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 21, 1999
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)
Exhibit Index is located on Page 4
Page 1 of 11 Pages
Item 5. Other Events.
1. On April 21, 1999, 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 21, 1999 announcing 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 21, 1999 By: Stephen S. Weddle
Name: Stephen S. Weddle
Title: Vice President,
General Counsel and
Secretary
Page 3 of 11 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated April 21, 1999
Exhibit No. Page
20(i) 5
20(ii) 11
Page 4 of 11 Pages
FOR IMMEDIATE RELEASE Exhibit (20)(i)
STANLEY REPORTS 1ST QUARTER RESULTS
New Britain, Connecticut, April 21, 1999: The Stanley Works (NYSE:
"SWK") announced that first quarter "core" net income was $43 million,
or $.48 per diluted share, compared with core earnings of $47 million,
or $.51 per diluted share last year. Core operating margin was 11.6%,
versus 12.2% in the first quarter of 1998, but improved from the 10.8%
operating margin in the fourth quarter of 1998. Core results exclude
restructuring charges, restructuring-related transition costs and
certain other non-recurring costs as defined below.
Net sales were $684 million, up 2% from last year. On the strength of
the ZAG business, which was acquired in mid-1998, revenues increased 3%
and were offset slightly by lower pricing and currency translation. Unit
sales volume from ongoing businesses was down 1%.
Reported earnings were $30 million, or $.34 per diluted share, compared
with the prior year's net income of $36 million, or $.40 per diluted
share. These amounts reflect $20 million, or $.14 per share, of
restructuring-related transition and other non-recurring costs incurred
in the first quarter this year and $16 million, or $.11 per share, of
such costs in last year's first quarter.
Core gross margins were 34.8%, compared with 35.9% in the first quarter
of 1998, but improved from 33.3% gross margins in the fourth quarter of
1998. As compared with the prior year's first quarter, productivity
savings continued to be offset by production and distribution
inefficiencies, some of which are related to initiatives designed to
improve customer service. This reflects first-quarter cost reductions
that included about 600 fewer people.
Selling, general and administrative expenses, on a core basis, declined
to 23.2% from 23.6% of sales in the first quarter of 1998, in spite of
the higher selling costs inherent in the MacDirect(TM) initiative.
First quarter net interest expense increased to $7.2 million from $4.8
million in 1998, reflecting working capital increases and acquisition
funding. The company's income tax rate was 36% in the first quarter of
1999, versus 37.5% last year, reflecting the continued benefit of
structural changes implemented in late 1998.
Tools sales increased 2.5% over the first quarter of 1998, to $525
million. This included the positive impact of the ZAG acquisition and
increases in the Mac Tools and consumer components of the mechanics
tools business, offset by lower unit volume in hand tools in Europe and
Latin America, fastening systems in Europe and vehicle-assembly air
tools. The Tools segment core operating margin was 12.7%, compared with
13.1% in the same period last year. The strength of Mac Tools was offset
by the effects of the customer service related cost inefficiencies
discussed above.
Page 5 of 11 Pages
Doors segment sales decreased 0.7% versus last year's first quarter, to
$158 million. Double-digit sales unit volume increases in residential
entry doors and access technologies in North America, as well as home
decor products in Europe, were more than offset by declines in U.S.
hardware and Canadian home decor sales, plus the negative impact of a
1998 divestiture. The Doors segment core operating profit decreased to
8.1% of sales, compared with 9.4% in the same period last year, largely
due to a continuing shift in the mix of product to lower-margin retail
channels.
"Slow but steady progress was the story of our first 1999 quarter," said
John M. Trani, Chairman and Chief Executive Officer. "We are encouraged
by this quarter's sales growth in our Mac Tools business, as our
traditional Mac distributors and MacDirect associates once again
combined to deliver a strong sales gain. At the same time, difficulties
in executing European elements of our restructuring offset that good
news."
Mr. Trani expressed optimism while pointing out the challenges that
remain: "While progress is visible, our company still has a distance to
go to achieve sustained profitable growth. Our selling, general and
administrative expenses decreased as a percentage of sales, reflecting
progress toward a leaner cost structure. The receivables increase of $36
million from year-end is due to Mac Tools and ZAG growth as well as a
shift to sales late in the quarter. Inventories decreased $13 million
although they traditionally increase in the first quarter. This is the
second consecutive quarter in which inventories decreased, and we
believe this is attributable to recent SKU reductions. Order fill rates
are approaching customer-required levels in a number of our business
units.
"However, we are still hampered by inefficiencies in manufacturing and
distribution. A number of important operating initiatives are scheduled
in the next several quarters, among them the continued implementation of
an integrated sales planning system. Step by step, our problems are
being corrected, and we look forward to better results in the second
half of 1999 and thereafter."
Transition and other costs incurred in the first quarter were $20
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.
Page 6 of 11 Pages
The Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
door systems and related hardware for professional, industrial and
consumer use.
#################
Investors Gerard J. Gould Media Vance N. Meyer
Contact: Director, Investor Relations Contact: Director, Communication
& Public Affairs
(860) 827-3833 office (860) 827-3871 office
(860) 658-2718 home (203) 929-9502 home
ggould@stanleyworks.com
This press release contains forward looking statements as to the
company's ability to 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 on the
company's Internet web site at http://www.stanleyworks.com.
Alternatively, they are available through PR Newswire's "Company News
On-Call" service by FAX at 800-758-5804, ext. 874363 or on the Internet
at http://www.prnewswire.com.
Page 7 of 11 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
First Quarter
1999 1998
Net Sales $ 683.7 $ 671.9
Costs and Expenses
Cost of sales 451.4 435.0
Selling, general and
administrative 173.1 171.1
Interest - net 7.2 4.8
Other - net 4.6 2.8
636.3 613.7
Earnings Before
Income Taxes 47.4 58.2
Income Taxes 17.1 21.8
Net Earnings $ 30.3 $ 36.4
Net Earnings Per Share
of Common Stock
Basic $ 0.34 $ 0.41
Diluted $ 0.34 $ 0.40
Dividends Per Share $ 0.215 $ 0.20
Average Shares Outstanding
(in thousands)
Basic 89,446 89,483
Diluted 89,642 90,520
Page 8 of 11 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
April 3 April 4
1999 1998
ASSETS
Cash and cash equivalents $ 80.5 $ 93.2
Accounts receivable 552.9 491.1
Inventories 367.6 331.2
Other current assets 84.5 88.3
Total current assets 1,085.5 1,003.8
Property, plant and equipment 487.2 501.6
Goodwill and other intangibles 191.2 102.1
Deferred income taxes 36.7 36.7
Other assets 100.8 99.9
$ 1,901.4 $ 1,744.1
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 260.5 $ 124.0
Accounts payable 166.6 159.1
Accrued expenses 221.1 229.9
Accrued restructuring 63.6 89.6
Total current liabilities 711.8 602.6
Long-term debt 306.7 275.3
Other long-term liabilities 209.2 239.1
Shareowners' equity 673.7 627.1
$ 1,901.4 $ 1,744.1
Page 9 of 11 Pages
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
First Quarter
1999 1998
INDUSTRY SEGMENTS
Net Sales
Tools $ 525.4 $ 512.5
Doors 158.3 159.4
Consolidated $ 683.7 $ 671.9
Operating Profit
Tools $ 66.5 $ 67.1
Doors 12.9 15.0
79.4 82.1
Restructuring-related
transition and other
non-recurring costs (20.2) (16.3)
Interest-net (7.2) (4.8)
Other-net (4.6) (2.8)
Earnings Before
Income Taxes $ 47.4 $ 58.2
GEOGRAPHIC NET SALES
United States $ 484.8 $ 475.3
Other Americas 46.5 55.5
Europe 129.2 119.9
Asia 23.2 21.2
Consolidated $ 683.7 $ 671.9
Page 10 of 11 Pages
Exhibit (20)(ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
The statements contained in the Press Release filed as a part of this
Current Report on Form 8-K regarding the Company's expectation for
better results in the second half of 1999 and thereafter are forward
looking and inherently subject to risk and uncertainty. The expectation
of improved results is dependent upon the successful implementation of
initiatives related to operational excellence and to the achievement of
sustained profitable growth.
The Company's drive for operational excellence is focused on improving
customer service, consolidating multiple manufacturing and distribution
facilities, outsourcing non-core activities and converting to common
systems. The ability to implement the initiatives associated with these
goals is dependent on the Company's ability to increase the
effectiveness of its routine business processes and to develop and
execute comprehensive plans for 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 non-core functions being outsourced, 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 and other unforeseen
events. Moreover, it is likely that, if the Company is unable to
complete its Y2K project as planned or if the company's key suppliers
and customers or a sizable number of its smaller suppliers and customers
fail to remediate their systems, this will have a material adverse
impact on the Company's results of operations, liquidity and financial
condition.
The Company's ability to generate sustained, profitable growth is
dependent on successfully freeing up resources to fund new product and
brand development and new ventures to broaden its markets and to defend
market share in the face of price competition. Success at developing
new products will depend on the ability of the new product development
process to foster creativity and identify viable new product ideas as
well as the Company's ability to attract new product engineers and to
design and implement strategies to effectively commercialize the new
product ideas. The achievement of growth through new ventures will
depend upon the ability to successfully identify, negotiate, consummate
and integrate into operations acquisitions, joint ventures and/or
strategic alliances.
The Company's ability to achieve and sustain the improvements resulting
from these initiatives will be dependent on the extent of pricing
pressure 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 products and recessionary or
expansive trends in the economies in which the company operates.
Page 11 of 11 Pages