15.5% Europe (27.4) 37.3 2.1 12.0 12.3% Other Areas 0.7 8.0 2.1 10.8 12.2% Total $(25.2) $ 102.1 $ 18.1 $ 95.0 14.6% Page 12 of 15 Pages THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars) OPERATING PROFIT Year to Date 1998 Transition Core Restrg & Other Profit Reported Chgs Costs Core Margin INDUSTRY SEGMENTS Tools $ 200.6 $ - $ 40.5 $ 241.1 15.3% Hardware 26.6 - 7.7 34.3 13.0% Specialty Hardware 6.2 - 9.9 16.1 7.7% Total 233.4 - 58.1 291.5 14.2% Net corporate expenses (32.0) - - (32.0) Interest expense (22.1) - - (22.1) Earnings before income taxes $ 179.3 $ - $ 58.1 $ 237.4 GEOGRAPHIC AREAS United States $ 171.4 $ - $ 50.3 $ 221.7 15.1% Europe 35.9 - 4.2 40.1 11.5% Other Areas 26.1 - 3.6 29.7 12.8% Total $ 233.4 $ - $ 58.1 $ 291.5 14.2% Year to Date 1997 Transition Core Restrg & Other Profit Reported Chgs Costs* Core Margin INDUSTRY SEGMENTS Tools $ 2.0 $ 194.8 $ 31.6 $ 228.4 15.3% Hardware 11.1 17.8 7.3 36.2 13.7% Specialty Hardware (13.7) 23.5 1.4 11.2 5.2% Total (0.6) 236.1 40.3 275.8 14.0% Net corporate expenses (50.2) 2.4 11.7 (36.1) Interest expense (18.4) - - (18.4) Earnings (loss) before income taxes $(69.2) $ 238.5 $ 52.0 $ 221.3 GEOGRAPHIC AREAS United States $ 35.7 $ 145.6 $ 30.0 $ 211.3 15.1% Europe (28.1) 61.8 5.6 39.3 12.6% Other Areas (8.2) 28.7 4.7 25.2 9.7% Total $ (0.6) $ 236.1 $ 40.3 $ 275.8 14.0% * Includes stock option charge. Page 13 of 15 Pages 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 costs of year-2000 compliance, improvements in customer service, mitigation of the costs of those improvements and achievement of revenues from new products are forward looking and are, therefore, inherently subject to risk and uncertainty. The estimates of the costs of year-2000 compliance are based on the company's current plans for the remediation or replacement of its operating systems and computer hardware. These plans may change based on future events, including the failure of software vendors to implement new operating systems or deliver upgrades and repairs as promised and the lack of availability of new computer hardware and consultants to meet the company's planned needs. In addition, the company's year- 2000 assessment is based in part on information obtained from third parties, including customers, suppliers and consultants hired to assist in the year-2000 compliance program. Although the company believes that its reliance on these third parties is reasonable, there can be no assurance that the information supplied by these third parties is accurate, complete or will not be subject to change in the future. The operating changes currently underway to improve customer service include a sku reduction program to eliminate low- selling items, better integration of production and sales planning, improving 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 levels of sales growth and operating margin improvement 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 Page 14 of 15 Pages 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 additional cost savings 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 generate revenues from new products will depend on the ability of the new product development process to foster creativity and identify new products that will be successful in the marketplace as well as the successful development of the Stanley(R) brand. The success of the company's brand development efforts will depend on the effectiveness of the Stanley:Make Something Great(TM) campaign and other actions being planned to enhance the image of the Stanley(R) brand and increase sales. The estimated level of year-2000 costs and the company's ability to achieve revenue growth and improvement in operating margins 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; 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. Page 15 of 15 Pages -----END PRIVACY-ENHANCED MESSAGE-----