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): April 22, 1998 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:(860) 225-5111 Not Applicable (Former name or former address, if changed since last report) Page 1 of 11 Pages Exhibit Index is located on Page 4 Item 5. Other Events. 1. On April 22, 1998, the Registrant issued a press release announcing first quarter earnings. Attached as Exhibit (20)(i) is a copy of the Registrant's press release. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) 20(i) Press release dated April 22, 1998 announcing Stanley's first quarter results. 20(ii) Cautionary statements relating to forward looking statements included in Exhibit 20(i). Page 2 of 11 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: April 22, 1998 By: Theresa F. Yerkes Name: Theresa F. Yerkes Title: Vice President and Controller Page 3 of 11 Pages EXHIBIT INDEX Current Report on Form 8-K Dated April 22, 1998 Exhibit No. Page 20(i) 5 20 (ii) 11 Page 4 of 11 Pages FOR IMMEDIATE RELEASE Exhibit (20) (i) THE STANLEY WORKS CORE EARNINGS UP 16% IN 1ST QUARTER New Britain, Connecticut, April 22, 1998: The Stanley Works (NYSE: "SWK") announced that "core" earnings increased by 16% in its first quarter ended April 4, 1998. Core results exclude restructuring charges, restructuring-related transition costs and certain other non-recurring costs. First quarter core net income increased to $47 million, or $.51 per diluted share, from prior-year first quarter core earnings of $40 million, or $.44 per diluted share. Core operating margin improved to 12.2% from 11.1%, driven by higher volume, better productivity and reduced material costs, partially offset by weaker prices and a stronger dollar. Reported earnings were $36 million, or $.40 per diluted share, compared with the prior year's net income of $37 million, or $.41 per diluted share. These amounts reflect $16 million, or $.11 per share, of restructuring-related transition and other costs incurred in the first quarter this year and $5 million, or $.03 per share, of restructuring charges and restructuring-related transition costs incurred in last year's first quarter. First quarter net sales were up 4% to $672 million from $647 million in the same period last year, including the negative effects of pricing and currency translation. Unit sales volume from ongoing businesses was up 6%. This increase was led by the MacTools and storage systems components of the mechanics tools business, fastening systems and mirrored closet doors in North America. Hand tool sales volumes in Europe were also strong. Core gross margins were up significantly to 35.9%, from 34.1% in 1997, as higher volume and procurement savings impacted the consumer tools, mechanics tools and MacTools margins positively. As expected, this benefit was somewhat offset by selling, general and administrative expenses which, on a core basis, increased to 23.6% from 23.0% of sales. Inherent in the MacDirect initiative are higher gross margins and selling costs. Further, in its early stages, the company's reallocation of resources brings about a positive effect on gross margins, but increases marketing, advertising and product development spending. Management is gauging the latter to achievement of restructuring savings. Page 5 of 11 Pages "Our people delivered shareholder expectations while undergoing fundamental changes in virtually every aspect of our business," said John M. Trani, Chairman and Chief Executive Officer. "We are particularly encouraged by this quarter's sales growth in our mechanics tools business. Our traditional Mac distributors and new MacDirect associates combined to deliver double-digit sales growth. Our 1.1 percentage point improvement in core operating margin shows continued progress toward establishing the lower cost structure necessary to invest for growth." Core segment operating margin was 13.8% versus 12.7% in 1997. The Tools segment delivered strong operating profit improvement, rising to 14.6% from 13.4% last year, despite continuation of a competitive pricing environment for fastening systems. Hardware operating profits increased to 16.4% from 15.1% last year, while Specialty Hardware operating profit declined to 3.3% from 4.4% in 1997 primarily due to the sale of the European access technologies business. Restructuring-related transition costs represent consulting, moving, start-up and duplicative facility costs. Other costs excluded from "core" results include year-2000 systems compliance costs. As previously announced, the company expects to incur approximately $100 million of such restructuring-related transition and other costs through mid-1999. The attached table, "Business Segment Information", provides clarification of reported results for the first quarters of 1998 and 1997, reconciling them with normalized core results. The Stanley Works, an S&P 500 company, is a worldwide supplier of tools, hardware and door systems for professional, industrial and consumer use. Investors Gerard J. Gould Media Vance N. Meyer Contact: Director, Investor Relations Contact: Director, Communication (860) 827-3833 office & Public Affairs (860) 658-2718 home (860) 827-3871 office (203) 929-9502 home This press release contains forward looking statements as to expected levels of restructuring-related transition and other costs related to the growth initiatives announced in 1997. 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 6 of 11 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, Millions of Dollars Except Per Share Amounts) First Quarter 1998 1997 Net Sales $ 671.9 $ 646.6 Costs and Expenses Cost of sales 435.0 431.4 Selling, general and administrative 171.1 153.2 Interest - net 4.8 4.3 Other - net 2.8 3.6 Restructuring and asset write-offs - (4.6) 613.7 587.9 Earnings Before Income Taxes 58.2 58.7 Income Taxes 21.8 22.0 Net Earnings $ 36.4 $ 36.7 Net Earnings Per Share of Common Stock Basic $ 0.41 $ 0.41 Diluted $ 0.40 $ 0.41 Dividends Per Share $ 0.20 $ 0.185 Average Shares Outstanding (in thousands) Basic 89,483 89,347 Diluted 90,520 90,138 Page 7 of 11 Pages THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, Millions of Dollars) April 4 March 29 1998 1997 ASSETS Cash and cash equivalents $ 93.2 $ 76.4 Accounts receivable 491.1 453.3 Inventories 331.2 329.2 Other current assets 88.3 40.3 Total current assets 1,003.8 899.2 Property, plant and equipment 501.6 561.6 Goodwill and other intangibles 102.1 95.9 Deferred income taxes 36.7 - Other assets 99.9 76.8 $ 1,744.1 $ 1,633.5 LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings $ 124.0 $ 53.7 Accounts payable 159.1 111.2 Accrued expenses 229.9 193.1 Accrued restructuring 89.6 29.0 Total current liabilities 602.6 387.0 Long-term debt 275.3 298.9 Other long-term liabilities 239.1 155.7 Shareholders' equity 627.1 791.9 $ 1,744.1 $ 1,633.5 Page 8 of 11 Pages THE STANLEY WORKS AND SUBSIDIARIES PRICE/VOLUME INFORMATION (Unaudited, Millions of Dollars) NET SALES First Quarter Unit ACQ/ 1998 Price Volume DVT Currency 1997 INDUSTRY SEGMENTS Tools Consumer $ 176.6 1 % 3% (1)% (4)% $ 178.0 Industrial 147.5 (1)% 12% - - 132.6 Engineered 188.4 (2)% 7% 6 % (2)% 172.1 Total Tools 512.5 (1)% 7% 2 % (2)% 482.7 Hardware 96.3 (3)% 7% - (1)% 93.1 Specialty Hardware 63.1 2 % 1% (13)% (1)% 70.8 Consolidated $ 671.9 (1)% 6% - % (1)% $ 646.6 GEOGRAPHIC AREAS United States $ 475.7 (1)% 7% (2)% - $ 455.8 Europe 119.9 1 % 7% 8 % (5)% 107.8 Other Areas 76.3 1 % - (2)% (7)% 83.0 Consolidated $ 671.9 (1)% 6% - (1)% $ 646.6 Page 9 of 11 Pages THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, Millions of Dollars) OPERATING PROFIT First Quarter 1998 Related Core Restrg Transition Profit Reported Charges Costs Core Margin INDUSTRY SEGMENTS Tools $ 62.9 $ - $ 12.0 $ 74.9 14.6% Hardware 13.7 - 2.1 15.8 16.4% Specialty Hardware (0.1) - 2.2 2.1 3.3% Total 76.5 - 16.3 92.8 13.8% Net corporate - expenses (11.5) - - (11.5) Interest expense (6.8) - - (6.8) Earnings before income taxes $ 58.2 $ - $ 16.3 $ 74.5 GEOGRAPHIC AREAS United States $ 55.2 $ - $ 14.3 $ 69.5 14.6% Europe 13.4 - 1.3 14.7 12.3% Other Areas 7.9 - 0.7 8.6 11.3% Total $ 76.5 $ - $ 16.3 $ 92.8 13.8% First Quarter 1997 Restrg Related Core & Other Transition Profit Reported Charges Costs Core Margin INDUSTRY SEGMENTS Tools $ 56.0 $ 1.1 $ 7.6 $ 64.7 13.4% Hardware 11.8 0.4 1.9 14.1 15.1% Specialty Hardware 2.3 0.6 0.2 3.1 4.4% Total 70.1 2.1 9.7 81.9 12.7% Net corporate expenses (5.8) (6.7) 0.1 (12.4) Interest expense (5.6) - - (5.6) Earnings before income taxes $ 58.7 $ (4.6) $ 9.8 $ 63.9 GEOGRAPHIC AREAS United States $ 53.2 $ 1.2 $ 7.6 $ 62.0 13.6% Europe 11.3 0.4 1.1 12.8 11.9% Other Areas 5.6 0.5 1.0 7.1 8.6% Total $ 70.1 $ 2.1 $ 9.7 $ 81.9 12.7% Page 10 of 11 Pages Exhibit (20) (ii) CAUTIONARY STATEMENTS Under the Private Securities Litigation Reform Act of 1995 Certain risks and uncertainties are inherent in the current estimation of the level of restructuring-related transition costs and other non-recurring costs that are expected to be incurred through mid-1999. The level of such costs actually incurred will depend on the ability of the company to manufacture products that meet customer requirements for on-time delivery, quality and value and the ability to develop and execute comprehensive plans for the facility consolidations; the ability of the organization to complete the transition to a product management structure without losing focus on the business; the availability of vendors to perform the non-core 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 during the transition; the complexity and ultimate extent of year-200 compliance efforts and unforeseen events. The level of restructuring-related transition costs and other non-recurring costs actually incurred will also be affected by pricing pressure within the company's markets and other changes in its competitive markets, the continued consolidation of customers in consumer channels, increasing global competition, changes in trade, monetary and fiscal policies and laws, inflation, currency exchange fluctuations, the impact of currency exchange rates on the competitiveness of the company's products and recessionary or expansive trends in the economies in which the company operates. Page 11 of 11 Pages