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
    2009   2008   2009   2008
 
                                
NET SALES
   $ 969.4     $ 1,085.9     $ 3,737.1     $ 4,426.2  
 
                                
COSTS AND EXPENSES 
                                
      Cost of sales
     575.2       693.4       2,228.8       2,754.8  
             Gross margin
     394.2       392.5       1,508.3       1,671.4  
             % to Net sales
     40.7 %     36.1 %     40.4 %     37.8 %
 
                                
      Selling, general and administrative
     269.0       275.3       1,028.4       1,107.6  
             % to Net sales
     27.7 %     25.4 %     27.5 %     25.0 %
 
                                
             Operating margin
     125.2       117.2       479.9       563.8  
             % to Net sales
     12.9 %     10.8 %     12.8 %     12.7 %
 
                                
      Other-net
     44.0       33.7       95.3       102.2  
      Restructuring and asset impairments
     15.1       60.5       40.7       85.5  
 
                                
             Income from operations
     66.1       23.0       343.9       376.1  
 
                                
      Interest-net
     14.0       20.9       60.6       82.9  
 
                                
 
                                
 
                                
 
                                
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
     52.1       2.1       283.3       293.2  
      Income taxes (benefit)
     (2.3 )     (2.0 )     55.8       72.5  
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS
     54.4       4.1       227.5       220.7  
 
                                
 
                                
      Less: net earnings (loss) attributable to noncontrolling interests
     (0.2 )     0.5       2.0       1.7  
 
                                
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS
     54.6       3.6       225.5       219.0  
 
                                
      Net (loss) earnings from discontinued operations before income taxes
     —       (5.8 )     (5.8 )     132.8  
      Income taxes (benefit) on discontinued operations
     (0.8 )     (1.5 )     (3.3 )     44.9  
 
                                
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
     0.8       (4.3 )     (2.5 )     87.9  
 
                                
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE STANLEY WORKS
   $ 55.4     $ (0.7 )   $ 223.0     $ 306.9  
 
                                
 
                                
BASIC EARNINGS PER SHARE OF COMMON STOCK
                                
      Continuing operations
   $ 0.67     $ 0.05     $ 2.82     $ 2.77  
      Discontinued operations
     0.01       (0.06 )     (0.03 )     1.11  
 
                                
          Total basic earnings (loss) per share of common stock
   $ 0.69     $ (0.01 )   $ 2.79     $ 3.88  
 
                                
 
                                
DILUTED EARNINGS PER SHARE OF COMMON STOCK
                                
      Continuing operations
   $ 0.67     $ 0.05     $ 2.80     $ 2.74  
      Discontinued operations
     0.01       (0.06 )     (0.03 )     1.10  
 
                                
          Total diluted earnings (loss) per share of common stock
   $ 0.68     $ (0.01 )   $ 2.77     $ 3.84  
 
                                
 
                                
DIVIDENDS PER SHARE
   $ 0.33     $ 0.32     $ 1.30     $ 1.26  
 
                                
 
                                
AVERAGE SHARES OUTSTANDING (in thousands)
                                
      Basic
     80,626       78,985       79,788       78,897  
 
                                
 
                                
      Diluted
     81,663       79,525       80,396       79,874  
 
                                
 
                                

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

                 
    (Unaudited)    
    January 2, 2010   January 3, 2009
ASSETS
 
 
           Cash and cash equivalents
  $ 400.7     $ 211.6  
           Accounts and notes receivable
    532.0       677.7  
           Inventories
    366.2       514.7  
           Other current assets
    117.2       94.0  
 
                
                  Total current assets
    1,416.1       1,498.0  
 
                
           Property, plant and equipment
    575.9       579.8  
           Goodwill and other intangibles
    2,594.8       2,596.1  
           Other assets
    186.0       192.7  
 
                
                  Total assets
  $ 4,772.8     $ 4,866.6  
 
                
 
 
 
 
 
 
LIABILITIES AND SHAREOWNERS’ EQUITY
               
           Short-term borrowings
  $ 298.4     $ 227.7  
           Accounts payable
    410.1       461.5  
           Accrued expenses
    483.1       504.0  
 
                
                  Total current liabilities
    1,191.6       1,193.2  
 
                
           Long-term debt
    1,084.7       1,383.8  
           Other long-term liabilities
    486.4       564.8  
           The Stanley Works’ shareowners’ equity
    1,984.8       1,706.3  
           Noncontrolling interests equity
    25.3       18.5  
 
                
                  Total liabilities and equity
  $ 4,772.8     $ 4,866.6  
 
                

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

                                         
    FOURTH QUARTER           YEAR TO DATE
    2009   2008           2009   2008
 
                                        
OPERATING ACTIVITIES
                                        
           Net earnings (loss)
   $ 55.4     $ (0.7 )           $ 223.0     $ 306.9  
           Depreciation and amortization
     51.3       54.5               200.1       183.0  
           Pretax (gain) loss from sale of businesses
     (0.8 )     (40.6 )             1.6       (126.5 )
           Income taxes paid on CST/berger divestiture
     —       (11.8 )             —       (46.0 )
           Changes in working capital
     209.2       127.4               226.0       122.7  
           Other
     (23.7 )     64.9               (111.3 )     76.5  
 
                                        
           Net cash provided by operating activities
     291.4       193.7               539.4       516.6  
 
                                        
INVESTING AND FINANCING ACTIVITIES
                                        
           Capital and software expenditures
     (28.2 )     (58.9 )             (93.4 )     (140.8 )
           Net proceeds from sales of businesses
     0.1       4.6               —       204.6  
           Business acquisitions and asset disposals
     (1.8 )     (207.5 )             (21.8 )     (570.7 )
           Proceeds from long-term borrowings
     —       249.5               —       249.7  
           Cash dividends on common stock
     (26.7 )     (25.2 )             (103.6 )     (99.0 )
           Other
     (41.5 )     (243.9 )             (131.5 )     (189.2 )
 
                                        
           Net cash used in investing and financing activities
     (98.1 )     (281.4 )             (350.3 )     (545.4 )
 
                                        
Increase (Decrease) in Cash and Cash Equivalents
     193.3       (87.7 )             189.1       (28.8 )
 
                                        
Cash and Cash Equivalents, Beginning of Period
     207.4       299.3               211.6       240.4  
 
                                        
 
                                        
Cash and Cash Equivalents, End of Period
   $ 400.7     $ 211.6             $ 400.7     $ 211.6  
 
                                        
 
                                        
 
                                        
 
                                        
Free Cash Flow Computation
                                        
 
                                        
Operating cash flow
   $ 291.4     $ 193.7             $ 539.4     $ 516.6  
Less: capital and software expenditures
     (28.2 )     (58.9 )             (93.4 )     (140.8 )
Add: Income taxes paid on CST/berger divestiture
     —       11.8               —       46.0  
 
                                        
Free Cash Flow (before dividends)
   $ 263.2     $ 146.6             $ 446.0     $ 421.8  
 
                                        
 
                                        
 
                                        

Free cash flow is defined as cash flow from operations less capital and capitalized software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. In 2008, free cash flow also excludes the income taxes paid on the CST/berger divestiture due to the fact the taxes are non-recurring and the directly related gross cash proceeds are classified in investing cash flows. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items.

The change in working capital is comprised of current 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
    2009   2008       2009   2008
NET SALES
 
 
 
 
 
           Security
  $ 393.2     $ 410.2         $ 1,560.2     $ 1,497.2  
           Industrial
    235.9       304.5           881.6       1,273.5  
           Construction & DIY
    340.3       371.2           1,295.3       1,655.5  
 
                                    
              Total
  $ 969.4     $ 1,085.9         $ 3,737.1     $ 4,426.2  
 
                                    
 
                                   
 
 
 
 
 
 
SEGMENT PROFIT
                                   
           Security
  $ 78.3     $ 75.3         $ 307.0     $ 268.7  
           Industrial
    26.7       31.2           89.3       164.2  
           Construction & DIY
    40.4       23.6           154.1       190.7  
 
                                    
              Segment Profit
    145.4       130.1           550.4       623.6  
           Corporate Overhead
    (20.2 )     (12.9 )         (70.5 )     (59.8 )
 
                                    
              Total
  $ 125.2     $ 117.2         $ 479.9     $ 563.8  
 
                                    
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit as a Percentage of Net Sales
 
 
 
 
 
           Security
    19.9 %     18.4 %         19.7 %     17.9 %
           Industrial
    11.3 %     10.2 %         10.1 %     12.9 %
           Construction & DIY
    11.9 %     6.4 %         11.9 %     11.5 %
 
                                    
              Segment Profit
    15.0 %     12.0 %         14.7 %     14.1 %
           Corporate Overhead
    -2.1 %     -1.2 %         -1.9 %     -1.4 %
 
                                    
              Total
    12.9 %     10.8 %         12.8 %     12.7 %
 
                                    

4