-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EQQhCHEh/D/qBs1WyD2t8r5NRMaUaW4NVP3sRxRIQd8cKZZlS+6YEjbE9kjKRkec uTOANRrhyAfKM+J8EpT1KQ== 0000093556-94-000012.txt : 19940812 0000093556-94-000012.hdr.sgml : 19940812 ACCESSION NUMBER: 0000093556-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANLEY WORKS CENTRAL INDEX KEY: 0000093556 STANDARD INDUSTRIAL CLASSIFICATION: 3420 IRS NUMBER: 060548860 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05224 FILM NUMBER: 94543168 BUSINESS ADDRESS: STREET 1: 1000 STANLEY DR STREET 2: P O BOX 7000 CITY: NEW BRITAIN STATE: CT ZIP: 06053 BUSINESS PHONE: 2032255111 10-Q 1 FORM 10Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 2, 1994 or [ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the transition period from [ ] to [ ] Commission file number 1-5224 I.R.S. Employer Identification Number 06-0548860 THE STANLEY WORKS (a Connecticut Corporation) 1000 Stanley Drive New Britain, Connecticut 06053 Telephone: (203) 225-5111 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: shares of the company's Common Stock ($2.50 par value) were outstanding 44,800,943 as of August 5, 1994. PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Millions of Dollars)
SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 Net Sales $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 Costs and Expenses Cost of sales 418.6 383.5 813.0 758.2 Selling, general and administrative 139.4 128.5 273.2 258.6 Interest - net 7.8 6.0 15.2 13.3 Other - net 9.0 4.0 17.8 7.8 ------- ------- -------- ------- 574.8 522.0 1,119.2 1,037.9 ------- ------- -------- ------- Earnings Before Income Taxes and Cumulative Effect of Accounting Change 54.0 43.2 95.3 80.7 Income Taxes 20.3 16.2 36.0 30.7 ------- ------- -------- ------- Earnings Before Cumulative Effect of Accounting Change 33.7 27.0 59.3 50.0 Cumulative Effect of Accounting Change for Postemployment Benefits (8.5) ------- ------- -------- ------- Net Earnings $ 33.7 $ 27.0 $ 59.3 $ 41.5 ======= ======= ======== ======= Net Earnings Per Share of Common Stock: Before Cumulative Effect of Accounting Change $ 0.75 $ 0.60 $ 1.32 $ 1.11 Cumulative Effect of Accounting Change (0.19) ------- ------- -------- ------- Net Earnings Per Share of Common Stock $ 0.75 $ 0.60 $ 1.32 $ 0.92 ======= ======= ======== ======= Dividends per share $ 0.34 $ 0.33 $ 0.68 $ 0.66 Average shares outstanding 44,829 44,971 44,798 45,152 (in thousands)
[FN] See notes to consolidated financial statements. -1- THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Millions of Dollars)
July 2 January 1 1994 1994 ASSETS Current Assets Cash and cash equivalents $ 33.8 $ 43.7 Accounts and notes receivable, net 416.4 371.2 Inventories 352.6 308.1 Other current assets 32.4 35.6 ------ ------ Total Current Assets 835.2 758.6 Property, Plant and Equipment 1,115.4 1,119.0 Less: accumulated depreciation (557.6) (552.5) ------- ------- 557.8 566.5 Goodwill, Patents and Other Intangibles 169.7 171.5 Other Assets 80.9 80.3 ------- ------- Total Assets $ 1,643.6 $ 1,576.9 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 76.5 $ 42.3 Current maturities of long-term debt 9.8 9.8 Accounts payable 101.2 103.3 Accrued expenses 194.2 201.7 ------- ------- Total Current Liabilities 381.7 357.1 Long-Term Debt 385.6 377.2 Deferred Income Taxes 34.9 36.0 Other Liabilities 123.1 125.7 Shareholders' Equity Common Stock 115.4 115.4 Capital in excess of par value 71.6 73.1 Retained earnings 901.6 871.1 Foreign currency translation adjustment (55.5) (56.7) ESOP Debt (257.3) (261.5) ------- ------- 775.8 741.4 Less: cost of common stock in treasury 57.5 60.5 Total Shareholders' Equity 718.3 680.9 ------- ------- Total Liabilities & Shareholders' Equity $ 1,643.6 $ 1,576.9 ======= =======
[FN] See notes to consolidated financial statements. -2- THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Dollars)
SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 Operating Activities Net Earnings $ 33.7 $ 27.0 $ 59.3 $ 41.5 Depreciation and amortization 21.6 17.7 42.8 39.8 Provision for postemployment benefits 13.6 Net gain on sale of non-operating asset (24.0) Other non-cash items 11.2 0.4 16.5 5.3 Changes in operating assets and liabilities (27.0) (35.1) (85.0) (70.6) ------ ------ ------ ------ Net cash provided by operating activities 39.5 10.0 33.6 5.6 Investing Activities Capital expenditures (17.9) (11.7) (31.1) (26.2) Proceeds from sales of assets 4.8 0.9 6.4 2.0 Proceeds from sale of non-operating asset 32.9 Business acquisitions (5.1) (5.1) (0.9) Other (2.7) (3.6) (3.0) (2.7) ------ ------ ------ ------ Net cash provided (used) by investing activities (20.9) (14.4) (32.8) 5.1 Financing Activities Payments on long-term debt (0.2) (65.7) (0.7) (67.0) Net short-term bank financing (3.7) 39.8 34.5 64.7 Proceeds from issuance of common stock 0.3 0.2 0.6 0.6 Purchase of common stock for treasury (0.8) (0.8) (26.5) Cash dividends on common stock (15.2) (29.7) (45.1) (44.7) ------ ------ ------ ------ Net cash used by financing activities (19.6) (55.4) (11.5) (72.9) Effect of Exchange Rate Changes on Cash (1.7) 0.4 0.8 (0.4) ------ ------ ------ ------ Decrease in Cash and Cash Equivalents (2.7) (59.4) (9.9) (62.6) Cash and Cash Equivalents, Beginning of Period 36.5 77.9 43.7 81.1 ------ ------ ------ ------ Cash and Cash Equivalents, End of Second Quarter $ 33.8 $ 18.5 $ 33.8 $ 18.5 ===== ===== ===== ======
[FN] See notes to consolidated financial statements. -3- THE STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Millions of Dollars)
SIX MONTHS 1994 1993 Balance at beginning of year $ 680.9 $ 696.3 Net earnings 59.3 41.5 Currency translation adjustment 1.2 (6.5) Cash dividends declared (30.5) (29.7) Net issuance of common stock 3.2 (22.9) ESOP debt 4.2 3.9 -------- ------- Balance at end of second quarter $ 718.3 $ 682.6 ======== =======
[FN] See notes to consolidated financial statements. -4- THE STANLEY WORKS AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 2, 1994 NOTE A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring items) considered necessary for a fair presentation of the results of operations for the interim periods have been included. For further information, refer to the consolidated financial statements and footnotes included in the company's annual report on Form 10-K for the year ended January 1, 1994. NOTE B - Computation of Earnings Per Share Earnings per share are based upon the weighted average number of common shares outstanding. The exercise of outstanding stock subscriptions and options would not result in a material dilution of earnings per share. (See Exhibit 11) NOTE C - Inventories The classification of inventories at the end of the second quarter of 1994 and at year-end 1993, in millions of dollars, is as follows: July 2 January 1 1994 1994 ------ ------ Finished products $ 231.2 $ 195.7 Work in process 68.9 61.1 Raw materials 49.5 48.7 Supplies 3.0 2.6 ------ ------ $ 352.6 $ 308.1 ====== ====== -5- NOTE D - Cash Flow Information Interest paid during the second quarter of 1994 and 1993 amounted to $6.4 million and $7.2 million, respectively. Interest paid for the six months of 1994 and 1993 amounted to $14.6 million and $15.3 million, respectively. Income taxes paid during the second quarter of 1994 and 1993 were $31.8 million and $27.2 million, respectively. Income taxes paid for the six months of 1994 and 1993 were $42.2 million and $36.1 million, respectively. NOTE E - Other-net Expenses In the consolidated statement of earnings for six months of 1993, Other-net included a gain of $24.0 million ($.33 per share) from the sale of a portion of the company's investment in Max Co., Ltd. Also included in Other-net were additional charges for a fine levied by U.S. District Court in Missouri for $5.0 million ($.07 per share) and contingency reserves of $15.7 million ($.21 per share) related to product liability litigation, restructuring activities and environmental remediation. NOTE F - Restatement Certain 1993 amounts in the Business Segment Information were reclassified to conform to the 1994 presentation. -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The company is pleased with its solid performance for the quarter and for the first six months of 1994. Sales in the second quarter of $629 million were 11% higher than the prior year and were a record for any quarter. Net earnings of $33.7 million, or $.75 per share, represented a 25% increase over 1993 and were records for second quarter results. Significant internal growth from all of the business units is the primary contributor to the current quarter sales increase. The businesses serving the U.S. industrial and construction markets had the most significant impact on the overall 10% increase in unit volume growth. The net incremental effect of acquisitions and divestitures increased sales by 1%, while the effects of a 1% price increase were offset by the negative effects of currency. Gross margins of 33.4% were substantially improved over margins of 32.1% reported in the prior year. This improvement was achieved through a combination of cost and volume efficiencies together with the absence of expenses related to manufacturing process changes and some extraordinarily high raw material costs that were incurred in the second quarter last year. Operating expenses also improved to 22.2% of sales compared with 22.7% in the prior year. Interest-net expenses for the quarter were 1.2% of sales compared with 1.1% in the prior year, reflecting a higher interest rate environment. Other-net of $9.0 million, or 1.4% of sales, for the second quarter compared with $4.0 million, or 0.7% of sales, in the same quarter a year ago. The increase in Other-net included additional reserves established in this year for environmental and plant closing expenses while the prior year benefitted from favorable adjustments to contingency reserves. Net sales for the first six months of 1994 were $1.2 billion, up 9% from 1993 sales of $1.1 billion. Net earnings of $59.3 million, or $1.32 per share, were 19% higher than prior year earnings of $50.0 million, or $1.11 per share. Net earnings and earnings per share in 1993 exclude the effects of a change in accounting principle. Net sales in the U.S. for the second quarter increased by 12%, entirely the result of internal growth. Strong order activity continued in the company's industrial and engineered tool categories and was augmented by strengthening in consumer tools. Price increases of 1% were offset by the negative effect of the company's divestiture activity. Sales in Europe continued to improve with an overall increase of 8% for the quarter. Unit volume growth of 4% reflected increased sales activity especially in the industrial tools category. The incremental effect of a recent acquisition increased sales by 6%. Minor price increases combined with the negative effects of currency resulted in a net 2% decrease from the prior year. Operating profits of $8.0 million were similar to the prior year while operating margins, reflecting more aggressive sales efforts, declined from 10.3% to 9.3%. Net sales in Other Areas increased by 13% for the quarter. Internal volume growth of 9% included strengthening in the Canadian businesses. The incremental effect of acquisitions increased sales by 5%; however, the net effect of price increases and negative currency translation decreased sales by 1%. -7- Net sales for the Tools segment increased 11%, principally the result of 10% internal sales growth. Consumer tools' unit volume growth of 6% was an improvement over more modest gains reported in the first quarter. The industrial and engineered tool categories continued with strong order activity and experienced double digit internal growth for the quarter. Price increases of 2% were substantially offset by the negative effects of currency. The net incremental effect of acquisitions and divestitures increased sales by 1%. Operating profits of $59.3 million were 19% higher than the comparable quarter last year. Operating margins of 12.5% compared with 11.7% in the prior year and reflected increased volume and operating efficiencies. For the six months, net sales increased by 9% and operating profits increased by 23% when compared with the same period last year. Net sales in the Hardware segment increased 6% over the prior year almost entirely due to unit volume increases. Minor price increases were offset by the negative effects of currency. Operating profits improved significantly to $10.8 million with operating margins of 13.7% comparing favorably with 10.1% in the prior year. Even when the effects of property losses related to the California earthquake are excluded, margins in the second quarter were improved over those reported in the first quarter. For the six months, net sales increased by 2% and operating profits increased by 8% when compared with the same period last year. Specialty Hardware net sales for the second quarter were 17% higher than the same quarter last year. As in the other segments, this increase was driven primarily by unit volume gains. Price increases of 1% were offset by a minor currency impact and resulted in no net effect on sales. Operating profits of $4.2 million were substantially improved from $1.8 million reported last year. The prior year's operating results were depressed because the Door Systems business experienced unusually high wood prices and related manufacturing process problems. For the six months, net sales increased by 15% when compared with the same period last year and operating profits increased significantly to $7.3 million from $2.5 million reported last year. On June 18, the company completed the divestiture of its Taylor Rental business with the sale of the remaining company-owned stores and related assets. The results through the second quarter give the company continued confidence in its expectations for 1994. The company is moving forward with its expansion in Asia and is encouraged by its new product development activities. The company feels confident that these initiatives position it well for continued long-term growth. Although there is some reason to be concerned about interest rates and the uncertainties of steel availability and price, the company believes its prediction in the 1993 annual report for higher sales and substantially higher profits in 1994 is still on target. Liquidity and Sources of Capital The company generated $39.5 million of cash from operations during the second quarter. This strong performance in comparison to the prior year reflected profitable growth as well as the effective management of working capital needed to fund that growth. Funds generated from operations were adequate to fund capital expenditures and payment of dividends and, as a result, the company had minimal short-term borrowings in the second quarter. Cash flow for the six month period includes the first quarter, which historically has lower cash flow than subsequent quarters. Capital expenditures for the year are forecast at approximately $70 million. -8- THE STANLEY WORKS AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Millions of Dollars)
SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 INDUSTRY SEGMENTS Net Sales Tools Consumer $ 179.2 $ 167.9 $ 341.8 $ 326.8 Industrial 129.5 112.7 260.0 227.9 Engineered 165.9 145.4 314.5 287.2 -------- -------- -------- ------- Total Tools 474.6 426.0 916.3 841.9 Hardware 78.7 74.6 156.3 153.5 Specialty Hardware 75.5 64.6 141.9 123.2 -------- -------- -------- ------- Consolidated $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 ======== ======== ======== ======= Operating Profit Tools $ 59.3 $ 49.9 $ 107.7 $ 87.8 Hardware 10.8 7.5 19.7 18.2 Specialty Hardware 4.2 1.8 7.3 2.5 -------- -------- -------- ------- Total 74.3 59.2 134.7 108.5 Net corporate expenses (10.7) (8.1) (21.7) (11.6) Interest expense (9.6) (7.9) (17.7) (16.2) -------- -------- -------- ------- Earnings before income taxes $ 54.0 $ 43.2 $ 95.3 $ 80.7 ======== ======== ======== ======= GEOGRAPHIC AREAS Net Sales United States $ 457.3 $ 409.6 $ 877.5 $ 806.3 Europe 86.0 80.0 174.4 163.2 Other Areas 85.5 75.6 162.6 149.1 -------- -------- -------- ------- Consolidated $ 628.8 $ 565.2 $ 1,214.5 $ 1,118.6 ======== ======== ======== ======= Operating Profit United States $ 57.4 $ 43.6 $ 102.2 $ 77.3 Europe 8.0 8.2 17.7 16.8 Other Areas 8.9 7.4 14.8 14.4 -------- -------- -------- ------- Total $ 74.3 $ 59.2 $ 134.7 $ 108.5 ======== ======== ======== =======
[FN] See notes to consolidated financial statements. -9- PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. Registrant filed a Current Report on Form 8-K, dated April 20, 1994, in respect of the Registrant's press release announcing first quarter results. Registrant filed a Current Report on Form 8-K, dated April 20, 1994, in respect of the Registrant's amendments to its Bylaws. Registrant filed a Current Report on Form 8-K, dated June 21, 1994, in respect of the Registrant's press release announcing the sale of Company-owned Taylor Rental Stores. Signatures 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: August 12, 1994 By: Richard Huck Richard Huck Vice President, Finance and Chief Financial Officer Date: August 12, 1994 By: Theresa F. Prime Theresa F. Prime Vice President and Controller (Chief Accounting Officer) -10- EX-11 2 EXHIBIT 11 Exhibit 11 THE STANLEY WORKS AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (dollars and shares in thousands except per share amounts)
SECOND QUARTER ENDED SIX MONTHS ENDED JULY 2 JULY 3 JULY 2 JULY 3 1994 1993 1994 1993 Earnings per common share: Weighted average shares outstanding 44,829 44,971 44,798 45,152 ====== ====== ====== ====== Earnings before cumulative effect of accounting change $33,737 $26,987 $59,330 $50,028 Cumulative effect of accounting change for Postemployment Benefits (8,489) ------- ------- ------- ------- Net earnings $33,737 $26,987 $59,330 $41,539 ======= ======= ======= ======= Per share amounts: Before cumulative effect of accounting change $0.75 $0.60 $1.32 $1.11 Cumulative effect of accounting change for Postemployment Benefits (0.19) ------ ------ ------ ------ Net earnings $0.75 $0.60 $1.32 $0.92 ====== ====== ====== ====== PRIMARY: Weighted average shares outstanding 44,829 44,971 44,798 45,152 Dilutive common stock equivalents - based on the treasury stock method using average market price 538 814 592 773 ------ ------ ------ ------ 45,367 45,785 45,390 45,925 ====== ====== ====== ====== Per share amounts: Before cumulative effect of accounting change for $0.74 $0.59 $1.31 $1.09 Cumulative effect of accounting change for Postemployment Benefits (0.19) ------ ------ ------ ------ Net earnings $0.74 $0.59 $1.31 $0.90 ====== ====== ====== ====== FULLY DILUTED: Weighted average shares outstanding 44,829 44,971 44,798 45,152 Dilutive common stock equivalents - based on the treasury stock method using the quarter end market price if higher than average market price 554 814 600 811 ------ ------ ------ ------ 45,383 45,785 45,398 45,963 ====== ====== ====== ====== Per share amounts: Before cumulative effect of accounting change $0.74 $0.59 $1.31 1.09 Cumulative effect of accounting change for Postemployment Benefits (0.19) ------ ------ ------ ------ Net earnings $0.74 $0.59 $1.31 $0.90 ====== ====== ====== ======
[FN] Note: This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-12 3 EXHIBIT 12 Exhibit 12 THE STANLEY WORKS AND SUBSIDIARIES COMPUTATION OF EARNINGS TO FIXED CHARGES (in Millions of Dollars)
SECOND QUARTER SIX MONTHS 1994 1993 1994 1993 Earnings before income taxes and cumulative effect of accounting change for postemployment benefits $54.0 $43.2 $95.3 $80.7 Add: Portion of rents representative of interest factor $2.9 $3.1 $5.8 $6.2 Interest expense 9.4 7.7 17.4 15.8 Amortization of expense on long-term debt 0.1 0.1 0.1 0.2 Amortization of capitalized interest 0.1 0.1 0.2 0.2 ----- ----- ----- ----- Income as adjusted $66.5 $54.2 $118.8 $103.1 ===== ===== ===== ===== Fixed charges: Interest expense $9.4 $7.7 $17.4 $15.8 Amortization of expense on long-term debt 0.1 0.1 0.1 0.2 Capitalized interest (0.1) (0.1) Portion of rents representative of interest factor 2.9 3.1 5.8 6.2 ----- ----- ----- ----- Fixed charges $12.4 $10.8 $23.3 $22.1 ===== ===== ===== ===== Ratio of earnings to fixed charges 5.36 5.02 5.10 4.67 ===== ===== ===== =====
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