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 24, 2002
-------------------
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 16 Pages
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press Release dated January 24, 2002
announcing fourth quarter 2001 results.
(c) 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 full year 2002 and
commentary regarding working capital efficiency and
cash generation for 2002. In a conference call held
today with industry analysts, shareowners and other
participants, the company reviewed the earnings
guidance and commentary regarding working capital
efficiency and cash generation in the press release.
Page 2 of 16 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 24, 2002 By: Bruce H. Beatt
-------------------------------
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 16 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated January 24, 2002
Exhibit No. Page
20(i) 5
20(ii) 15
Page 4 of 16 Pages
Exhibit 20(i)
FOR IMMEDIATE RELEASE
4TH QUARTER EARNINGS MEET 1ST CALL EXPECTATIONS; OPERATING CASH FLOW
REACHES $118 MILLION
Full-Year Operating Margin Exceeds 13% For The First Time Since
Mid-1950s, Before Restructuring and Other Charges and Credits
New Britain, Connecticut, January 24, 2002: The Stanley Works (NYSE: SWK)
announced today that fourth quarter net income, excluding restructuring and
special charges, was $50 million, or $.57 per diluted share, matching First
Call's consensus of analyst estimates. In the same quarter last year, the
company had earnings of $47 million, or $.54 per diluted share. Reported results
of $.07 per diluted share in the fourth quarter included previously- announced
restructuring and special charges to income, the sum of which decreased overall
reported earnings by $60 million pre-tax ($.50 per diluted share).
Net sales were $646 million, a 3% decline from $666 million last year, due to
lower unit sales volumes. Despite numerous recent share gains, the company's
sales growth continues to be constrained by a weak U.S. industrial economy. On a
segment basis, sales decreased 6% in Tools and increased 6% in Doors. On a
geographic basis, sales decreased 3% in the Americas, 3% in Europe and 6% in
Asia/Pacific. Exclusive of the effects of foreign currency, sales decreased 4%
in Europe and 1% in Asia/Pacific.
John M. Trani, Chairman and Chief Executive Officer, commented: "Revenues, in
particular on the retail side of our business, improved steadily as the quarter
progressed. It is clear that we are benefiting from recent retail share gains
and that consumer markets are slowly improving. Our U.S. hand tools business
delivered solid sales growth for the third consecutive quarter due to new
product sales and higher share, especially at Wal*Mart where the product line
continues to be rolled out. Shipments of our entry door products to The Home
Depot also showed continued strength as the new product line enjoys significant
success with consumers."
Page 5 of 16 Pages
"However," Mr. Trani added, "as expected this quarter these positives were not
enough to completely offset the very weak commercial and industrial markets
served by the majority of our businesses. Industrial market conditions showed no
improvement, and remain the weakest encountered by Stanley in at least a decade.
Nonetheless, we are encouraged by our outperformance in these markets as well.
Despite this weakness in our most profitable markets, we delivered earnings per
share growth and very strong cash flow. In addition, our team delivered expected
cost reductions and identified significant new opportunities."
Gross margin, exclusive of restructuring and special charges, was 34.6% of sales
versus 35.9% last year. Productivity improvements were insufficient to offset
shifts in sales mix to lower-margin retail (vs. industrial) and independent (vs.
direct) Mac sales channels.
Selling, general and administrative expenses of $137 million were 21.2% of sales
compared with $154 million or 23.2% of sales in the fourth quarter of 2000.
Resulting operating margin was 13.4%, up 70 basis points from 12.7% last year.
Employment reductions of 900 were almost double the original expectation.
Net interest expense of $5 million, versus $6 million in 2000, resulted from
lower interest rates and significant repayment of short-term borrowings. Other
net expense of $7 million decreased from $9 million last year, primarily as a
result of improved performance in the Mac Advantage long-term financing program.
The company also indicated that, aided by significant inventory reductions,
fourth quarter cash from operations was very strong, reaching $118 million and
exceeding levels realized in the fourth quarter a year ago. Free cash flow
(after capital expenditures and dividends) was $80 million, matching the $80
million generated last year. Mr. Trani added: "Stanley's inherent
cash-generating ability remains apparent. Our sequential inventory decrease,
which was the result of improved planning and inventory disposition, was
particularly important. We have every expectation that 2002 will show greater
working capital efficiency and further enhanced cash generation."
During the fourth quarter, management established plans to undertake additional
measures to rationalize its cost structure, including facility closures and
related workforce reductions. Such activities were targeted for execution
primarily during the fourth quarter and throughout 2002. The company recorded
Page 6 of 16 Pages
$54 million of restructuring and asset impairment charges in the fourth quarter,
principally for severance costs and asset write-downs related to these
activities. Additionally, a $6 million special charge was recorded primarily for
disposition of raw and in-process inventories associated principally with
discontinued manufacturing plants and SKUs. Cash requirements represent $43
million of these costs, of which the company indicated $14 million had been
expended. Remaining cash outlays in 2002 are expected to be more than offset by
the reversion of approximately $60 million of cash proceeds from a
previously-announced pension plan change.
Tools segment sales of $491 million were 6% lower. Strong sales performance in
U.S. consumer markets was offset by weakness in the U.S. and European industrial
and commercial markets. Tools segment operating margin, excluding special
credits and charges, was 12.6% compared with 12.8% in the same period last year,
as productivity gains were offset by the continuing shift in mix to lower-margin
consumer markets.
Doors segment sales increased 6% to $154 million, while operating profit
improved to 15.7% of sales versus 12.6% in the same period last year, due
principally to the benefits of shifting the production base in the Hardware
business to low-cost countries.
For 2001, the company reported net sales of $2,625 million, down 5% from last
year. Gross margin was 35.6% of sales versus 36.3%, reflecting the year-long
weakness in industrial and commercial markets. Selling, general and
administrative expenses were 22.3% of sales down 160 basis points, with
sequential decreases in each quarter. Resulting operating margin was 13.3%, up
90 basis points over 12.4% last year, and the highest achieved since the
mid-1950s. Net income was $202 million ($2.31 per diluted share), versus $194
million ($2.22 per diluted share) in 2000. Full year results exclude
restructuring and the net of special charges and credits.
Looking ahead to 2002, Mr. Trani added: "As a result of the share gains and the
many programs in place to improve competitiveness, we are confident that even
with no improvement in the economy our 2002 earnings per share will reach our
previously-stated estimate of $2.64 up 14%." The company expects to give
specific earnings guidance during its February 8 analyst meeting.
Page 7 of 16 Pages
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
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.
Page 8 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Year
---------------- -------------------
2001 2000 2001 2000
----- --------- ------ -------
NET SALES $ 645.6 $ 666.3 $ 2,624.4 $ 2,748.9
COSTS AND EXPENSES
Cost of sales 428.7 427.0 1,701.3 1,751.5
Selling, general
and administrative 137.1 154.4 593.7 656.6
Interest - net 4.8 6.2 25.6 27.1
Other - net 6.9 8.5 (5.3) 20.0
Restructuring charges
and asset write-off's 54.1 - 72.4 -
------ ------ ------- -------
631.6 596.1 2,387.7 2,455.2
----- ----- ------- -------
EARNINGS BEFORE INCOME TAXES 14.0 70.2 236.7 293.7
Income taxes 7.5 23.3 78.4 99.3
--- ---- ---- ----
NET EARNINGS $ 6.5 $ 46.9 $ 158.3 $ 194.4
====== ======= ======= ========
NET EARNINGS PER SHARE
OF COMMON STOCK
Basic $ 0.08 $ 0.54 $ 1.85 $ 2.22
====== ======= ====== ========
Diluted $ 0.07 $ 0.54 $ 1.81 $ 2.22
====== ======= ====== ========
DIVIDENDS PER SHARE $ 0.24 $ 0.23 $ 0.94 $ 0.90
====== ======= ====== ========
AVERAGE SHARES OUTSTANDING (in thousands)
Basic 85,811 86,414 85,761 87,407
====== ====== ====== ======
Diluted 87,748 86,767 87,467 87,668
====== ====== ====== ======
Page 9 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
December 29 December 30
2001 2000
---------- ---------
ASSETS
Cash and cash equivalents $ 115.2 $ 93.6
Accounts receivable 551.3 531.9
Inventories 410.1 398.1
Other current assets 64.8 70.7
---- ----
Total current assets 1,141.4 1,094.3
------- -------
Property, plant and equipment 494.3 503.7
Goodwill and other intangibles 236.1 175.9
Other assets 183.9 110.9
----- -----
$ 2,055.7 $ 1,884.8
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 372.4 $ 213.7
Accounts payable 247.7 239.8
Accrued expenses 280.4 253.8
----- -----
Total current liabilities 900.5 707.3
----- -----
Long-term debt 121.8 248.7
Other long-term liabilities 201.1 192.3
Shareowners' equity 832.3 736.5
----- -----
$ 2,055.7 $ 1,884.8
=========== =========
Page 10 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Fourth Quarter Year
------------------ --------------
2001 2000 2001 2000
-------- -------- ------ -------
OPERATING ACTIVITIES
Net earnings $ 6.5 $ 46.9 $ 158.3 $ 194.4
Depreciation and amortization 22.1 18.9 82.9 83.3
Restructuring charges
and asset write-off's 54.1 - 72.4 -
Other non-cash items 42.9 32.3 17.3 42.2
Changes in working capital 29.8 53.8 (45.5) (26.3)
Changes in other operating
assets and liabilities (37.7) (36.2) (63.8) (57.4)
----- ----- ----- -----
Net cash provided by
operating activities 117.7 115.7 221.6 236.2
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (17.1) (16.3) (73.1) (64.4)
Business acquisitions/dispositions 8.4 4.1 (69.5) 14.1
Cash dividends on common stock (20.6) (19.8) (80.5) (78.3)
Other net investing and
financing activity (125.4) (83.4) 23.1 (102.0)
------ ----- ---- ------
Net cash used in investing and
financing activities (154.7) (115.4) (200.0) (230.6)
Increase (Decrease) in Cash
and Cash Equivalents (37.0) 0.3 21.6 5.6
Cash and Cash Equivalents,
Beginning of Period 152.2 93.3 93.6 88.0
----- ---- ---- ----
Cash and Cash Equivalents,
End of Period $ 115.2 $ 93.6 $ 115.2 $ 93.6
======== ====== ======= =======
Page 11 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Fourth Quarter Year
----------------- ----------------
2001 2000 2001 2000
-------- --------- ------- --------
INDUSTRY SEGMENTS
Net Sales
Tools $ 491.4 $ 520.6 $ 2,022.1 $ 2,142.5
Doors 154.2 145.7 602.3 606.4
Consolidated $ 645.6 $ 666.3 $ 2,624.4 $ 2,748.9
Operating Profit
Tools $ 60.4 $ 66.6 $ 265.6 $ 285.7
Doors 19.4 18.3 63.8 55.1
Consolidated $ 79.8 $ 84.9 $ 329.4 $ 340.8
Page 12 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 Restructuring Charges, Asset Write-Off's and Special Charges
Fourth Quarter 2001 vs. 2000
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000
----------------------------------------- -------------
Excluding Restructuring
Restructuring Charges,
Charges, Asset Asset Write-Off's
Write-Off's and and Special
Special Charges Charges Reported Reported
--------------- ------------- ----------- ----------
Net sales $ 645.6 $ - $ 645.6 $ 666.3
Cost of sales 422.3 6.4 428.7 427.0
----- --- ----- -----
Gross margin 223.3 (6.4) 216.9 239.3
34.6% 33.6% 35.9%
SG&A expenses 137.1 - 137.1 154.4
----- ----- -----
21.2% 21.2% 23.2%
Operating profit 86.2 (6.4) 79.8 84.9
13.4% 12.4% 12.7%
Interest, net 4.8 - 4.8 6.2
Other, net 6.9 - 6.9 8.5
Restructuring charges
and asset write-off's - 54.1 54.1 -
---- ---- ----- ------
Earnings before income taxes 74.5 (60.5) 14.0 70.2
Income taxes 24.6 (17.1) 7.5 23.3
33.0% - 53.6% 33.2%
---- ---- ---- ------
Net earnings $ 49.9 $ (43.4) $ 6.5 $ 46.9
========= ========= ======= ======
Average shares
outstanding (diluted) 87,748 87,748 87,748 86,767
Earnings per
share (diluted) $ 0.57 $ (0.50) $ 0.07 $ 0.54
========= ======== ======== =======
INDUSTRY SEGMENTS
Net sales
Tools $ 491.4 $ - $ 491.4 $ 520.6
Doors 154.2 - 154.2 145.7
----- ----- ------ -------
Consolidated $ 645.6 $ - $ 645.6 $ 666.3
========= ======= ========= ========
Operating profit
Tools $ 62.1 $ (1.7) $ 60.4 $ 66.6
Doors 24.1 (4.7) 19.4 18.3
---- ---- ---- ----
Consolidated 86.2 (6.4) 79.8 84.9
---- ---- ---- ----
Interest, net 4.8 - 4.8 6.2
Other, net 6.9 - 6.9 8.5
Restructuring charges
and asset write-off's - 54.1 54.1 -
---- ---- ----- -----
Earnings before income taxes $ 74.5 $ (60.5) $ 14.0 $ 70.2
====== ========= ======= ========
Page 13 of 16 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 Restructuring Charges and Asset Write-Off's and Special Charges
Year-to-Date 2001 vs. 2000
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001 2000
- ---------------------------------------------------------------- -------------
Excluding Restructuring
Restructuring Charges,
Charges, Asset Asset Write-Off's
Write-Off's and and Special
Special Charges Charges Reported Reported
-------------- ----------- --------- ---------
Net sales $2,625.1 $ (0.7) $ 2,624.4 $2,748.9
Cost of sales 1,689.4 11.9 1,701.3 1,751.5
------- ---- ------- -------
Gross margin 935.7 (12.6) 923.1 997.4
35.6% 35.2% 36.3%
SG&A expenses 585.6 8.1 593.7 656.6
----- --- ----- -----
22.3% 22.6% 23.9%
Operating profit 350.1 (20.7) 329.4 340.8
13.3% 12.6% 12.4%
Interest, net 25.8 (0.2) 25.6 27.1
Other, net 22.3 (27.6) (5.3) 20.0
Restructuring charges
and asset write-off's - 72.4 72.4 -
----- ----- ----- ----
Earnings before income taxes 302.0 (65.3) 236.7 293.7
Income taxes 99.6 (21.2) 78.4 99.3
---- ----- ---- ----
33.0% 33.1% 33.8%
Net earnings $ 202.4 $ (44.1) $ 158.3 $ 194.4
======= ====== ======== =========
Average shares
outstanding (diluted) 87,467 87,467 87,467 87,668
Earnings per share (diluted) $ 2.31 $ (0.50) $ 1.81 $ 2.22
======= ====== ========= ========
INDUSTRY SEGMENTS
Net sales
Tools $2,022.8 $ (0.7) $ 2,022.1 $2,142.5
Doors 602.3 - 602.3 606.4
----- ----- -----
Consolidated $2,625.1 $ (0.7) $ 2,624.4 $2,748.9
======== ======= ======== ========
Operating profit
Tools $ 281.3 $(15.7) $ 265.6 $ 285.7
Doors 68.8 (5.0) 63.8 55.1
---- ---- ----- ----
Consolidated 350.1 (20.7) 329.4 340.8
===== ===== ===== =====
Interest, net 25.8 (0.2) 25.6 27.1
Other, net 22.3 (27.6) (5.3) 20.0
Restructuring charges
and asset write-off's - 72.4 72.4 -
---- ----- ----- -----
Earnings before income taxes $ 302.0 $(65.3) $ 236.7 $ 293.7
========= ======== ======== =========
Page 14 of 16 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 regarding the company's ability to achieve earnings of $2.64 per fully
diluted share in 2002 and to show greater working capital efficiency and further
enhanced cash generation in 2002 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.
Page 15 of 16 Pages
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 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 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 improve its working capital efficiency and continue
strong cash generation in 2002 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