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 24, 2002
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The Stanley Works
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(Exact name of registrant as specified in charter)
Connecticut 1-5224 06-0548860
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Stanley Drive, New Britain, CT 06053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 225-5111
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Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 14 Pages
Item 7. Financial Statements and Exhibits.
(c) 20(i) Press Release dated April 24, 2002.
20(ii) Cautionary Statements relating to forward
looking statements included in Exhibit 20(i)
and made today in a conference call with
industry analysts, shareowners and other
participants.
Item 9. Regulation FD Disclosure.
In a press release attached to this 8-K, the company
provided earnings guidance for the second quarter and
full year 2002 and commentary regarding inventory
reductions. In a conference call with industry
analysts, shareowners and other participants, the
company reviewed the earnings guidance and commentary
regarding inventory reductions.
Page 2 of 14 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 24, 2002 By: /s/ Bruce H. Beatt
-----------------------------------
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 14 Pages
EXHIBIT INDEX
Current Report on Form 8-K
Dated April 24, 2002
Exhibit No. Page
20(i) 5
20(ii) 13
Page 4 of 14 Pag
Exhibit 20(i)
FOR IMMEDIATE RELEASE
STANLEY REPORTS 1ST QUARTER E.P.S. UP 4% FROM PRIOR YEAR; HIGHEST 1ST QUARTER
OPERATING CASH FLOW SINCE 1996
Also Announces Further Business Gains With Wal-Mart & The Home Depot
New Britain, Connecticut, April 24, 2002: The Stanley Works (NYSE: "SWK")
announced that first quarter net income was $49 million (56 cents per
fully-diluted share) matching previous guidance and the First Call consensus
estimate of Wall Street analysts, and exceeding last year's earnings of $47
million or 54 cents per fully-diluted share.
Net sales were $617 million, 1% lower than last year, on continued weakness
across industrial tool channels. Sales were reduced by $5 million each in the
first quarters of 2002 and 2001 upon the reclassification of cooperative
advertising expenses out of selling, general and administrative expenses and
into net sales as the company implemented EITF 00-25.
John M. Trani, Chairman and Chief Executive Officer, commented: "Revenue
continues to be impacted by weak global economies and inventory corrections at
industrial customers. It was clear again this quarter that we are benefiting
from recent retail share gains, at a time when U.S. retail markets seem to be
returning to more normal conditions. There was particular strength in our U.S.
consumer hand tools and access technologies businesses, both of which delivered
solid double-digit percentage sales growth. With industrial markets appearing to
have bottomed, albeit at a low level, this bodes well for organic sales growth
in the second half."
Selling, general and administrative expenses of $135 million (21.9% of sales)
were $11 million or 150 basis points below comparable first quarter 2001 levels.
First quarter 2002 expenses included $2.2 million, or $.02 per fully-diluted
share, of expenses related to costs incurred in pursuit of Bermuda
re-incorporation.
Resulting operating margin was 13.0%, down 50 basis points from 13.5% last year.
The company also noted that its Mac Tools business was solidly profitable for
the first time since early 1998 as benefits from its ongoing repositioning began
to firmly take hold.
Page 5 of 14 Pages
Mr. Trani continued: "Again this quarter we dealt with continuing weak markets
and adjusted our employment and production accordingly. Approximately 600
positions were eliminated. Our operations team continues to rationalize our
manufacturing structure, and administrative costs are trending downward."
Other-net included no goodwill amortization in 2002, in accordance with SFAS
142, versus $1.3 million or $.01 per fully-diluted share in 2001. The company's
income tax rate was 32% versus 33% in the first quarter last year reflecting the
continued benefit of structural changes. The company expects the 32% rate to be
sustainable.
In the first quarter of 2001, the company recorded a non-recurring $29 million
pension-related gain, offset by an $18 million charge for severance obligations
and an $11 million one-time charge associated with business repositionings. The
net difference between the one-time pension gain and the one-time restructuring
and other charges was negligible, and all discussions above exclude such items.
Tools sales decreased 2% from the first quarter of 2001 to $478 million.
Operating margin was 12.9% versus 14.7% in the same period last year. Doors
segment sales increased 4% versus last year's first quarter to $139 million.
Operating margin increased to 13.4% of sales compared with 8.8% last year.
Despite lower volume and a continuing mix shift to lower-margin retail channels,
performance in both segments reflected continuing productivity gains and SG&A
expense reductions.
The company also indicated that, aided by $15 million of net inventory
reduction, operating cash flow was $21 million in the quarter, representing a
$42 million improvement versus a year ago and the best first quarter performance
since 1996. Debt to capital dropped to 36% from 41% a year ago.
Mr. Trani continued: "For the first time in six years, we generated positive
free cash flow (before dividend payments) in the first quarter. Since this is
normally a cash-consuming quarter, we are encouraged that full-year free cash
flows will achieve our objective. The decline in inventories marks the third
consecutive quarterly reduction, and the full-year projected reduction of $60
million is on track."
The company also announced that Stanley has been named "category captain" for
Wal-Mart's hand-tool and toolbox modular in the U.K. and Mexico, expanding
Stanley's product listings and marketing initiatives to those locations.
Page 6 of 14 Page
Mr. Trani added: "Our Wal-Mart and Target programs continue to outpace customer
expectations, and the result is additional opportunity. In addition, our new
Stanley(R) Pro Series(TM) trowel trade offering is now at Lowe's, and initial
orders are being received under our new alliance with The Home Depot for
delivery in the second quarter.
"Our efforts in the more traditional channels are gaining new momentum. The
Preview Dealer Club member count has risen to 8,300 stores (up 11% from
December), well on our way to the 9,000 year-end objective. Themed promotions
like 'Work Hard . . . Play Hard' - offered quarterly in the traditional channel
- have delivered displays to 5,000 stores. National promotions at the co-ops
will generate two and a half times the prior year volume."
The company also announced that its Stanley Access Technologies division has
been selected by Wal-Mart to provide automatic door systems for all 192K and
208K ft. sq. prototype Supercenter stores to be constructed in 2002 and 2003.
Also, the division has been selected by The Home Depot to provide automatic door
systems for all new stores to be built from 2002 through 2004. Stanley credits
these opportunities to product innovation and excellent customer service.
All of these developments have solidified second quarter and second half sales
expectations and, with that, confidence in recent E.P.S. guidance continues to
remain high. The company reaffirmed earnings guidance provided on April 3,
specifically expressing confidence that second quarter earnings per
fully-diluted share will be $.71 - $.73, consistent with the current First Call
consensus estimate of $.72, an improvement of 22%-26% over the $.58 earned in
the second quarter of 2001. Management also reaffirmed its full year 2002
guidance that earnings per fully diluted share are expected to be up 18%-22%
over 2001. The company noted that this and all previous earnings guidance
excludes any possible benefit from its proposed re-incorporation in Bermuda.
Finally, the company announced that Institutional Shareholder Services ("ISS")
has issued a recommendation in favor of Stanley's proposed re-incorporation in
Bermuda, stating: "The company has been outperforming peers and its index in
terms of shareholder returns consistently in the past five years. Its insertion
into international markets goes hand-in-hand with the request to be domiciled in
Bermuda, which will make its shares even more liquid. As such, we believe this
item merits shareholder support."
Page 7 of 14 Pages
On April 2, the Securities and Exchange Commission declared effective the S-4
Registration Statement filed by The Stanley Works, Ltd. Proxies and annual
reports have been mailed and the company's annual meeting of shareowners has
been scheduled for Thursday, May 9 in New Britain, Connecticut. At that time the
company's previously announced proposal to re-incorporate in Bermuda will be
voted upon by its shareowners.
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.
Contact: Gerard J. Gould
Vice President, Investor Relations
(860) 827-3833
ggould@stanleyworks.com
This press release contains forward-looking statements. 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 www.stanleyworks.com. Alternatively, they are available
through PR Newswire's "Company News On-Call" service by FAX at 800-758-5804,
ext. 874363.
Page 8 of 14 Pages
THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Excluding 2001 Restructuring and Special Credits & Charges
First Quarter 2002 vs. 2001
(Unaudited, Millions of Dollars Except Per Share Amounts)
2001
------------------------------------------
Excluding
Restructuring, Restructuring,
Asset Impairments Asset Impairments
and Special and Special
Charges & Charges &
2002 Credits Credits Reported
------- ---------- ---------- ---------
Net sales $616.7 $622.3 $(0.7) $621.6
Cost of sales 401.2 393.0 5.5 398.5
----- ----- --- -----
Gross margin 215.5 229.3 (6.2) 223.1
34.9% 36.8% 35.9%
Selling, general
& administrative 135.1 145.6 3.3 148.9
----- ----- --- -----
21.9% 23.4% 24.0%
Operating profit 80.4 83.7 (9.5) 74.2
13.0% 13.5% 11.9%
Interest, net 6.4 6.6 - 6.6
Other, net 2.1 6.5 (27.6) (21.1)
Restructuring & asset impairments - - 18.3 18.3
---- ---- ------ ------
Earnings before income taxes 71.9 70.6 (0.2) 70.4
Income taxes 23.0 23.3 0.5 23.8
---- ---- --- ----
32.0% 33.0% 33.8%
Net earnings $48.9 $47.3 $(0.7) $46.6
===== ===== ===== =====
Average shares
outstanding (diluted) 87,889 87,113 87,113 87,113
Earnings per share (diluted) $ 0.56 $ 0.54 $ 0.00 $ 0.54
====== ====== ===== =====
INDUSTRY SEGMENTS
Net sales
Tools $478.0 $488.7 $(0.7) $488.0
Doors 138.7 133.6 - 133.6
----- ----- ----- ------
Consolidated $616.7 $622.3 $(0.7) $621.6
====== ====== ===== ======
Operating profit
Tools $61.8 $71.9 $(9.2) $62.7
Doors 18.6 11.8 (0.3) 11.5
---- ---- ---- ----
Consolidated 80.4 83.7 (9.5) 74.2
---- ---- ---- ----
Interest, net 6.4 6.6 - 6.6
Other, net 2.1 6.5 (27.6) (21.1)
Restructuring & asset impairments - - 18.3 18.3
----- ----- ---- ----
Earnings before income taxes $71.9 $70.6 $(0.2) $70.4
===== ===== ===== =====
Page 9 of 14 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
First Quarter
-----------------
2002 2001
-----------------
NET SALES $616.7 $621.6*
COSTS AND EXPENSES
Cost of sales 401.2 398.5
Selling, general and administrative 135.1 148.9*
Interest - net 6.4 6.6
Other - net 2.1 (21.1)
Restructuring charge and asset impairments - 18.3
----- ----
544.8 551.2*
----- -----
EARNINGS BEFORE INCOME TAXES 71.9 70.4
Income taxes 23.0 23.8
---- ----
NET EARNINGS $48.9 $46.6
===== =====
NET EARNINGS PER SHARE OF COMMON STOCK
Basic $0.57 $0.54
===== =====
Diluted $0.56 $0.54
===== =====
DIVIDENDS PER SHARE $0.24 $0.23
===== =====
AVERAGE SHARES OUTSTANDING (in thousands)
Basic 85,518 85,897
====== ======
Diluted 87,889 87,113
====== ======
* In January, 2002 the company adopted Emerging Issues Task Force (EITF) Issue
Number 00-25 "Vendor Income Statement Characterization of Consideration to a
Purchaser of the Vendor's Products or Services". EITF 00-25 requires the
reclassification of certain customer promotional payments previously reported in
selling, general and administrative (SG&A) expenses as a reduction of revenue,
and prior periods must be restated for comparability of results. First quarter
2001 Net Sales and SG&A are $4.6 million lower than previously published amounts
reflecting reclassification of certain cooperative advertising (co-op) expenses.
The co-op reclassifications for 2001 will be less than 1% of previously reported
Net Sales.
Page 10 of 14 Pages
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
March 30 March 31
2002 2001
----------- ----------
ASSETS
Cash and cash equivalents $109.9 $111.4
Accounts receivable 566.8 530.0
Inventories 394.6 417.6
Other current assets 71.8 78.1
---- ----
Total current assets 1,143.1 1,137.1
------- -------
Property, plant and equipment 490.9 496.8
Goodwill and other intangibles 235.4 170.6
Other assets 194.5 148.9
----- -----
$2,063.9 $1,953.4
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $301.4 $285.7
Accounts payable 249.9 232.5
Accrued expenses 258.6 248.2
----- -----
Total current liabilities 809.9 766.4
----- -----
Long-term debt 194.8 240.4
Other long-term liabilities 182.4 187.5
Shareowners' equity 876.8 759.1
----- -----
$2,063.9 $1,953.4
======== ========
Page 11 of 14 Pages
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
First Quarter
------------------
2002 2001
------ ------
OPERATING ACTIVITIES
Net earnings $48.9 $46.6
Depreciation and amortization 16.7 22.3
Restructuring charge and
asset impairments - 18.3
Other non-cash items (15.1) (30.4)
Changes in working capital (5.9) (46.0)
Changes in other operating
assets and liabilities (24.1) (32.0)
----- -----
Net cash provided (used) by
operating activities 20.5 (21.2)
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (18.7) (15.9)
Proceeds from sales of assets 3.7 -
Cash dividends on common stock (20.4) (19.7)
Other net investing and financing
activity 9.6 74.6
--- ----
Net cash provided (used) by investing
and financing activities (25.8) 39.0
Increase (Decrease) in Cash
and Cash Equivalents (5.3) 17.8
Cash and Cash Equivalents,
Beginning of Period 115.2 93.6
----- ----
Cash and Cash Equivalents,
End of First Quarter $109.9 $111.4
====== ======
Page 12 of 14 Pages
Exhibit 20(ii)
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Statements in the company's press release attached to this Current Report on
Form 8-K regarding the company's ability to (i) deliver second quarter earnings
per fully-diluted share of $.71 - $.73, consistent with the current First Call
consensus estimate of $.72, an improvement of 22%-26% over the $.58 earned in
the second quarter of 2001; (ii) deliver full year inventory reductions of $60
million; and (iii) for the full year 2002, deliver earnings per fully-diluted
share up 18%-22% from the full year 2001, are forward looking and inherently
subject to risk and uncertainty.
The company's ability to achieve the earnings objectives identified in the
preceding paragraph is dependent on both internal and external factors,
including the success of the company's marketing and sales efforts, continuing
improvements in productivity and cost reductions, including inventory reductions
identified in the preceding paragraph, and continued reduction of selling,
general and administrative expenses as a percentage of sales, the strength of
the United States economy and the strength of foreign currencies, including,
without limitation, the Euro.
The company's ability to achieve the expected level of revenues is dependent
upon a number of factors, including (i) the ability to recruit and retain a
sales force comprised of employees and manufacturers representatives, (ii) the
success of The Home Depot and Wal-Mart programs, and of other initiatives to
increase retail sell through and stimulate demand for the company's products,
(iii) the ability of the sales force to adapt to changes made in the sales
organization and achieve adequate customer coverage, (iv) the ability of the
company to fulfill demand for its products, (v) the absence of increased pricing
pressures from customers and competitors and the ability to defend market share
in the face of price competition, and (vi) the acceptance of the company's new
products in the marketplace as well as the ability to satisfy demand for these
products.
The company's ability to deliver full year inventory reductions of $60 million
and otherwise improve its productivity and to lower the cost structure is
dependent on the success of various initiatives that are underway or are being
developed to improve manufacturing and sales operations and to implement related
control systems, which initiatives include certain facility closures and related
Page 13 of 14 Pages
workforce reductions expected to be completed in 2002. The success of these
initiatives is dependent on the company's ability to increase the efficiency of
its routine business processes, to develop and implement process control
systems, to mitigate the effects of any material cost inflation, to develop and
execute comprehensive plans for facility consolidations, the availability of
vendors to perform outsourced 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 while
any facility consolidation is in process and other unforeseen events.
The company's ability to continue to reduce selling, general and administrative
expenses as a percentage of sales is dependent on various process improvement
activities, the continued success of changes to the sales organization and the
reduction of transaction costs.
The company's ability to achieve the objectives discussed above will also be
affected by external factors. These external factors include pricing pressure
and other changes within competitive markets, the continued consolidation of
customers in consumer channels, increasing competition, changes in trade,
monetary and fiscal policies and laws, inflation, currency exchange
fluctuations, the impact of dollar/foreign currency exchange rates on the
competitiveness of products, the impact of the events of September 11, 2001, and
recessionary or expansive trends in the economies of the world in which the
company operates.
Page 14 of 14 Pages