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): July 20, 1994 The Stanley Works (Exact name of registrant as specified in charter) Connecticut 1-5224 06-058860 (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:(203) 225-5111 Not Applicable (Former name or former address, if changed since last report) Item 5. Other Events. 1. On July 20, 1994, the Registrant issued a press release. Attached as Exhibit (21)(i) is a copy of the Registrant's press release. This Exhibit is incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (21)(i) Press release dated July 20, 1994 reporting on Stanley's second quarter sales and earnings. 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 By: \s\Stephen S. Weddle Name: Stephen S. Weddle Title: Vice President, General Counsel and Secretary Date: July 22, 1994 Exhibit (21)(i) July 20, 1994 STANLEY REPORTS RECORD SECOND QUARTER RESULTS New Britain, Connecticut . . . Richard H. Ayers, Chairman and Chief Executive Officer of The Stanley Works announced today, "We are pleased with our solid performance for the quarter and for the first six months of 1994. Sales in the second quarter of $629 million were 11% higher than the prior year and were a record for any quarter. Net earnings of $33.7 million, or $.75 per share, represented a 25% increase over 1993 and were records for second quarter results." Mr. Ayers noted, "Significant internal growth from all our business units was the primary contributor to the current quarter sales increase. Our businesses serving the U.S. industrial and construction markets had the most significant impact on the overall 10% increase in unit volume growth. The net incremental effect of acquisitions and divestitures increased sales by 1%, while the effects of a 1% price increase were offset by the negative effects of currency." Gross margins of 33.4% were substantially improved over margins of 32.1% reported in the prior year. This improvement was achieved through a combination of cost and volume efficiencies together with the absence of expenses related to manufacturing process changes and some extraordinarily high raw material costs that were incurred in the second quarter last year. Operating expenses also improved to 22.2% of sales compared with 22.7% in the prior year. Interest-net expenses for the quarter were 1.2% of sales compared with 1.1% in the prior year, reflecting a higher interest rate environment. Other-net of $9.0 million, or 1.4% of sales, for the second quarter compared with $4.0 million, or 0.7% of sales, in the same quarter a year ago. The increase in Other-net included additional reserves established in this year for environmental and plant closing expenses while the prior year benefitted from favorable adjustments to contingency reserves. -- more -- (page 2) Net sales for the first six months of 1994 were $1.2 billion, up 9% from 1993 sales of $1.1 billion. Net earnings of $59.3 million, or $1.32 per share, were 19% higher than prior year earnings of $50.0 million, or $1.11 per share. Net earnings and earnings per share in 1993 exclude the effects of a change in accounting principle. Net sales in the U.S. for the second quarter increased by 12%, entirely the result of internal growth. Strong order activity continued in our industrial and engineered tool categories and was augmented by strengthening in consumer tools. Price increases of 1% were offset by the negative effect of the company's divestiture activity. Sales in Europe continued to improve with an overall increase of 8% for the quarter. Unit volume growth of 4% reflected increased sales activity especially in the industrial tools category. The incremental effect of a recent acquisition increased sales by 6%. Minor price increases combined with the negative effects of currency resulting in a net 2% decrease from the prior year. Operating profits of $8.0 million were similar to the prior year while operating margins, reflecting more aggressive sales efforts, declined from 10.3% to 9.3%. Net sales in Other Areas increased by 13% for the quarter. Internal volume growth of 9% included strengthening in our Canadian businesses. The incremental effect of acquisitions increased sales by 5%; however, the net effect of price increases and negative currency translation decreased sales by 1%. Net sales for the Tools segment increased 11%, principally the result of 10% internal sales growth. Consumer tools' unit volume growth of 6% was an improvement over more modest gains reported in the first quarter. The industrial and engineered tool categories continued with strong order activity and experienced double digit internal growth for the quarter. Price increases of 2% were substantially offset by the negative effects of currency. The net incremental effect of acquisitions and divestitures increased sales by 1%. Operating profits of $59.3 million were 19% higher than the comparable quarter last year. Operating margins of 12.5% compared with 11.7% in the prior year and reflected increased volume and operating efficiencies. -- more -- (page 3) Net sales in the Hardware segment increased 6% over the prior year almost entirely due to unit volume increases. Minor price increases were offset by the negative effects of currency. Operating profits improved significantly to $10.8 million with operating margins of 13.7% comparing favorably with 10.1% in the prior year. Even when the effects of property losses related to the California earthquake are excluded, margins in the second quarter were improved over those reported in the first quarter. Specialty Hardware net sales for the second quarter were 17% higher than the same quarter last year. As in the other segments, this increase was driven primarily by unit volume gains. Price increases of 1% were offset by a minor currency impact and resulted in no net effect on sales. Operating profits of $4.2 million were substantially improved from $1.8 million reported last year. The prior year's operating results were depressed because our Door Systems business experienced unusually high wood prices and related manufacturing process problems. On June 18, the company completed the divestiture of its Taylor Rental business with the sale of the remaining company-owned stores and related assets. Mr. Ayers stated, "Our results through the second quarter give us continued confidence in our expectations for 1994. We are moving forward with our expansion in Asia and are encouraged by our new product development activities. We feel confident that these initiatives position us well for continued long-term growth. Although there is some reason to be concerned about interest rates and the uncertainties of steel availability and price, we believe our prediction in the 1993 annual report for higher sales and substantially higher profits in 1994 is still on target." ############## CONTACT: Patricia McLean Manager, Corp. Communications (203) 827-3833 (page 4) THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Millions of Dollars) SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 Net Sales $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 Costs and Expenses Cost of sales 418.6 383.5 813.0 758.2 Selling, general and administrative 139.4 128.5 273.2 258.6 Interest - net 7.8 6.0 15.2 13.3 Other - net 9.0 4.0 17.8 7.8 ------- ------- -------- ------- 574.8 522.0 1,119.2 1,037.9 ------- ------- -------- ------- Earnings Before Income Taxes and Cumulative Effect of Accounting Change 54.0 43.2 95.3 80.7 Income Taxes 20.3 16.2 36.0 30.7 ------- ------- -------- ------- Earnings Before Cumulative Effect of Accounting Change 33.7 27.0 59.3 50.0 Cumulative Effect of Accounting Change for Postemployment Benefits (8.5) ------- ------- -------- ------- Net Earnings $ 33.7 $ 27.0 $ 59.3 $ 41.5 ======= ======= ======== ======= Net Earnings Per Share of Common Stock: Before Cumulative Effect of Accounting Change $ 0.75 $ 0.60 $ 1.32 $ 1.11 Cumulative Effect of Accounting Change (0.19) ------- ------- -------- ------- Net Earnings Per Share of Common Stock $ 0.75 $ 0.60 $ 1.32 $ 0.92 ======= ======= ======== ======= Dividends per share $ 0.34 $ 0.33 $ 0.68 $ 0.66 Average shares outstanding 44,829 44,971 44,798 45,152 (in thousands) [FN] See notes to consolidated financial statements. (page 5) THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Millions of Dollars) July 2 July 3 1994 1993 ASSETS Cash and cash equivalents $ 33.8 $ 18.5 Accounts receivable 416.4 388.7 Inventories 352.6 329.4 Other current assets 32.4 32.7 ------- ------- Total current assets 835.2 769.3 Property, plant and equipment - net 557.8 555.4 Goodwill and other intangibles 169.7 170.3 Other assets 80.9 76.1 ------- ------- $ 1,643.6 $ 1,571.1 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 86.3 $ 92.3 Accounts payable 101.2 93.6 Accrued expenses 194.2 186.9 ------- ------- Total current liabilities 381.7 372.8 Long-term debt 385.6 364.8 Other long-term liabilities 158.0 150.9 Shareholders' equity 718.3 682.6 ------- ------- $ 1,643.6 $ 1,571.1 ======= ======= <FN> See notes to consolidated financial statements. (page 6) THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Dollars) SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 Operating Activities Net Earnings $ 33.7 $ 27.0 $ 59.3 $ 41.5 Depreciation and amortization 21.6 17.7 42.8 39.8 Provision for postemployment benefits 13.6 Net gain on sale of non-operating asset (24.0) Other non-cash items 11.2 0.4 16.5 5.3 Changes in operating assets and liabilities (27.0) (35.1) (85.0) (70.6) ------ ------ ------ ------ Net cash provided by operating activities 39.5 10.0 33.6 5.6 Investing Activities Capital expenditures (17.9) (11.7) (31.1) (26.2) Proceeds from sales of assets 4.8 0.9 6.4 2.0 Proceeds from sale of non-operating asset 32.9 Business acquisitions (5.1) (5.1) (0.9) Other (2.7) (3.6) (3.0) (2.7) ------ ------ ------ ------ Net cash provided (used) by investing activities (20.9) (14.4) (32.8) 5.1 Financing Activities Payments on long-term debt (0.2) (65.7) (0.7) (67.0) Net short-term bank financing (3.7) 39.8 34.5 64.7 Proceeds from issuance of common stock 0.3 0.2 0.6 0.6 Purchase of common stock for treasury (0.8) (0.8) (26.5) Cash dividends on common stock (15.2) (29.7) (45.1) (44.7) ------ ------ ------ ------ Net cash used by financing activities (19.6) (55.4) (11.5) (72.9) Effect of Exchange Rate Changes on Cash (1.7) 0.4 0.8 (0.4) ------ ------ ------ ------ Decrease in Cash and Cash Equivalents (2.7) (59.4) (9.9) (62.6) Cash and Cash Equivalents, Beginning of Period 36.5 77.9 43.7 81.1 ------ ------ ------ ------ Cash and Cash Equivalents, End of Second Quarter $ 33.8 $ 18.5 $ 33.8 $ 18.5 ===== ===== ===== ====== <FN> See notes to consolidated financial statements. (page 7) THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Millions of Dollars) SIX MONTHS 1994 1993 Balance at beginning of year $ 680.9 $ 696.3 Net earnings 59.3 41.5 Currency translation adjustment 1.2 (6.5) Cash dividends declared (30.5) (29.7) Net issuance of Common Stock 3.2 (22.9) ESOP debt 4.2 3.9 -------- ------- Balance at end of second quarter $ 718.3 $ 682.6 ======== ======= <FN> See notes to consolidated financial statements. (page 8) THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Millions of Dollars) SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 INDUSTRY SEGMENTS Net Sales Tools Consumer $ 179.2 $ 167.9 $ 341.8 $ 326.8 Industrial 129.5 112.7 260.0 227.9 Engineered 165.9 145.4 314.5 287.2 -------- -------- -------- ------- Total Tools 474.6 426.0 916.3 841.9 Hardware 78.7 74.6 156.3 153.5 Specialty Hardware 75.5 64.6 141.9 123.2 -------- -------- -------- ------- Consolidated $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 ======== ======== ======== ======= Operating Profit Tools $ 59.3 $ 49.9 $ 107.7 $ 87.8 Hardware 10.8 7.5 19.7 18.2 Specialty Hardware 4.2 1.8 7.3 2.5 -------- -------- -------- ------- Total 74.3 59.2 134.7 108.5 Net corporate expenses (10.7) (8.1) (21.7) (11.6) Interest expense (9.6) (7.9) (17.7) (16.2) -------- -------- -------- ------- Earnings before income taxes $ 54.0 $ 43.2 $ 95.3 $ 80.7 ======== ======== ======== ======= GEOGRAPHIC AREAS Net Sales United States $ 457.3 $ 409.6 $ 877.5 $ 806.3 Europe 86.0 80.0 174.4 163.2 Other Areas 85.5 75.6 162.6 149.1 -------- -------- -------- ------- Consolidated $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 ======== ======== ======== ======= Operating Profit United States $ 57.4 $ 43.6 $ 102.2 $ 77.3 Europe 8.0 8.2 17.7 16.8 Other Areas 8.9 7.4 14.8 14.4 -------- -------- -------- ------- Total $ 74.3 $ 59.2 $ 134.7 $ 108.5 ======== ======== ======== ====== <FN> See notes to consolidated financial statements. (page 9) THE STANLEY WORKS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the consolidated statement of earnings for six months of 1993, Other-net includes a gain of $24.0 million ($.33 per share) from the sale of a portion of the company's investment in Max Co., Ltd. Also included in Other-net were additional charges for a fine levied by U.S. District Court in Missouri for $5.0 million ($.07 per share) and contingency reserves of $15.7 million ($.21 per share) related to product liability litigation, restructuring activities and environmental remediation. Certain 1993 amounts in the Business Segment Information were reclassified to conform to the 1994 presentation.