SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 25, 2001
The Stanley Works
(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-0548860
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Stanley Drive, New Britain, Connecticut 06053
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(860) 225-5111
Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 17 Pages
Item 5. Other Events.
1. On January 25, 2001 the Registrant announced fourth
quarter 2000 results. Attached as Exhibit 20(i) is a copy of the Registrant's
press release.
2. On January 25, 2001 the Registrant announced first quarter
2001 dividends. Attached as Exhibit 20(iii) is a copy of the Registrant's press
release.
3. On January 24, 2001 the Registrant and Wal-Mart Stores,
Inc. announced a strategic alliance to significantly expand Stanley tool
and toolbox offerings. Attached as Exhibit 20(iv) is a copy of the
Registrant's press release.
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press Release dated January 25, 2001
announcing fourth quarter 2000 results.
20(ii) Cautionary Statements relating to forward looking
statements included in Exhibit 20(i) and made
today in a conference call with industry
analysts, shareowners and other participants.
20(iii) Press Release dated January 25, 2001 announcing
first quarter 2001 dividends.
20(iv) Press Release dated January 24, 2001 announcing
strategic alliance of The Stanley Works and
Wal-Mart Stores, Inc.
Page 2 of 17 Pages
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE STANLEY WORKS
Date: January 25, 2001 By: Bruce H. Beatt
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 17 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated January 25, 2001
Exhibit No. Page
----------- ----
20(i) 5
20(ii) 13
20(iii) 15
20(iv) 16
Page 4 of 17 Pages
Exhibit 20(i)
FOR IMMEDIATE RELEASE
STANLEY REPORTS 13% INCREASE IN 4TH QUARTER EARNINGS PER SHARE
Achieves Record Free Cash Flow
New Britain, Connecticut, January 25, 2001: The Stanley Works (NYSE: "SWK")
announced today that fourth quarter net income was $46.9 million, or $.54 per
diluted share, matching First Call's consensus of analyst estimates. In the same
quarter last year, the company had earnings of $43.4 million, or $.48 per
diluted share, excluding special credits and charges. Reported results of $.49
per diluted share in the fourth quarter of 1999 included one-time special
credits and charges to income, the sum of which increased overall reported
earnings by $1.2 million pre-tax ($.01 per diluted share).
Net sales in the quarter were $666 million, a 4% decline from last year when,
excluding effects of special credits and charges, net sales were $693 million.
The effects of foreign currency translation, primarily a weak Euro, accounted
for a 3% decrease and unit volume was down 1%. Despite numerous recent share
gains, the company's sales growth continues to be constrained by a weakening
U.S. economy and inventory corrections at major U.S. retailers. On a segment
basis, sales decreased 3% in Tools and 8% in Doors. On a geographic basis, sales
decreased 4% in the Americas, 5% in Europe and 1% in Asia/Pacific. However,
exclusive of the effects of foreign currency, sales increased 6% in Europe and
8% in Asia/Pacific.
John M. Trani, Chairman and Chief Executive Officer, commented: "The U.S.
economic environment rapidly deteriorated in the fourth quarter with some of our
largest customers experiencing weak sales. Despite experiencing a similar trend,
we were able to deliver double-digit percentage earnings per share growth and
very strong cash flow. Clearly the first half of this year will be difficult,
but continued growth and productivity initiatives, a solid balance sheet and
inherent strong cash flow position us well in this environment. In the second
half, if the economy rebounds and the Euro stays at its current level, our
operating leverage should result in double-digit percentage earnings per share
gains. A myriad of programs continue to lower our manufacturing cost base, and
controls over administrative expenses are working."
Gross margin was 35.9% of sales versus 35.3% exclusive of special credits and
charges last year, an improvement of 60 basis points. Selling, general and
administrative expenses were 23.2% of sales, compared with 24.5%, exclusive of
special credits and charges, in the fourth quarter of 1999. Resulting operating
margin was 12.7%, up 200 basis points from 10.7% last year. Mr. Trani continued:
"Early in the year we recognized the potential for weak markets and adjusted our
Page 5 of 17 Pages
employment and production plans. Employment reductions were almost double the
original expectation. Our operations team continued to rationalize our
manufacturing structure, while administrative costs have been tightened. The 130
basis point improvement in selling, general and administrative expenses is
particularly encouraging in that we continued to invest in several marketing
initiatives."
Net interest expense of $6 million approximated fourth quarter 1999 levels.
Other net expense of $8 million increased $7 million primarily as a result of
lower gains from asset sales and the write-off of the company's remaining
interest in a previously-disposed equipment rental business.
In the full year 2000, the company reported net sales of $2,749 million,
essentially unchanged from last year. Gross margin was 36.3% of sales versus
35.3%, an improvement of 100 basis points, marking the first year the company
has achieved gross margin above 36%. While selling, general and administrative
expenses were 23.9% of sales in both years, sequential increases in the prior
year were reversed this year. Resulting operating margin was 12.4%, up 100 basis
points over 11.4% last year. Net income for 2000 was $194 million ($2.22 per
diluted share), versus $185 million ($2.06 per diluted share) in 1999. Full-year
1999 results above exclude the aforementioned 1999 special charges and credits,
as well as restructuring-related transition costs in the first two quarters.
The company also reported that fourth quarter cash generated by operations was a
record $116 million versus $70 million last year, and free cash flow (after
capital expenditures and dividends) was $80 million versus $28 million last
year. For the year, free cash flow of $94 million more than doubled the $41
million free cash flow in 1999. Mr. Trani added: "The high quality of our
earnings and inherent cash- generating ability are now apparent. Our accounts
receivable decrease, which was the result of improved collection of delinquent
and overdue balances, was particularly impressive. We have every expectation
that 2001 will show greater working capital efficiency and further enhanced cash
generation."
Tools segment sales of $521 million were 3% lower than the fourth quarter of
1999. Strong sales performance in the U.S. industrial markets and Latin America
were offset by weakness in the U.S. and European consumer markets. European tool
sales were impacted by $13 million of negative foreign currency versus $8
million negative impact in 1999. Tools segment operating margin, excluding
special credits and charges, was 12.8% compared with 12.2% in the same period
last year, from productivity gains.
Doors segment sales decreased 8% to $146 million, as markets for U.S.
residential entry doors and home decor products weakened. Doors segment
operating profit improved to 12.6% of sales versus 5.7% in the same
Page 6 of 17 Pages
period last year due to productivity gains in entry door plants and the benefits
of shifting the production base in the Hardware business to low-cost countries.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools and
doors and related hardware products for professional, industrial and consumer
use.
Contact: Gerard J. Gould
Vice President, Investor Relations
(860) 827-3833 office
(860) 658-2718 home
ggould@stanleyworks.com
This press release contains forward looking statements. Cautionary statements
accompanying these forward-looking statements are set forth, along with this
news release, in a Form 8-K to be filed with the Securities and Exchange
Commission today.
The Stanley Works corporate press releases are available on the company's
internet web site at http://www.stanleyworks.com. Alternatively, they are
available through PR Newswire's "Company News On Call" service by FAX at
800-758-5804, ext. 874363 or on the internet at http://www.prnewswire.com.
Page 7 of 17 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 1999 Special Credits and Charges
Fourth Quarters 2000 vs. 1999
(Unaudited, Millions of Dollars Except Per Share Amounts)
2000 1999
---- ------------------------------
Excluding
Special Special
Credits Credits
Reported & Charges & Charges Reported
-----------------------------------------
Net Sales $ 666.3 $ 693.4 $ (2.8) $ 690.6
Cost of Sales 427.0 448.9 11.6 460.5
----- ----- ---- -----
Gross margin - - $ 239.3 244.5 (14.4) 230.1
- - % 35.9% 35.3% 33.3%
SG&A expenses - - $ 154.4 170.2 10.6 180.8
----- ----- ---- -----
- - % 23.2% 24.5% 26.2%
Operating income - - $ 84.9 74.3 (25.0) 49.3
- - % 12.7% 10.7% 7.1%
Interest, net 6.2 6.0 - 6.0
Other, net 8.5 1.6 (4.9) (3.3)
Restructuring credit - - (21.3) (21.3)
----- ----- ----- -----
Earnings before income taxes 70.2 66.7 1.2 67.9
Income taxes - - $ 23.3 23.3 0.5 23.8
----- ---- --- ----
- - % 33.2% 35.0% 35.0%
Net earnings $ 46.9 $ 43.4 $ 0.7 $ 44.1
======= ====== ======= =======
Average shares outstanding
(diluted) 86,767 90,159 90,159 90,159
Earnings Per Share (diluted) $ 0.54 $ 0.48 $ 0.01 $ 0.49
======= ======= ======= ======
INDUSTRY SEGMENTS
Net sales
Tools $ 520.6 $ 534.9 $ (2.8) $ 532.1
Doors 145.7 158.5 - 158.5
----- ----- ----- -----
Consolidated $ 666.3 $ 693.4 $ (2.8) $ 690.6
======= ======= ====== =======
Operating profit
Tools $ 66.6 $ 65.2 $(25.0) $ 40.2
Doors 18.3 9.1 - 9.1
---- --- ----- -----
Consolidated $ 84.9 $ 74.3 $(25.0) $ 49.3
====== ====== ====== =======
Restructuring credit $ - $ - $ 21.3 $ 21.3
Interest - net (6.2) (6.0) - (6.0)
Other - net (8.5) (1.6) 4.9 3.3
---- ---- --- ---
Earnings before income taxes $ 70.2 $ 66.7 $ 1.2 $ 67.9
====== ====== ====== =======
Page 8 of 17 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Year
---------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales $ 666.3 $ 690.6 $ 2,748.9 $ 2,751.8
Costs and Expenses
Cost of sales 427.0 460.5 1,751.5 1,813.9
Selling, general and
administrative 154.4 180.8 656.6 703.0
Interest - net 6.2 6.0 27.1 27.9
Other - net 8.5 (3.3) 20.0 (2.5)
Restructuring credit (21.3) (21.3)
----- ----- ----- -----
596.1 622.7 2,455.2 2,521.0
----- ----- ------- -------
Earnings before
income taxes 70.2 67.9 293.7 230.8
Income taxes 23.3 23.8 99.3 80.8
---- ---- ---- ----
Net Earnings $ 46.9 $ 44.1 $ 194.4 $ 150.0
====== ====== ======= ========
Net Earnings Per
Share of Common Stock
Basic $ 0.54 $ 0.49 $ 2.22 $ 1.67
======= ======= ========= =========
Diluted $ 0.54 $ 0.49 $ 2.22 $ 1.67
======= ======= ========= =========
Dividends per share $ 0.23 $ 0.22 $ 0.90 $ 0.87
======= ======= ========= =========
Average shares outstanding
(in thousands)
Basic 86,414 89,942 87,407 89,626
====== ====== ====== ======
Diluted 86,767 90,159 87,668 89,887
====== ====== ====== ======
Page 9 of 17 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
December 30 January 1
2000 2000
---- ----
ASSETS
Cash and cash equivalents $ 93.6 $ 88.0
Accounts receivable 531.9 546.1
Inventories 398.1 381.2
Other current assets 70.7 75.7
---- ----
Total current assets 1,094.3 1,091.0
------- -------
Property, plant and equipment 503.7 520.6
Goodwill and other intangibles 175.9 185.2
Other assets 110.9 93.8
----- ----
$ 1,884.8 $ 1,890.6
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 213.7 $ 157.0
Accounts payable 239.8 225.0
Accrued expenses 253.8 311.0
----- -----
Total current liabilities 707.3 693.0
----- -----
Long-term debt 248.7 290.0
Other long-term liabilities 192.3 172.2
Shareowners' equity 736.5 735.4
----- -----
$ 1,884.8 $ 1,890.6
========= =========
Page 10 of 17 Pages
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Fourth Quarter Year
-------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
OPERATING ACTIVITIES
Net earnings $ 46.9 $ 44.1 $ 194.4 $ 150.0
Depreciation and amortization 18.9 19.4 83.3 85.6
Other non-cash items 32.3 26.6 42.2 36.4
Changes in working capital 53.8 22.1 (26.3) (25.1)
Changes in other operating
assets and liabilities (36.2) (42.5) (57.4) (24.6)
----- ----- ----- -----
Net cash provided by
operating activities 115.7 69.7 236.2 222.3
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (16.3) (21.1) (64.4) (102.9)
Proceeds from sales of assets 4.1 (1.9) 14.1 35.1
Net borrowing activity (80.9) (65.8) 27.0 (96.5)
Net stock transactions 7.4 (4.0) (99.7) (10.4)
Proceeds from swap termination - - - 13.9
Cash dividends on common stock (19.8) (20.6) (78.3) (78.5)
Other (9.9) 0.2 (29.3) (5.1)
---- --- ----- ----
Net cash used by investing
and financing activities (115.4) (113.2) (230.6) (244.4)
Increase (Decrease) in Cash
and Cash Equivalents 0.3 (43.5) 5.6 (22.1)
Cash and Cash Equivalents,
Beginning of Period 93.3 131.5 88.0 110.1
---- ----- ---- -----
Cash and Cash Equivalents,
End of Fourth Quarter $ 93.6 $ 88.0 $ 93.6 $ 88.0
======= ======= ======= =======
Page 11 of 17 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Fourth Quarter Year
---------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
INDUSTRY SEGMENTS
Net Sales
Tools $ 520.6 $ 532.1 $ 2,142.5 $ 2,116.2
Doors 145.7 158.5 606.4 635.6
----- ----- ----- -----
Consolidated $ 666.3 $ 690.6 $ 2,748.9 $ 2,751.8
======= ======= ========= =========
Operating Profit
Tools $ 66.6 $ 40.2 $ 285.7 $ 248.1
Doors 18.3 9.1 55.1 41.7
---- --- ---- ----
84.9 49.3 340.8 289.8
Restructuring-related
transition and other
non-recurring costs - 21.3 - (33.6)
Interest-net (6.2) (6.0) (27.1) (27.9)
Other-net (8.5) 3.3 (20.0) 2.5
---- --- ----- ---
Earnings before
income taxes $ 70.2 $ 67.9 $ 293.7 $ 230.8
====== ======= ======== ========
Page 12 of 17 Pages
Exhibit 20(ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
The statements in the company's press releases issued today and made today in a
conference call with industry analysts, shareowners and other participants
regarding the company's ability (1) to be well positioned in the first half of
2001 despite a difficult economic environment through continued growth and
productivity initiatives, a solid balance sheet and inherent strong cash flow
positions, (2) to deliver revenues in the first quarter of 2001 similar to or
moderately below those delivered in the fourth quarter of 2000, (3) to see a
sales boost in the second-half of 2001 and an opportunity to grow sales
significantly thereafter in connection with the recently announced strategic
alliance with Wal-Mart Stores, Inc.,(4) to deliver first quarter earnings per
share in the $.54 range, (5) to achieve double-digit earnings per share gains in
the second half of 2001 in the event that certain economic conditions exist, and
(6) to show greater working capital efficiency and enhanced cash generation in
2001 are forward looking and inherently subject to risk and uncertainty.
The company's ability to achieve the revenue and earnings objectives identified
in the preceding paragraph are dependent on both internal and external factors,
including the success of the company's marketing and sales efforts, continuing
improvements in productivity and cost reductions and continued reduction of
selling, general and administrative expenses as a percentage of sales, the
strength of the United States economy and the strength of foreign currencies,
including the Euro.
The company's ability to improve its productivity and to lower the cost
structure is dependent on the success of various initiatives that are underway
or are being developed to improve manufacturing and sales operations and to
implement related control systems. The success of these initiatives is dependent
on the company's ability to increase the efficiency of its routine business
processes, to develop and implement process control systems, to mitigate the
effects of any material cost inflation, to develop and execute comprehensive
plans for facility consolidations, the availability of vendors to perform
outsourced functions, the successful recruitment and training of new employees,
the resolution of any labor issues related to closing facilities, the need to
respond to significant changes in product demand while any facility
consolidation is in process and other unforeseen events. In addition, the
Company's ability to leverage the benefits of gross margin improvements is
dependent upon achieving targeted levels of selling, general and administrative
expenses.
Page 13 of 17 Pages
The company's ability to increase market share and generate sales is
dependent upon a number of factors, including: (i) the ability to recruit and
retain a sales force comprised of employees and manufacturers representatives,
(ii) the success of the Wal-Mart program and other initiatives to increase
retail sell through and stimulate demand for the company's products, (iii) the
ability of the sales force to adapt to changes made in the sales organization
and achieve adequate customer coverage, (iv) the ability of the company to
fulfill increased demand for its products, (v) the absence of increased
pricing pressures from customers and competitors and the ability to defend
market share in the face of price competition, (vi) the ability to improve
the cost structure in order to fund new product and brand development, and
(vii) the acceptance of the company's new products in the marketplace as
well as the ability to satisfy demand for these products.
The company's ability to reduce selling, general and administrative expenses as
a percentage of sales is dependent upon the success of various process
improvement activities, the continued success of changes to the sales
organization and the reduction of transaction costs.
The company's ability to show greater working capital efficiency and enhanced
cash generation in 2001 are dependent on achieving its earnings growth targets
and the continued success of improvements in processes to manage inventory and
receivables levels.
The company's ability to achieve the objectives discussed above will also be
affected by external factors. These external factors include pricing pressure
and other changes within competitive markets, the continued consolidation of
customers in consumer channels, increasing competition, changes in trade,
monetary and fiscal policies and laws, inflation, currency exchange
fluctuations, the impact of dollar/foreign currency exchange rates on the
competitiveness of products and recessionary or expansive trends in the
economies of the world in which the company operates.
Page 14 of 17 Pages
Exhibit 20 (iii)
FOR IMMEDIATE RELEASE
THE STANLEY WORKS ANNOUNCES FIRST QUARTER DIVIDEND
New Britain, Connecticut, January 25, 2001, The Board of Directors of The
Stanley Works (NYSE: "SWK") announced a first quarter regular dividend of $.23
per share on the company's common stock. The dividend is payable on Friday,
March 23, 2001 to shareholders of record at the close of business on Monday,
March 5, 2001.
This is the 125th consecutive year in which the company has paid dividends, a
record for industrial companies listed on the New York Stock Exchange.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
hardware and doors for professional, industrial and consumer use.
Investor Gerard J. Gould
Contact: Vice President, Investor Relations
(860) 827-3833 office
(860) 658-2718 home
The Stanley Works corporate press releases are available on the company's
internet web site at http://www.stanleyworks.com. Click on "About Stanley", then
on "Investor Relations" and then on "News Releases".
Page 15 of 17 Pages
Exhibit 20(iv)
FOR IMMEDIATE RELEASE Contacts: Gerard J. Gould (Stanley)
860/827-3833
Rob Phillips (Wal-Mart)
501/277-2987
Stanley Works and Wal-Mart Announce Strategic Alliance
No. 1 retailer to significantly expand
Stanley tool and toolbox offerings
By featuring more than 100 Stanley products
NEW BRITAIN, Conn., Jan. 24, 2001 --- The Stanley Works (NYSE: SWK)
and Wal-Mart Stores, Inc. (NYSE: WMT) have formed a strategic
business alliance that will significantly expand the No. 1
retailer's offerings of Stanley tool and toolbox products. Key
elements of the alliance are:
* Wal-Mart in March will begin phasing in 112 Stanley (Registered) hand tools,
mechanics tools and Stanley/ZAG (Registered) toolboxes at all U.S. Wal-Mart
stores and Supercenters, and will discontinue sales of its private label
brand of carpenter' and mechanics' hand tools.
* Stanley has been named "category captain" for Wal-Mart's hand-tool and
toolbox modulars. In this capacity, Stanley will recommend product listings
based on syndicated market data and will lead marketing initiatives including
in-store signage, racking, off-shelf displays and product presentation.
* Wal-Mart will feature such Stanley hand tools a tape measures, knives and
blades, saws, hammers and screwdrivers, and such Stanley mechanics tools as
wrenches, ratchets and sockets.
Gordon Erickson, Wal-Mart's senior vice president and general merchandise
manager, said the business alliance is designed to help Wal-Mart better position
itself in the branded hand tool business. "Customers have long associated the
Stanley brand with quality and durability, and we're pleased to offer this
outstanding line of products," he said. "With more than 100 Stanley hand tools
and toolboxes to choose from, our customers will enjoy a wide selection of great
products at Wal-Mart's everyday low prices."
John M. Trani, Stanley chairman and chief executive officer, added, "We are
excited about this opportunity to work with the world's largest retailer. We are
combining the strengths of our brand with Wal-Mart's distribution prowess. This
powerful combination benefits both companies, but most of all consumers, who
will find great values on quality Stanley products at more than 2,600 Wal-Mart
stores in all 50 states."
The Stanley Works is a worldwide supplier of tools, door systems and related
hardware for professional, industrial and consumer use, with sales approximately
$3 billion 1999. More information about Stanley can be located on-line at
www.stanleyworks.com.
Page 16 of 17 Pages
Wal-Mart Stores, Inc. operates more than 2,600 Wal-Mart stores, Supercenters and
Neighborhood Markets in the United States, along with 472 SAM'S Clubs.
Internationally, the company operates more than 1,000 units. Wal-Mart employs
more than 885,000 associates in the U.S. and 255,000 internationally. More
information about Wal-Mart can be located on-line at www.walmartstores.com. The
SAM'S Club Web site can be accessed at www.samsclub.com.
Page 17 of 17 Pages