FOR IMMEDIATE RELEASE Exhibit (20)(ii)
July 18, 1997
THE STANLEY WORKS REPORTS SECOND QUARTER 1997 EARNINGS AND
ANNOUNCES NEW PROGRAMS FOR LONG-TERM GROWTH
New Britain, Connecticut (NYSE: SWK ) ... The Stanley Works
today announced a significant increase in normalized or core
earnings for the second quarter ended June 28, 1997. Excluding
restructuring and other charges discussed below, normalized or
core net income in the second 1997 quarter was $50 million, or
$.56 per share, a 15% increase over prior year core earnings of $43
million, or $.49 per share. Excluding prior year sales from
recently divested businesses and product lines, net sales from
ongoing businesses increased 4% compared with the second quarter of
1996. Gross margins reported for the second quarter, on a core
basis, were 34.9% of sales compared with 33.7% in the prior year's
quarter. Volume increases and the positive effects of previously
announced restructuring initiatives, including strong contributions
from company-wide procurement efforts, accounted for most of the
improvement in gross margin.
Reported net sales for the quarter were $674 million, a decrease of
less than 1% from sales of $677 million in the same quarter of
1996. Ongoing businesses experienced unit volume growth of 6% with
particular strength in fastening systems and consumer tools.
Business and product line divestitures decreased sales by $32
million, or 5%, from prior year levels. Price declines and effects
of foreign currency decreased sales by a combined 2%. North
American unit volume growth was 5%, while European volume increased
a very strong 11%. The European volume gains were somewhat offset
by a 1% price decline and a 4% negative currency impact.
A significant restructuring charge, described below, accounted
for a reported net loss of $65 million, or $.72 per share, as
compared with the prior year's net income of $33 million, or $.37
per share. In addition to the restructuring charge, the company
also recorded $24 million, or $.16 per share, of restructuring-
related transition costs and a non-recurring charge. The
transition costs represent moving, start-up and duplicative
facility costs for facility closures and consolidations incurred
in connection with initiatives announced in 1995. A one-time
non-cash charge was also recorded in connection with stock
options issued to the company's new chief executive officer.
Page 6 of 17
Second quarter consolidated core segment operating profit
margin improved to 14.7% of sales from 12.9% in the prior year.
The attached table, "Business Segment Information", provides
clarification of reported results for the second quarters of 1997
and 1996, and their respective year-to-date periods, reconciling
them with normalized core results. Core results exclude
restructuring charges, restructuring-related transition costs and
a charge related to stock options granted to the company's new
chairman and chief executive officer. The Tools, Hardware and
Specialty Hardware segment comments that follow are based on
normalized core results.
In the Tools segment overall, second quarter unit volume sales
increased 7% over last year. Consumer tools unit growth was 10%
with particular strength in North America. Industrial tools
increased 3%, primarily reflecting improved storage systems
results in the U.S. Engineered tools increased 7% in unit
volume, reflecting continued strong sales of fastening tools and
fasteners in the U. S. and Europe. Core operating profits in the
Tools segment for the quarter increased to 16.0% of sales, from
13.3% a year ago. This improvement resulted from higher sales
volume, savings from cross-divisional purchasing efforts, other
restructuring initiatives and performance improvements in the
mechanics tools operations.
The Hardware segment saw 1% unit growth in the quarter, with
continued strong demand for Home Decor products in the U.S.,
Canadian and European markets. Demand in the U. S. consumer
market for traditional hardware products declined from robust
levels seen in recent quarters. Core operating profits decreased
to 14.2% of sales, from 16.0% in the prior year. This decline
resulted from inclusion in 1996 of a gain realized upon
resolution of a legal matter.
The Specialty Hardware segment experienced 3% unit growth in the
second quarter. Core operating results decreased to a 5.6%
profit on sales, from a 7.7% operating profit last year. This
decrease was principally due to a 2% price decline resulting from
the continuation of an extremely competitive pricing environment.
The company continues to maintain its strategic decision to
defend its market share.
John M. Trani, Chairman and Chief Executive Officer, commented on
the quarter's results: "Our second quarter core net profit
improvement of 15%, as well as our 1.2 percentage point gross
margin and 1.8 percentage point segment operating profit gains,
indicate that our cost structure continues to become leaner.
This provides us the platform from which to embark upon the
growth programs we are announcing today."
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Mr. Trani continued with an announcement of a resource
reallocation intended to grow the enterprise: "Today we are
announcing initiatives designed to deliver profitable sales
growth on a sustained basis. New products are the lifeblood of a
manufacturing company. Increased expenditures will be made on
new product development and expansion into a number of near-
neighbor or related products. Considerably greater resources
will be allocated to brand development, including advertising, so
that our customers think of Stanley first and are always
informed about our new products. To support this thrust, we have
established a corporate marketing and brand development function,
whose focus will be the nurturing and leveraging of the Stanley
brand."
Funding for these initiatives will come from streamlining
manufacturing, sales, distribution and administrative operations.
Manufacturing and distribution facility locations will decrease
from 123 to 70. Additional savings will come from the company's
previously announced reorganization of its operations into a
product management structure, and the centralization of
manufacturing, engineering, sales and service, finance, human
resource and information technology. Overall, these actions will
change the composition of the company s workforce and will reduce
net employment levels by 4,500 people.
Recognizing the impact that these changes have on Stanley people,
the company has provided increased benefits. Mr. Trani noted:
"It is always difficult to reduce employment. We are extremely
sensitive to the needs of our people. Notification periods will
exceed required lengths; severance packages have been enhanced
and are generous; and benefits will be provided to the fullest
extent possible."
In total, restructuring charges of $240 million, including $140
million of cash costs and $100 million non-cash costs, plus
restructuring-related transition costs of $100 million, are
anticipated in connection with these actions. The restructuring
charges will be recorded entirely in 1997, with $137 million
having been taken in the second quarter and the remainder to
follow in the third quarter. The $100 million of non-cash
restructuring charges relate to write-offs of non-productive
assets including goodwill and capitalized software. The
restructuring-related transition costs will be incurred
throughout the remainder of 1997 and 1998.
The Stanley Works is a worldwide producer of tools, hardware and
specialty hardware for consumer, home improvement, industrial and
professional use.
Page 8 of 17
Contact: Gerard J. Gould
Director, Investor Relations and Communications
Tel.: (860) 827-3833
This press release contains forward looking statements as to the
company's ability to complete the reallocation of its resources
in order to achieve sustained, profitable growth. 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 through
PR Newswire's "Company News On-Call" service. By FAX: dial
1-800-758-5804, ext. 874363 or on the internet at:
http://www.prnewswire.com or http://www.StanleyWorks.com.
Page 9 of 17
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Second Quarter Six Months
1997 1996 1997 1996
Net Sales $ 673.6 $ 677.2 $ 1,320.2 $ 1,312.5
Costs and Expenses
Cost of sales 446.1 453.0 877.5 882.3
Selling, general and
administrative 153.8 153.1 307.0 302.1
Interest - net 4.4 5.4 8.7 11.9
Other - net 13.6 4.4 17.2 7.9
Restructuring 137.2 3.8 132.6 3.8
755.1 619.7 1,343.0 1,208.0
Earnings (Loss) before
income taxes (81.5) 57.5 (22.8) 104.5
Income Taxes (17.0) 24.9 5.0 42.3
Net Earnings (Loss) $ (64.5) $ 32.6 $ (27.8) $ 62.2
Net Earnings (Loss) Per
Share of Common Stock $ (0.72) $ 0.37 $ (0.31) $ 0.70
Dividends per share $ 0.185 $ 0.18 $ 0.37 $ 0.36
Average shares outstanding
(in thousands) 88,987 88,825 88,878 88,830
Page 10 of 17
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
June 28, June 29,
1997 1996
ASSETS
Cash and cash equivalents $ 107.6 $ 79.5
Accounts receivable 457.1 454.2
Inventories 323.4 344.4
Other current assets 52.8 42.3
Total current assets 940.9 920.4
Property, plant and equipment 508.3 556.0
Goodwill and other intangibles 73.6 121.0
Deferred income taxes 47.6 -
Other assets 96.4 71.2
$ 1,666.8 $ 1,668.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 76.4 $ 47.2
Accounts payable 114.6 119.6
Accrued expenses 299.2 204.6
Total current liabilities 490.2 371.4
Long-term debt 295.8 373.3
Other long-term liablities 164.1 158.2
Shareholders' equity 716.7 765.7
$ 1,666.8 $ 1,668.6
Page 11 of 17
THE STANLEY WORKS AND SUBSIDIARIES
PRICE/VOLUME INFORMATION
(Unaudited, Millions of Dollars)
NET SALES
Second Quarter
Unit ACQ/
1997 Price Volume DVT Currency 1996
INDUSTRY SEGMENTS
Tools
Consumer $ 188.2 - 10% (3)% (2)% $ 179.7
Industrial 141.6 2% 3% (3)% - 138.5
Engineered 186.4 (1)% 7% - (1)% 177.3
Total Tools 516.2 - 7% (2)% (1)% 495.5
Hardware 86.2 (3)% 1% - - 87.9
Specialty Hardware 71.2 (2)% 3% (25)% - 93.8
Consolidated $ 673.6 (1)% 6% (5)% (1)% $ 677.2
GEOGRAPHIC AREAS
United States $ 479.7 (1)% 4% (6)% - $ 493.2
Europe 106.3 (1)% 11% (1)% (4)% 101.0
Other Areas 87.6 1% 11% (5)% (2)% 83.0
Consolidated $ 673.6 (1)% 6% (5)% (1)% $ 677.2
Year to Date
Unit ACQ/
1997 Price Volume DVT Currency 1996
INDUSTRY SEGMENTS
Tools
Consumer $ 366.2 - 8% (4)% (1)% $ 356.5
Industrial 274.2 2% - (2)% - 274.8
Engineered 358.5 (1)% 7% - (1)% 341.3
Total Tools 998.9 - 6% (2)% (1)% 972.6
Hardware 179.3 (1)% 6% - - 171.1
Specialty Hardware 142.0 (2)% 6% (20)% - 168.8
Consolidated $ 1,320.2 - 6% (4)% (1)% $ 1,312.5
GEOGRAPHIC AREAS
United States $ 935.5 (1)% 5% (5)% - $ 942.7
Europe 214.1 (1)% 7% - (4)% 209.1
Other Areas 170.6 1% 9% (3)% (1)% 160.7
Consolidated $ 1,320.2 - 6% (4)% (1)% $ 1,312.5
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Second Quarter 1997
Related Core
Restrg Transition Profit
Reported Charges Costs* Core Margin
INDUSTRY SEGMENTS
Tools $ (38.3) $ 110.7 $ 10.4 $ 82.8 16.0%
Hardware 2.6 7.5 2.1 12.2 14.2%
Specialty Hardware (9.8) 13.7 - 3.9 5.6%
Total (45.5) 131.9 12.5 98.9 14.7%
Net corporate
expenses (29.6) 5.3 11.0 (13.3)
Interest expense (6.4) - - (6.4)
Earnings(loss)before
income taxes $ (81.5) $ 137.2 $ 23.5 $ 79.2
GEOGRAPHIC AREAS
United States $ (19.1) $ 87.6 $ 8.5 $ 77.0 16.1%
Europe (12.0) 24.1 2.4 14.5 13.6%
Other Areas (14.4) 20.2 1.6 7.4 8.4%
Total $ (45.5) $ 131.9 $ 12.5 $ 98.9 14.7%
Second Quarter 1996
Related Core
Restrg Transition Profit
Reported Charges Costs Core Margin
INDUSTRY SEGMENTS
Tools $ 58.8 $ 0.7 $ 6.3 $ 65.8 13.3%
Hardware 12.7 - 1.4 14.1 16.0%
Specialty Hardware 6.7 - 0.5 7.2 7.7%
Total 78.2 0.7 8.2 87.1 12.9%
Net corporate
expenses (13.7) 3.1 - (10.6)
Interest expense (7.0) - - (7.0)
Earnings before
income taxes $ 57.5 $ 3.8 $ 8.2 $ 69.5
GEOGRAPHIC AREAS
United States $ 63.4 $ 0.1 $ 7.5 $ 71.0 14.4%
Europe 9.3 - 0.4 9.7 9.6%
Other Areas 5.5 0.6 0.3 6.4 7.7%
Total $ 78.2 $ 0.7 $ 8.2 $ 87.1 12.9%
* Includes stock option charge.
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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
OPERATING PROFIT
Year to Date 1997
Related Core
Restrg Transition Profit
Reported Chgs Costs* Core Margin
INDUSTRY SEGMENTS
Tools $ 17.7 $ 111.8 $ 18.0 $ 147.5 14.8%
Hardware 14.4 7.9 4.0 26.3 14.7%
Specialty Hardware (7.5) 14.3 0.2 7.0 4.9%
Total 24.6 134.0 22.2 180.8 13.7%
Net corporate
expenses (35.4) (1.4) 11.1 (25.7)
Interest expense (12.0) - - (12.0)
Earnings(loss)before
income taxes $ (22.8) $ 132.6 $ 33.3 $ 143.1
GEOGRAPHIC AREAS
United States $ 34.1 $ 88.8 $ 16.1 $ 139.0 14.9%
Europe (0.7) 24.5 3.5 27.3 12.8%
Other Areas (8.8) 20.7 2.6 14.5 8.5%
Total $ 24.6 $ 134.0 $ 22.2 $ 180.8 13.7%
Year to Date 1996
Related Core
Restrg Transition Profit
Reported Chgs Costs Core Margin
INDUSTRY SEGMENTS
Tools $ 110.7 $ 0.7 $ 10.5 $ 121.9 12.5%
Hardware 22.3 - 2.2 24.5 14.3%
Specialty Hardware 9.0 - 1.0 10.0 5.9%
Total 142.0 0.7 13.7 156.4 11.9%
Net corporate
expenses (22.9) 3.1 1.3 (18.5)
Interest expense (14.6) - - (14.6)
Earnings before
income taxes $ 104.5 $ 3.8 $ 15.0 $ 123.3
GEOGRAPHIC AREAS
United States $ 108.8 $ 0.1 $ 11.9 $ 120.8 12.8%
Europe 20.9 - 1.0 21.9 10.5%
Other Areas 12.3 0.6 0.8 13.7 8.5%
Total $ 142.0 $ 0.7 $ 13.7 $ 156.4 11.9%
* Includes stock option charge.
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