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): April 18, 2001
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The Stanley Works
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(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-0548860
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Stanley Drive, New Britain, Connecticut 06053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(860) 225-5111
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Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 13 Pages
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) 20(i) Press Release dated April 18, 2001
announcing first quarter 2001 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.
Item 9. Regulation FD Disclosure.
------------------------
In a press release attached to this 8-K, the company
provided earnings guidance for the second quarter and
full year of 2001. In a conference call held today
with industry analysts, shareowners and other
participants, the company reviewed the earnings
guidance in the press release, provided revenue and
cash flow projections and commented on the benefits
expected from the acquisition of Contact East.
Page 2 of 13 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: April 18, 2001 By: /s/ Bruce H. Beatt
--------------------------------
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 13 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated April 18, 2001
Exhibit No. Page
----------- ----
20 (i) 4
20 (ii) 12
Page 4 of 13 Pages
Exhibit 20 (i)
FOR IMMEDIATE RELEASE
STANLEY REPORTS FIRST QUARTER EARNINGS
Meets Analyst Expectations Despite Market-Related Sales Decline
New Britain, Connecticut, April 18, 2001: The Stanley Works (NYSE: "SWK")
announced that first quarter net income was $47 million, or $.54 per diluted
share, matching the First Call consensus estimate of Wall Street analysts and
equal to last year.
Net sales were $627 million, 10% lower than last year, on more severe than
originally anticipated weakness across consumer and industrial tool channels in
the Americas. Sales declined 7% from unit volume, 2% from foreign currency
translation and 1% from price/mix. Approximately one-third of the decline
occurred in Mac Tools where repositioning initiatives had a temporary negative
impact. On a segment basis, sales decreased 9% in Tools and 11% in Doors. On a
geographic basis, sales decreased 13% in the Americas but increased 2% in both
Europe and Asia/Pacific. Exclusive of the effects of foreign currency, sales
increased 12% in Asia/Pacific, 8% in Europe and 4% in Latin America.
John M. Trani, Chairman and Chief Executive Officer, commented: "Despite
numerous recent share gains, revenue was impacted by weak U.S. and Canadian
economies and the continuation of inventory corrections at major retailers and
industrial customers. The U.S. economic environment, which rapidly deteriorated
in the fourth quarter of 2000, eroded even further in the first quarter of 2001
with some of our largest customers experiencing their worst environment in
twenty years. Despite experiencing a similar trend, we were able to deliver
earnings per share at the same level as last year."
Gross margin, exclusive of special credits and charges discussed below, was
37.3%, an increase of 30 basis points over 37.0% in the first-quarter of 2000
despite the sales volume decline. The negative impacts of price pressure,
inflationary commodity costs and lower volume were more than offset by improved
cost controls in operations, continuing restructuring and material cost
productivity.
Exclusive of one-time charges and credits, selling, general and administrative
expenses of $150 million (24.0% of sales) were $22 million or 70 basis points
below first quarter 2000 levels and declined $4 million sequentially from the
Page 5 of 13 Pages
fourth quarter of 2000. These costs were not expected to decline as a percentage
of sales until the second quarter of this year. Resulting operating margin was
13.4%, up 110 basis points from 12.3% last year.
Mr. Trani continued: "Again this quarter we dealt with the likelihood of weak
markets and adjusted our employment and production early. Approximately 500
positions were eliminated, exceeding our original expectation. Our operations
team continues to rationalize our manufacturing structure while administrative
costs have been tightened. Selling, general and administrative costs continue to
be reduced sequentially despite investment in growth-oriented marketing
initiatives."
Net interest expense of $7 million and other net expenses of $6 million,
exclusive of one-time charges and credits, approximated first quarter 2000
levels. The company's income tax rate was 33% versus 34% in the first quarter
last year reflecting the continued benefit of structural changes. The company
expects the 33% rate to be sustainable.
In the first quarter, the company recorded a non-recurring $29 million, or $.22
per fully diluted share, pension-related gain in accordance with FAS 88. In
connection with this gain, the company expects a reversion of cash within twelve
to twenty-four months.
Also during the quarter, the company undertook new initiatives for reduction of
its cost structure and executed several business repositionings intended to
improve its competitiveness, including continuing movement of production,
permanent reduction of the overhead cost structure in its manufacturing system
and a series of initiatives in Mac Tools. As a result, the company incurred an
$18 million charge for new restructuring-related severance obligations of which
$3 million was paid out during the quarter. In addition, the company recorded an
$11 million one-time charge associated with the aforementioned repositionings.
The net difference between the one-time pension gain and the one-time
restructuring and other charges was negligible.
Addressing business prospects for the second quarter and beyond, Mr. Trani
continued: "Our solid balance sheet and inherent strong cash flow position us
well in this unfavorable economic environment. We expect the markets for our
products to remain lackluster at least through the second quarter. As a result
and consistent with recent quarters, we will pursue a myriad of programs to
lower our manufacturing cost base and administrative expenses.
"Our growth initiatives are continuing, and the business transitions embarked
upon in the first quarter are reaching completion. In particular, the per-truck
Page 6 of 13 Pages
sales trend of Mac Tools' direct sales representatives showed an encouraging
diminishing of previous declines in March, an indication that interruptions in
that business are subsiding. In the second half of 2001 and beyond, 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."
Despite expectations of continued economic weakness, the company expects
fully-diluted earnings per share in the second quarter to approximate last
year's $.58 per share. For the full year 2001, management reaffirmed its
confidence in the current First Call consensus of analyst estimates of $2.41 per
diluted share, up 9% over 2000.
Accounts receivable decreased $2 million from year-end, largely reflecting lower
sales volume. Inventories increased $20 million as they traditionally do in the
first quarter in preparation for peak selling seasons.
Tools sales decreased 9% from the first quarter of 2000 to $492 million.
Operating margin was 14.6%, an improvement of 100 basis points over the same
period last year. Doors segment sales of $135 million decreased 11% versus last
year's first quarter. Operating margin increased to 8.8% of sales compared with
7.5% last year. Despite lower volume and a continuing mix shift to lower-margin
retail channels, performance in both segments reflected continuing productivity
gains and SG&A expense reductions.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools, door
systems and related hardware 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 filed with the Securities and Exchange Commission
today.
The Stanley Works corporate press releases are available on the company's
Internet web site at www.stanleyworks.com. Alternatively, they are available
through PR Newswire's "Company News On-Call" service by FAX at 800-758-5804,
ext. 874363.
Page 7 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 Restructuring and Special Credits & Charges
First Quarter 2001 vs. 2000
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000
----------------------------------- ------------
Excluding
Restructuring Restructuring
and Special and Special
Charges & Charges &
Credits Credits Reported Reported
Net Sales $ 626.9 $ (0.7) $ 626.2 $ 695.4
Cost of sales 393.0 5.5 398.5 438.0
------ ------ ------ ------
Gross margin 233.9 (6.2) 227.7 257.4
37.3% 36.4% 37.0%
SG&A expenses 150.2 3.3 153.5 171.9
------ ------ ------ ------
24.0% 24.5% 24.7%
Operating profit 83.7 (9.5) 74.2 85.5
13.4% 11.8% 12.3%
Interest, net 6.6 - 6.6 6.5
Other, net 6.5 (27.6) (21.1) 6.0
Restructuring charge - 18.3 18.3 -
------ ------ ------ ------
Earnings before income taxes 70.6 (0.2) 70.4 73.0
Income taxes 23.3 0.5 23.8 24.8
------ ------ ------ ------
33.0% 33.8% 34.0%
Net earnings $ 47.3 $ (0.7) $ 46.6 $ 48.2
======= ======= ======= ======
Average shares
outstanding (diluted) 87,113 87,113 87,113 89,158
Earnings Per Share (diluted) $ 0.54 $ 0.00 $ 0.54 $ 0.54
======= ======= ======= =======
INDUSTRY SEGMENTS
Net sales
Tools $ 492.1 $ (0.7) $ 491.4 $ 543.7
Doors 134.8 - 134.8 151.7
------ ------ ------ -------
Consolidated $ 626.9 $ (0.7) $ 626.2 $ 695.4
======= ======= ======= =======
Operating profit
Tools $ 71.9 $ (9.2) $ 62.7 $ 74.1
Doors 11.8 (0.3) 11.5 11.4
------ ------ ------ ------
Consolidated $ 83.7 $ (9.5) $ 74.2 $ 85.5
======= ======= ======= =======
Interest - net $ 6.6 $ - $ 6.6 $ 6.5
Other - net 6.5 (27.6) (21.1) 6.0
Restructuring charge - 18.3 18.3 -
------ ------ ------ ------
Earnings before income taxes $ 70.6 $ (0.2) $ 70.4 $ 73.0
====== ====== ====== ======
Page 8 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per share Amounts)
First Quarter
---------------------------
2001 2000
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NET SALES $ 626.2 $ 695.4
COSTS AND EXPENSES
Cost of sales 398.5 438.0
Selling, general and administrative 153.5 171.9
Interest - net 6.6 6.5
Other - net (21.1) 6.0
Restructuring charge 18.3 -
------ ------
555.8 622.4
====== ======
EARNINGS BEFORE INCOME TAXES 70.4 73.0
Income Taxes 23.8 24.8
------ ------
NET EARNINGS $ 46.6 $ 48.2
====== ======
NET EARNINGS PER SHARE
OF COMMON STOCK
Basic $ 0.54 $ 0.54
====== =======
Diluted $ 0.54 $ 0.54
====== ======
DIVIDENDS PER SHARE $ 0.23 $ 0.22
====== ======
AVERAGE SHARES OUTSTANDING
(in thousands)
Basic 85,897 88,936
====== ======
Diluted 87,113 89,158
====== ======
Page 9 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
March 31 April 1
2001 2000
---------- ----------
ASSETS
Cash and cash equivalents $ 111.4 $ 128.9
Accounts receivable 530.0 584.4
Inventories 417.6 390.8
Other current assets 78.1 75.5
------ ------
Total current assets 1,137.1 1,179.6
======= =======
Property, plant and equipment 496.8 522.2
Goodwill and other intangibles 170.6 181.6
Other assets 148.9 84.3
------ ------
$1,953.4 $1,967.7
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 285.7 $ 290.3
Accounts payable 232.5 223.2
Accrued expenses 248.2 295.4
------ ------
Total current liabilities 766.4 808.9
======= =======
Long-term debt 240.4 277.4
Other long-term liabilities 187.5 167.1
Shareowners' equity 759.1 714.3
------ ------
$1,953.4 $1,967.7
======== ========
Page 10 of 13 Pages
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
First Quarter
----------------------
2001 2000
---------- ----------
OPERATING ACTIVITIES
Net earnings $ 46.6 $ 48.2
Depreciation and amortization 22.3 23.7
Restructuring charge 18.3 -
Other non-cash items (30.4) 7.2
Changes in working capital (46.0) (61.6)
Changes in other operating
assets and liabilities (32.0) (20.0)
------ ------
Net cash used by operating activities (21.2) (2.5)
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (15.9) (16.0)
Proceeds from sales of assets - 0.7
Net borrowing activity 72.7 127.9
Net stock transactions 5.1 (44.0)
Cash dividends on common stock (19.7) (19.5)
Other (3.2) (5.7)
------ ------
Net cash provided by investing
and financing activities 39.0 43.4
Increase in Cash and Cash Equivalents 17.8 40.9
Cash and Cash Equivalents,
Beginning of Period 93.6 88.0
------ ------
Cash and Cash Equivalents,
End of First Quarter $ 111.4 $ 128.9
======= =======
Page 11 of 13 Pages
Exhibit 20 (ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Statements in the company's press release attached to this Current Report on
Form 8-K and made today in a conference call with analysts, shareowners and
other participants regarding the company's ability (1) to deliver earnings per
diluted share of $.58 in the second quarter and $2.41 for the year, (2) to
deliver revenues in the second quarter of 2001 six to eight percent below those
achieved in the second quarter of 2000, (3) to generate significant cash flow
over the next three years, and (4) to realize $100 million in annual revenues
and a positive addition to earnings from the acquisition of Contact East are
forward looking and inherently subject to risk and uncertainty.
The company's ability to achieve the earnings objectives identified in the
preceding paragraph is 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, without limitation, the Euro.
The company's ability to achieve the expected level of revenues 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 announced January 24, 2001 and of 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 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, and (vi) 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 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
Page 12 of 13 Pages
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.
The company's ability to continue to reduce selling, general and administrative
expenses as a percentage of sales is dependent on various process improvement
activities, the continued success of changes to the sales organization and the
reduction of transaction costs.
The company's ability to generate significant cash flow over the next three
years is dependent on achieving its earnings growth targets and on the continued
success of improvements in processes to manage inventory and receivables levels.
The reversion of $60-80 million in cash to the company within 12 to 24 months
in connection with a pension-related gain is subject to regulatory approvals,
which the company expects to obtain in due course.
The company's ability to realize $100 million in annual revenues and a positive
addition to earnings from the acquisition of Contact East is dependent upon,
among other things, the receipt of the regulatory and other approvals required
to close the transaction, the achievement of the sales plan of Contact East,
Inc., and the successful integration of Contact East with Jensen Tools, Inc., a
subsidiary of the company.
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.
Pages 13 of 13 Pages