0000093556-01-500018.txt : 20011026 0000093556-01-500018.hdr.sgml : 20011026 ACCESSION NUMBER: 0000093556-01-500018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011018 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20011018 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: 1934 Act SEC FILE NUMBER: 001-05224 FILM NUMBER: 1761626 BUSINESS ADDRESS: STREET 1: 1000 STANLEY DR STREET 2: P O BOX 7000 CITY: NEW BRITAIN STATE: CT ZIP: 06053 BUSINESS PHONE: 8602255111 MAIL ADDRESS: STREET 1: 1000 STANLEY DR CITY: NEW BRITAIN STATE: CT ZIP: 06053 8-K 1 swk-file.txt 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 17, 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 16 Pages Item 5. Other Events. On October 17, 2001, Emmanuel A. Kampouris was elected to the Registrant's Board of Directors. Attached as Exhibit 20(ii) is a copy of the Registrant's Press Release dated October 18, 2001 announcing the election of the new director. Item 7. Financial Statements and Exhibits. (c) 20(i) Press Release dated October 18, 2001 announcing third quarter 2001 results. 20(ii) Press Release dated October 18, 2001 announcing the election of Emmanuel A. Kampouris to the Board of Directors. 20(iii)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. Item 9. Regulation FD Disclosure. In a press release attached to this 8-K, the company provided earnings guidance and revenue projections for the fourth quarter of 2001 and full year of 2002. In a conference call held today with industry analysts, shareowners and other participants, the company reviewed the earnings guidance and revenue projections in the press release. Page 2 of 16 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 18, 2001 By: Bruce H. Beatt ----------------------------- Name: Bruce H. Beatt Title: Vice President, General Counsel and Secretary Page 3 of 16 Pages EXHIBIT INDEX Current Report on Form 8-K Dated October 18, 2001 Exhibit No. Page ----------- ---- 20(i) 5 20(ii) 14 20(iii) 15 Page 4 of 16 Pages Exhibit 20(i) FOR IMMEDIATE RELEASE STANLEY WORKS REPORTS 3RD QUARTER NET EARNINGS OF 62 CENTS PER SHARE, UP 11% OVER PRIOR YEAR 13.6% Operating Margin Is Highest In 15 Years New Britain, Connecticut, October 18, 2001: The Stanley Works (NYSE: "SWK") announced that third quarter net income was $54 million, or 62 cents per fully-diluted share, up 11% over last year and exceeding the 60 cents First Call consensus Wall Street estimate. Net sales of $676 million were 1% lower than last year. On a segment basis, sales decreased 3% in Tools and increased 5% in Doors. John M. Trani, Chairman and Chief Executive Officer, commented: "Our U.S. hand tools business delivered sales growth for the second consecutive quarter due to new product sales and recent share gains, especially at Wal*Mart where the product line continues to be rolled out. Shipments of our entry door products to The Home Depot were very strong as the new product line enjoyed significant success with consumers." "However," Mr. Trani added, "these positives were not enough to completely offset the very weak commercial and industrial markets served by the majority of our businesses. These market conditions are the weakest encountered by Stanley in at least a decade." Gross margin was 35.4%, a decline of 40 basis points from 35.8% in the third quarter of 2000, principally from lower industrial sales. Continuing solid productivity improvements were insufficient to offset the mix shift to the retail channel. Selling, general and administrative ("SG&A") expenses, exclusive of a one-time charge, were $147 million (21.8% of sales) and were 10% (or 190 basis points) below last year. Excluding both the one-time charge in the third quarter and the impact of the acquisition in the second quarter, SG&A expenses declined sequentially for the 7th consecutive quarter. Mr. Trani commented: "Again this quarter we dealt with lower volume in continuing weak markets and adjusted employment levels accordingly." As a result and as previously announced, the company incurred a third-quarter charge of $5 Page 5 of 16 Pages million for new severance obligations, of which $3 million was paid out during the quarter. The after-tax effect of the charge was offset by certain non-recurring tax transactions. Operating margin was 13.6%, up 150 basis points from 12.1% last year. The year-to-date operating margin of 13.3%, if sustained through year-end, would be the company's highest operating margin in the more than 35 years its stock has been listed on the New York Stock Exchange. Net interest expense of $6.7 million was less than the $7.2 million in the prior year due to lower interest rates. Other net expenses increased to $3.9 million versus $1.8 million last year due to higher goodwill amortization and the absence of gains from asset sales. Cash generated by operations was $69 million, and free cash flow (after dividend payments) was $29 million, both slightly less than year-ago levels. Inventory reductions were especially noteworthy given their tendency to rise in the third quarter on a seasonal basis. Tools sales decreased 3% from the third quarter of 2000 to $514 million. Operating margin, exclusive of the one-time charge described above, was 14.3%, an increase of 140 basis points over last year. Doors sales increased 5% to $162 million. Operating margin increased 220 basis points to 11.4% of sales, compared with 9.2% last year. Benefits from the company's relocation of its hardware business to China drove the improvement. Despite lower volume and a continuing mix shift to retail channels, performance in both segments reflected continuing productivity gains and selling, general and administrative expense reductions. Since the events of September 11, orders have been somewhat below normal. Management's current estimate is that fourth quarter sales will be about 5% below last year. Industrial and commercial markets are likely to remain weak for the remainder of the year. In response, salaried employment reductions of 10% (about 475 positions) have been undertaken, most of which are already completed. These reductions are expected to lower SG&A expenses by $6-8 million in the fourth quarter. Additional actions will be undertaken, including facility closures and related workforce reductions. The company expects to complete these actions during the fourth quarter of 2001 and the year 2002. These actions will require a restructuring charge to fourth quarter earnings of approximately $60 million, virtually all of which is severance-related. The cash Page 6 of 16 Pages outflow for these restructuring activities is likely to be offset by the reversion of cash proceeds from the pension-related gain recorded in the first quarter of 2001, as both are expected to occur principally during 2002. Mr. Trani stated: "These actions should enable us to deliver fourth quarter earnings of approximately $.57 per fully-diluted share, up 5% over last year, despite an expected 5% sales decline. With a solid balance sheet, a rapidly declining cost structure and an inherent strong cash flow, we are very well positioned to outperform in this unfavorable economic environment. For the full year 2002, these cost actions enable management to affirm its concurrence with current First Call consensus earnings estimates in the range of $2.64 per fully-diluted share, a double-digit percentage increase over 2001. Expectations are for sales to be slightly higher than 2001, principally in the second half of the year. These estimates assume that global economic conditions remain lackluster but do not deteriorate further during 2002. 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. 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 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. Page 7 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts)
Third Quarter Nine Months ---------------- ------------------ 2001 2000 2001 2000 ------ ------ ------- ------ NET SALES $ 676.1 $ 684.4 $ 1,978.8 $ 2,082.6 COSTS AND EXPENSES Cost of sales 436.8 439.4 1,272.6 1,324.5 Selling, general and administrative 152.1 162.2 456.6 502.2 Interest - net 6.7 7.2 20.8 20.9 Other - net 3.9 1.8 (12.2) 11.5 Restructuring charge - - 18.3 - ----- ------ ------- ------- 599.5 610.6 1,756.1 1,859.1 ----- ----- ------- ------- EARNINGS BEFORE INCOME TAXES 76.6 73.8 222.7 223.5 Income taxes 22.1 25.1 70.9 76.0 ---- ---- ---- ---- NET EARNINGS $ 54.5 $ 48.7 $ 151.8 $ 147.5 ====== ====== ======= ======== NET EARNINGS PER SHARE OF COMMON STOCK Basic $ 0.64 $ 0.56 $ 1.77 $ 1.68 ======= ======= ========= ========= Diluted $ 0.62 $ 0.56 $ 1.74 $ 1.68 ======= ======= ========= ========= DIVIDENDS PER SHARE $ 0.24 $ 0.23 $ 0.70 $ 0.67 ======= ======= ========= ========= AVERAGE SHARES OUTSTANDING (in thousands) Basic 85,439 86,532 85,744 87,721 ====== ====== ====== ====== Diluted 87,419 86,677 87,346 87,927 ====== ====== ====== ======
Page 8 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars)
Sept. 29 Sept. 30 2001 2000 --------- --------- ASSETS Cash and cash equivalents $ 152.2 $ 93.3 Accounts receivable 559.9 576.7 Inventories 432.2 388.6 Other current assets 96.5 72.9 ---- ---- Total current assets 1,240.8 1,131.5 ------- ------- Property, plant and equipment 506.7 505.3 Goodwill and other intangibles 234.3 174.9 Other assets 157.0 111.8 ----- ----- $2,138.8 $ 1,923.5 ======== ========= LIABILITIES AND SHAREOWNERS' EQUITY Short-term borrowings $ 380.4 $ 293.5 Accounts payable 237.8 222.4 Accrued expenses 271.9 288.4 ----- ----- Total current liabilities 890.1 804.3 ----- ----- Long-term debt 231.5 243.3 Other long-term liabilities 187.1 175.1 Shareowners' equity 830.1 700.8 ----- ----- $ 2,138.8 $ 1,923.5 ========= =========
Page 9 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES SUMMARY OF CASH FLOW ACTIVITY (Unaudited, Millions of Dollars)
Third Quarter Nine Months -------------- ---------------- 2001 2000 2001 2000 ------ ------ ------ ------ OPERATING ACTIVITIES Net earnings $ 54.5 $ 48.7 $151.8 $147.5 Depreciation and amortization 18.6 20.3 60.8 64.4 Restructuring charge - - 18.3 - Changes in working capital (11.0) (16.7) (75.3) (80.1) Changes in other operating assets and liabilities 7.0 20.3 (51.7) (11.3) --- ---- ----- ----- Net cash provided by operating activities 69.1 72.6 103.9 120.5 INVESTING AND FINANCING ACTIVITIES Capital and software expenditures (20.0) (19.3) (56.0) (48.1) Business acquisitions/dispositions 0.2 6.5 (77.9) 10.0 Cash dividends on common stock (20.6) (19.8) (59.9) (58.5) Other net investing and financing activity (38.7) (29.7) 148.5 (18.6) ----- ----- ----- ----- Net cash used in investing and financing activities (79.1) (62.3) (45.3) (115.2) Increase (Decrease) in Cash and Cash Equivalents (10.0) 10.3 58.6 5.3 Cash and Cash Equivalents, Beginning of Period 162.2 83.0 93.6 88.0 ----- ---- ---- ---- Cash and Cash Equivalents, End of Period $152.2 $ 93.3 $152.2 $ 93.3 ====== ======= ====== ======
Page 10 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars)
Third Quarter Nine Months --------------- ----------------- 2001 2000 2001 2000 ----- ----- ------ ------ INDUSTRY SEGMENTS Net Sales Tools $ 514.4 $ 530.6 $ 1,530.7 $ 1,621.8 Doors 161.7 153.8 448.1 460.8 ----- ----- ----- ----- Consolidated $ 676.1 $ 684.4 $ 1,978.8 $ 2,082.6 ======= ======= ========= ========= Operating Profit Tools $ 68.8 $ 68.7 $ 205.2 $ 219.2 Doors 18.4 14.1 44.4 36.7 ---- ---- ---- ---- Consolidated $ 87.2 $ 82.8 $ 249.6 $ 255.9 ======= ====== ========= ========
Page 11 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES Consolidated Statements of Operations and Business Segment Information Excluding 2001 One-Time Charges & Credits Third Quarter 2001 vs. 2000 (Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000 ---------------------------------- ------------ Excluding One-Time One-Time Charges & Charges & Credits Credits Reported Reported ------- ------- -------- -------- Net Sales $ 676.1 $ - $ 676.1 $ 684.4 Cost of sales 436.8 - 436.8 439.4 ----- ----- ----- Gross Margin 239.3 - 239.3 245.0 35.4% 35.4% 35.8% SG&A Expenses 147.3 4.8 152.1 162.2 ----- --- ----- ----- 21.8% 22.5% 23.7% Operating profit 92.0 (4.8) 87.2 82.8 13.6% 12.9% 12.1% Interest, net 6.9 (0.2) 6.7 7.2 Other, net 3.9 3.9 1.8 --- ----- --- --- Earnings before income taxes 81.2 (4.6) 76.6 73.8 Income taxes 26.7 (4.6) 22.1 25.1 ---- ---- ---- ---- 32.9% 28.9% 34.0% Net earnings $ 54.5 $ - $ 54.5 $ 48.7 ======= ===== ======== ======= Average shares outstanding (diluted) 87,419 87,419 87,419 86,677 Earnings per share (diluted) $ 0.62 $ 0.00 $ 0.62 $ 0.56 ======= ======== ======== ======= INDUSTRY SEGMENTS Net sales Tools $ 514.4 $ - $ 514.4 $ 530.6 Doors 161.7 - 161.7 153.8 ----- ------ ----- ----- Consolidated 676.1 - 676.1 684.4 ===== ====== ===== ===== Operating profit Tools $ 73.6 $ (4.8) $ 68.8 $ 68.7 Doors 18.4 - 18.4 14.1 ---- ----- ---- ---- Consolidated 92.0 (4.8) 87.2 82.8 ---- ----- ---- ---- Interest, net 6.9 (0.2) 6.7 7.2 Other, net 3.9 - 3.9 1.8 --- ---- --- --- Earnings before income taxes $ 81.2 $ (4.6) $ 76.6 $ 73.8 ======= ====== ======= =======
Page 12 of 16 Pages THE STANLEY WORKS AND SUBSIDIARIES Consolidated Statements of Operations and Business Segment Information Excluding 2001 Restructuring and One-Time Charges & Credits YTD 2001 vs. 2000 (Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000 ------------------------------------- --------- Excluding Restructuring Restructuring and One-Time and One-Time Charges & Charges & Credits Credits Reported Reported ------- ------- -------- -------- Net Sales $1,979.5 $ (0.7) $1,978.8 $2,082.6 Cost of sales 1,267.1 5.5 1,272.6 1,324.5 ------- --- ------- ------- Gross Margin 712.4 (6.2) 706.2 758.1 36.0% 35.7% 36.4% SG&A Expenses 448.5 8.1 456.6 502.2 ----- --- ----- ----- 22.7% 23.1% 24.1% Operating profit 263.9 (14.3) 249.6 255.9 13.3% 12.6% 12.3% Interest, net 21.0 (0.2) 20.8 20.9 Other, net 15.4 (27.6) (12.2) 11.5 Restructuring charge - 18.3 18.3 - ----- ---- ---- ------ Earnings before income taxes 227.5 (4.8) 222.7 223.5 Income taxes 75.0 (4.1) 70.9 76.0 ---- ---- ---- ---- 33.0% 31.8% 34.0% Net earnings $ 152.5 $ (0.7) $ 151.8 $ 147.5 ======== ========= ======= ======= Average shares outstanding (diluted) 87,346 87,346 87,346 87,927 Earnings per share (diluted) $ 1.74 $ 0.00 $ 1.74 $ 1.68 ======= ========= ======== ======= INDUSTRY SEGMENTS Net sales Tools $1,531.4 $ (0.7) $ 1,530.7 $1,621.8 Doors 448.1 - 448.1 460.8 -------- --------- ------- ------- Consolidated $1,979.5 $ (0.7) $ 1,978.8 $2,082.6 ======== ========= ========= ======= Operating profit Tools $ 219.2 $ (14.0) $ 205.2 $ 219.2 Doors 44.7 (0.3) 44.4 36.7 ---- ---- ---- ---- Consolidated $ 263.9 $ (14.3) $ 249.6 $ 255.9 ===== ===== ===== ===== Interest, net $ 21.0 $ (0.2) $ 20.8 $ 20.9 Other, net 15.4 (27.6) (12.2) 11.5 Restructuring charge - 18.3 18.3 - ------ ---- ---- ----- Earnings before income taxes $ 227.5 $ (4.8) $ 222.7 $ 223.5 ======== ======== ======== =======
Page 13 of 16 Pages Exhibit 20(ii) FOR IMMEDIATE RELEASE THE STANLEY WORKS ADDS EMMANUEL A. KAMPOURIS TO BOARD OF DIRECTORS New Britain, Connecticut, October 18, 2001 - - The Board of Directors of The Stanley Works (NYSE: SWK) announced the election of a new member, Emmanuel A. Kampouris, retired Chairman, President and Chief Executive Officer of American Standard Companies, Inc. (NYSE: ASD), a leading supplier of air conditioning equipment, plumbing products and electronic braking and control systems. John M. Trani, Chairman and Chief Executive Officer of The Stanley Works, stated, "We are very pleased that Mano Kampouris has joined Stanley's Board. Mano has over 30 years of general management experience with American Standard companies that have competed successfully on a global basis. In the 10 years he ran his company's Building Products sector, he gained a wealth of experience with the same customers and channels we serve. Mano will bring great value to Stanley as we continue on our journey to becoming a Great Brand." Mr. Kampouris joined American Standard's plumbing products subsidiary in Greece in 1966. His career later included management positions of increasing responsibility in the Building Products sector and at the corporate level. He was elected president and chief executive officer in 1989, became chairman of the company's board of directors in 1993 and retired at the end of 1999. Mr. Kampouris is a graduate of North Staffordshire College of Technology, Stroke-on-Trent, England, where he earned a degree in ceramic technology. He also earned an M.A. degree in law from Oxford University, Oxford, England. Contact: Gerard J. Gould Vice President, Investor Relations (860) 827-3833 Page 14 of 16 Pages Exhibit 20(iii) CAUTIONARY STATEMENTS Under the Private Securities Litigation Reform Act of 1995 Statements in the company's press release attached to this Current Report on Form 8-K and made today in a conference call with analysts, shareowners and other participants regarding the company's ability (1) to deliver fourth quarter earnings of $.57 per fully-diluted share; (2) to deliver fourth quarter sales about five percent below those achieved in the fourth quarter of 2000; (3) to affirm its concurrence with current First Call consensus earnings estimates for the full year 2002 in the range of $2.64 per diluted share; and (4) to deliver sales for the full year 2002 slightly higher than those for 2001 are forward looking and inherently subject to risk and uncertainty. The company's ability to achieve the earnings objectives identified in the preceding paragraph is 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, without limitation, the Euro. The company's ability to achieve the expected level of revenues 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 of 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 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, and (vi) 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 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, which initiatives include certain facility closures and related workforce reductions expected to be completed during the fourth quarter 2001 and in 2002. 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 Page 15 of 16 Pages 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. The company's ability to continue to reduce selling, general and administrative expenses as a percentage of sales is dependent on various process improvement activities, the continued success of changes to the sales organization and the reduction of transaction costs. The company's ability to continue strong cash generation in 2001 is dependent on achieving its earnings growth targets and on 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, the impact of the events of September 11, 2001 and recessionary or expansive trends in the economies of the world in which the company operates. Page 16 of 16 Pages