FOR IMMEDIATE RELEASE January 31, 1996
STANLEY REPORTS 1995 SALES AND EARNINGS
New Britain, Connecticut (NYSE:SWK)..."The Stanley Works achieved record
sales of $2.6 billion in 1995, which represented a 4.5% increase over the prior
year", reported Richard H. Ayers, Chairman and Chief Executive Officer.
Mr. Ayers stated, "We are particularly pleased that these sales gains were
achieved despite weakening economic conditions in many of our markets."
Net earnings for 1995 were reported at $59 million, or $1.33 per share,
reflecting charges for restructuring and other non-recurring activities related
to the company's previously announced initiative to realign and restructure
operations. These charges totaled $1.57 per share for the year including $1.44
per share of restructuring and asset write-offs and $.13 per share of related
charges. Excluding the effects of these charges, net earnings on a normalized
basis were $129 million, or $2.90 per share, compared with $2.80 per share in
the prior year.
Mr. Ayers commented, "While it is not easy or pleasant to report that there is,
indeed, a high cost associated with taking bold steps toward reorganization, we
were pleased with our core business results for 1995. More important, we are
excited about the future as each of our businesses implements the plans required
to achieve its full potential. These plans will result in more efficient
operations and a cost structure that is more focused on generating strong,
sustainable growth in sales and profits for The Stanley Works and increased
value for our shareholders."
Fourth quarter net sales of $670 million increased 1% over a particularly strong
quarter in the prior year. A gain of 2% from price increases was offset by
volume declines of 1% that were associated with growing weakness in European
markets, continued weakness in other international markets, and flattening
demand in the U.S.
Net earnings for the quarter were $.6 million, or $.01 per share, and included
restructuring charges of $23 million and asset write-offs of $21 million,
totaling $44 million, or $.73 per share, along with related non-recurring
charges of $7 million, or $.09 per share. Excluding these charges, normalized
earnings were $37 million, or $.83 per share, up 9% from the $.76 per share
reported in the fourth quarter last year.
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(page 2)
Included in the $44 million charge were: severance costs associated with a
workforce reduction of approximately 350 employees; a comprehensive SKU
reduction program; costs associated with exiting several small manufacturing and
administrative facilities; asset write-offs for goodwill and other intangibles;
and asset write-offs for underutilized manufacturing equipment. The $7 million
charge reflected consulting expenses and costs related to a more aggressive
program for reducing inventories.
Gross margins reported in the fourth quarter were 31.3% compared with 32.9% last
year and reflected charges related to the previously mentioned inventory
reduction program and integration charges at our Mechanics Tools subsidiary.
Operating expense ratios in the fourth quarter improved to 22.1% from 22.3 % in
the prior year, reflecting savings from recent workforce reductions and
increased costs associated with restructuring-related consulting. Interest-net
expense of 1.1% of sales was comparable to the prior year quarter. Other-net
expense of $1.6 million reflected lower charges associated with the writedown
and sale of equipment, primarily for the Mechanics Tools manufacturing
integration, and lower environmental remediation expense.
Tax expense of $8 million for the quarter reflected the non-deductibility of
certain costs resulting from the restructuring activity. Excluding these items,
the effective tax rate for the quarter was approximately 38.0%, slightly lower
than the 38.6% in the prior year.
Net sales for the Tools segment in the fourth quarter increased 1% over the
prior year as a 1% volume decline was offset by a 2% gain due to pricing. The
volume decline resulted primarily from weak international sales. For the first
time this year, European businesses experienced lower volume, while other
markets continued to reflect weak economic conditions. In addition, volume was
affected by flattening demand in the U.S. Operating profit margins on a
normalized basis, after excluding the effects of restructuring and related
non-recurring charges of $39 million, were 12.2% versus 11.1% for the prior
year.
Net sales for the Hardware segment in the fourth quarter increased 2% over the
prior year as a 3% price increase and a 1% increase due to foreign currency
translation were offset by a 2% reduction in volume. Sales in the U.S. were
virtually flat, while volume declined in the European home decor markets.
Excluding charges of $8 million for restructuring and non-recurring activities,
operating profit margins, on a normalized basis, improved to 8.2% from 7.8%,
primarily the result of improved operations in our Acmetrack business in France.
Net sales for the Specialty Hardware segment in the fourth quarter were up 3%
over the prior year with volume, principally in the U.S., contributing 1%, and
recent acquisitions adding 2%. Normalized operating profit margins, excluding $1
million of restructuring and related charges, were 6.2% compared with 10.0% in
the prior year, reflecting a profitability decline that resulted primarily from
increased promotional support in the entry door business.
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(page 3)
Geographically, net sales for the U.S. in the fourth quarter increased 3%, price
increases contributed 2% and volume contributed 1%. Normalized operating profit
margins were consistent with the prior year at 12.4%. European markets suffered
a decline in the fourth quarter in contrast to the strength experienced in the
first nine months. Overall, net sales increased 5%, including a 2% increase from
price, a 2% increase from recent acquisitions, a 3% decline in volume and a 4%
increase due to currency translation. Improvements in the operations of our
French Acmetrack business were primarily responsible for the improvement of
operating margins to 8.9% on a normalized basis from 6.9% in the prior year. Net
sales in Other Areas continued to reflect sluggish markets in Canada, Australia
and Mexico where a 14% decline in net sales resulted from a 10% decrease in
volume, a 6% negative foreign currency effect and a 2% price increase.
Normalized operating profits were unchanged from the 4.8% reported in the prior
year.
Commenting on the fourth quarter and full year results, Mr. Ayers stated, "In
July of 1995, we announced a reorganization plan that is creating sweeping
changes throughout the company. Because the plan is directed toward re-focusing
virtually all of our businesses, its result will be a lasting cultural change
throughout our organization. We are moving toward a culture that is intolerant
of underperformance and that requires our organization to reach its full
profitability potential."
Mr. Ayers continued, "We are closing and exiting underperforming plants and
businesses, adjusting our workforce to be more competitive, aggressively
reducing the SKUs in our businesses and writing off assets that are impaired or
underutilized as a result of our new initiatives. The 1995 phase of these
initiatives has resulted in $86 million in restructuring charges and $10 million
in related charges. These actions are expected to generate about $30 million in
annualized savings and reduce our assets by $65 million.
Mr. Ayers concluded, "Our restructuring initiatives are part of a multi-year
effort and, as we continue to evaluate the full potential of many of our
businesses, we will likely record additional restructuring charges in 1996 and
possibly beyond. These charges may approximate those recognized in 1995 and are
expected to provide us with even greater savings than are anticipated from the
actions taken to date.
"Putting the effects of our restructuring initiative aside, our businesses
succeeded in navigating the difficulties experienced in our markets in 1995.
They continue to make the adjustments we believe are necessary to help us
improve our profitability even in the face of the weaknesses we have been
experiencing in our markets early in 1996."
############
CONTACT: Patricia McLean
Manager, Corporate Communications
(203) 827-3833
-4-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Millions of Dollars)
FOURTH QUARTER TWELVE MONTHS
1995 1994 1995 1994
Net Sales $ 669.8 $ 663.8 $ 2,624.3 $ 2,510.9
Costs and Expenses
Cost of sales 460.5 445.3 1,789.7 1,684.0
Selling, general and
administrative 147.8 147.7 591.7 560.4
Interest - net 7.1 6.9 30.3 29.0
Other - net 1.6 8.8 14.3 35.7
Restructuring and
asset writeoffs 44.0 - 85.5 -
------- ------- -------- --------
661.0 608.7 2,511.5 2,309.1
------- ------- -------- --------
Earnings Before Income Taxes 8.8 55.1 112.8 201.8
Income Taxes 8.2 21.3 53.7 76.5
------- ------- -------- --------
Net Earnings $ 0.6 $ 33.8 $ 59.1 $ 125.3
======= ======= ======== ========
Net Earnings Per Share of
Common Stock $ 0.01 $ 0.76 $ 1.33 $ 2.80
======= ======= ======== ========
Dividends per share $ 0.36 $ 0.35 $ 1.42 $ 1.38
Average shares outstanding 44,347 44,691 44,360 44,775
(in thousands)
See notes to consolidated financial statements.
-5-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
December 30 December 31
1995 1994
ASSETS
Cash and cash equivalents $ 75.4 $ 69.3
Accounts receivable 438.7 410.3
Inventories 349.1 369.2
Other current assets 51.9 39.7
------- -------
Total current assets 915.1 888.5
Property, plant and equipment 532.1 559.8
Goodwill and other intangibles 131.8 164.6
Other assets 91.0 88.2
------- -------
$ 1,670.0 $ 1,701.1
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 91.3 $ 93.7
Accounts payable 112.7 125.3
Accrued expenses 183.7 202.5
------- -------
Total current liabilities 387.7 421.5
Long-term debt 391.1 387.1
Other long-term liabilities 156.6 148.3
Shareholders' equity 734.6 744.2
------- -------
$ 1,670.0 $ 1,701.1
======= =======
See notes to consolidated financial statements.
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
FOURTH QUARTER TWELVE MONTHS
1995 1994 1995 1994
Operating Activities
Net earnings $ 0.6 $ 33.8 $ 59.1 $ 125.3
Depreciation and amortization 17.5 19.3 81.2 81.8
Restructuring and asset writeoffs 44.0 - 85.5 -
Other non-cash items 18.7 (5.2) 32.3 18.3
Changes in operating assets
and liabilities 21.5 27.2 (80.0) (96.9)
------ ------ ------ ------
Net cash provided by
operating activities 102.3 75.1 178.1 128.5
Investing Activities
Capital expenditures (21.8) (17.8) (66.5) (66.4)
Proceeds from sales of assets 3.7 3.6 4.3 11.0
Business acquisitions - - (3.3) (5.1)
Other (7.0) (4.8) (19.8) (9.7)
------ ------ ------ ------
Net cash used by
investing activities (25.1) (19.0) (85.3) (70.2)
Financing Activities
Payments on long-term debt - (1.0) (83.5) (2.9)
Proceeds from long-term borrowings 1.8 - 86.0 -
Net short-term borrowings (23.4) (10.7) (5.1) 40.9
Proceeds from issuance of common stock 3.0 0.7 5.7 4.2
Purchase of common stock for treasury (0.7) (14.3) (13.2) (16.3)
Cash dividends on common stock (28.9) (0.7) (75.2) (61.5)
------ ------ ------ ------
Net cash used by (48.2) (26.0) (85.3) (35.6)
financing activities
Effect of Exchange Rate Changes on Cash (2.1) 0.4 (1.4) 2.9
------ ------ ------ ------
Increase in Cash and Cash Equivalents 26.9 30.5 6.1 25.6
Cash and Cash Equivalents,
Beginning of Period 48.5 38.8 69.3 43.7
------ ------ ------ ------
Cash and Cash Equivalents,
End of Fourth Quarter $ 75.4 $ 69.3 $ 75.4 $ 69.3
===== ===== ===== =====
See notes to consolidated financial statements.
-7-
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Millions of Dollars)
TWELVE MONTHS
1995 1994
Balance at beginning of year $ 744.2 $ 680.9
Net earnings 59.1 125.3
Currency translation adjustment (14.3) 0.4
Cash dividends declared (62.6) (61.9)
Net common stock activity (1.2) (8.3)
ESOP debt 9.4 7.8
-------- -------
Balance at end of fourth quarter $ 734.6 $ 744.2
======== =======
See notes to consolidated financial statements.
-8-
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Millions of Dollars)
FOURTH QUARTER TWELVE MONTHS
1995 1994 1995 1994
INDUSTRY SEGMENTS
Net Sales
Tools
Consumer $ 200.2 $ 196.7 $ 738.9 $ 716.0
Industrial 136.8 135.0 552.3 524.4
Engineered 168.0 170.8 678.3 643.5
-------- -------- -------- --------
Total Tools 505.0 502.5 1,969.5 1,883.9
Hardware 76.7 75.5 324.2 311.1
Specialty Hardware 88.1 85.8 330.6 315.9
-------- -------- -------- --------
Consolidated $ 669.8 $ 663.8 $ 2,624.3 $ 2,510.9
======== ======== ======== ========
Operating Profit
Tools $ 23.3 $ 55.7 $ 154.9 $ 217.0
Hardware (1.9) 5.9 13.4 33.3
Specialty Hardware 4.0 8.6 17.8 24.0
-------- -------- -------- --------
Total 25.4 70.2 186.1 274.3
Net corporate expenses (7.9) (6.5) (37.6) (38.8)
Interest expense (8.7) (8.6) (35.7) (33.7)
-------- -------- -------- --------
Earnings before
income taxes $ 8.8 $ 55.1 $ 112.8 $ 201.8
======== ======== ======== ========
GEOGRAPHIC AREAS
Net Sales
United States $ 491.7 $ 478.2 $ 1,884.9 $ 1,808.6
Europe 100.8 95.8 413.4 357.6
Other Areas 77.3 89.8 326.0 344.7
-------- -------- -------- --------
Consolidated $ 669.8 $ 663.8 $ 2,624.3 $ 2,510.9
======== ======== ======== ========
Operating Profit
United States $ 30.6 $ 59.3 $ 146.9 $ 215.4
Europe (0.6) 6.6 26.8 31.9
Other Areas (4.6) 4.3 12.4 27.0
-------- -------- -------- --------
Total $ 25.4 $ 70.2 $ 186.1 $ 274.3
======== ======== ======== ========
See notes to consolidated financial statements.
-9-
THE STANLEY WORKS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles. However, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto to be included in The Stanley Works annual report for the year ended
December 30, 1995.