THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter | Year to Date | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
NET SALES | $ | 802.9 | $ | 688.3 | $ | 3,043.4 | $ | 2,530.6 | ||||||||
COSTS AND EXPENSES | ||||||||||||||||
Cost of sales | 509.4 | 466.4 | 1,931.1 | 1,673.0 | ||||||||||||
Selling, general and administrative | 183.1 | 151.8 | 694.3 | 615.5 | ||||||||||||
Interest-net | 9.8 | 6.7 | 34.4 | 27.9 | ||||||||||||
Other-net | 19.8 | 26.2 | 54.5 | 91.6 | ||||||||||||
722.1 | 651.1 | 2,714.3 | 2,408.0 | |||||||||||||
EARNINGS FROM CONTINUING OPERATIONS | ||||||||||||||||
BEFORE INCOME TAXES | 80.8 | 37.2 | 329.1 | 122.6 | ||||||||||||
Income taxes | 15.6 | 8.3 | 88.9 | 31.7 | ||||||||||||
NET EARNINGS FROM CONTINUING OPERATIONS | $ | 65.2 | $ | 28.9 | $ | 240.2 | $ | 90.9 | ||||||||
Earnings from discontinued operations (including gain | ||||||||||||||||
on disposals of $38.5 million on the quarter and of $180.7 million year to date) | 40.6 | 9.4 | 195.9 | 28.2 | ||||||||||||
Income taxes on discontinued operations | 17.7 | 3.7 | 69.2 | 11.2 | ||||||||||||
NET EARNINGS FROM DISCONTINUED OPERATIONS | 22.9 | 5.7 | 126.7 | 17.0 | ||||||||||||
NET EARNINGS | $ | 88.1 | $ | 34.6 | $ | 366.9 | $ | 107.9 | ||||||||
BASIC EARNINGS PER SHARE OF COMMON STOCK | ||||||||||||||||
Continuing operations | $ | 0.79 | $ | 0.35 | $ | 2.93 | $ | 1.08 | ||||||||
Discontinued operations | 0.28 | 0.07 | 1.54 | 0.20 | ||||||||||||
Total basic earnings per share of common stock | $ | 1.07 | $ | 0.42 | $ | 4.47 | $ | 1.28 | ||||||||
DILUTED EARNINGS PER SHARE OF COMMON STOCK | ||||||||||||||||
Continuing operations | $ | 0.77 | $ | 0.35 | $ | 2.85 | $ | 1.07 | ||||||||
Discontinued operations | 0.27 | 0.07 | 1.50 | 0.20 | ||||||||||||
Total diluted earnings per share of common stock | $ | 1.04 | $ | 0.42 | $ | 4.36 | $ | 1.27 | ||||||||
DIVIDENDS PER SHARE | $ | 0.28 | $ | 0.26 | $ | 1.08 | $ | 0.99 | ||||||||
AVERAGE SHARES OUTSTANDING (in thousands) | ||||||||||||||||
Basic | 82,487 | 81,514 | 82,058 | 84,143 | ||||||||||||
Diluted | 85,020 | 82,572 | 84,244 | 84,839 | ||||||||||||
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
January 1, 2005 | January 3, 2004 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 250.0 | $ | 204.4 | ||||
Accounts receivable | 595.8 | 462.8 | ||||||
Inventories | 414.3 | 361.6 | ||||||
Other current assets | 102.4 | 97.0 | ||||||
Assets held for sale | 1.4 | 110.3 | ||||||
Total current assets | 1,363.9 | 1,236.1 | ||||||
Property, plant and equipment | 398.9 | 392.5 | ||||||
Goodwill and other intangibles | 924.8 | 629.2 | ||||||
Other assets | 184.8 | 166.0 | ||||||
Total assets | $ | 2,872.4 | $ | 2,423.8 | ||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||||
Short-term borrowings | $ | 102.5 | $ | 157.7 | ||||
Accounts payable | 301.2 | 222.2 | ||||||
Accrued expenses | 436.0 | 314.3 | ||||||
Liabilities held for sale | — | 62.5 | ||||||
Total current liabilities | 839.7 | 756.7 | ||||||
Long-term debt | 481.8 | 534.5 | ||||||
Other long-term liabilities | 340.1 | 274.0 | ||||||
Shareowners’ equity | 1,210.8 | 858.6 | ||||||
Total liabilities and shareowners’ equity | $ | 2,872.4 | $ | 2,423.8 | ||||
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THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Fourth Quarter | Year to Date | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net earnings | $ | 88.1 | $ | 34.6 | $ | 366.9 | $ | 107.9 | ||||||||
Depreciation and amortization | 24.7 | 21.0 | 95.0 | 86.5 | ||||||||||||
Reclassify net proceeds from sale of businesses to | ||||||||||||||||
investing activities | (75.4 | ) | — | (204.9 | ) | — | ||||||||||
Changes in working capital and other | 91.0 | 142.1 | 114.5 | 269.9 | ||||||||||||
Net cash provided by operating activities | 128.4 | 197.7 | 371.5 | 464.3 | ||||||||||||
INVESTING AND FINANCING ACTIVITIES | ||||||||||||||||
Capital and software expenditures | (18.4 | ) | (11.7 | ) | (54.8 | ) | (39.4 | ) | ||||||||
Proceeds (taxes paid) from sale of businesses | 75.4 | — | 204.9 | — | ||||||||||||
Business acquisitions | (43.2 | ) | (1.4 | ) | (301.2 | ) | (22.3 | ) | ||||||||
Cash dividends on common stock | (22.8 | ) | (21.1 | ) | (89.4 | ) | (86.1 | ) | ||||||||
Other | (125.7 | ) | (128.7 | ) | (85.4 | ) | (233.8 | ) | ||||||||
Net cash used in investing and financing activities | (134.7 | ) | (162.9 | ) | (325.9 | ) | (381.6 | ) | ||||||||
Increase(Decrease) in Cash and Cash Equivalents | (6.3 | ) | 34.8 | 45.6 | 82.7 | |||||||||||
Cash and Cash Equivalents, Beginning of Period | 256.3 | 169.6 | 204.4 | 121.7 | ||||||||||||
Cash and Cash Equivalents, End of Period | $ | 250.0 | $ | 204.4 | $ | 250.0 | $ | 204.4 | ||||||||
Free Cash Flow Computation | ||||||||||||||||
Operating Cash Flow | $ | 128.4 | $ | 197.7 | $ | 371.5 | $ | 464.3 | ||||||||
Less: capital and software expenditures | (18.4 | ) | (11.7 | ) | (54.8 | ) | (39.4 | ) | ||||||||
Free Cash Flow from Operations (before dividends) | $ | 110.0 | $ | 186.0 | $ | 316.7 | $ | 424.9 | ||||||||
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.
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Fourth Quarter | Year to Date | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
BUSINESS SEGMENTS | ||||||||||||||||
Net Sales | ||||||||||||||||
Consumer products | $ | 296.2 | $ | 275.5 | $ | 1,073.1 | $ | 958.2 | ||||||||
Industrial tools | 331.7 | 285.7 | 1,292.5 | 1,098.3 | ||||||||||||
Security solutions | 175.0 | 127.1 | 677.8 | 474.1 | ||||||||||||
Consolidated | $ | 802.9 | $ | 688.3 | $ | 3,043.4 | $ | 2,530.6 | ||||||||
Operating Profit | ||||||||||||||||
Consumer products | $ | 49.4 | $ | 47.3 | $ | 175.4 | $ | 149.4 | ||||||||
Industrial tools | 34.1 | 5.4 | 131.9 | 17.0 | ||||||||||||
Security solutions | 26.9 | 17.4 | 110.7 | 75.7 | ||||||||||||
Consolidated | $ | 110.4 | $ | 70.1 | $ | 418.0 | $ | 242.1 | ||||||||
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THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Reconciliation to GAAP Earnings
Fourth Quarter 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)
2003 | ||||||||||||
(a) | ||||||||||||
Pro-forma Excludes Charges | Charges | Reported | ||||||||||
Net sales | $ | 688.3 | $ | — | $ | 688.3 | ||||||
Cost of sales | 453.8 | 12.6 | 466.4 | |||||||||
Gross Margin | 234.5 | (12.6 | ) | 221.9 | ||||||||
34.1 | % | 32.2 | % | |||||||||
Selling, general & administrative | 144.8 | 7.0 | 151.8 | |||||||||
21.0 | % | 22.1 | % | |||||||||
Subtotal | 89.7 | (19.6 | ) | 70.1 | ||||||||
13.0 | % | 10.2 | % | |||||||||
Interest, net | 6.7 | — | 6.7 | |||||||||
Other, net | 8.5 | 17.7 | 26.2 | |||||||||
Earnings from continuing operations before income taxes | 74.5 | (37.3 | ) | 37.2 | ||||||||
Income taxes | 20.2 | (11.9 | ) | 8.3 | ||||||||
27.1 | % | 22.3 | % | |||||||||
Net earnings from continuing operations | $ | 54.3 | $ | (25.4 | ) | $ | 28.9 | |||||
Earnings from discontinued operations | 9.4 | — | 9.4 | |||||||||
Income taxes on discontinued operations | 3.7 | — | 3.7 | |||||||||
Net earnings | $ | 60.0 | $ | (25.4 | ) | $ | 34.6 | |||||
Average shares outstanding (diluted, in thousands) | 82,572 | 82,572 | 82,572 | |||||||||
Earnings per share (diluted) | $ | 0.73 | $ | (0.31 | ) | $ | 0.42 | |||||
BUSINESS SEGMENTS | ||||||||||||
Net sales | ||||||||||||
Consumer products | $ | 275.5 | $ | — | $ | 275.5 | ||||||
Industrial tools | 285.7 | — | 285.7 | |||||||||
Security solutions | 127.1 | — | 127.1 | |||||||||
Consolidated | $ | 688.3 | $ | — | $ | 688.3 | ||||||
Operating profit (loss) | ||||||||||||
Consumer products | $ | 47.4 | $ | (0.1 | ) | $ | 47.3 | |||||
Industrial tools | 24.8 | (19.4 | ) | 5.4 | ||||||||
Security Solutions | 17.5 | (0.1 | ) | 17.4 | ||||||||
Consolidated | $ | 89.7 | $ | (19.6 | ) | $ | 70.1 | |||||
Interest, net | 6.7 | — | 6.7 | |||||||||
Other, net | 8.5 | 17.7 | 26.2 | |||||||||
Earnings from continuing operations before income taxes | $ | 74.5 | $ | (37.3 | ) | $ | 37.2 | |||||
(a) Includes $37.3 million of pre-tax Operation 15 restructuring costs, asset impairment charges and other exit costs. Aggregate restructuring charges of $17.4 million include the following: $11.5 million attributable to asset impairments, $3.1 million in severance and related benefits for headcount reductions pertaining to Operation 15 initiatives, and $2.5 million other. Cost of sales reflects a $12.6 million inventory charge associated with the planned closure of a U. S. distribution facility. Costs of $7.0 million and $0.6 million related to the Mac Direct retail channel exit and other Operation 15 costs are classified in SG&A and Other, net, respectively.
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THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Reconciliation to GAAP Earnings
Year 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)
2003 | ||||||||||||
(a) | ||||||||||||
Pro-forma Excludes Charges | Charges | Reported | ||||||||||
Net sales | $ | 2,530.6 | $ | — | $ | 2,530.6 | ||||||
Cost of sales | 1,653.4 | 19.6 | 1,673.0 | |||||||||
Gross Margin | 877.2 | (19.6 | ) | 857.6 | ||||||||
34.7 | % | 33.9 | % | |||||||||
Selling, general & administrative | 578.3 | 37.2 | 615.5 | |||||||||
22.9 | % | 24.3 | % | |||||||||
Subtotal | 298.9 | (56.8 | ) | 242.1 | ||||||||
11.8 | % | 9.6 | % | |||||||||
Interest, net | 27.9 | — | 27.9 | |||||||||
Other, net | 29.9 | 61.7 | 91.6 | |||||||||
Earnings from continuing operations before income taxes | 241.1 | (118.5 | ) | 122.6 | ||||||||
Income taxes | 69.6 | (37.9 | ) | 31.7 | ||||||||
28.9 | % | 25.9 | % | |||||||||
Net earnings from continuing operations | $ | 171.5 | $ | (80.6 | ) | $ | 90.9 | |||||
Earnings from discontinued operations | 28.2 | — | 28.2 | |||||||||
Income taxes on discontinued operations | 11.2 | — | 11.2 | |||||||||
Net earnings | $ | 188.5 | $ | (80.6 | ) | $ | 107.9 | |||||
Average shares outstanding (diluted, in thousands) | 84,839 | 84,839 | 84,839 | |||||||||
Earnings per share (diluted) | $ | 2.22 | $ | (0.95 | ) | $ | 1.27 | |||||
BUSINESS SEGMENTS | ||||||||||||
Net sales | ||||||||||||
Consumer products | $ | 958.2 | $ | — | $ | 958.2 | ||||||
Industrial tools | 1,098.3 | — | 1,098.3 | |||||||||
Security solutions | 474.1 | — | 474.1 | |||||||||
Consolidated | $ | 2,530.6 | $ | — | $ | 2,530.6 | ||||||
Operating profit (loss) | ||||||||||||
Consumer products | $ | 153.0 | $ | (3.6 | ) | $ | 149.4 | |||||
Industrial tools | 68.6 | (51.6 | ) | 17.0 | ||||||||
Security Solutions | 77.3 | (1.6 | ) | 75.7 | ||||||||
Consolidated | $ | 298.9 | $ | (56.8 | ) | $ | 242.1 | |||||
Interest, net | 27.9 | — | 27.9 | |||||||||
Other, net | 29.9 | 61.7 | 91.6 | |||||||||
Earnings from continuing operations before income taxes | $ | 241.1 | $ | (118.5 | ) | $ | 122.6 | |||||
(a) Includes $118.5 million of pre-tax Operation 15 restructuring costs, asset impairment charges, other exit costs and Chief Executive Officer (CEO) retirement costs. Aggregate charges of $52.7 million arising from the Mac Direct retail channel exit are classified as follows: Cost of sales - $7.0 million; SG&A – 26.1 million; Other, net — $9.5 million; and Restructuring and asset impairment charges — $10.1 million. Cost of sales also reflects a $12.6 million inventory charge related to the planned closure of a U. S. distribution facility. In addition, $7.6 million in compensation and benefit costs associated with the CEO’s announced retirement plans and $3.5 million other are classified in SG&A. Restructuring and asset impairment charges, aside from the $10.1 million for Mac Direct, are comprised of the following: asset impairments of $21.9 million, contract termination charges of $2.8 million, and $17.4 million mainly attributable to severance and related benefits for Operation 15 headcount reduction initiatives.
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