Exhibit 20 (i)
FOR IMMEDIATE RELEASE
THE STANLEY WORKS REPORTS 4TH QUARTER EARNINGS
New Britain, Connecticut, January 28, 1999: The Stanley Works (NYSE: "SWK")
announced that "core" earnings increased 2% in its fiscal year ended January 2,
1999, but decreased 11% in its fourth quarter. Core results exclude
restructuring charges, restructuring-related transition costs and certain other
non-recurring costs as defined below.
Fourth quarter core net income was $44.5 million, or $.50 per diluted share,
compared with prior year core earnings of $50.1 million, or $.55 per diluted
share. Reported earnings were $25.8 million, or $.29 per diluted share, compared
with the prior year's fourth quarter net income of $26.5 million, or $.29 per
diluted share. These amounts reflect $27.8 million, or $.21 per share, of
restructuring-related transition and other non-recurring costs incurred in the
fourth quarter this year and $29.6 million, or $.20 per share in the prior year.
Net sales declined 3% to $676 million from $699 million last year. These results
included 3% growth from acquisitions, more than offset by a 6% decline in
ongoing business. A fourteenth week in the fourth quarter of 1997 accounted for
approximately half of the volume decrease. Volume was soft in hand tools in the
U.S., hand tools and fastening systems in Europe, and across industrial and
commercial markets in North America.
John M. Trani, Chairman and Chief Executive Officer, commented: "Weak order
rates experienced in September continued throughout the quarter. Industrial
markets remained soft and the normal year-end flurry of retail customer orders
did not materialize, particularly in the U.K. and France. Existing inventory
levels at key customers are sufficient and now are a quarterly focus for them as
well."
Core gross margin in the fourth quarter was 33.3% of sales versus 34.3% in 1997,
as a result of lower volume and a mix to lower-margin consumer products. In
addition, productivity programs and successful pricing initiatives were more
than offset by continued production and distribution inefficiencies.
Selling, general and administrative expenses, excluding restructuring- related
transition costs and other non-recurring costs, were 22.4% of sales, up from
21.9% in the fourth quarter last year. This increase
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resulted from higher selling costs as anticipated for the MacDirect(TM)
initiative, increased engineering expenses, and costs to improve customer
service. Core operating margin decreased to 10.8% of sales from 12.4% in the
prior year. Interest expense increased to $5.7 million from $3.7 million,
reflecting working capital increases and acquisition funding.
For the full year 1998, core earnings increased 2% and earnings per share 3% to
$193 million or $2.14 per diluted share in 1998 versus $188 million or $2.08 per
share in 1997. Net sales were $2,729 million, a 2% increase over 1997. Volume
from ongoing businesses was up 2% on the strength of mechanics tools.
The company's income tax rate on core earnings decreased to 30.4% for the fourth
quarter and 36% for the full year 1998 from 37.5% in both comparable periods of
1997. These decreases reflected favorable tax settlements in the fourth quarter
that yielded cash refunds, as well as tax initiatives that were finalized during
the quarter.
Mr. Trani stated: "While the quarter was below our expectation, there are
several encouraging signs. First, fill rates in our Hardware product line have
been fixed, and we are aggressively pursuing orders. Second, overall fill rates
have been improving slowly and the 80,000-sku reduction is nearing completion,
representing 61% of the total stock-keeping units. Third, MacDirect(TM)
continues to grow at a double-digit rate. Fourth, the ZAG acquisition is proving
to be a winner, and we expect double-digit growth in its sales and earnings in
1999. ZAG's backlog went from less than $2 million at the end of 1997 to nearly
$9 million at the end of 1998 primarily as a result of winning business at
several large Stanley customers.
"Nonetheless, the inefficiencies in our manufacturing processes are all too
clear. The complexity of our operating structure and lack of an integrated
production and sales planning system have resulted in more than $50 million in
higher costs to improve customer service through sheer brute force. The good
news is that these problems are correctable, although not overnight."
Transition and other costs incurred in the fourth quarter were $28 million and
represented consulting, moving, start-up and duplicative facility costs incurred
in connection with the company's reallocation of resources announced in mid-1997
and year-2000 compliance costs. To a great extent, the latter expenditures are
being incurred for systems advances that move the company toward a single set of
operating systems.
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
hardware and door systems for professional, industrial and consumer use.
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Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: Director,
(860) 827-3833 office Communication & Public
(860) 658-2718 home Affairs
(860) 827-3871 office
(203) 795-0581 home
This press release contains forward looking statements as to the company's
ability improve customer service and to obtain revenue 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 6 of 10 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
January 2 January 3
1999 1998
ASSETS
Cash and cash equivalents $ 110.1 $ 152.2
Accounts receivable 517.0 472.5
Inventories 380.9 301.2
Other current assets 78.4 79.4
Total current assets 1,086.4 1,005.3
Property, plant and equipment 511.4 513.2
Goodwill and other intangibles 196.9 104.1
Deferred income taxes 34.0 36.1
Other assets 104.2 100.0
$ 1,932.9 $ 1,758.7
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 222.0 $ 130.8
Accounts payable 172.1 155.5
Accrued expenses 217.7 236.7
Accrued restructuring 90.3 99.7
Total current liabilities 702.1 622.7
Long-term debt 344.8 283.7
Other long-term liablities 216.6 244.5
Shareholders' equity 669.4 607.8
$ 1,932.9 $ 1,758.7
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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Fourth Quarter Twelve Months
1998 1997 1998 1997
Net Sales $ 675.8 $ 698.8 $ 2,729.1 $ 2,669.5
Costs and Expenses
Cost of sales 455.7 469.3 1,792.8 1,783.4
Selling, general and
administrative 174.8 172.5 684.7 627.7
Interest - net 5.7 3.7 23.1 16.6
Other - net 3.5 2.7 13.1 21.9
Restructuring and
asset write-offs - - - 238.5
639.7 648.2 2,513.7 2,688.1
Earnings (Loss) before
income taxes 36.1 50.6 215.4 (18.6)
Income Taxes 10.3 24.1 77.6 23.3
Net Earnings (Loss) $ 25.8 $ 26.5 $ 137.8 $ (41.9)
Net Earnings (Loss) Per
Share of Common Stock
Basic $ 0.29 $ 0.30 $ 1.54 $ (0.47)
Diluted $ 0.29 $ 0.29 $ 1.53 $ (0.47)
Dividends per share $ 0.215 $ 0.20 $ .83 $ 0.77
Average shares outstanding
(in thousands)
Basic 89,375 89,517 89,408 89,470
Diluted 89,745 90,534 90,193 89,470
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