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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 | ||||||||||||
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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 | ||||
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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.
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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 | ||||||||
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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 |
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