THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts)
THIRD QUARTER
YEAR TO DATE
2005
2004
2005
2004
NET SALES
$
844.8
$
751.8
$
2,475.1
$
2,240.5
COSTS AND EXPENSES
Cost of sales
539.7
474.0
1,578.9
1,421.7
Selling, general and administrative
179.8
173.2
554.1
511.2
Interest-net
8.2
8.3
23.9
24.6
Other-net
12.2
10.3
33.7
34.7
Restructuring charges
2.3
—
3.9
—
742.2
665.8
2,194.5
1,992.2
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
102.6
86.0
280.6
248.3
Income taxes
25.7
24.8
71.0
73.3
NET EARNINGS FROM CONTINUING OPERATIONS
$
76.9
$
61.2
$
209.6
$
175.0
Earnings from discontinued operations (including gain
on disposal of $142.7 million) before income taxes
—
3.8
0.1
155.3
Income taxes on discontinued operations
—
1.1
0.3
51.5
NET EARNINGS FROM DISCONTINUED OPERATIONS
—
2.7
(0.2
)
103.8
NET EARNINGS
$
76.9
$
63.9
$
209.4
$
278.8
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations
$
0.92
$
0.74
$
2.52
$
2.14
Discontinued operations
—
0.03
—
1.27
Total basic earnings per share of common stock
$
0.92
$
0.78
$
2.52
$
3.40
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations
$
0.90
$
0.72
$
2.46
$
2.08
Discontinued operations
—
0.03
—
1.24
Total diluted earnings per share of common stock
$
0.90
$
0.76
$
2.46
$
3.32
DIVIDENDS PER SHARE
$
0.29
$
0.28
$
0.85
$
0.80
AVERAGE SHARES OUTSTANDING (in thousands)
Basic
83,566
82,173
83,160
81,904
Diluted
85,483
84,384
85,242
83,945
1
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THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars)
October 1, 2005
January 1, 2005
ASSETS
Cash and cash equivalents
$
338.1
$
250.0
Accounts and notes receivable
652.9
582.0
Inventories
447.0
413.4
Other current assets
74.5
82.2
Assets held for sale
0.6
44.3
Total current assets
1,513.1
1,371.9
Property, plant and equipment
402.0
398.9
Goodwill and other intangibles
986.9
928.2
Other assets
151.4
151.6
Total assets
$
3,053.4
$
2,850.6
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings
$
211.6
$
102.5
Accounts payable
319.0
300.4
Accrued expenses
362.8
415.9
Total current liabilities
893.4
818.8
Long-term debt
467.1
481.8
Other long-term liabilities
314.7
328.7
Shareowners’ equity
1,378.2
1,221.3
Total liabilities and equity
$
3,053.4
$
2,850.6
2
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THE STANLEY WORKS AND SUBSIDIARIES SUMMARY OF CASH FLOW ACTIVITY (Unaudited, Millions of Dollars)
THIRD QUARTER
YEAR TO DATE
2005
2004
2005
2004
OPERATING ACTIVITIES
Net earnings
$
76.9
$
63.9
$
209.4
$
278.8
Depreciation and amortization
23.4
23.2
70.7
70.3
Reclassify taxes paid (proceeds) from sale of business
to investing activities
1.9
10.5
20.6
(129.5
)
Changes in working capital
(45.2
)
(34.0
)
(114.0
)
(47.0
)
Other
17.6
35.4
25.6
69.4
Net cash provided by operating activities
74.6
99.0
212.3
242.0
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures
(17.0
)
(15.3
)
(44.0
)
(36.4
)
Proceeds (taxes paid) from sale of business
(1.9
)
(10.5
)
(20.6
)
129.5
Business acquisitions and asset disposals
(2.3
)
(3.2
)
(108.4
)
(257.5
)
Cash dividends on common stock
(24.2
)
(23.0
)
(70.6
)
(65.4
)
Other
(16.7
)
(26.4
)
119.4
39.7
Net cash used in investing and financing activities
(62.1
)
(78.4
)
(124.2
)
(190.1
)
Increase in Cash and Cash Equivalents
12.5
20.6
88.1
51.9
Cash and Cash Equivalents, Beginning of Period
325.6
235.7
250.0
204.4
Cash and Cash Equivalents, End of Period
$
338.1
$
256.3
$
338.1
$
256.3
Free Cash Flow Computation
Operating Cash Flow
$
74.6
$
99.0
$
212.3
$
242.0
Less: capital and software expenditures
(17.0
)
(15.3
)
(44.0
)
(36.4
)
Free Cash Flow (before dividends)
$
57.6
$
83.7
$
168.3
$
205.6
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.
3
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THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars)
THIRD QUARTER
YEAR TO DATE
2005
2004
2005
2004
NET SALES
Consumer Products
$
295.5
$
256.9
$
825.8
$
776.9
Industrial Tools
332.7
323.4
1,030.2
960.8
Security Solutions
216.6
171.5
619.1
502.8
Total
$
844.8
$
751.8
$
2,475.1
$
2,240.5
OPERATING PROFIT
Consumer Products
$
57.0
$
41.6
$
141.4
$
126.0
Industrial Tools
29.6
33.7
104.3
97.8
Security Solutions
38.7
29.3
96.4
83.8
Total
$
125.3
$
104.6
$
342.1
$
307.6
4
-Page 10-
THE STANLEY WORKS AND SUBSIDIARIES 2005 – 2008 OUTLOOK (Unaudited, Millions of Dollars Except Per Share Amounts)
2005 Earnings Outlook:
4Q2005
2005
Sales Growth:
Organic
1-2
%
4-6
%
Acquisitions
4
%
4
%
5-6
%
8-10
%
EPS:
Operating
$
0.85-$0.87
$
3.34-$3.36
Restructuring
(0.01
)
(0.04
)
$
0.84-$0.86
$
3.30-$3.32
Growth
8-11
%
16
%
Free Cash Flow:
~ $300M
2006 Earnings Outlook:
2006
Q1
Q2
Q3
Q4
Sales Growth:
Organic
4-6
%
5
%
5
%
3
%
4
%
Facom Tools
$
450M
27
%
25
%
22
%
26
%
National Hardware
$
185M
24
%
27
%
25
%
24
%
Other Acquisitions
$
100M
25
%
25
%
25
%
25
%
26-27
%
EPS:
Operating
$
3.65-$3.70
Facom Tools
$
0.10
National Hardware
$
0.01
Other Acquisitions
$
0.03
Sub-total (EPS up 14-16%)
$
3.79-$3.84
2006 Tax Rate Effect
$
(0.14-0.18
)
Sub-total (EPS up 9-11%)
$
3.61-$3.70
FAS 123R Stock Option
$
(0.06
)
$
3.55-$3.64
EPS Growth:
7-9
%
2005-2008 Earnings Outlook:
2005
2006
2007
2008
Sales (billions)
$
3.3
$
4.2
$
4.4
$
4.7
Sales Growth Rate
8-10
%
26-27
%
5-6
%
5-6
%
EPS
$
3.30-$3.32
$
3.55-$3.64
$
4.19-$4.37
$
4.78-$5.07
EPS Growth Rate
16
%
7-9
%
18-20
%
14-16
%
Major Assumptions
- 3-4% organic growth
- Close Facom Tools acquisition 1/1/06
- Close National Hardware acquisition 1/1/06
- $100M/year Security acquisitions ’06-‘08
- Major Security acquisitions possible, but not assumed
- SWK share repurchase activity possible, but not assumed
5
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