-----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, HE/W02Of1jyktr8mmolMtdlj4EJrD0ndr6s80h8LOlmNvoaRrvMbp3b01MYsrOJz MjebFjIJ31qoA7StYtVSNA== 0000093556-99-000005.txt : 19990129 0000093556-99-000005.hdr.sgml : 19990129 ACCESSION NUMBER: 0000093556-99-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990102 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990128 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: 99514768 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): January 28, 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) Page 1 of 10 Pages Item 5. Other Events. 1. On January 28, 1999 the Registrant announced fourth quarter and year end results. 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 January 28, 1999 announcing fourth quarter and year end results. 20(ii)Cautionary statements relating to forward look- ing statements included in Exhibit 20(i). Page 2 of 10 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: January 28, 1999 By: Stephen S. Weddle ----------------- Name: Stephen S. Weddle Title: Vice President, General Counsel and Secretary Page 3 of 10 Pages EX-20 2 Exhibit 20 (i) FOR IMMEDIATE RELEASE THE STANLEY WORKS REPORTS 4TH QUARTER EARNINGS New Britain, Connecticut, January 28, 1999: The Stanley Works (NYSE: "SWK") announced that "core" earnings increased 2% in its fiscal year ended January 2, 1999, but decreased 11% in its fourth quarter. Core results exclude restructuring charges, restructuring-related transition costs and certain other non-recurring costs as defined below. Fourth quarter core net income was $44.5 million, or $.50 per diluted share, compared with prior year core earnings of $50.1 million, or $.55 per diluted share. Reported earnings were $25.8 million, or $.29 per diluted share, compared with the prior year's fourth quarter net income of $26.5 million, or $.29 per diluted share. These amounts reflect $27.8 million, or $.21 per share, of restructuring-related transition and other non-recurring costs incurred in the fourth quarter this year and $29.6 million, or $.20 per share in the prior year. Net sales declined 3% to $676 million from $699 million last year. These results included 3% growth from acquisitions, more than offset by a 6% decline in ongoing business. A fourteenth week in the fourth quarter of 1997 accounted for approximately half of the volume decrease. Volume was soft in hand tools in the U.S., hand tools and fastening systems in Europe, and across industrial and commercial markets in North America. John M. Trani, Chairman and Chief Executive Officer, commented: "Weak order rates experienced in September continued throughout the quarter. Industrial markets remained soft and the normal year-end flurry of retail customer orders did not materialize, particularly in the U.K. and France. Existing inventory levels at key customers are sufficient and now are a quarterly focus for them as well." Core gross margin in the fourth quarter was 33.3% of sales versus 34.3% in 1997, as a result of lower volume and a mix to lower-margin consumer products. In addition, productivity programs and successful pricing initiatives were more than offset by continued production and distribution inefficiencies. Selling, general and administrative expenses, excluding restructuring- related transition costs and other non-recurring costs, were 22.4% of sales, up from 21.9% in the fourth quarter last year. This increase Page 4 of 10 Pages resulted from higher selling costs as anticipated for the MacDirect(TM) initiative, increased engineering expenses, and costs to improve customer service. Core operating margin decreased to 10.8% of sales from 12.4% in the prior year. Interest expense increased to $5.7 million from $3.7 million, reflecting working capital increases and acquisition funding. For the full year 1998, core earnings increased 2% and earnings per share 3% to $193 million or $2.14 per diluted share in 1998 versus $188 million or $2.08 per share in 1997. Net sales were $2,729 million, a 2% increase over 1997. Volume from ongoing businesses was up 2% on the strength of mechanics tools. The company's income tax rate on core earnings decreased to 30.4% for the fourth quarter and 36% for the full year 1998 from 37.5% in both comparable periods of 1997. These decreases reflected favorable tax settlements in the fourth quarter that yielded cash refunds, as well as tax initiatives that were finalized during the quarter. Mr. Trani stated: "While the quarter was below our expectation, there are several encouraging signs. First, fill rates in our Hardware product line have been fixed, and we are aggressively pursuing orders. Second, overall fill rates have been improving slowly and the 80,000-sku reduction is nearing completion, representing 61% of the total stock-keeping units. Third, MacDirect(TM) continues to grow at a double-digit rate. Fourth, the ZAG acquisition is proving to be a winner, and we expect double-digit growth in its sales and earnings in 1999. ZAG's backlog went from less than $2 million at the end of 1997 to nearly $9 million at the end of 1998 primarily as a result of winning business at several large Stanley customers. "Nonetheless, the inefficiencies in our manufacturing processes are all too clear. The complexity of our operating structure and lack of an integrated production and sales planning system have resulted in more than $50 million in higher costs to improve customer service through sheer brute force. The good news is that these problems are correctable, although not overnight." Transition and other costs incurred in the fourth quarter were $28 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 and year-2000 compliance costs. To a great extent, the latter expenditures are being incurred for systems advances that move the company toward a single set of operating systems. The Stanley Works, an S&P 500 company, is a worldwide supplier of tools, hardware and door systems for professional, industrial and consumer use. Page 5 of 10 Pages Investors Gerard J. Gould Media Vance N. Meyer Contact: Director, Investor Relations Contact: Director, (860) 827-3833 office Communication & Public (860) 658-2718 home Affairs (860) 827-3871 office (203) 795-0581 home This press release contains forward looking statements as to the company's ability improve customer service and to obtain revenue growth. 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 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 6 of 10 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars) January 2 January 3 1999 1998 ASSETS Cash and cash equivalents $ 110.1 $ 152.2 Accounts receivable 517.0 472.5 Inventories 380.9 301.2 Other current assets 78.4 79.4 Total current assets 1,086.4 1,005.3 Property, plant and equipment 511.4 513.2 Goodwill and other intangibles 196.9 104.1 Deferred income taxes 34.0 36.1 Other assets 104.2 100.0 $ 1,932.9 $ 1,758.7 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings $ 222.0 $ 130.8 Accounts payable 172.1 155.5 Accrued expenses 217.7 236.7 Accrued restructuring 90.3 99.7 Total current liabilities 702.1 622.7 Long-term debt 344.8 283.7 Other long-term liablities 216.6 244.5 Shareholders' equity 669.4 607.8 $ 1,932.9 $ 1,758.7 Page 7 of 10 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts) Fourth Quarter Twelve Months 1998 1997 1998 1997 Net Sales $ 675.8 $ 698.8 $ 2,729.1 $ 2,669.5 Costs and Expenses Cost of sales 455.7 469.3 1,792.8 1,783.4 Selling, general and administrative 174.8 172.5 684.7 627.7 Interest - net 5.7 3.7 23.1 16.6 Other - net 3.5 2.7 13.1 21.9 Restructuring and asset write-offs - - - 238.5 639.7 648.2 2,513.7 2,688.1 Earnings (Loss) before income taxes 36.1 50.6 215.4 (18.6) Income Taxes 10.3 24.1 77.6 23.3 Net Earnings (Loss) $ 25.8 $ 26.5 $ 137.8 $ (41.9) Net Earnings (Loss) Per Share of Common Stock Basic $ 0.29 $ 0.30 $ 1.54 $ (0.47) Diluted $ 0.29 $ 0.29 $ 1.53 $ (0.47) Dividends per share $ 0.215 $ 0.20 $ .83 $ 0.77 Average shares outstanding (in thousands) Basic 89,375 89,517 89,408 89,470 Diluted 89,745 90,534 90,193 89,470 Page 8 of 10 Pages EX-20 3 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 achievement of revenue growth and improved customer service are forward looking and are, therefore, inherently subject to risk and uncertainty. There are currently many operating changes underway to improve customer service. These include a sku reduction program to eliminate low-selling items, better integration of production and sales planning, improved 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 level of revenues 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 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 the expected benefits 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 achieve revenue growth and improved customer service 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; Page 9 of 10 Pages 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 10 of 10 Pages -----END PRIVACY-ENHANCED MESSAGE-----