8-K 1 final.txt 4QTR ER-DIV 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 25, 2001 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 17 Pages Item 5. Other Events. 1. On January 25, 2001 the Registrant announced fourth quarter 2000 results. Attached as Exhibit 20(i) is a copy of the Registrant's press release. 2. On January 25, 2001 the Registrant announced first quarter 2001 dividends. Attached as Exhibit 20(iii) is a copy of the Registrant's press release. 3. On January 24, 2001 the Registrant and Wal-Mart Stores, Inc. announced a strategic alliance to significantly expand Stanley tool and toolbox offerings. Attached as Exhibit 20(iv) is a copy of the Registrant's press release. Item 7. Financial Statements and Exhibits. (c) 20(i) Press Release dated January 25, 2001 announcing fourth 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. 20(iii) Press Release dated January 25, 2001 announcing first quarter 2001 dividends. 20(iv) Press Release dated January 24, 2001 announcing strategic alliance of The Stanley Works and Wal-Mart Stores, Inc. Page 2 of 17 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 25, 2001 By: Bruce H. Beatt Name: Bruce H. Beatt Title: Vice President, General Counsel and Secretary Page 3 of 17 Pages EXHIBIT INDEX Current Report on Form 8-K Dated January 25, 2001 Exhibit No. Page ----------- ---- 20(i) 5 20(ii) 13 20(iii) 15 20(iv) 16 Page 4 of 17 Pages Exhibit 20(i) FOR IMMEDIATE RELEASE STANLEY REPORTS 13% INCREASE IN 4TH QUARTER EARNINGS PER SHARE Achieves Record Free Cash Flow New Britain, Connecticut, January 25, 2001: The Stanley Works (NYSE: "SWK") announced today that fourth quarter net income was $46.9 million, or $.54 per diluted share, matching First Call's consensus of analyst estimates. In the same quarter last year, the company had earnings of $43.4 million, or $.48 per diluted share, excluding special credits and charges. Reported results of $.49 per diluted share in the fourth quarter of 1999 included one-time special credits and charges to income, the sum of which increased overall reported earnings by $1.2 million pre-tax ($.01 per diluted share). Net sales in the quarter were $666 million, a 4% decline from last year when, excluding effects of special credits and charges, net sales were $693 million. The effects of foreign currency translation, primarily a weak Euro, accounted for a 3% decrease and unit volume was down 1%. Despite numerous recent share gains, the company's sales growth continues to be constrained by a weakening U.S. economy and inventory corrections at major U.S. retailers. On a segment basis, sales decreased 3% in Tools and 8% in Doors. On a geographic basis, sales decreased 4% in the Americas, 5% in Europe and 1% in Asia/Pacific. However, exclusive of the effects of foreign currency, sales increased 6% in Europe and 8% in Asia/Pacific. John M. Trani, Chairman and Chief Executive Officer, commented: "The U.S. economic environment rapidly deteriorated in the fourth quarter with some of our largest customers experiencing weak sales. Despite experiencing a similar trend, we were able to deliver double-digit percentage earnings per share growth and very strong cash flow. Clearly the first half of this year will be difficult, but continued growth and productivity initiatives, a solid balance sheet and inherent strong cash flow position us well in this environment. In the second half, if the economy rebounds and the Euro stays at its current level, our operating leverage should result in double-digit percentage earnings per share gains. A myriad of programs continue to lower our manufacturing cost base, and controls over administrative expenses are working." Gross margin was 35.9% of sales versus 35.3% exclusive of special credits and charges last year, an improvement of 60 basis points. Selling, general and administrative expenses were 23.2% of sales, compared with 24.5%, exclusive of special credits and charges, in the fourth quarter of 1999. Resulting operating margin was 12.7%, up 200 basis points from 10.7% last year. Mr. Trani continued: "Early in the year we recognized the potential for weak markets and adjusted our Page 5 of 17 Pages employment and production plans. Employment reductions were almost double the original expectation. Our operations team continued to rationalize our manufacturing structure, while administrative costs have been tightened. The 130 basis point improvement in selling, general and administrative expenses is particularly encouraging in that we continued to invest in several marketing initiatives." Net interest expense of $6 million approximated fourth quarter 1999 levels. Other net expense of $8 million increased $7 million primarily as a result of lower gains from asset sales and the write-off of the company's remaining interest in a previously-disposed equipment rental business. In the full year 2000, the company reported net sales of $2,749 million, essentially unchanged from last year. Gross margin was 36.3% of sales versus 35.3%, an improvement of 100 basis points, marking the first year the company has achieved gross margin above 36%. While selling, general and administrative expenses were 23.9% of sales in both years, sequential increases in the prior year were reversed this year. Resulting operating margin was 12.4%, up 100 basis points over 11.4% last year. Net income for 2000 was $194 million ($2.22 per diluted share), versus $185 million ($2.06 per diluted share) in 1999. Full-year 1999 results above exclude the aforementioned 1999 special charges and credits, as well as restructuring-related transition costs in the first two quarters. The company also reported that fourth quarter cash generated by operations was a record $116 million versus $70 million last year, and free cash flow (after capital expenditures and dividends) was $80 million versus $28 million last year. For the year, free cash flow of $94 million more than doubled the $41 million free cash flow in 1999. Mr. Trani added: "The high quality of our earnings and inherent cash- generating ability are now apparent. Our accounts receivable decrease, which was the result of improved collection of delinquent and overdue balances, was particularly impressive. We have every expectation that 2001 will show greater working capital efficiency and further enhanced cash generation." Tools segment sales of $521 million were 3% lower than the fourth quarter of 1999. Strong sales performance in the U.S. industrial markets and Latin America were offset by weakness in the U.S. and European consumer markets. European tool sales were impacted by $13 million of negative foreign currency versus $8 million negative impact in 1999. Tools segment operating margin, excluding special credits and charges, was 12.8% compared with 12.2% in the same period last year, from productivity gains. Doors segment sales decreased 8% to $146 million, as markets for U.S. residential entry doors and home decor products weakened. Doors segment operating profit improved to 12.6% of sales versus 5.7% in the same Page 6 of 17 Pages period last year due to productivity gains in entry door plants and the benefits of shifting the production base in the Hardware business to low-cost countries. 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 Vice President, Investor Relations (860) 827-3833 office (860) 658-2718 home ggould@stanleyworks.com 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 to be 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 7 of 17 Pages THE STANLEY WORKS AND SUBSIDIARIES Consolidated Statements of Operations and Business Segment Information Excluding 1999 Special Credits and Charges Fourth Quarters 2000 vs. 1999 (Unaudited, Millions of Dollars Except Per Share Amounts)
2000 1999 ---- ------------------------------ Excluding Special Special Credits Credits Reported & Charges & Charges Reported ----------------------------------------- Net Sales $ 666.3 $ 693.4 $ (2.8) $ 690.6 Cost of Sales 427.0 448.9 11.6 460.5 ----- ----- ---- ----- Gross margin - - $ 239.3 244.5 (14.4) 230.1 - - % 35.9% 35.3% 33.3% SG&A expenses - - $ 154.4 170.2 10.6 180.8 ----- ----- ---- ----- - - % 23.2% 24.5% 26.2% Operating income - - $ 84.9 74.3 (25.0) 49.3 - - % 12.7% 10.7% 7.1% Interest, net 6.2 6.0 - 6.0 Other, net 8.5 1.6 (4.9) (3.3) Restructuring credit - - (21.3) (21.3) ----- ----- ----- ----- Earnings before income taxes 70.2 66.7 1.2 67.9 Income taxes - - $ 23.3 23.3 0.5 23.8 ----- ---- --- ---- - - % 33.2% 35.0% 35.0% Net earnings $ 46.9 $ 43.4 $ 0.7 $ 44.1 ======= ====== ======= ======= Average shares outstanding (diluted) 86,767 90,159 90,159 90,159 Earnings Per Share (diluted) $ 0.54 $ 0.48 $ 0.01 $ 0.49 ======= ======= ======= ====== INDUSTRY SEGMENTS Net sales Tools $ 520.6 $ 534.9 $ (2.8) $ 532.1 Doors 145.7 158.5 - 158.5 ----- ----- ----- ----- Consolidated $ 666.3 $ 693.4 $ (2.8) $ 690.6 ======= ======= ====== ======= Operating profit Tools $ 66.6 $ 65.2 $(25.0) $ 40.2 Doors 18.3 9.1 - 9.1 ---- --- ----- ----- Consolidated $ 84.9 $ 74.3 $(25.0) $ 49.3 ====== ====== ====== ======= Restructuring credit $ - $ - $ 21.3 $ 21.3 Interest - net (6.2) (6.0) - (6.0) Other - net (8.5) (1.6) 4.9 3.3 ---- ---- --- --- Earnings before income taxes $ 70.2 $ 66.7 $ 1.2 $ 67.9 ====== ====== ====== =======
Page 8 of 17 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Year ---------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net Sales $ 666.3 $ 690.6 $ 2,748.9 $ 2,751.8 Costs and Expenses Cost of sales 427.0 460.5 1,751.5 1,813.9 Selling, general and administrative 154.4 180.8 656.6 703.0 Interest - net 6.2 6.0 27.1 27.9 Other - net 8.5 (3.3) 20.0 (2.5) Restructuring credit (21.3) (21.3) ----- ----- ----- ----- 596.1 622.7 2,455.2 2,521.0 ----- ----- ------- ------- Earnings before income taxes 70.2 67.9 293.7 230.8 Income taxes 23.3 23.8 99.3 80.8 ---- ---- ---- ---- Net Earnings $ 46.9 $ 44.1 $ 194.4 $ 150.0 ====== ====== ======= ======== Net Earnings Per Share of Common Stock Basic $ 0.54 $ 0.49 $ 2.22 $ 1.67 ======= ======= ========= ========= Diluted $ 0.54 $ 0.49 $ 2.22 $ 1.67 ======= ======= ========= ========= Dividends per share $ 0.23 $ 0.22 $ 0.90 $ 0.87 ======= ======= ========= ========= Average shares outstanding (in thousands) Basic 86,414 89,942 87,407 89,626 ====== ====== ====== ====== Diluted 86,767 90,159 87,668 89,887 ====== ====== ====== ======
Page 9 of 17 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars)
December 30 January 1 2000 2000 ---- ---- ASSETS Cash and cash equivalents $ 93.6 $ 88.0 Accounts receivable 531.9 546.1 Inventories 398.1 381.2 Other current assets 70.7 75.7 ---- ---- Total current assets 1,094.3 1,091.0 ------- ------- Property, plant and equipment 503.7 520.6 Goodwill and other intangibles 175.9 185.2 Other assets 110.9 93.8 ----- ---- $ 1,884.8 $ 1,890.6 ========= ========= LIABILITIES AND SHAREOWNERS' EQUITY Short-term borrowings $ 213.7 $ 157.0 Accounts payable 239.8 225.0 Accrued expenses 253.8 311.0 ----- ----- Total current liabilities 707.3 693.0 ----- ----- Long-term debt 248.7 290.0 Other long-term liabilities 192.3 172.2 Shareowners' equity 736.5 735.4 ----- ----- $ 1,884.8 $ 1,890.6 ========= =========
Page 10 of 17 Pages THE STANLEY WORKS AND SUBSIDIARIES SUMMARY OF CASH FLOW ACTIVITY (Unaudited, Millions of Dollars)
Fourth Quarter Year -------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- OPERATING ACTIVITIES Net earnings $ 46.9 $ 44.1 $ 194.4 $ 150.0 Depreciation and amortization 18.9 19.4 83.3 85.6 Other non-cash items 32.3 26.6 42.2 36.4 Changes in working capital 53.8 22.1 (26.3) (25.1) Changes in other operating assets and liabilities (36.2) (42.5) (57.4) (24.6) ----- ----- ----- ----- Net cash provided by operating activities 115.7 69.7 236.2 222.3 INVESTING AND FINANCING ACTIVITIES Capital and software expenditures (16.3) (21.1) (64.4) (102.9) Proceeds from sales of assets 4.1 (1.9) 14.1 35.1 Net borrowing activity (80.9) (65.8) 27.0 (96.5) Net stock transactions 7.4 (4.0) (99.7) (10.4) Proceeds from swap termination - - - 13.9 Cash dividends on common stock (19.8) (20.6) (78.3) (78.5) Other (9.9) 0.2 (29.3) (5.1) ---- --- ----- ---- Net cash used by investing and financing activities (115.4) (113.2) (230.6) (244.4) Increase (Decrease) in Cash and Cash Equivalents 0.3 (43.5) 5.6 (22.1) Cash and Cash Equivalents, Beginning of Period 93.3 131.5 88.0 110.1 ---- ----- ---- ----- Cash and Cash Equivalents, End of Fourth Quarter $ 93.6 $ 88.0 $ 93.6 $ 88.0 ======= ======= ======= =======
Page 11 of 17 Pages THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars)
Fourth Quarter Year ---------------- --------------------- 2000 1999 2000 1999 ---- ---- ---- ---- INDUSTRY SEGMENTS Net Sales Tools $ 520.6 $ 532.1 $ 2,142.5 $ 2,116.2 Doors 145.7 158.5 606.4 635.6 ----- ----- ----- ----- Consolidated $ 666.3 $ 690.6 $ 2,748.9 $ 2,751.8 ======= ======= ========= ========= Operating Profit Tools $ 66.6 $ 40.2 $ 285.7 $ 248.1 Doors 18.3 9.1 55.1 41.7 ---- --- ---- ---- 84.9 49.3 340.8 289.8 Restructuring-related transition and other non-recurring costs - 21.3 - (33.6) Interest-net (6.2) (6.0) (27.1) (27.9) Other-net (8.5) 3.3 (20.0) 2.5 ---- --- ----- --- Earnings before income taxes $ 70.2 $ 67.9 $ 293.7 $ 230.8 ====== ======= ======== ========
Page 12 of 17 Pages Exhibit 20(ii) CAUTIONARY STATEMENTS Under the Private Securities Litigation Reform Act of 1995 The statements in the company's press releases issued today and made today in a conference call with industry analysts, shareowners and other participants regarding the company's ability (1) to be well positioned in the first half of 2001 despite a difficult economic environment through continued growth and productivity initiatives, a solid balance sheet and inherent strong cash flow positions, (2) to deliver revenues in the first quarter of 2001 similar to or moderately below those delivered in the fourth quarter of 2000, (3) to see a sales boost in the second-half of 2001 and an opportunity to grow sales significantly thereafter in connection with the recently announced strategic alliance with Wal-Mart Stores, Inc.,(4) to deliver first quarter earnings per share in the $.54 range, (5) to achieve double-digit earnings per share gains in the second half of 2001 in the event that certain economic conditions exist, and (6) to show greater working capital efficiency and enhanced cash generation in 2001 are forward looking and inherently subject to risk and uncertainty. The company's ability to achieve the revenue and earnings objectives identified in the preceding paragraph are dependent on both internal and external factors, including the success of the company's marketing and sales efforts, continuing improvements in productivity and cost reductions and continued reduction of selling, general and administrative expenses as a percentage of sales, the strength of the United States economy and the strength of foreign currencies, including the Euro. 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 are being developed to improve manufacturing and sales 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 targeted levels of selling, general and administrative expenses. Page 13 of 17 Pages The company's ability to increase market share and generate sales 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 Wal-Mart program and other 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. 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 show greater working capital efficiency and enhanced cash generation in 2001 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 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 17 Pages Exhibit 20 (iii) FOR IMMEDIATE RELEASE THE STANLEY WORKS ANNOUNCES FIRST QUARTER DIVIDEND New Britain, Connecticut, January 25, 2001, The Board of Directors of The Stanley Works (NYSE: "SWK") announced a first quarter regular dividend of $.23 per share on the company's common stock. The dividend is payable on Friday, March 23, 2001 to shareholders of record at the close of business on Monday, March 5, 2001. This is the 125th consecutive year in which the company has paid dividends, a record for industrial companies listed on the New York Stock Exchange. The Stanley Works, an S&P 500 company, is a worldwide supplier of tools, hardware and doors for professional, industrial and consumer use. Investor Gerard J. Gould Contact: Vice President, Investor Relations (860) 827-3833 office (860) 658-2718 home The Stanley Works corporate press releases are available on the company's internet web site at http://www.stanleyworks.com. Click on "About Stanley", then on "Investor Relations" and then on "News Releases". Page 15 of 17 Pages Exhibit 20(iv) FOR IMMEDIATE RELEASE Contacts: Gerard J. Gould (Stanley) 860/827-3833 Rob Phillips (Wal-Mart) 501/277-2987 Stanley Works and Wal-Mart Announce Strategic Alliance No. 1 retailer to significantly expand Stanley tool and toolbox offerings By featuring more than 100 Stanley products NEW BRITAIN, Conn., Jan. 24, 2001 --- The Stanley Works (NYSE: SWK) and Wal-Mart Stores, Inc. (NYSE: WMT) have formed a strategic business alliance that will significantly expand the No. 1 retailer's offerings of Stanley tool and toolbox products. Key elements of the alliance are: * Wal-Mart in March will begin phasing in 112 Stanley (Registered) hand tools, mechanics tools and Stanley/ZAG (Registered) toolboxes at all U.S. Wal-Mart stores and Supercenters, and will discontinue sales of its private label brand of carpenter' and mechanics' hand tools. * Stanley has been named "category captain" for Wal-Mart's hand-tool and toolbox modulars. In this capacity, Stanley will recommend product listings based on syndicated market data and will lead marketing initiatives including in-store signage, racking, off-shelf displays and product presentation. * Wal-Mart will feature such Stanley hand tools a tape measures, knives and blades, saws, hammers and screwdrivers, and such Stanley mechanics tools as wrenches, ratchets and sockets. Gordon Erickson, Wal-Mart's senior vice president and general merchandise manager, said the business alliance is designed to help Wal-Mart better position itself in the branded hand tool business. "Customers have long associated the Stanley brand with quality and durability, and we're pleased to offer this outstanding line of products," he said. "With more than 100 Stanley hand tools and toolboxes to choose from, our customers will enjoy a wide selection of great products at Wal-Mart's everyday low prices." John M. Trani, Stanley chairman and chief executive officer, added, "We are excited about this opportunity to work with the world's largest retailer. We are combining the strengths of our brand with Wal-Mart's distribution prowess. This powerful combination benefits both companies, but most of all consumers, who will find great values on quality Stanley products at more than 2,600 Wal-Mart stores in all 50 states." The Stanley Works is a worldwide supplier of tools, door systems and related hardware for professional, industrial and consumer use, with sales approximately $3 billion 1999. More information about Stanley can be located on-line at www.stanleyworks.com. Page 16 of 17 Pages Wal-Mart Stores, Inc. operates more than 2,600 Wal-Mart stores, Supercenters and Neighborhood Markets in the United States, along with 472 SAM'S Clubs. Internationally, the company operates more than 1,000 units. Wal-Mart employs more than 885,000 associates in the U.S. and 255,000 internationally. More information about Wal-Mart can be located on-line at www.walmartstores.com. The SAM'S Club Web site can be accessed at www.samsclub.com. Page 17 of 17 Pages