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): October 17, 2001
------------------------------
The Stanley Works
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 225-5111
-----------------------------
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 16 Pages
<Page>
Item 5. Other Events.
On October 17, 2001, Emmanuel A. Kampouris was elected to
the Registrant's Board of Directors. Attached as Exhibit
20(ii) is a copy of the Registrant's Press Release dated
October 18, 2001 announcing the election of the new
director.
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press Release dated October 18, 2001
announcing third quarter 2001 results.
20(ii) Press Release dated October 18, 2001 announcing the
election of Emmanuel A. Kampouris to the Board of
Directors.
20(iii)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 and revenue
projections for the fourth quarter of 2001 and
full year of 2002. In a conference call held today
with industry analysts, shareowners and other
participants, the company reviewed the earnings
guidance and revenue projections in the press
release.
Page 2 of 16 Pages
<page>
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: October 18, 2001 By: Bruce H. Beatt
-----------------------------
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 16 Pages
<Page>
EXHIBIT INDEX
Current Report on Form 8-K
Dated October 18, 2001
Exhibit No. Page
----------- ----
20(i) 5
20(ii) 14
20(iii) 15
Page 4 of 16 Pages
<Page>
Exhibit 20(i)
FOR IMMEDIATE RELEASE
STANLEY WORKS REPORTS 3RD QUARTER NET EARNINGS OF 62 CENTS PER SHARE, UP 11%
OVER PRIOR YEAR
13.6% Operating Margin Is Highest In 15 Years
New Britain, Connecticut, October 18, 2001: The Stanley Works (NYSE: "SWK")
announced that third quarter net income was $54 million, or 62 cents per
fully-diluted share, up 11% over last year and exceeding the 60 cents First Call
consensus Wall Street estimate. Net sales of $676 million were 1% lower than
last year. On a segment basis, sales decreased 3% in Tools and increased 5% in
Doors.
John M. Trani, Chairman and Chief Executive Officer, commented: "Our U.S. hand
tools business delivered sales growth for the second consecutive quarter due to
new product sales and recent share gains, especially at Wal*Mart where the
product line continues to be rolled out. Shipments of our entry door products to
The Home Depot were very strong as the new product line enjoyed significant
success with consumers."
"However," Mr. Trani added, "these positives were not enough to completely
offset the very weak commercial and industrial markets served by the majority of
our businesses. These market conditions are the weakest encountered by Stanley
in at least a decade."
Gross margin was 35.4%, a decline of 40 basis points from 35.8% in the third
quarter of 2000, principally from lower industrial sales. Continuing solid
productivity improvements were insufficient to offset the mix shift to the
retail channel.
Selling, general and administrative ("SG&A") expenses, exclusive of a one-time
charge, were $147 million (21.8% of sales) and were 10% (or 190 basis points)
below last year. Excluding both the one-time charge in the third quarter and the
impact of the acquisition in the second quarter, SG&A expenses declined
sequentially for the 7th consecutive quarter.
Mr. Trani commented: "Again this quarter we dealt with lower volume in
continuing weak markets and adjusted employment levels accordingly." As a result
and as previously announced, the company incurred a third-quarter charge of $5
Page 5 of 16 Pages
<Page>
million for new severance obligations, of which $3 million was paid out during
the quarter. The after-tax effect of the charge was offset by certain
non-recurring tax transactions.
Operating margin was 13.6%, up 150 basis points from 12.1% last year. The
year-to-date operating margin of 13.3%, if sustained through year-end, would be
the company's highest operating margin in the more than 35 years its stock has
been listed on the New York Stock Exchange.
Net interest expense of $6.7 million was less than the $7.2 million in the prior
year due to lower interest rates. Other net expenses increased to $3.9 million
versus $1.8 million last year due to higher goodwill amortization and the
absence of gains from asset sales.
Cash generated by operations was $69 million, and free cash flow (after dividend
payments) was $29 million, both slightly less than year-ago levels. Inventory
reductions were especially noteworthy given their tendency to rise in the third
quarter on a seasonal basis.
Tools sales decreased 3% from the third quarter of 2000 to $514 million.
Operating margin, exclusive of the one-time charge described above, was 14.3%,
an increase of 140 basis points over last year. Doors sales increased 5% to $162
million. Operating margin increased 220 basis points to 11.4% of sales, compared
with 9.2% last year. Benefits from the company's relocation of its hardware
business to China drove the improvement. Despite lower volume and a continuing
mix shift to retail channels, performance in both segments reflected continuing
productivity gains and selling, general and administrative expense reductions.
Since the events of September 11, orders have been somewhat below normal.
Management's current estimate is that fourth quarter sales will be about 5%
below last year. Industrial and commercial markets are likely to remain weak for
the remainder of the year. In response, salaried employment reductions of 10%
(about 475 positions) have been undertaken, most of which are already completed.
These reductions are expected to lower SG&A expenses by $6-8 million in the
fourth quarter. Additional actions will be undertaken, including facility
closures and related workforce reductions. The company expects to complete these
actions during the fourth quarter of 2001 and the year 2002.
These actions will require a restructuring charge to fourth quarter earnings of
approximately $60 million, virtually all of which is severance-related. The cash
Page 6 of 16 Pages
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outflow for these restructuring activities is likely to be offset by the
reversion of cash proceeds from the pension-related gain recorded in the first
quarter of 2001, as both are expected to occur principally during 2002.
Mr. Trani stated: "These actions should enable us to deliver fourth quarter
earnings of approximately $.57 per fully-diluted share, up 5% over last year,
despite an expected 5% sales decline. With a solid balance sheet, a rapidly
declining cost structure and an inherent strong cash flow, we are very well
positioned to outperform in this unfavorable economic environment.
For the full year 2002, these cost actions enable management to affirm its
concurrence with current First Call consensus earnings estimates in the range of
$2.64 per fully-diluted share, a double-digit percentage increase over 2001.
Expectations are for sales to be slightly higher than 2001, principally in the
second half of the year. These estimates assume that global economic conditions
remain lackluster but do not deteriorate further during 2002.
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 http://www.stanleyworks.com.
Page 7 of 16 Pages
<Page>
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Third Quarter Nine Months
---------------- ------------------
2001 2000 2001 2000
------ ------ ------- ------
NET SALES $ 676.1 $ 684.4 $ 1,978.8 $ 2,082.6
COSTS AND EXPENSES
Cost of sales 436.8 439.4 1,272.6 1,324.5
Selling, general and
administrative 152.1 162.2 456.6 502.2
Interest - net 6.7 7.2 20.8 20.9
Other - net 3.9 1.8 (12.2) 11.5
Restructuring charge - - 18.3 -
----- ------ ------- -------
599.5 610.6 1,756.1 1,859.1
----- ----- ------- -------
EARNINGS BEFORE
INCOME TAXES 76.6 73.8 222.7 223.5
Income taxes 22.1 25.1 70.9 76.0
---- ---- ---- ----
NET EARNINGS $ 54.5 $ 48.7 $ 151.8 $ 147.5
====== ====== ======= ========
NET EARNINGS PER SHARE
OF COMMON STOCK
Basic $ 0.64 $ 0.56 $ 1.77 $ 1.68
======= ======= ========= =========
Diluted $ 0.62 $ 0.56 $ 1.74 $ 1.68
======= ======= ========= =========
DIVIDENDS PER SHARE $ 0.24 $ 0.23 $ 0.70 $ 0.67
======= ======= ========= =========
AVERAGE SHARES OUTSTANDING
(in thousands)
Basic 85,439 86,532 85,744 87,721
====== ====== ====== ======
Diluted 87,419 86,677 87,346 87,927
====== ====== ====== ======
Page 8 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
Sept. 29 Sept. 30
2001 2000
--------- ---------
ASSETS
Cash and cash equivalents $ 152.2 $ 93.3
Accounts receivable 559.9 576.7
Inventories 432.2 388.6
Other current assets 96.5 72.9
---- ----
Total current assets 1,240.8 1,131.5
------- -------
Property, plant and equipment 506.7 505.3
Goodwill and other intangibles 234.3 174.9
Other assets 157.0 111.8
----- -----
$2,138.8 $ 1,923.5
======== =========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 380.4 $ 293.5
Accounts payable 237.8 222.4
Accrued expenses 271.9 288.4
----- -----
Total current liabilities 890.1 804.3
----- -----
Long-term debt 231.5 243.3
Other long-term liabilities 187.1 175.1
Shareowners' equity 830.1 700.8
----- -----
$ 2,138.8 $ 1,923.5
========= =========
Page 9 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
-------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
OPERATING ACTIVITIES
Net earnings $ 54.5 $ 48.7 $151.8 $147.5
Depreciation and amortization 18.6 20.3 60.8 64.4
Restructuring charge - - 18.3 -
Changes in working capital (11.0) (16.7) (75.3) (80.1)
Changes in other operating
assets and liabilities 7.0 20.3 (51.7) (11.3)
--- ---- ----- -----
Net cash provided by
operating activities 69.1 72.6 103.9 120.5
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (20.0) (19.3) (56.0) (48.1)
Business acquisitions/dispositions 0.2 6.5 (77.9) 10.0
Cash dividends on common stock (20.6) (19.8) (59.9) (58.5)
Other net investing and
financing activity (38.7) (29.7) 148.5 (18.6)
----- ----- ----- -----
Net cash used in investing
and financing activities (79.1) (62.3) (45.3) (115.2)
Increase (Decrease) in Cash
and Cash Equivalents (10.0) 10.3 58.6 5.3
Cash and Cash Equivalents,
Beginning of Period 162.2 83.0 93.6 88.0
----- ---- ---- ----
Cash and Cash Equivalents,
End of Period $152.2 $ 93.3 $152.2 $ 93.3
====== ======= ====== ======
Page 10 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Third Quarter Nine Months
--------------- -----------------
2001 2000 2001 2000
----- ----- ------ ------
INDUSTRY SEGMENTS
Net Sales
Tools $ 514.4 $ 530.6 $ 1,530.7 $ 1,621.8
Doors 161.7 153.8 448.1 460.8
----- ----- ----- -----
Consolidated $ 676.1 $ 684.4 $ 1,978.8 $ 2,082.6
======= ======= ========= =========
Operating Profit
Tools $ 68.8 $ 68.7 $ 205.2 $ 219.2
Doors 18.4 14.1 44.4 36.7
---- ---- ---- ----
Consolidated $ 87.2 $ 82.8 $ 249.6 $ 255.9
======= ====== ========= ========
Page 11 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 One-Time Charges & Credits
Third Quarter 2001 vs. 2000
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000
---------------------------------- ------------
Excluding
One-Time One-Time
Charges & Charges &
Credits Credits Reported Reported
------- ------- -------- --------
Net Sales $ 676.1 $ - $ 676.1 $ 684.4
Cost of sales 436.8 - 436.8 439.4
----- ----- -----
Gross Margin 239.3 - 239.3 245.0
35.4% 35.4% 35.8%
SG&A Expenses 147.3 4.8 152.1 162.2
----- --- ----- -----
21.8% 22.5% 23.7%
Operating profit 92.0 (4.8) 87.2 82.8
13.6% 12.9% 12.1%
Interest, net 6.9 (0.2) 6.7 7.2
Other, net 3.9 3.9 1.8
--- ----- --- ---
Earnings before income taxes 81.2 (4.6) 76.6 73.8
Income taxes 26.7 (4.6) 22.1 25.1
---- ---- ---- ----
32.9% 28.9% 34.0%
Net earnings $ 54.5 $ - $ 54.5 $ 48.7
======= ===== ======== =======
Average shares
outstanding (diluted) 87,419 87,419 87,419 86,677
Earnings per share (diluted) $ 0.62 $ 0.00 $ 0.62 $ 0.56
======= ======== ======== =======
INDUSTRY SEGMENTS
Net sales
Tools $ 514.4 $ - $ 514.4 $ 530.6
Doors 161.7 - 161.7 153.8
----- ------ ----- -----
Consolidated 676.1 - 676.1 684.4
===== ====== ===== =====
Operating profit
Tools $ 73.6 $ (4.8) $ 68.8 $ 68.7
Doors 18.4 - 18.4 14.1
---- ----- ---- ----
Consolidated 92.0 (4.8) 87.2 82.8
---- ----- ---- ----
Interest, net 6.9 (0.2) 6.7 7.2
Other, net 3.9 - 3.9 1.8
--- ---- --- ---
Earnings before income taxes $ 81.2 $ (4.6) $ 76.6 $ 73.8
======= ====== ======= =======
Page 12 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 Restructuring and One-Time Charges & Credits
YTD 2001 vs. 2000
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000
------------------------------------- ---------
Excluding
Restructuring Restructuring
and One-Time and One-Time
Charges & Charges &
Credits Credits Reported Reported
------- ------- -------- --------
Net Sales $1,979.5 $ (0.7) $1,978.8 $2,082.6
Cost of sales 1,267.1 5.5 1,272.6 1,324.5
------- --- ------- -------
Gross Margin 712.4 (6.2) 706.2 758.1
36.0% 35.7% 36.4%
SG&A Expenses 448.5 8.1 456.6 502.2
----- --- ----- -----
22.7% 23.1% 24.1%
Operating profit 263.9 (14.3) 249.6 255.9
13.3% 12.6% 12.3%
Interest, net 21.0 (0.2) 20.8 20.9
Other, net 15.4 (27.6) (12.2) 11.5
Restructuring charge - 18.3 18.3 -
----- ---- ---- ------
Earnings before income taxes 227.5 (4.8) 222.7 223.5
Income taxes 75.0 (4.1) 70.9 76.0
---- ---- ---- ----
33.0% 31.8% 34.0%
Net earnings $ 152.5 $ (0.7) $ 151.8 $ 147.5
======== ========= ======= =======
Average shares
outstanding (diluted) 87,346 87,346 87,346 87,927
Earnings per share (diluted) $ 1.74 $ 0.00 $ 1.74 $ 1.68
======= ========= ======== =======
INDUSTRY SEGMENTS
Net sales
Tools $1,531.4 $ (0.7) $ 1,530.7 $1,621.8
Doors 448.1 - 448.1 460.8
-------- --------- ------- -------
Consolidated $1,979.5 $ (0.7) $ 1,978.8 $2,082.6
======== ========= ========= =======
Operating profit
Tools $ 219.2 $ (14.0) $ 205.2 $ 219.2
Doors 44.7 (0.3) 44.4 36.7
---- ---- ---- ----
Consolidated $ 263.9 $ (14.3) $ 249.6 $ 255.9
===== ===== ===== =====
Interest, net $ 21.0 $ (0.2) $ 20.8 $ 20.9
Other, net 15.4 (27.6) (12.2) 11.5
Restructuring charge - 18.3 18.3 -
------ ---- ---- -----
Earnings before income taxes $ 227.5 $ (4.8) $ 222.7 $ 223.5
======== ======== ======== =======
Page 13 of 16 Pages
Exhibit 20(ii)
FOR IMMEDIATE RELEASE
THE STANLEY WORKS ADDS EMMANUEL A. KAMPOURIS TO BOARD OF DIRECTORS
New Britain, Connecticut, October 18, 2001 - - The Board of Directors of
The Stanley Works (NYSE: SWK) announced the election of a new member,
Emmanuel A. Kampouris, retired Chairman, President and Chief Executive
Officer of American Standard Companies, Inc. (NYSE: ASD), a leading
supplier of air conditioning equipment, plumbing products and electronic
braking and control systems.
John M. Trani, Chairman and Chief Executive Officer of The Stanley Works,
stated, "We are very pleased that Mano Kampouris has joined Stanley's Board.
Mano has over 30 years of general management experience with American Standard
companies that have competed successfully on a global basis. In the 10 years he
ran his company's Building Products sector, he gained a wealth of experience
with the same customers and channels we serve. Mano will bring great value to
Stanley as we continue on our journey to becoming a Great Brand."
Mr. Kampouris joined American Standard's plumbing products subsidiary in Greece
in 1966. His career later included management positions of increasing
responsibility in the Building Products sector and at the corporate level. He
was elected president and chief executive officer in 1989, became chairman of
the company's board of directors in 1993 and retired at the end of 1999.
Mr. Kampouris is a graduate of North Staffordshire College of Technology,
Stroke-on-Trent, England, where he earned a degree in ceramic technology. He
also earned an M.A. degree in law from Oxford University, Oxford, England.
Contact: Gerard J. Gould
Vice President, Investor Relations
(860) 827-3833
Page 14 of 16 Pages
Exhibit 20(iii)
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 fourth quarter
earnings of $.57 per fully-diluted share; (2) to deliver fourth quarter sales
about five percent below those achieved in the fourth quarter of 2000; (3) to
affirm its concurrence with current First Call consensus earnings estimates for
the full year 2002 in the range of $2.64 per diluted share; and (4) to deliver
sales for the full year 2002 slightly higher than those for 2001 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 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, which initiatives include certain facility
closures and related workforce reductions expected to be completed during the
fourth quarter 2001 and in 2002. 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
Page 15 of 16 Pages
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 continue strong cash
generation in 2001 is dependent on achieving its earnings growth targets and on
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, the impact of the events of September 11, 2001 and
recessionary or expansive trends in the economies of the world in which the
company operates.
Page 16 of 16 Pages