EX-99.1 3 exhibit2.htm EX-99.1 EX-99.1

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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)

                                 
    FOURTH QUARTER   YEAR TO DATE
    2005   2004   2005   2004
NET SALES
   $ 839.4     $ 790.9     $ 3,285.3     $ 2,997.4  
COSTS AND EXPENSES
                                
Cost of sales
     550.1       500.0       2,104.0       1,893.8  
Selling, general and administrative
     184.9       182.4       736.8       691.3  
Interest-net
     9.9       9.7       33.8       34.4  
Other-net
     13.8       12.2       47.9       46.0  
Restructuring charges
     0.7       7.7       4.6       7.7  
 
                                
 
     759.4       712.0       2,927.1       2,673.2  
 
                                
EARNINGS FROM CONTINUING OPERATIONS
                                
BEFORE INCOME TAXES
     80.0       78.9       358.2       324.2  
Income taxes
     15.8       14.5       86.5       87.3  
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS
   $ 64.2     $ 64.4     $ 271.7     $ 236.9  
 
                                
Earnings (loss) from discontinued operations (including
                                
gain on disposal of $38.5 million fourth quarter and
                                
$180.7 million year to date 2004) before income taxes
     (3.8 )     42.6       (1.2 )     200.8  
Income taxes on discontinued operations
     0.2       18.9       0.9       70.8  
 
                                
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
     (4.0 )     23.7       (2.1 )     130.0  
NET EARNINGS
   $ 60.2     $ 88.1     $ 269.6     $ 366.9  
 
                                
BASIC EARNINGS PER SHARE OF COMMON STOCK
                                
Continuing operations
   $ 0.76     $ 0.78     $ 3.26     $ 2.89  
Discontinued operations
     (0.05 )     0.29       (0.03 )     1.58  
 
                                
Total basic earnings per share of common stock
   $ 0.72     $ 1.07     $ 3.23     $ 4.47  
 
                                
DILUTED EARNINGS PER SHARE OF COMMON STOCK
                                
Continuing operations
   $ 0.75     $ 0.76     $ 3.18     $ 2.81  
Discontinued operations
     (0.05 )     0.28       (0.02 )     1.54  
 
                                
Total diluted earnings per share of common stock
   $ 0.70     $ 1.04     $ 3.16     $ 4.36  
 
                                
DIVIDENDS PER SHARE
   $ 0.29     $ 0.28     $ 1.14     $ 1.08  
 
                                
AVERAGE SHARES OUTSTANDING (in thousands)
                                
Basic
     83,915       82,487       83,347       82,058  
 
                                
Diluted
     85,856       85,020       85,406       84,244  
 
                                

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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)

                 
    December 31, 2005   January 1, 2005
ASSETS
                
Cash and cash equivalents
   $ 657.8     $ 250.0  
Accounts and notes receivable
     609.6       575.4  
Inventories
     460.7       407.3  
Other current assets
     75.6       82.3  
Assets held for sale
     13.3       59.9  
 
                
Total current assets
     1,817.0       1,374.9  
 
                
Property, plant and equipment
     467.1       396.2  
Goodwill and other intangibles
     1,060.4       928.0  
Other assets
     191.0       168.5  
 
                
Total assets
   $ 3,535.5     $ 2,867.6  
 
                
LIABILITIES AND SHAREOWNERS’ EQUITY
                
Short-term borrowings
   $ 170.2     $ 102.5  
Accounts payable
     327.7       297.9  
Accrued expenses
     395.0       416.9  
Liabilities held for sale
     3.1       3.7  
 
                
Total current liabilities
     896.0       821.0  
 
                
Long-term debt
     895.3       481.8  
Other long-term liabilities
     309.4       328.2  
Shareowners’ equity
     1,434.8       1,236.6  
 
                
Total liabilities and equity
   $ 3,535.5     $ 2,867.6  
 
                

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THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)

                                 
    FOURTH QUARTER   YEAR TO DATE
    2005   2004   2005   2004
OPERATING ACTIVITIES
                                
Net earnings
   $ 60.2     $ 88.1     $ 269.6     $ 366.9  
Depreciation and amortization
     25.8       24.7       96.5       95.0  
Changes in working capital
     90.1       40.0       (23.9 )     (7.0 )
Other
     (26.1 )     (23.2 )     20.1       (83.4 )
 
                                
Net cash provided by operating activities
     150.0       129.6       362.3       371.5  
INVESTING AND FINANCING ACTIVITIES
                                
Capital and software expenditures
     (24.4 )     (18.4 )     (68.4 )     (54.8 )
Proceeds (taxes paid) from sale of business
     —       75.4       (20.6 )     204.9  
Business acquisitions and asset disposals
     (174.5 )     (40.7 )     (282.9 )     (298.2 )
Cash dividends on common stock
     (24.3 )     (24.0 )     (94.9 )     (89.4 )
Other
     392.9       (128.2 )     512.3       (88.4 )
 
                                
Net cash provided by( used in) investing and financing activities
     169.7       (135.9 )     45.5       (325.9 )
Increase (decrease) in Cash and Cash Equivalents
     319.7       (6.3 )     407.8       45.6  
Cash and Cash Equivalents, Beginning of Period
     338.1       256.3       250.0       204.4  
 
                                
Cash and Cash Equivalents, End of Period
   $ 657.8     $ 250.0     $ 657.8     $ 250.0  
 
                                
Free Cash Flow Computation
                                
Operating Cash Flow
   $ 150.0     $ 129.6     $ 362.3     $ 371.5  
Less: capital and software expenditures
     (24.4 )     (18.4 )     (68.4 )     (54.8 )
 
                                
Free Cash Flow (before dividends)
   $ 125.6     $ 111.2     $ 293.9     $ 316.7  
 
                                

Free cash flow is defined as cash flow from operations less capital expenditures; the company believes this is an important measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners.

The change in working capital is comprised of accounts receivable, inventory and accounts payable.

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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)

                                 
    FOURTH QUARTER   YEAR TO DATE
    2005   2004   2005   2004
NET SALES
                                
Consumer Products
   $ 289.5     $ 288.6     $ 1,097.8     $ 1,042.7  
Industrial Tools
     339.4       331.6       1,369.5       1,292.5  
Security Solutions
     210.5       170.7       818.0       662.2  
 
                                
Total
   $ 839.4     $ 790.9     $ 3,285.3     $ 2,997.4  
 
                                
OPERATING PROFIT
                                
Consumer Products
   $ 45.2     $ 48.0     $ 185.2     $ 171.4  
Industrial Tools
     30.9       35.1       135.5       133.1  
Security Solutions
     28.3       25.4       123.8       107.8  
 
                                
Total
   $ 104.4     $ 108.5     $ 444.5     $ 412.3  
 
                                

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THE STANLEY WORKS AND SUBSIDIARIES
2006 SALES GROWTH
(Unaudited, Millions of Dollars)

                                                 
2006 Earnings Outlook:
                                                
 
           Total Year           Split By Quarter
        
Sales Growth:
             2006       Q1       Q2       Q3       Q4  
 
                                                
Consumer Products
             2-3 %     (1-2 %)     4-6 %     2-4 %     3-4 %
Industrial Tools
             1-2 %     (0-1 %)     2-3 %     2-3 %     1-2 %
Security Solutions
             3-4 %     2-3 %     4-5 %     4-5 %     2-3 %
 
                                                
 
   Core Organic:
   2-4 %     ~1 %     ~4 %     ~4 %     ~3 %
Facom Tools
           $ 450M       27 %     25 %     22 %     26 %
National Hardware
           $ 185M       24 %     27 %     25 %     24 %
06 Acquisitions
           $ 100M       0 %     0 %     50 %     50 %
 
                                                
 
           +24% -26 %                                

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