EX-99.1 3 exhibit2.htm EX-99.1 EX-99.1

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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)

                         
    FIRST QUARTER        
    2008   2007        
 
                        
NET SALES
   $ 1,096.9     $ 1,062.1          
 
                        
COSTS AND EXPENSES 
                        
      Cost of sales
     681.9       666.8          
 
                        
             Gross Margin
     415.0       395.3          
             % to Net Sales
     37.8 %     37.2 %        
 
                        
      Selling, general and administrative
     279.5       259.0          
             % to Net Sales
     25.5 %     24.4 %        
 
                        
 
                        
             Operating Margin
     135.5       136.3          
             % to Net Sales
     12.4 %     12.8 %        
 
                        
      Other-net
     20.7       19.9          
      Restructuring charges
     3.3       4.0          
 
                        
             Income from Operations
     111.5       112.4          
 
                        
      Interest-net
     18.4       20.2          
 
                        
 
                        
EARNINGS BEFORE INCOME TAXES
     93.1       92.2          
      Income taxes
     25.1       24.6          
 
                        
 
                        
NET EARNINGS
   $ 68.0     $ 67.6          
 
                        
 
                        
 
                        
 
                        
 
                        
 
                        
BASIC EARNINGS PER SHARE OF COMMON STOCK
   $ 0.86     $ 0.82          
 
                        
 
                        
 
                        
 
                        
DILUTED EARNINGS PER SHARE OF COMMON STOCK
   $ 0.85     $ 0.80          
 
                        
 
                        
DIVIDENDS PER SHARE
   $ 0.31     $ 0.30          
 
                        
 
                        
AVERAGE SHARES OUTSTANDING (in thousands)
                        
      Basic
     79,025       82,851          
 
                        
 
                        
      Diluted
     80,274       84,774          
 
                        
 
                        

Operating margin is defined as sales less cost of sales less SG&A. Management uses operating margin and its percentage of net sales as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level.

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THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)

                 
    March 29, 2008   December 29, 2007
ASSETS
                
           Cash and cash equivalents
   $ 324.8     $ 240.4  
           Accounts and notes receivable
     891.0       848.4  
           Inventories
     591.6       567.3  
           Other current assets
     91.8       88.0  
           Assets held for sale
     —       24.3  
 
                
                  Total current assets
     1,899.2       1,768.4  
 
                
           Property, plant and equipment
     579.5       569.3  
           Goodwill and other intangibles
     2,274.8       2,252.6  
           Other assets
     201.2       189.6  
 
                
                  Total assets
   $ 4,954.7     $ 4,779.9  
 
                
 
                
 
                
LIABILITIES AND SHAREOWNERS’ EQUITY
                
           Short-term borrowings
   $ 417.9     $ 292.8  
           Accounts payable
     532.0       508.6  
           Accrued expenses
     479.6       476.1  
 
                
                  Total current liabilities
     1,429.5       1,277.5  
 
                
           Long-term debt
     1,204.0       1,212.1  
           Other long-term liabilities
     604.6       561.8  
           Shareowners’ equity
     1,716.6       1,728.5  
 
                
                  Total liabilities and equity
   $ 4,954.7     $ 4,779.9  
 
                

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THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)

                         
    FIRST QUARTER        
    2008   2007        
 
                        
OPERATING ACTIVITIES
                        
           Net earnings
   $ 68.0     $ 67.6          
           Depreciation and amortization
     40.8       37.2          
           Changes in working capital
     (8.1 )     (18.7 )        
           Other
     7.0       7.7          
 
                        
           Net cash provided by operating activities
     107.7       93.8          
 
                        
INVESTING AND FINANCING ACTIVITIES
                        
           Capital and software expenditures
     (25.1 )     (26.2 )        
           Business acquisitions and asset disposals
     (0.5 )     (541.4 )        
           Proceeds from long-term borrowings
     —       529.7          
           Cash dividends on common stock
     (24.3 )     (24.9 )        
           Other
     26.6       3.2          
 
                        
           Net cash used in investing and financing activities
     (23.3 )     (59.6 )        
 
                        
Increase in Cash and Cash Equivalents
     84.4       34.2          
 
                        
Cash and Cash Equivalents, Beginning of Period
     240.4       176.6          
 
                        
 
                        
Cash and Cash Equivalents, End of Period
   $ 324.8     $ 210.8          
 
                        
 
                        
 
                        
 
                        
Free Cash Flow Computation
                        
 
                        
Operating Cash Flow
   $ 107.7     $ 93.8          
Less: capital and software expenditures
     (25.1 )     (26.2 )        
 
                        
Free Cash Flow (before dividends)
   $ 82.6     $ 67.6          
 
                        
 
                        
 
                        

Free cash flow is defined as cash flow from operations less capital and capitalized software expenditures. The Company believes this is an important measure of its liquidity as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not reflect, among other things, deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and acquisitions.

The change in working capital is comprised of accounts receivable, inventory and accounts payable.

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THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)

                                 
    FIRST QUARTER                
    2008   2007                
NET SALES
                                
           Construction & DIY
   $ 423.2     $ 423.7                  
           Industrial
     335.7       310.7                  
           Security
     338.0       327.7                  
 
                                
              Total
   $ 1,096.9     $ 1,062.1                  
 
                                
 
                                
 
                                
SEGMENT PROFIT
                                
           Construction & DIY
   $ 50.8     $ 62.5                  
           Industrial
     49.1       45.5                  
           Security
     53.3       45.7                  
 
                                
              Segment Profit
     153.2       153.7                  
           Corporate Overhead
     (17.7 )     (17.4 )                
 
                                
              Total
   $ 135.5     $ 136.3                  
 
                                
 
                                
 
                                
Segment Profit as a Percentage of Net Sales
                                
           Construction & DIY
     12.0 %     14.8 %                
           Industrial
     14.6 %     14.6 %                
           Security
     15.8 %     13.9 %                
 
                                
              Segment Profit
     14.0 %     14.4 %                
           Corporate Overhead
     -1.6 %     -1.6 %                
 
                                
              Total
     12.4 %     12.8 %                
 
                                

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