UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
COMMISSION FILE 1-5224
THE STANLEY WORKS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-0548860
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1000 STANLEY DRIVE
NEW BRITAIN, CONNECTICUT 06053
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(860) 225-5111
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock--Par Value $2.50 Per Share New York Stock Exchange
Pacific Stock Exchange
9% Notes due 1998
7 3/8% Notes Due December 15, 2002
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of Common Stock, par value $2.50 per share, held
by non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 14, 1997 was approximately $3.5 billion. As of March 14,
1997, there were 88,966,440 shares of Common Stock, par value $2.50 per share,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 28, 1996 are incorporated by reference into Parts I and II.
Portions of the definitive Proxy Statement dated March 10, 1997, filed with
the Commission pursuant to Regulation 14A, are incorporated by reference into
Part III.
FORM 10-K
Part I
Item 1. Business
1(a) Introduction. (i) General. The Stanley Works ("Stanley" or the
"Company") was founded in 1843 by Frederick T. Stanley and incorporated in
1852. Stanley is a worldwide manufacturer and marketer of tools, hardware and
specialty hardware offering a wide range of products for home improvement,
consumer, industrial and professional use. Stanley(R) is a brand recognized
around the world for quality and value.
In 1996, Stanley had net sales of $2.7 billion and employed
approximately 19,000 people worldwide. The Company's principal executive
office is located at 1000 Stanley Drive, New Britain, Connecticut 06053 and
its telephone number is (860) 225-5111.
(ii) Strategic Restructuring. In July 1995, the Company announced a
multi-year restructuring program in order to create a more competitive cost
base and to fuel long-term growth. The program encompasses all of the
Company's businesses and focuses on the profitability potential of each
product category.
In 1996, under this restructuring program the Company sold a number of
businesses and product lines that did not meet the Company's criteria for
revenue growth and profitability. In addition, numerous facilities,
particularly in the Tools segment were closed. The Company's investment in
assets was also reduced primarily through inventory management activities and
divestitures. The Company has begun to reinvest some of these savings in its
best performing businesses and to fund growth initiatives such as national
advertising to build upon the equity in the Stanley(R) brand.
While the initial target of $400 million in cost and asset reductions
will likely be reached in 1997, the Company's new Chief Executive Officer has
appointed seven task forces to examine areas for additional change. The task
forces have the objectives of reducing the number of manufacturing locations,
realigning the organizational structure, reducing working capital, increasing
new product development and identifying opportunities for product and market
extensions. The Company expects that plans currently in place and being
developed will result in restructuring charges and restructuring related
transition costs in 1997 and possibly beyond. While the Company is unable to
estimate the amount of these charges, it is anticipated that they will be
significant.
1(b) Industry Segment Information. Financial information
regarding the Company's industry segments is incorporated herein
-1-
by reference from page 19 of the Company's Annual Report to Shareholders for
the year ended December 28, 1996.
1(c) Narrative Description of Business. The Company's
operations are classified into three industry segments: Tools,
Hardware and Specialty Hardware.
Tools. The Tools segment manufactures and markets consumer, industrial and
engineered tools. Consumer tools includes hand tools such as measuring
instruments, planes, hammers, knives and blades, wrenches, sockets,
screwdrivers, saws, chisels, boring tools, masonry, tile and drywall tools,
paint preparation and paint application tools. Industrial tools includes
industrial and mechanics hand tools, including STANLEY-PROTO(R) industrial
tools and MAC(R) mechanics tools, and high-density industrial storage and
retrieval systems. Engineered tools includes STANLEY-BOSTITCH(R) fastening
tools and fasteners used for commercial, industrial, construction, packaging
and consumer use; hydraulic tools (these are hand-held hydraulic tools used by
contractors, utilities, railroads and public works as well as mounted
demolition hammers and compactors designed to work on skid steer loaders,
mini-excavators, backhoes and large excavators); and air tools (these are high
performance, precision assembly tools, controllers and systems for tightening
threaded fasteners used chiefly by vehicle manufacturers).
Hardware. The hardware segment manufactures and markets hardware products
ranging from hinges, hasps, shelf brackets, bolts and latches to a line of
closet organizing systems and mirrored closet doors, door hardware and wall
mirrors.
Specialty Hardware. The specialty hardware segment manufactures and
markets residential insulated steel and reinforced fiberglass entrance door
systems and automatic doors. The garage-related products business was disposed
of in February, 1997.
Competition. The Company competes on the basis of its reputation for
product quality, its well-known brands, its commitment to customer service and
strong customer relationships, the breadth of its product lines and its
emphasis on product innovation. The Company is also striving to find new
customers both within the markets that it currently serves and in new markets
around the world.
The Company encounters active competition in all of its businesses from
both larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses. In
1996, the Company invested approximately $104 million in facilities, new
equipment, technology and software in order to achieve enhanced customer
service, operational excellence in manufacturing and new product
-2-
innovation.
In the Company's consumer hand tool and consumer hardware businesses, a
small number of competitors produce a range of products somewhat comparable to
the Company's, but the majority of its competitors compete only with respect
to one or more individual products within a particular line. The Company
believes that it is the largest manufacturer of consumer hand tools in the
world and that it offers the broadest line of such products. The Company
believes that its market position in the U.S. and Canada for consumer hardware
is comparable to or greater than that of its major competitors and that it
offers the broadest line of hinges and home hardware, which represents the
most important part of its hardware product sales.
In the Company's industrial tool business in the U.S., the Company
believes that it is the leading manufacturer of high-density industrial
storage cabinets. In the Company's engineered tool business in the U.S., the
Company believes that it is the leader in the manufacture and sale of
pneumatic fastening tools and related fasteners to professional contractors
and to the furniture and pallet industries as well as the leading manufacturer
of hand-held hydraulic tools and a leading manufacturer of mounted hydraulic
tools.
In the Company's hardware business in the U.S., the Company believes that
it is a leading manufacturer of builders and architectural hardware products,
mirrored closet doors and hardware for sliding, folding and pocket doors and
the leading supplier of wall mirrors.
In the Company's specialty hardware business, the Company believes that it
is the leader in the U.S. with respect to the manufacture and sale of
insulated steel residential entrance doors as well as the leader in the U.S.
in the manufacture, sale and installation of power-operated sliding doors.
Customers. A substantial portion of the Company's products are sold
through home centers and mass merchant distribution channels in the U.S. A
consolidation of retailers in these channels is occurring. These customers
constitute a growing percent of the Company's sales and are important to the
Company's operating results. While this consolidation and the domestic and
international expansion of these large retailers provide the Company with
opportunities for growth, the increasing size and importance of individual
customers creates a certain degree of exposure to potential volume loss. The
loss of certain of the larger home centers as customers would have a material
adverse effect on each of the Company's business segments until either such
customers are replaced or the Company makes the necessary adjustments to
compensate for the loss of business. The Company's "Power of One" initiative
is directed at preserving and
-3-
strengthening these relationships. Through the "Power of One", the Company
will offer its customers a single contact for all of the Company's support
systems. When this initiative is completed, customers will be able to place
one order, receive one shipment, pay one invoice and deal with one team of
employees even though the Company operates through multiple business units.
Raw Materials. The Company's products are manufactured primarily of steel
and other metals, although some are of wood or plastic. The raw materials
required are available from a number of sources at competitive prices and the
Company has relationships of long standing with many of its suppliers. The
Company has experienced no difficulties in obtaining supplies in recent
periods.
Backlog. At February 1, 1997, the Company had approximately $149 million
in unfilled orders compared with $137 million in unfilled orders at February
3, 1996. All these orders are reasonably expected to be filled within the
current fiscal year. Most customers place orders for immediate shipment and as
a result, the Company produces primarily for inventory, rather than to fill
specific orders. The Company has begun implementation of demand flow
production, which aligns inventory levels with actual demand, in three of its
manufacturing facilities.
Patents and Trademarks. No business segment is dependent, to any
significant degree, on patents, licenses, franchises or concessions and the
loss of these patents, licenses, franchises or concessions would not have a
material adverse effect on any business segment. The Company owns numerous
patents, none of which are material to the Company's operations as a whole.
These patents expire from time to time over the next 17 years. The Company
holds licenses, franchises and concessions, none of which individually or in
the aggregate is material to the Company's operations as a whole. These
licenses, franchises and concessions vary in duration from one to 17 years.
The Company has numerous trademarks that are utilized in its businesses
worldwide. The STANLEY(R) and STANLEY (in a notched rectangle)(R) trademarks
are material to all three business segments. These well-known trademarks enjoy
a reputation for quality and value and are among the world's most trusted
brand names. In addition, in the Tools segment, the Bostitch(R), Powerlock(R),
Tape Rule Case Design (Powerlock)(R), LaBounty(R), MAC Tools(R), Proto(R),
Jensen(R), Goldblatt(R) and Vidmar(R) trademarks are material to the business.
Environmental Regulations. The Company is subject to various
environmental laws and regulations in the U.S. and foreign
countries where it has operations. Future laws and regulations
are expected to be increasingly stringent and will likely
increase the Company's expenditures related to environmental
-4-
matters.
The Company is involved with remedial and other environmental compliance
activities at some of its current and former sites. Additionally, the Company,
together with many other parties, has been named as a potentially responsible
party ("PRP") in a number of administrative proceedings for the remediation of
various waste sites, including nine Superfund sites. Current laws potentially
impose joint and several liability upon each PRP. In assessing its potential
liability at these sites, the Company has considered the following: the
solvency of the other PRP's, whether responsibility is being disputed, the
terms of existing agreements, experience at similar sites, and the fact that
its volumetric contribution at these sites is relatively small.
The Company's policy is to accrue environmental investigatory and
remediation costs for identified sites when it is probable that a liability
has been incurred and the amount of loss can be reasonably estimated. The
amount of liability recorded is based on an evaluation of currently available
facts with respect to each individual site and includes such factors as
existing technology, presently enacted laws and regulations, and prior
experience in remediation of contaminated sites. The liabilities recorded do
not take into account any claims for recoveries from insurance or third
parties. As assessments and remediation progress at individual sites, the
amounts recorded are reviewed periodically and adjusted to reflect additional
technical and legal information that becomes available. As of December 28,
1996, the Company had reserves of $29 million, primarily for remediation
activities associated with company-owned properties as well as for Superfund
sites.
The amount recorded for identified contingent liabilities is based on
estimates. Amounts recorded are reviewed periodically and adjusted to reflect
additional technical and legal information that becomes available. Actual
costs to be incurred in future periods may vary from the estimates, given the
inherent uncertainties in evaluating environmental exposures. Subject to the
imprecision in estimating future environmental costs, the Company does not
expect that any sum it may have to pay in connection with environmental
matters in excess of the amounts recorded will have a materially adverse
effect on its financial position, results of operations or liquidity.
Power-generating Subsidiary. Under the General Statutes of Connecticut,
the Company is deemed to be a "holding company" that controls an electric
company as a result of its being the sole shareholder of Farmington River
Power Co., a power-generating subsidiary of the Company since 1916. Under such
statute, no organization or person may take any action to acquire control of
such a holding company without the prior approval of the
-5-
Connecticut Department of Public Utility Control.
Employees. During 1996, the Company had approximately 19,000 employees,
approximately 12,000 of whom were employed in the U.S. Of these U.S.
employees, approximately 24% are covered by collective bargaining agreements
with approximately 12 labor unions. The majority of the Company's hourly- and
weekly-paid employees outside the U.S. are covered by collective bargaining
agreements. The Company's labor agreements in the U.S. expire in 1997, 1998,
1999 and 2000. There have been no significant interruptions or curtailments of
the Company's operations in recent years due to labor disputes. The Company
believes that its relationship with its employees is good.
Cautionary Statements. Certain risks and uncertainties are inherent in the
company's ability to implement the recommendations of the task forces, to
complete the competitive positioning of its cost structure through its
restructuring initiatives and to achieve sustained, profitable growth.
The company's ability to implement successfully all of its restructuring
initiatives, including the relocation and consolidation of multiple
manufacturing operations, the realignment of the organizational structure and
the success of the Perfect Customer Service Program, is dependent on such
factors as the ability of its employees, with the help of outside consultants,
to develop and execute comprehensive plans to provide for smooth transitions,
the resolution of any labor issues related to closing facilities, the
successful recruitment and training of new employees, the need to respond to
significant changes in product demand during the transition and unforeseen
events. In addition, the company's ability to retain profits from the
profitability improvements that have been attributable to the restructuring
initiatives is dependent on the extent of pricing pressure within the
company's markets, the continued consolidation of customers in consumer
channels, increasing global competition, changes in trade, monetary and fiscal
policies and laws, inflation and currency exchange fluctuations, as well as
recessionary or expansive trends in the economies in which the company
operates.
The company's ability to generate sustained, profitable growth is
dependent on its ability to competitively position its cost structure, to gain
acceptance of the company's products within new or developing markets and to
continue the development of successful new products. The achievement of
externally- generated growth will depend upon the ability to successfully
identify, negotiate, consummate and integrate into operations, acquisitions,
joint ventures and/or strategic alliances.
1(d) Financial information about foreign and domestic
operations and export sales. Geographic area information on page
-6-
19 of the Annual Report to Shareholders for the year ended December 28, 1996
is incorporated herein by reference.
Item 2. Properties.
As of December 28, 1996, Registrant and its subsidiaries owned or leased
facilities for manufacturing, distribution and sales offices in 28 states and
33 foreign countries. The Registrant believes that its facilities are suitable
and adequate for its business.
A summary of material locations (over 50,000 square feet) that are owned
by the Registrant and its subsidiaries are:
Tools
Phoenix, Arizona; Visalia, California; Clinton and New Britain,
Connecticut; Shelbyville, Indiana; Kansas City, Kansas; Two Harbors,
Minnesota; Hamlet and Sanford, North Carolina; Columbus, Georgetown and
Sabina, Ohio; Allentown, Royersford and York, Pennsylvania; East Greenwich,
Rhode Island; Cheraw, South Carolina; Pulaski and Shelbyville, Tennessee;
Dallas and Wichita Falls, Texas; Pittsfield and Shaftsbury, Vermont; Hedelberg
West, Ingleburn and Moonah, Australia; Sao Paulo, Brazil; Smiths Falls and
Toronto, Canada; Pecky, Czech Republic; Ecclesfield, Hellaby, Manchester and
Sheffield, England; Besancon Cedex and Maxonchamp, France; Wieseth, Germany;
Surabaya, Indonesia; Chihuahua and Puebla, Mexico; Taichung Hsien, Taiwan; and
Amphur Bangpakong, Thailand.
Hardware
Chatsworth and San Dimas, California; New Britain,
Connecticut; Richmond, Virginia; Brampton, Canada; Sheffield,
England; and Marquette, France.
Specialty Hardware
Farmington, Connecticut; Birmingham, Novi and Troy, Michigan;
and Covington, Ohio.
A summary of material locations (over 50,000 square feet) that are leased
by the Registrant and its subsidiaries are:
Tools
Costa Mesa, California; Covington, Georgia; Fernley, Nevada; Charlotte and
Kannapolis, North Carolina; Cleveland and Columbus, Ohio; Milwaukie, Oregon;
Carrollton, Texas; Burlington and Mississauga, Canada; Northampton, England;
and Saverne, France.
Hardware
-7-
Lenexa, Kansas; Tupelo, Mississippi; and Oakville, Ontario.
Specialty Hardware
Rancho Cucamonga, California; Orlando, Florida; Winchester,
Virginia; Langley and Montreal, Canada.
Item 3. Legal Proceedings.
On November 30, 1995, the U.S. Department of Justice ("DOJ") filed a
civil complaint against the Company and sixteen other defendants pursuant to
the Federal Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"). Under CERCLA, the DOJ can seek to impose strict liability and
joint and several liability on liable parties.
The DOJ is seeking recovery of past response costs of approximately
$1.3 million incurred by the United States Environmental Protection Agency
("EPA") at the Erie Coatings and Chemicals ("Erie") site in Erie, Michigan and
a declaratory judgment that the defendants are liable for future response
costs. The majority of the EPS's response costs were incurred in removing
drums of materials from the site. The EPA also conducted some limited soil
removal. It is the Company's understanding that it is unlikely that any
additional significant remediation work will be necessary.
Eight defendants (including the Company) filed a third party
contribution claim against the 23 parties and a counterclaim against various
federal agencies that sent materials to the site. The eight defendants along
with various third-party defendants have reached an agreement in principle
with the government to settle the litigation for $900,000. The Company has
agreed to pay approximately $120,000 of the settlement amount. The settlement
does not resolve the Company's potential liability for response costs that may
be incurred by the government in the future. However, it is the Company's
understanding that it is unlikely that the government will incur significant
future response costs.
The proposed settlement must be published in the Federal Register for
comment. It is possible that the court will not approve the consent decree in
the form presented based on the receipt of public comments in opposition to
the settlement. The Company does not believe that this is likely. In any
event, the Company does not believe that its costs in connection with the Erie
site will be material.
In the normal course of business, the Company is involved in various
lawsuits and claims, including product liability and distributor claims. The
Company does not expect that the resolution of these matters will have a
materially adverse effect
-8-
on the Company's consolidated financial position, results of
operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the Registrant's last
fiscal year to a vote of security holders.
Executive Officers. The following is a list of the executive officers
of the Registrant as of December 28, 1996:
Elected
Name, Age, Birth date Office to Office
- --------------------- ------ ---------
R.H. Ayers (54) Chairman, President and Chief Executive 4/19/89
(10/12/42) Officer. Joined Stanley in 1972;
1985 Chief Operating Officer and
President; 1987 President and Chief
Executive Officer. (1)
B.W. Bennett(53) Vice President, Human Resources. Joined 7/1/92
(6/4/43) Stanley in 1984 as Taylor Rental Train-
ing Manager; 1990 Director, Organi-
zation Development; 1991 Vice President,
Human Resources, Stanley Access
Technologies.
J.B. Gustafson (53) Vice President, Information Systems. 1/1/90
(5/10/43) Joined Stanley in 1977; 1986 Director
of Information Systems.
R. Huck (52) Vice President, Finance and Chief 7/1/93
(2/22/45) Financial Officer. Joined Stanley
in 1970; 1987 Controller, Stanley Tools;
1990 Vice President and Controller.
R.A. Hunter (50) President and Chief Operating Officer. 7/1/93
(12/15/46) Joined Stanley in 1974; 1987 Vice
President, Finance and Chief Financial
Officer.
- --------
(1) As of December 31, 1996, John M. Trani was elected Chairman and
Chief Executive Officer of the Company replacing Mr. Ayers who announced his
retirement in April 1996. Mr. Trani was previously employed by General
Electric Company since 1978 and served as the president and chief executive
officer of GE Medical Systems from 1986 through December 1996.
-9-
T.E. Mahoney (54) Vice President, Marketing Development 6/5/95
(3/20/42) and President and General Manager of
Stanley Customer Support Division.
Joined Stanley in 1965; 1988 President
and General Manager, National Hand Tools
business unit; 1992 President and General
Manager, Stanley Hardware.
P.W. Russo (43) Vice President, Strategy and Development. 9/18/95
(5/22/53) Joined Stanley in 1995; 1991 Co-Chairman
and Co-Chief Executive Officer, SV Corp.
(formerly Smith Valve Corp.); 1988
Co-founder and Managing Director,
Cornerstone Partners Limited.
S.S. Weddle (58) Vice President, General Counsel 1/1/88
(11/9/38) and Secretary. Joined Stanley in 1978.
T. F. Yerkes (41) Vice President and Controller. Joined 7/1/93
(9/9/55) Stanley in 1989 from Ernst & Young,
certified public accountants; 1989
Director of Consolidations and
Accounting Services; 1990 Director
of Accounting and Financial Reporting.
Executive officers serve at the pleasure of the Board of Directors. Unless
otherwise indicated, each officer has had the same position with the
Registrant for five years.
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters. Registrant incorporates by reference the line item
"Shareholders of record at end of year" from pages 20 and 21 and the material
captioned "Investor and Shareholder Information" on page 41 of its Annual
Report to Shareholders for the year ended December 28, 1996.
Item 6. Selected Financial Data. Registrant
incorporates by reference pages 20 and 21 of its Annual Report to
Shareholders for the year ended December 28, 1996.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. Registrant incorporates by reference pages 22
through 25 of its Annual Report to Shareholders for the year ended December
28, 1996.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and report of independent
auditors included on pages 26 to 39 and page 18, respectively, of
-10-
the Annual Report to Shareholders for the year ended December 28, 1996 are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
Information regarding the Company's Executive Officers appears in the
"Executive Officers" section at the end of Part I of this report. In addition,
the Registrant incorporates by reference pages 1 through 4 of its definitive
Proxy Statement, dated March 10, 1997.
Item 11. Executive Compensation. Registrant incorporates by reference
the last paragraph of "Information Concerning Directors Continuing in Office"
on page 4 and the material captioned "Executive Compensation" on pages 7
through 13 of its definitive Proxy Statement, dated March 10, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management. Registrant incorporates by reference the material captioned
"Security Ownership" on pages 5 and 6 of its definitive Proxy Statement, dated
March 10, 1997.
Item 13. Certain Relationships and Related
Transactions. None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
14(a) Index to documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement
Schedules.
The response to this portion of Item 14 is submitted as a separate section of
this report (see page F-1).
3. Exhibits
See Exhibit Index on page E-1.
-11-
14(b) The following reports on Form 8-K were filed during the last
quarter of the period covered by this report:
Date of Report Items Reported
-------------- --------------
October 16, 1996 Press release, dated October
16, 1996 announcing third
quarter results.
14(c) See Exhibit Index on page E-1.
14(d) The response to this portion of Item 14 is submitted as a separate
section of this report (see page F-1).
-12-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By John M. Trani
---------------------------------
John M. Trani, Chairman
and Chief Executive Officer
February 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on February 26, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
John M. Trani Eileen S. Kraus
- ----------------------------- -----------------------------
John M. Trani, Chairman, Eileen S. Kraus, Director
Chief Executive Officer and
Director
Richard Huck George A. Lorch
- ----------------------------- -----------------------------
Richard Huck, Vice President, George A. Lorch, Director
Finance and Chief Financial
Officer
Theresa F. Yerkes James G. Kaiser
- ----------------------------- -----------------------------
Theresa F. Yerkes, Vice President James G. Kaiser, Director
and Controller (Chief Accounting
Officer)
Stillman B. Brown Gertrude G. Michelson
- ----------------------------- -----------------------------
Stillman B. Brown, Director Gertrude G. Michelson, Director
Edgar R. Fiedler John S. Scott
- ----------------------------- -----------------------------
Edgar R. Fiedler, Director John S. Scott, Director
Mannie L. Jackson Kathryn D. Wriston
- ----------------------------- -----------------------------
Mannie L. Jackson, Director Kathryn D. Wriston, Director
-13-
FORM 10-K--ITEM 14(a) (1) and (2)
THE STANLEY WORKS AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
auditors of The Stanley Works and subsidiaries, included in the Annual Report
of the Registrant to its Shareholders for the fiscal year ended December 28,
1996, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statements of Earnings--fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994.
Consolidated Balance Sheets--December 28, 1996 and December 30, 1995.
Consolidated Statements of Cash Flows--fiscal years ended December 28,
1996, December 30, 1995 and December 31, 1994.
Consolidated Statements of Changes in Shareholders' Equity--fiscal years
ended December 28, 1996, December 30, 1995 and December 31, 1994.
Notes to Consolidated Financial Statements.
The following consolidated financial statement schedule of The Stanley
Works and subsidiaries is included in Item 14(d):
F-4 Schedule -- II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
F-1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Stanley Works of our report dated January 23, 1997, included in the
1996 Annual Report to Shareholders of The Stanley Works.
Our audits also included the consolidated financial statement schedule of The
Stanley Works listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the following
registration statements of our report dated January 23, 1997, with respect to
the consolidated financial statements incorporated herein by reference, and
our report included in the preceding paragraph with respect to the
consolidated financial statement schedule included in this Annual Report (Form
10-K) of The Stanley Works.
Registration Statement (Form S-8 No. 2-93025)
Registration Statement (Form S-8 No. 2-96778)
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-16669)
Registration Statement (Form S-3 No. 33-12853)
Registration Statement (Form S-3 No. 33-19930)
Registration Statement (Form S-8 No. 33-39553)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-3 No. 33-46212)
Registration Statement (Form S-3 No. 33-47889)
Registration Statement (Form S-8 No. 33-55663)
Registration Statement (Form S-8 No. 33-62565)
Registration Statement (Form S-8 No. 33-62567)
Registration Statement (Form S-8 No. 33-62575)
ERNST & YOUNG LLP
Hartford, Connecticut
March 13, 1997
F-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following registration
statements pertaining to The Stanley Works 401(k) Savings Plan of our report
dated March 13, 1997, with respect to the financial statements and schedules
of The Stanley Works 401(k) Savings Plan for the year ended December 31, 1996
included as Exhibit 99(i) to this Annual Report (Form 10-K) for the fiscal
year ended December 28, 1996.
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-8 no. 33-55663)
ERNST & YOUNG LLP
Hartford, Connecticut
March 13, 1997
F-3
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE STANLEY WORKS AND SUBSIDIARIES
Fiscal years ended December 28, 1996, December 30, 1995 and December 31, 1994
(In Millions of Dollars)
- ---------------------------------------------------------------------------------------------------------
COL. A | COL. B | COL. C | COL. D | COL. E
- --------------------------------------|----------|----------------------------------|----------|-------
| | Additions | |
|Balance at|----------------------------------| |Balance
Description |Beginning | (1) | (2) |Deductions|at End
|Of Period |Charged to Costs|Charged to Other |-Describe |of Period
| | and Expenses |Accounts-Describe| |
- --------------------------------------------------------------------------------------------------------
Fiscal year ended December 28, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $18.2 $21.1 $16.8 (A) $22.5
Noncurrent 0.8 0.8
Fiscal year ended December 30, 1995
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $20.9 $9.7 $0.3 (B) $12.8 (A) $18.2
0.1 (C)
Noncurrent 0.5 0.3 0.8
Fiscal year ended December 31, 1994
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $24.8 $8.2 $(0.1) (B) $12.0 (A) $20.9
Noncurrent 0.0 0.5 (B) 0.5
Notes: (A) Represents doubtful accounts charged off, less recoveries of
accounts previously charged off. (B) Represents net transfers from
other accounts and foreign currency translation adjustments.
(C) Represents opening balances related to acquired companies.
F-4
EXHIBIT LIST
------------
(3) (i) Restated Certificate of Incorporation
(incorporated by reference to Exhibit (3)(i) to
Quarterly Report on Form 10-Q for quarter ended
June 29, 1996)
(ii) By-laws
(4) (i) Indenture defining the rights of holders of 7-3/8%
Notes Due December 15, 2002 and 9% Notes due 1998
(incorporated by reference to Exhibit 4(a) to
Registration Statement No. 33-4344 filed March
27, 1986)
(ii) First Supplemental Indenture, dated as of June 15, 1992
between the Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National Bank)
(incorporated by reference to Exhibit (4)(c) to Registration
Statement No. 33-46212 filed July 21, 1992)
(a) Certificate of Designated Officers establishing
Terms of 9% Notes (incorporated by reference to Exhibit
(4)(i)(c) to Annual Report on Form 10-K for year ended
January 2, 1988)
(b) Certificate of Designated Officers establishing
Terms of 7-3/8% Notes Due December 15, 2002 (incorporated by
reference to Exhibit (4)(ii) to Current Report on Form 8-K
dated December 7, 1992)
(iii) Rights Agreement, dated January 31, 1996 (incorporated by
reference to Exhibit (4)(i) to Current Report on Form 8-K
dated January 31, 1996)
(iv) Amended and Restated Facility A (364 Day) Credit Agreement,
dated as of October 23, 1996, with the banks named therein
and Citibank, N.A. as agent
(v) Amended and Restated Facility B (Five Year) Credit
Agreement, dated as of October 23, 1996, with the banks
named therein and Citibank, N.A. as agent
(10) (i) Executive Agreements (incorporated by reference
to Exhibit 10(i) to Annual Report on Form 10-K
for year ended January 3, 1987)*
* Management contract or compensation plan or arrangement
E-1-
(ii) Deferred Compensation Plan for Non-Employee Directors as
amended January 31, 1996 (incorporated by reference to Exhibit
10(i) to Current Report on Form 8-K dated January 31, 1996)*
(iii) 1988 Long-Term Stock Incentive Plan (incorporated by reference
to Exhibit 10(v) to Annual Report on Form 10-K for year ended
December 31, 1988)*
(iv) Management Incentive Compensation Plan effective January 1,
1996 (incorporated by reference to Exhibit 10(iv) to Annual
Report on Form 10-K for year ended December 30, 1995)*
(v) Deferred Compensation Plan for Participants in Stanley's
Management Incentive Plan effective January 1, 1996
(incorporated by reference to Exhibit 10(v) to Annual Reort on
Form 10-K for year ended December 30, 1995)*
(vi) Restated Supplemental Retirement and Savings Plan
for Salaried Employees of The Stanley Works
effective as of January 1, 1997*
(vii) Term Loan Agreement dated as of May 13, 1988
between the Savings and Retirement Trust for
Salaried Employees and Wachovia Bank and Trust
Company N.A. and related Guaranty dated as of May
13, 1988 from The Stanley Works to Wachovia Bank
and Trust Company, N.A. (incorporated by
reference to Exhibit 10(x) to Annual Report on
Form 10-K for year ended December 31, 1988)
(viii) Loan and Guarantee Agreement dated as of June 6,
1989 among The Stanley Works Savings Trust for
Hourly Paid Employees, The Stanley Works and
Wachovia Bank and Trust Company, N.A.,
Massachusetts Mutual Life Insurance Company and
The Lincoln National Life Insurance Company
(incorporated by reference to Exhibit 10(i) to
Quarterly Report on Form 10-Q for quarter ended
July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as
of February __, 1993 (incorporated by reference to Exhibit
10(viii)(a) to Annual Report on Form 10-K for year ended
December 31, 1994)
* Management contract or compensation plan or arrangement
E-2-
(ix) Loan and Guarantee Agreement dated as of June 6,
1989 among The Stanley Works Savings and Retirement Trust,
The Stanley Works and Wachovia Bank and Trust Company,
N.A., Massachusetts Mutual Life Insurance Company, The
Lincoln National Life Insurance Company, First Penn-
Pacific Life Insurance Company, Security-Connecticut Life
Insurance Company- Universal Life, Lincoln National Life
Reinsurance Company and American States Life Insurance
Company-Universal Life (incorporated by reference to
Exhibit (10)(ii) to Quarterly Report on Form 10-Q
for quarter ended July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as
of February __, 1993 (incorporated by reference to Exhibit
10(ix)(a) to Annual Report on Form 10-K for year ended
December 31, 1994)
(x) Assignment and Assumption Agreement and Second
Amendment to Loan and Guarantee Agreements, dated
as of September 30, 1994, among The Stanley Works
Savings Trust for Hourly Paid Employees, The
Stanley Works Savings and Retirement Trust, The
Stanley Works and the Financial Institutions
named in Schedules I and II thereto (incorporated by
reference to Exhibit 10(x) to Annual Report on Form 10-K
for year ended December 31, 1994)
(xi) Receivables Purchase Agreement dated as of
December 1, 1993, among THE STANLEY WORKS, MAC
TOOLS, INC., STANLEY BOSTITCH, INC., the
PURCHASERS listed on the signature pages thereof,
and WACHOVIA BANK OF GEORGIA, NATIONAL
ASSOCIATION, as Agent (incorporated by reference
to Exhibit (10) (xii) to Annual Report on Form
10-K for year ended January 1, 1994)
(a) First Amendment to Receivables Purchase Agreement,
dated as of December 20, 1995, among The Stanley Works,
Stanley Mechanics Tools, Inc. (formerly known as Mac
Tools, Inc.), Stanley-Bostitch, Inc. and the Purchasers
listed on the signature pages thereof and Wachovia
Bank of Georgia, N.A. as Agent (incorporated by reference
to Exhibit 10(xi)(a) to Annual Report on Form 10-K for year
ended December 30, 1995)
(b) Second Amendment to Receivables Purchase Agreement,
dated as of April 24, 1996, among The Stanley Works,
Stanley Mechanics Tools, Inc. (formerly known as Mac
Tools, Inc.), Stanley-Bostitch, Inc. and the Purchasers
listed on the signature pages thereof and Wachovia
Bank of Georgia, N.A. as Agent
E-3-
(xii)(a) The Stanley Works Non-Employee Directors' Benefit Trust
Agreement dated December 27, 1989 and amended as of January 1,
1991 by and between The Stanley Works and Connecticut National
Bank (incorporated by reference to Exhibit (10)(xvii)(a) to
Annual Report on Form 10-K for year ended December 29, 1990)
(b) The Stanley Works Employees' Benefit Trust Agreement dated
December 27, 1989 and amended as of January 1, 1991 by and
between The Stanley Works and Connecticut National Bank
(incorporated by reference to Exhibit (10)(xvii)(b) to Annual
Report on Form 10-K for year ended December 29, 1990)
(xiii) Restated and Amended 1990 Stock Option Plan
(xiv) Term Note, dated as of June 7, 1991, by State
Street Bank and Trust Company, as Trustee for the
Savings Plan for Salaried Employees of The
Stanley Works, to Stanley Works Funding
Corporation (incorporated by reference to Exhibit (10)(xxi) to
Current Report on Form 8-K dated June 7, 1991)
(xv) Term Note, dated as of June 7, 1991, by State Street Bank and
Trust Company, as Trustee for the Savings Plan for Hourly Paid
Employees of The Stanley Works, to Stanley Works Funding
Corporation (incorporated by reference to Exhibit (10)(xxii)
to Current Report on Form 8-K dated June 7, 1991)
(xvi) Master Leasing Agreement, dated September 1, 1992 between BLC
Corporation and The Stanley Works (incorporated by reference
to Exhibit (10)(i) to Quarterly Report on Form 10-Q for
quarter ended September 26, 1992)
(xvii) The Stanley Works Stock Option Plan for Non- employee Directors
(incorporated by reference to Exhibit 10(xvii) to the Annual
Report on Form 10-K for the year ended December 31, 1994)
(xviii) Employment Agreement effective December 27, 1996 between The
Stanley Works and John M. Trani (incorporated by reference to
Exhibit 10(i) to Current Report on Form 8-K dated January 2,
1997)*
* Management contract or compensation plan or arrangement
E-4-
(xix) Employment Agreement effective December 31, 1996 between The
Stanley Works and Richard H. Ayers (incorporated by reference
to Exhibit 10(ii) to Current Report on Form 8-K dated January
2, 1997)*
(11) Statement re computation of per share earnings
(12) Statement re computation of ratio of earnings to fixed charges
(13) Annual Report to shareholders for year ended
December 28, 1996
(21) Subsidiaries of Registrant
(23) Consents of Independent Auditors (at pages F-2 and F-3)
(27) Financial Data Schedule
(27) (i) Restated Interim 1996 Financial Data Schedule
(27) (ii) Restated 1995 and 1994 Financial Data Schedule
(99) (i) Financial Statements and report of independent auditors for
the year ended December 31, 1996, of The Stanley Works 401(k)
Savings Plan
(ii) Policy on Confidential Proxy Voting and Independent Tabulation
and Inspection of Elections as adopted by The Board of
Directors October 23, 1991 (incorporated by reference to
Exhibit (28)(i) to Quarterly Report on Form 10-Q for quarter
ended September 28, 1991)
* Management contract or compensation plan or arrangement
E-5-