THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts)
SECOND QUARTER
YEAR TO DATE
2008
2007
2008
2007
NET SALES
$
1,154.2
$
1,095.7
$
2,227.9
$
2,133.8
COSTS AND EXPENSES
Cost of sales
712.3
673.3
1,380.0
1,325.2
Gross margin
441.9
422.4
847.9
808.6
% to Net sales
38.3
%
38.6
%
38.1
%
37.9
%
Selling, general and administrative
283.2
263.4
558.3
517.7
% to Net sales
24.5
%
24.0
%
25.1
%
24.3
%
Operating margin
158.7
159.0
289.6
290.9
% to Net sales
13.7
%
14.5
%
13.0
%
13.6
%
Other-net
21.1
23.5
41.4
42.5
Restructuring charges
17.0
3.6
20.2
7.6
Income from operations
120.6
131.9
228.0
240.8
Interest-net
17.8
20.3
36.2
40.4
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
102.8
111.6
191.8
200.4
Income taxes
27.1
29.0
50.7
52.3
NET EARNINGS FROM CONTINUING OPERATIONS
75.7
82.6
141.1
148.1
Earnings from discontinued operations before income taxes
4.7
4.4
8.8
7.8
Income taxes on discontinued operations
0.8
1.7
2.3
3.0
NET EARNINGS FROM DISCONTINUED OPERATIONS
3.9
2.7
6.5
4.8
NET EARNINGS
$
79.6
$
85.3
$
147.6
$
152.9
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations
$
0.96
$
1.00
$
1.79
$
1.79
Discontinued operations
0.05
0.03
0.08
0.06
Total basic earnings per share of common stock
$
1.01
$
1.03
$
1.87
$
1.85
DILUTED EARNINGS PER SHARE OF COMMON STOCK
�� Continuing operations
$
0.95
$
0.98
$
1.76
$
1.75
Discontinued operations
0.05
0.03
0.08
0.06
Total diluted earnings per share of common stock
$
1.00
$
1.01
$
1.84
$
1.81
DIVIDENDS PER SHARE
$
0.31
$
0.30
$
0.62
$
0.60
AVERAGE SHARES OUTSTANDING (in thousands)
Basic
78,650
82,810
78,878
82,752
Diluted
79,827
84,542
80,096
84,605
1
-Page 8-
THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Millions of Dollars)
(Unaudited)
June 30, 2008
December 29, 2007
ASSETS
Cash and cash equivalents
$
384.2
$
240.4
Accounts and notes receivable
928.1
831.1
Inventories
563.3
556.4
Other current assets
177.2
192.0
Total current assets
2,052.8
1,819.9
Property, plant and equipment
572.5
564.9
Goodwill and other intangibles
2,233.9
2,206.7
Other assets
207.3
188.4
Total assets
$
5,066.5
$
4,779.9
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings
$
464.7
$
292.8
Accounts payable
529.6
499.6
Other current liabilities
491.4
486.0
Total current liabilities
1,485.7
1,278.4
Long-term debt
1,197.8
1,212.1
Other long-term liabilities
591.7
560.9
Shareowners’ equity
1,791.3
1,728.5
Total liabilities and equity
$
5,066.5
$
4,779.9
2
-Page 9-
THE STANLEY WORKS AND SUBSIDIARIES SUMMARY OF CASH FLOW ACTIVITY (Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR TO DATE
2008
2007
2008
2007
OPERATING ACTIVITIES
Net earnings
$
79.6
$
85.3
$
147.6
$
152.9
Depreciation and amortization
40.5
40.7
81.3
77.9
Changes in working capital
(24.6
)
(13.4
)
(32.7
)
(32.1
)
Other
(12.0
)
(10.5
)
(5.0
)
(2.8
)
Net cash provided by operating activities
83.5
102.1
191.2
195.9
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures
(28.5
)
(17.3
)
(53.6
)
(43.5
)
�� Proceeds from sale of business
3.3
—
3.3
—
Business acquisitions and asset disposals
(26.5
)
(21.8
)
(27.0
)
(563.2
)
Proceeds from long-term borrowings
—
0.1
—
529.8
Cash dividends on common stock
(24.3
)
(24.6
)
(48.6
)
(49.5
)
Other
51.9
(23.6
)
78.5
(20.4
)
Net cash used in investing and financing activities
(24.1
)
(87.2
)
(47.4
)
(146.8
)
Increase (Decrease) in Cash and Cash Equivalents
59.4
14.9
143.8
49.1
Cash and Cash Equivalents, Beginning of Period
324.8
210.8
240.4
176.6
Cash and Cash Equivalents, End of Period
$
384.2
$
225.7
$
384.2
$
225.7
Free Cash Flow Computation
Operating cash flow
$
83.5
$
102.1
$
191.2
$
195.9
Less: capital and software expenditures
(28.5
)
(17.3
)
(53.6
)
(43.5
)
Free cash flow (before dividends)
$
55.0
$
84.8
$
137.6
$
152.4
Free cash flow is defined as cash flow from operations less capital and capitalized software expenditures. The Company believes this is an important measure of its liquidity, of its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not reflect, among other things, deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and acquisitions.
The change in working capital is comprised of current accounts receivable, inventory and accounts payable.
3
-Page 10-
THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR TO DATE
2008
2007
2008
2007
NET SALES
Construction & DIY
$
451.8
$
432.6
$
857.6
$
836.9
Industrial
338.2
302.2
670.9
610.3
Security
364.2
360.9
699.4
686.6
Total
$
1,154.2
$
1,095.7
$
2,227.9
$
2,133.8
SEGMENT PROFIT
Construction & DIY
$
65.8
$
63.3
$
112.8
$
121.8
Industrial
44.1
45.9
92.8
91.1
Security
66.0
67.4
118.9
113.0
Segment Profit
175.9
176.6
324.5
325.9
Corporate Overhead
(17.2
)
(17.6
)
(34.9
)
(35.0
)
Total
$
158.7
$
159.0
$
289.6
$
290.9
Segment Profit as a Percentage of Net Sales
Construction & DIY
14.6
%
14.6
%
13.2
%
14.6
%
Industrial
13.0
%
15.2
%
13.8
%
14.9
%
Security
18.1
%
18.7
%
17.0
%
16.5
%
Segment Profit
15.2
%
16.1
%
14.6
%
15.3
%
Corporate Overhead
-1.5
%
-1.6
%
-1.6
%
-1.7
%
Total
13.7
%
14.5
%
13.0
%
13.6
%
4
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