THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts)
THIRD QUARTER
YEAR TO DATE
2008
2007
2008
2007
NET SALES
$
1,119.7
$
1,106.2
$
3,347.6
$
3,240.0
COSTS AND EXPENSES
Cost of sales
688.3
684.6
2,068.3
2,009.8
Gross margin
431.4
421.6
1,279.3
1,230.2
% to Net sales
38.5
%
38.1
%
38.2
%
38.0
%
Selling, general and administrative
275.0
252.4
833.3
770.1
% to Net sales
24.6
%
22.8
%
24.9
%
23.8
%
Operating margin
156.4
169.2
446.0
460.1
% to Net sales
14.0
%
15.3
%
13.3
%
14.2
%
Other-net
28.7
25.2
70.1
67.7
Restructuring charges and asset impairments
4.8
2.8
25.0
10.4
Income from operations
122.9
141.2
350.9
382.0
Interest-net
18.3
20.2
54.5
60.6
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
104.6
121.0
296.4
321.4
Income taxes
26.2
32.5
76.9
84.8
NET EARNINGS FROM CONTINUING OPERATIONS
78.4
88.5
219.5
236.6
Earnings from discontinued operations before income taxes
(including $128.1 million gain on third quarter 2008 divestiture and $129.7 million year –to –date 2008)
130.4
4.6
139.2
12.4
Income taxes on discontinued operations
44.3
1.7
46.6
4.7
NET EARNINGS FROM DISCONTINUED OPERATIONS
86.1
2.9
92.6
7.7
NET EARNINGS
$
164.5
$
91.4
$
312.1
$
244.3
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations
$
1.00
$
1.08
$
2.78
$
2.86
Discontinued operations
1.09
0.03
1.17
0.09
Total basic earnings per share of common stock
$
2.09
$
1.11
$
3.96
$
2.96
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations
$
0.98
$
1.05
$
2.74
$
2.80
Discontinued operations
1.08
0.03
1.16
0.09
Total diluted earnings per share of common stock
$
2.06
$
1.09
$
3.90
$
2.89
DIVIDENDS PER SHARE
$
0.32
$
0.31
$
0.94
$
0.91
AVERAGE SHARES OUTSTANDING (in thousands)
Basic
78,808
82,288
78,867
82,616
Diluted
79,846
83,999
80,025
84,417
1
-Page 8-
THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars)
September 27, 2008
December 29, 2007
ASSETS
Cash and cash equivalents
$
299.3
$
240.4
Accounts and notes receivable
884.7
831.1
Inventories
571.4
556.4
Other current assets
93.1
192.0
Total current assets
1,848.5
1,819.9
Property, plant and equipment, net
588.7
564.9
Goodwill and other intangibles, net
2,486.9
2,206.7
Other assets
197.2
188.4
Total assets
$
5,121.3
$
4,779.9
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings
$
456.2
$
292.8
Accounts payable
523.8
499.6
Accrued expenses
518.8
486.0
Total current liabilities
1,498.8
1,278.4
Long-term debt
1,194.4
1,212.1
Other long-term liabilities
556.6
560.9
Shareowners’ equity
1,871.5
1,728.5
Total liabilities and equity
$
5,121.3
$
4,779.9
2
-Page 9-
THE STANLEY WORKS AND SUBSIDIARIES SUMMARY OF CASH FLOW ACTIVITY (Unaudited, Millions of Dollars)
THIRD QUARTER
YEAR TO DATE
2008
2007
2008
2007
OPERATING ACTIVITIES
Net earnings
$
164.5
$
91.4
$
312.1
$
244.3
Depreciation and amortization
47.2
42.2
128.5
120.1
Changes in working capital
40.2
(22.3
)
7.5
(54.4
)
Net gain on sale of businesses
(84.3
)
—
(85.9
)
—
Other
(1.7
)
19.0
(5.1
)
16.2
Net cash provided by operating activities
165.9
130.3
357.1
326.2
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures
(28.3
)
(11.5
)
(81.9
)
(55.0
)
Proceeds from sale of business, net of income taxes paid
162.5
—
165.8
—
Business acquisitions and asset disposals
(336.2
)
(55.9
)
(363.2
)
(619.1
)
Proceeds on long-term borrowings
0.2
—
0.2
529.8
Cash dividends on common stock
(25.2
)
(25.4
)
(73.8
)
(74.9
)
Other
(23.8
)
17.4
54.7
(3.0
)
Net cash used in investing and financing activities
(250.8
)
(75.4
)
(298.2
)
(222.2
)
Increase (Decrease) in Cash and Cash Equivalents
(84.9
)
54.9
58.9
104.0
Cash and Cash Equivalents, Beginning of Period
384.2
225.7
240.4
176.6
Cash and Cash Equivalents, End of Period
$
299.3
$
280.6
$
299.3
$
280.6
Free Cash Flow Computation
Operating cash flow
$
165.9
$
130.3
$
357.1
$
326.2
Less: capital and software expenditures
(28.3
)
(11.5
)
(81.9
)
(55.0
)
Free cash flow (before dividends)
$
137.6
$
118.8
$
275.2
$
271.2
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)
THIRD QUARTER
YEAR TO DATE
2008
2007
2008
2007
NET SALES
Construction & DIY
$
426.7
$
437.5
$
1,284.3
$
1,274.4
Industrial
298.1
298.1
969.0
908.4
Security
394.9
370.6
1,094.3
1,057.2
Total
$
1,119.7
$
1,106.2
$
3,347.6
$
3,240.0
SEGMENT PROFIT
Construction & DIY
$
54.2
$
72.2
$
167.0
$
194.0
Industrial
40.2
41.4
133.0
132.5
Security
74.0
68.3
192.9
181.3
Segment Profit
168.4
181.9
492.9
507.8
Corporate Overhead
(12.0
)
(12.7
)
(46.9
)
(47.7
)
Total
$
156.4
$
169.2
$
446.0
$
460.1
Segment Profit as a Percentage of Net Sales
Construction & DIY
12.7
%
16.5
%
13.0
%
15.2
%
Industrial
13.5
%
13.9
%
13.7
%
14.6
%
Security
18.7
%
18.4
%
17.6
%
17.1
%
Segment Profit
15.0
%
16.4
%
14.7
%
15.7
%
Corporate Overhead
-1.0
%
-1.1
%
-1.4
%
-1.5
%
Total
14.0
%
15.3
%
13.3
%
14.2
%
4
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